New York Price of Gold Suppression 1/2 Year Patterns

July 27, 2000

Now that we've reached the half-year point in my tracking the cyclical pattern of gold trading, e.g., "Up overseas / Down in NY", it's time to examine that phenomenon a little more closely. The price of gold has gone nowhere in terms of the average price from early January until today (hovering around $280/oz).

I have divided the six-month period into 2 halves. These two halves show about the same frequency of gains overseas Vs losses in the NY market but, the magnitude of those gains and losses has been markedly reduced during the second half of the 6 month period. Table 2 shows a frequency of trading gains overseas that averages about 73% for the period Vs about 70% losses in NY. You will notice that the difference between overseas and NY trading was about $2 per day during the first half of the 6 month period (e.g., $.95 overseas gain plus $1.03 NY loss per day). While the POG still hovers around $280 and overseas and NY trading are still going in opposite directions, the difference between overseas and NY trading has been reduced to a little over a dollar (e.g., $.58 overseas gain plus $.45 NY loss per day). Although the frequency of overseas gains Vs NY losses is almost exactly the same it is much harder to trade the reduced size of the differences.

Another phenomenon of the trading pattern is the larger variability of the NY Vs the overseas changes. This difference appears in several different places. First is the visual representation in Chart 1. The purple band of NY losses shows a large rise in frequency when the losses equal/exceed $2.25 for the trading day. Table 1 shows that more than 26% of all trading days in NY (32/120) have losses of this magnitude during the 6-month period.

Overseas gains are much more consistent with smaller standard deviations during both trading periods. The great majority of overseas gains occur between a few pennies and $1.50 with very few losses ever exceeding the $1.50 mark.

In summary, it almost appears as if the NY market is pacing the overseas market - when there are larger gains overseas, there are larger losses in NY and when there are smaller gains overseas, there are smaller losses in NY.

I recommend that you read my earlier articles that analyze why this pattern is not likely to go away quietly. Only an unmanageably large crisis will drive overseas buying through the roof, bury several bullion banks and mining companies, and finally drag American buyers into the market.

Minting of gold in the U.S. stopped in 1933, during the Great Depression.