Much confusion persists regarding the method, or mechanics, of how the big banks are able to push the price of precious metals around at will for so long.
GATA and Ted Butler have long established and outlined the reasons why this occurs (legally). They have also established the foundation that forms the basis of how the manipulation unfolds. Despite very clear and concise commentary, the message sometimes becomes diluted in its distribution. This situation makes for easy picking from the hard-core opposition who mainly reside, ironically, as part of the professional mining and trading community.
The confusion comes from declarations that on price drops, the bullion banks are selling. This then triggers the frequent and violent down-drafts we have witnessed over the last 2 years and counting. However, the trading data indicates the contrary. Commitment of Traders (COT) data shows that the big banks alway buy on these dips and they always sell on rallies. Always. (This is clear evidence of manipulation in and of itself.)
So how do they get the price moving in one direction or another, usually to the downside?
The mechanism is made clear by the forensic analysts at NANEX, which provides documented real time price action down to the microsecond.
Stacking the Bid with Fill and Kill
Via high frequency trading, the big banks are able to stack the bid with spoof orders because of their size and privilege. They are able to place the trades in large size because of their already super-concentrated short (and long in the case of gold) corners. This issue, along with no governor on position limits, also constitutes manipulation on its own.
This technique has been around the HFT world for years and is otherwise known as “fill and kill” trades. The price for these contracts is impossible to fill, so the transaction never closes. However, the bid lasts long enough to trigger speculative funds (hedge funds) to respond (via their own algorithms) into automatic selling and down goes the price.
In the aftermath, the big banks are ready and willing to buy. And they clean up, as it is revealed when the COT data is released a week later. The reverse happens on the way up.
Who has the ability to put a trade on like that?
These sudden moves appear around market opens and coincide with the overlap between the London fixes and the COMEX open. These millisecond trades that have 'broken' the CME platform more than a few times over the last six months are fill and kill trades.
These are naturally active sessions of which, on at least four occasions over the last six months, the CME has needed to stop trading because of the sudden surge in liquidity.
The resulting price action forms the foundation of the technical analysis. It also forms the popular commentary as to why the price moved this way or that, which of course really has not much to do with those exogenous events.
Opponents, mainly those in the professional trading community, will often misrepresent or attack the wrong argument. It is natural that most of us desire to imagine we are part of an ethical system and not operating in a rigged casino.
That the miners remain largely mute on the issue may be simply due to their dependence on the very banks that control the price.