This is not the first time that Paul Craig Roberts and his colleagues have exposed flagrant rigging of the Comex (paper) gold market downward by market insiders. One possible motive for such manipulation "...is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar..." Blogger's recommendation: Buy real gold metal (not paper) now, because sometime in the not too distant future such rigging will no longer work, whereupon the value of gold metal will double or triple over night...

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Insider Trading and Financial Terrorism on Comex

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July 16, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Paul Craig Roberts and Dave Kranzler

July 16, 2014. The first two days this week gold was subjected to a series of computer HFT-driven “flash crashes” that were aimed at cooling off the big move higher gold has made since the beginning of June. During this move higher, the hedge funds, who typically “chase” the momentum of gold up or down, built up hefty long positions in gold futures over the last 6 weeks. In order to disrupt the upward momentum in the price of gold, the bullion banks short gold in the futures market by dumping large contracts that drive down the price and make money for the banks in the process.

As we explained in previous articles on this subject, the price of gold is not determined in markets where physical gold is bought and sold but in the paper futures market where contracts trade and speculators place bets on the price of gold. Most of the contracts traded on the Comex futures market are settled in cash. The value of the contracts used to short gold and drive down the price is well in excess of the actual amount of physical gold that is kept on the Comex and available for delivery. One might think that regulators would pay attention to a market in which the value of contracts outstanding exceeds by several multiples the amount of physical gold available for delivery.

The Comex gold futures market trades 23 hours per day on a global computer system called Globex and on the NYC trading floor from 8:20 a.m. EST to 1:30p.m. EST (the 8:30 a.m. opening time on the face of the graph below is a draftsman’s error). The Comex floor trading session is the highest volume trading period during any 23 hour trading period because that is when most of the large U.S. financial institutions and other users of Comex futures (jewelry manufactures and gold mining companies) are open for business and therefore transact their Comex business during Comex floor hours in order to achieve the best trading execution at the lowest cost.

The big hedge funds primarily trade gold futures using computers and algorithm programs. When they buy, they set stop-loss orders which are used to protect their trading positions on the downside. A “stop-loss” order is an order to sell at a pre-specified price by a trader. A stop-loss order is automatically triggered and the position is sold when the market trades at the price which was pre-set with the stop-order.

The bullion banks who are members and directors of Comex have access to the computers used to clear Comex trades, which means they can see where the stop-loss orders are set. When they decide to short the market, they start selling Comex futures in large amounts to force the market low enough to trigger the stop-loss orders being used by the hedge fund computers. For instance, huge short-sell orders at 2:20 a.m. Monday morning triggered an avalanche of stop-loss selling, as shown in this graph of Monday’s (July 14) action (click on graph to enlarge):

In the graph above, the first circled red bar shows the flash crash that was engineered at 2:20 a.m. EST, a typically low-volume, quiet period for gold trading. 13.5 tonnes of short-sales were unloaded into the Comex computer trading system. The second circled red bar shows a second engineered flash-crash right before the Comex floor opened at 8:20 a.m. EST. This was triggered by sales of futures contracts representing 27.5 tonnes of gold. A third hit (not shown) occurred at 9:01 a.m. This time contracts representing 40 tonnes of gold hit the market.

The banks use the selling from the hedge funds to cover the short positions they’ve amassed and book trading profits as they cover their short positions at price levels that are below the prices at which their short positions were established. This is insider trading and unrestrained financial terrorism at its finest.

As shown on the graph below, on Tuesday, July 15, another flash-crash in gold was engineered in the middle of Janet Yellen’s very “dovish” Humphrey-Hawkins testimony. Contracts representing 45 tonnes of gold were sold in 3 minutes, which took gold down over $13 and below the key $1300 price level. There were no apparent news triggers or specific comments from Yellen that would have triggered a sudden sell-off in gold — just a massive dumping of gold futures contracts. No other related market (stocks, commodities) registered any unusual movement up or down when this occurred:

Between July 14 and July 15, contracts representing 126 tonnes of gold was sold in a 14-minute time window which took the price of gold down $43 dollars. No other market showed any unusual or extraordinary movement during this period.

To put contracts for 126 tonnes of gold into perspective, the Comex is currently reporting that 27 tonnes of actual physical gold are classified as being available for deliver should the buyers of futures contracts want delivery. But the buyers are the banks themselves who won’t be taking delivery.

One motive of the manipulation is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar, as we’ve described in previous articles on this topic. And, of course, the banks make money from the manipulation of the futures market.

