Is the Price of Gold Manipulated? (w/ Grant Williams)

[Music] because of its fascination for mankind gold has always been surrounded by conspiracy theories and stories of price suppression and manipulation that's really no surprise after all wherever you find money you inevitably find human beings trying to cheat in some way or another fake gold bars have frequently surfaced over the years with gold-plated tungsten which has an identical density to gold being the most common substitute fortunately any one of a number of very simple tests will provide a conclusive answer as to whether a particular bar is fake or not gold is unique however the most important questions about possible manipulation of the gold price concern much broader issues and occur at a much higher level well the question about manipulation is is clearly a favored one people like to discuss this I do think that even a cursory glance at historical fact will lead you in a fairly clear direction I mean it's not like this is a hidden thing I mean the London gold pool existed it was an overt way of managing the gold price in terms of its this price it's clearly in the interest of central banks to manage particularly in the in the monetary system as it functions right now whether it does function modeling a slightly separate point it's clearly in in their interest to to manage the risk-free rates would you influence the gold price well instead the gold is the reciprocal trust in central banks you betcha would a cheaper gold price notwithstanding the fact that central banks are the biggest holders of God 60% of their reserves are in gold would you want to suppress it via Boettcher the problem is too big are they doing it I don't know is the answer but money this almost a racing certainty they probably are others however are far more confident not only as to the question of whether the gold price is manipulated but also who the culprits might be well the gold price is absolutely manipulate it when I say that I'm not you know you imply some deep dark conspiracy I don't think Janet Yellen wakes up in the morning and thinks about gold I don't think John knows anything about gold to be honest I mean she's sort of a geeky liberal laborer economist who worships the phillips curve so I don't think Janet yellen's behind some conspiracy to you know suppress the price of gold but there's absolutely manipulation I've spoken to the several experts one is a PhD statistician so it's not a PhD in economics his ph.d and statistics works for one of the largest hedge funds in the world he looked at a ten-year time series and he took like literally tick by tick information on the Comex gold future for ten years and he said there is no explanation for this data other than manipulation it could not possibly have happened through normal market forces in particular he noticed that at the end of the day like on the last trading tick on the Comex the price of gold got smacked down and then at the open the next day it could kind of pop up again so he said well this is the easiest trade in the world just buy gold right after the close and sell it the next morning you know just before the open and you'll just make consistent steady profits well anyone knows anything about about markets and how they operate knows that you cannot make consistent steady profit this is what Bernie Madoff said he was doing right so he said the probability that the price naturally goes down at the close and naturally goes up the next point is like zero after ten years and this is not inference I mean this is like DNA like you know you may not see the crime being committed but if you have the DNA evidence you can be pretty sure who did it governments everywhere throughout history have wanted to manage it's a critical national security you know whether you go back to the time of the Romans etc value of a currency is very very important to manage particularly if you're a government that hasn't managed your finances all that well and unfortunately that is over time most governments sooner or later find themselves in that position and so the manipulation is right there in the open and that it is a creation of a of a derivative market that satisfies demand that would otherwise go to physical and that that was the goal of setting that up and that's not well understood I don't by many market participants but as I said it's there in black and white and historical archives when you see gold trade the way it trades when it drops you know someone sells three billion dollars worth of you know notional futures at 2:00 a.m. New York time you know having been on Wall Street for 22 years and over fact that if any buy-side trader would execute an order like that on any consistent basis they'd be out of a job very very quickly you know there there clearly somebody not trying to get best you know best execution and and if they're not trying to get best execution what you're talking about the currency intervention basically and so you know new who is doing that is that originally the US government had a very strong interest in managing the person either the perception of the dollar through gold so yeah there was a you know famously in the late 1990s that he George an official with the I believe of the Bank of England and UK he famously said we looked into the abyss you know if the gold price continued to rise it would take it would have taken down one major trading house and and a number of others would have followed and so there is a you know there is a a sign there that the banks at that point had gotten involved in you know gold financing that have left them short gold in a way that any real rise in gold would have you know you know led to an existential threat to to them yes I think the price of gold is manipulated and I think it's manipulated in a number of ways I mean certainly there is a a concerted PR campaign against gold by central banks for the reasons that we've discussed you know they they it is very specifically in the statist and central banker kind of interest to ensure a a weak gold price you don't want to see essentially the gold price de-facto recreating a sort of reserve currency by just being incredibly strong so there's a there's a there's a constant barrage of negative publicity towards the gold the gold industry when it comes to specific