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Fwd: Big jump in gold sale spurs manipulation talk

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  • RoadsEnd
    Begin forwarded message: From: Sardar Date: August 31, 2008 12:26:54 PM PDT To: Sardar Subject: Big jump
    Message 1 of 1 , Aug 31, 2008
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      Begin forwarded message:

      From: "Sardar" <sardar@...>
      Date: August 31, 2008 12:26:54 PM PDT
      To: "Sardar" <recon1968bravo@...>
      Subject: Big jump in gold sale spurs manipulation talk

      Big jump in gold sale spurs manipulation talk
      Some analysts say only manipulation is government's attempt to take down oil
      By Moming Zhou, MarketWatch
      Last update: 7:54 p.m. EDT Aug. 29, 2008
      NEW YORK (MarketWatch) -- Recent heat from Congress and regulators, along with public speculation, over whether commodity prices are being manipulated has also reached gold pits, where the debate was stirred by a surge in bets last month that gold prices would fall.
      "Congress is already investigating allegations of manipulation in the oil market, and it seems likely that it is only a matter of time before a similar investigation will be required in the precious metal markets," said Mark O'Byrne, executive director at Gold and Silver Investment.
      Three unidentified U.S. banks held 86,398 short positions, or bets that gold prices will fall, in the COMEX gold market as of Aug. 5 -- 10 times more short positions than a month earlier, a government report showed.
      The report by the Commodity Futures Trading Commission, which regulates U.S. futures markets, also showed short positions held by three U.S. banks in silver futures had increased more than four times during the same period.
      "The data in the bank participation report is so clear and compelling that it is hard to conclude anything but manipulation," said Theodore Butler, a precious metals analyst, in a note.
      The sudden jump in short positions coincided with a slide in silver and gold prices, which fell $12.30 an ounce in July and another $89.20 in August, their biggest monthly loss since at least 1984, according to Factset.
      Manipulation vs. speculation
      Taking a short position, even large amounts, however, doesn't equate to manipulation, which would imply collusion between several big players to influence prices one way or the other.
      But the fact that three big banks were singled out in the CFTC report is nothing new. The regulator's reports always show the largest three players in futures markets in any given month.
      "One can take any data and make it suit their argument," said Jon Nadler, senior analyst at Kitco Bullion Dealers.
      "The theory that the market is somehow sinisterly manipulated, especially as it comes at a time when U.S. regulators are keeping a keen eye on the goings-on in the commodities and financial markets for just such type of evidence, is simply ludicrous and totally out of touch with market reality."
      The talk of manipulation in metals markets follows similar allegations that crude oil and agricultural commodities prices were bid up by speculators, and were not the result of fundamental demand and supply situations.
      As oil surged this year and almost reached $150 a barrel in early July, while food prices also kept on rising, cries grew louder in Congress that something had to be done.
      The CFTC took steps to stamp out "excessive speculation" in the oil markets, while Congress also held numerous hearings and investigations into other futures market.
      In July, the CFTC charged Dutch company Optiver Holding BV with manipulation of crude oil and of other energy futures. In at least five out of 19 attempts, the defendants successfully manipulated certain energy futures contracts, causing artificial prices, the CFTC alleged. See related story.
      Of oil and elections
      Some analysts say the surge in oil and gasoline prices earlier this year caused many worries in Washington, where all eyes were already turned toward the presidential elections in November.
      "My gut feeling is that the Republicans wouldn't mind taking oil back down under $100 before the elections," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
      Mendelsohn said he believes the government has tried to make the U.S. economy, oil, and markets appear in better shape and also to temporarily curb the immediate effects of the slumping housing market, of bad home loans and of the credit crisis.
      In July, the Securities and Exchange Commission, the stock market regulator, limited so-called "naked" short selling of shares in Fannie Mae (FNM:
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      Comments: 278

      "Congress is already investigating allegations of manipulation in the oil market, and it seems likely that it is only a matter of time before a similar investigation will be required in the precious metal markets,"

      What a joke...

      - bugbee

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