The Commodity Futures Trading Commission, the branch of government which was established to oversee the Comex and enforce long-established trading regulations, has been presented with the evidence of manipulation several times. Its near-automatic response is to disregard the evidence and look the other way. The only explanation for this is that the Government is complicit in the price suppression and manipulation of gold and silver and welcomes the insider trading that helps to achieve this result. The conclusion is inescapable: if illegality benefits the machinations of the US government, the US government is all for illegality.

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THE U.S. DEPARTMENT OF "JUSTICE" BLACKMAILED BARLEYS BANK THUSLY: PAY THE U.S. A FINE OF $160 MILLION OR FACE PROSECUTION FOR THEIR RIGGING OF THE LIBOR (WHICH JUST HAPPENED TO ROB THEIR CLIENTS OF MANY BILLIONS OF DOLLARS). AGREED, SCREW THE CLIENTS.

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Will Obama Admin. Prosecute the Big Banks for LIBOR Manipulation? 

Michael Greenberger: With Wall St.'s embace of Romney, Obama has nothing to lose prosecuting the big banks for the LIBOR fraud 

A complete transcript is available at the original.

Bio 

Michael Greenberger is a professor at theUniversity of Maryland School of Law, where he teaches a course entitled "Futures, Options and Derivatives."Professor Greenberger serves as the Technical Advisor to the United Nations Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. He has recently been named to the International Energy Forum’s Independent Expert Group that provided recommendations for reducing energy price volatility to the IEF’s 12th Ministerial Meeting in March 2010. Professor Greenberger was a partner for more than 20 years in the Washington, D.C. law firm of Shea & Gardner, where he served as lead litigation counsel before courts of law nationwide, including the United States Supreme Court.

Robert Reich's Blog

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The Remarkable Political Stupidity of the Street

Friday, December 9, 2011

Wall Street is its own worst enemy. It should have welcomed new financial regulation as a means of restoring public trust. Instead, it’s busily shredding new regulations and making the public more distrustful than ever.

The Street’s biggest lobbying groups have just filed a lawsuit against the Commodities Futures Trading Commission, seeking to overturn its new rule limiting speculative trading.

For years Wall Street has speculated like mad in futures markets – food, oil, other commodities – causing prices to fluctuate wildly. The Street makes bundles from these gyrations, but they have raised costs for consumers.

In other words, a small portion of what you and I pay for food and energy has been going into the pockets of Wall Street. It’s just another hidden redistribution from the middle class and poor to the rich.

The new Dodd-Frank law authorizes the Commodity Futures Trading Commission to limit such speculative trading. The commission considered 15,000 comments, largely from the Street. It did numerous economic and policy analyses, carefully weighing the benefits to the public of the new regulation against its costs to the Street. It even agreed to delay enforcement of the new rule for at least a year.

But this wasn’t enough for the Street. The new regulation would still put a crimp in Wall Street’s profits.

So the Street is going to court. What’s its argument? The commission’s cost-benefit analysis wasn’t adequate.

At first blush it’s a clever ploy. There’s no clear legal standard for an “adequate” weighing of costs and benefits of financial regulations, since both are so difficult to measure. And putting the question into the laps of federal judges gives the Street a huge tactical advantage because the Street has almost an infinite amount of money to hire so-called “experts” (some academics are not exactly prostitutes but they have their price) who will use elaborate methodologies to show benefits have been exaggerated and costs underestimated.

It’s not the first time the Street has used this ploy. Last year, when the Securities and Exchange Commission tried to implement a Dodd-Frank policy making it easier for shareholders to nominate company directors, Wall Street sued the SEC. It alleged the commission’s cost-benefit analysis for the new rule was inadequate.

Last July, a federal appeals court – inundated by Wall Street lawyers and hired-gun “experts” – agreed with the Street. So much for shareholders nominating company directors.

Obviously, government should weigh the costs against the benefits of anything it does. But when it comes to the regulation of Wall Street, one overriding cost doesn’t make it into any individual weighing: The public’s mounting distrust of the entire economic system, generated by the Street’s repeated abuse of the public’s trust.

Wall Street’s shenanigans have convinced a large portion of America that the economic game is rigged.

Yet capitalism depends on trust. Without trust, people avoid even sensible economic risks. They also begin trading in gray markets and black markets. They think that if the big guys cheat in big ways, they might as well begin cheating in small ways. And when they think the game is rigged, they’re easy prey for political demagogues with fast tongues and dumb ideas.

Tally up these costs and it’s a whopper.

