The Smoking Gun For Gold Manipulation By The Fed

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
July 15, 2015

Over the last few years, we have heard much about the metals being manipulated, especially by the Fed.  Two weeks ago, Gold-Eagle published an article of mine which addressed much of the manipulation argument.

Within that article, I tried to point out that it was not the gold market being manipulated as much as the participants within the market being manipulated by all the analysts that have been wrong for 4 years:

You see, these investors and analysts know for a fact that they are smarter than the market, and are even smarter than price.  So, in their perspective, it is not possible for metals to decline if it were allowed to be “free.”  Rather, someone must be manipulating it to go down.  In fact, gold is the only market I know of where a common belief is held that it is not supposed to be a two way market, since it must only go in one direction.  I am sorry, but that is an absurd way to look at any market.  Markets naturally enter phases of progression and regression, and that is just the way all markets work. To believe otherwise is simply foolish.  And, as Dr. John Bridges noted in 1587 “a foole and his money is soone parted.”

Along those lines, it is my firm belief that the “manipulation” theories have been propagated by analysts who have been on the wrong side of the metals market for the last 3 years.  Think about it.  Did any of them claim the market was manipulated when it went to $1,900?  No. They were all too intoxicated with euphoric expectations of imminently eclipsing the $2,000 mark that they failed to see the impending top.  They continually reiterated the same fundamental drivel, which is the exact same fundamental drivel which is paraded before you today, as to why the metals should be going only higher.

So, rather than admit they were wrong, or worse, that their methods in the metals market failed miserably, they claim the market is “manipulated.” Well, it sure has made many of their followers feel “smarter” about holding on to their metals positions without hedges for the last 3 years of significant drawdown.  I mean, they “know” they are right and the market is wrong, but it is someone else’s fault that they lost money.  Yea . . . and the dog ate my homework.

As a response to this article, a commenter argued that even Alan Greenspan, in his testimony before the Committee on Banking and Financial Services in 1998, noted that there was clear manipulation by the Fed in the gold market.  And, he based his opinion on one line in that testimony, where Greenspan stated that “central banks stand ready to lease gold in increasing quantities should the price rise.”

Sounds like he found the smoking gun, right?

Not really, if you actually read what he said.  You see, the manipulation theorists take bits and pieces they feel support their positions without regard to the context in which the entire quote was meant, and they ignore everything else said by the person they quote which evidences the appropriate context.  As an example, if one were to actually read the entire paragraph cited by the manipulation theorists, you would note that Mr. Greenspan was bringing up a methodology which may combat an attempt at market manipulation in the gold market. But, Mr. Greenspan never even opined as to how successful such an attempt would be, nor did he even state that there was manipulation which had to be combatted.

While I am sure the manipulation theorists will still discount what he really said and view it as evidence that the Fed is manipulating gold, a few paragraphs later, Mr. Greenspan noted that manipulation did not likely exist:

"Even with centralized execution or clearing, the most relevant attributes of these markets would not resemble those of the agricultural futures markets and hence would not be susceptible to manipulation."

Of course, I now fully expect to be bombarded by the manipulation theorists with the point that Greenspan is not to be trusted.  My question to them is then why do they attempt to use his testimony as evidence for their perspective that the Fed manipulates gold?  It’s about time for a little honesty and consistency, don’t you think?

Ultimately, one needs to accept that markets enter corrections as part of their natural progression, and not due to manipulation.  Again, as I noted in my article about manipulation:

So, let’s talk some honesty.  Do you know of any market on the face of this earth that only goes up? Don’t all major markets move up and then correct before continuing to move in the prior direction? Yet, these “manipulation theorists” want you to buy into a few facts to which they point to claim that a standard correction is due to “manipulation.” Rather, the more reasonable and less paranoid perspective is that corrections are simply the part of the natural course of financial markets.

In conclusion, I will post this question again:  What is being manipulated more – gold or investors?  The answer is actually quite clear once you look at the question with an open mind.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: [email protected].

The melting point of gold is 1337.33 K (1064.18 °C, 1947.52 °F).
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