Wall Street has blanketed America in a miasma of cynicism. Most Americans assume the reason the Street got its taxpayer-funded bailout without strings in the first place was because of its political clout. That must be why the banks didn’t have to renegotiate the mortgages of Americans – many of whom, because of the economic collapse brought on by the Street’s excesses, are still under water. Some are drowning.

That must be why taxpayers didn’t get equity stakes in the banks we bailed out – as Warren Buffet got when he bailed out Goldman Sachs. That means when the banks became profitable gain we didn’t get any of the upside gains; we just padded the Street’s downside risks.

The Street’s political clout must be why most top Wall Street executives who were bailed out by taxpayers still have their jobs, have still avoided prosecution, are still making vast fortunes – while tens of millions of average Americans continue to lose their jobs, their wages, their medical coverage, or their homes.

And why the Dodd-Frank bill was filled with loopholes big enough for Wall Street executives and traders to drive their ferrari’s through.

The cost of such cynicism has leeched deep into America, causing so much suspicion and anger that our politics has become a cauldron of rage. It’s found expression in Tea Partiers and Occupiers, and millions of others who think the people at the top have sold us out.

Every week, it seems, we learn something new about how Wall Street has screwed us. Last week we heard from Bloomberg News (that had to go to court for the information) that in 2009 the Street’s six largest banks borrowed almost half a trillion dollars from the Fed at nearly zero cost – but never disclosed it.

In early 2009, after Citigroup tapped the Fed for almost $100 billion, the bank’s CEO, Vikram Pandit, had the temerity to call Citi’s first quarter the “best since 2007.” Is there another word for fraud?

Finally, everyone knows the biggest banks are too big to fail — and yet, despite this, Congress won’t put a cap on the size of the banks. The assets of the four biggest – J.P. Morgan Chase, Bank of America, Citigroup, and Wells Fargo – now equal 62 percent of total commercial bank assets. That’s up from 54 percent five years ago. Throw in Goldman Sachs and Morgan Stanley, and these six leviathans preside over the American economy like Roman emperors.

Speaking of Rome, if Italy or Greece defaults and Europe’s major banks can’t make payments on their debts to Wall Street, another bailout will surely be required. And the politics won’t be pretty.

There you have it. A federal court will now weigh costs and benefits of a modest rule designed to limit speculative trading in food and energy.

But in coming months and years, the American public will weigh the social costs and social benefits of Wall Street itself. And it wouldn’t surprise me if they decide the costs of the Street as it is far outweigh the benefits.

The result will be caps on the size of banks. Some will be broken up. Glass-Steagall will be resurrected. Some Wall Street bigwigs may even see in the insides of jails.

If so, the Street has only itself to blame.

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Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock. His "Marketplace" commentaries can be found on publicradio.com and iTunes. He is also Common Cause's board chairman.

AN INTERVIEW WITH A COMMODITY FUTURES TRADING COMMISSION COMMISSIONER WHO HOPES TO REGULATE HIGH-SPEED COMMODITIES TRADING AND THE $600 TRILLION DERIVATIVES MARKET SUFFICIENTLY TO AVERT ANOTHER BIG-BANK CRASH...

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August 15, 2011

CFTC Commissioner: "A Hair Trigger Away from Economic Calamity"

Bart Chilton Pt.1: Wall Street lobbyists trying to slow down trading regulations and defund Commission



August 16, 2011

Food, Speculation and Parasitical Trading

Bart Chilton Pt.2: Massive spikes in price of food, oil, natural gas and silver cannot be the result of supply and demand



August 18, 2011

Will CFTC Limit Excessive Speculation?

Bart Chilton Pt.3: For regulations to be effective, there has to be political will and proper resources



Bio

Bart Chilton is the current commissioner for the U.S. Commodity Futures Trading Commission. Bart Chilton was nominated by President Bush and confirmed by the U. S. Senate in 2007. In 2009, he was re-nominated by President Obama and reconfirmed by the Senate. He has served as the Chairman of the CFTC’s Energy and Environmental Markets Advisory Committee (EEMAC). His career spans 25 years in government service—working on Capitol Hill in the House of Representatives, in the Senate, and serving in the Executive Branch during the Clinton, Bush and Obama Administrations. Prior to joining the CFTC, Mr. Chilton was the Chief of Staff and Vice President for Government Relations at the National Farmers Union where he represented family farmers. In 2005, Mr. Chilton was a Schedule C political appointee of President Bush at the U. S. Farm Credit Administration where he served as an Executive Assistant to the Board. From 2001 to 2005, Mr. Chilton was a Senior Advisor to Senator Tom Daschle, the Democrat Leader of the United States Senate, where he worked on myriad issues including agriculture and transportation policy.