manipulation of the gold price yeah I think that that is is probably likely to and I can't we can't actually tell because of the way central banks don't you know are very a very opaque with what they do their gold hole is that particularly their gold swap positions but I think it's likely and the reason why I think it's likely is because they've been manipulating other markets for a very long period of time now historically hedge funds were not players in gold there was a few specialists but you know they're done' stocks bonds whatever well they've sort of glommed onto gold to them it's just another commodity it could be coffee beans soy beans lumber who cares it's a thing to trade well if you're if you're sure gold like you've done some derivative contract with goldman sachs and you're short it's easy to paint the tape I mean painting the tape just means manipulating the market through the Gulf futures market now the other day well recently a few weeks ago somebody sold 60 tons equivalent of paper gold now I make the point they didn't sell 60 tons of gold they sold gold futures contracts that were equivalent to 60 times but I can sell 60 tons of paper gold with a phone call to my broker all I need is a brokerage account they got to put some margin like five percent but they drove the price down I figure I think 20 $30 an ounce in in a matter of minutes and so if I'm sure it over here on the derivatives side and I dumped the gold here and the price goes down and then all of a sudden to make money over here or maybe I want to go long and I want to drive the price down and then buy at the bottom and write it back up again so perhaps unsurprisingly hedge funds and bullion bank traders push the gold price around to try and make profits but while gold remains a strategic asset which sits at the foundation of many nations balance sheets there are players far far bigger than hedge funds who don't care about making a profit but you have much broader and far stronger motivation to suppress the price of bullion the the important question is who's doing it and why there are and the question I asked is why is there not being investigated by the regulatory authorities by the Commodity Futures Trading Commission etc now one possible answer to that is that the Chinese are behind it and they're outside the jurisdiction there's no way that a US government agency is going to investigate the activities of China in our markets China's too big they're sovereign nation that would not go anywhere there could be a million diplomatic and national security and other reasons for not messing with China in that dimension so China's my number one suspect because people go wait a second they got all this gold why would they want the price to go down well the answer is they're still buying ultimately they're gonna want the price to go where it's going to go which is ten thousand dollars an ounce or higher but they don't want that now because they're still buying they're playing catch-up with the United States and by the way they've bought thousands of tons which is a lot of gold but they have thousands of tons to go to equal the u.s. in the gold of GDP ratio we're either in the absolute sense to get to 8,000 tons or in the proportional sense gold to GDP either way they're still playing catch-up with the United States but not every gold market veteran buys into the idea that the gold price is subject to manipulation it has to be said some of the reasons they offer as to why the idea of a state-sponsored price suppression scheme may be far-fetched are both simple to understand and hard to argue with I think that all financial markets are manipulated from time to time unlike many of my peers in the gold business I have seen upwards price manipulation when that is easier long-term manipulation requires a conspiracy of a size that I don't think is possible the idea is an example that the US government the trilateral commission and the international Jewish conspiracy whoever they are could come together and do a three decade-long manipulation in gold forgets that the US government can't educate the kids it can't deliver the mail it lost the war on drugs lost the war in poverty it lost the war in Vietnam inant lost the war in Afghanistan how on earth could they organize a broad scale manipulation when they can't even manage their own campaigns most governments eventually wind up manipular gold price to protect their own power so certainly possibility I I've never seen any hard evidence of that and also I would say that it is the nature of gold to underperform other is incredible you don't need Anna Faris fed reserve pushing it down because that's what happens naturally incredible everything else goes up in terms of golden their course when the bubble ends is it must things crash it turns we go that is a natural thing and it's really what we saw over the last 40 years when I mean for example from 2000 to 2008 bill winner phenomenal prices we went down in terms of oil and other commodities so in fact it did very badly in real terms when when the bubble had popped in 2008 and nine gold did fantastically well in nominal and real terms and then Bernanke managed to blow a bigger bubble and so is nobody surprised that gold did badly during that period now it was with the Fed movement downwards I mean it's possible but we don't need that as a theory but why would any suppression of the gold price be so important and what might happen were it to be both exposed and shut down January 2018 a group of traders working for the big bullion banks became the latest market participants to be fine for trying to manipulate precious metals markets a pattern net has been commonplace over the years but this proof of price manipulation in the gold market like many similar episodes which have gone before it had no meaningful impact on the price however any manipulation in the gold market like all price suppression schemes will ultimately come to an end at some point and when it does the potential ramifications are enormous all manipulations fail at the end of the day they all fail the 1968 London gold pool failed late 1970s u.s. and IMF dumped us for twice or 1700 tons of gold in the market it failed the price in 1980 was higher than ever late 90s we twisted the UK's arm got them to sell over half their gold now they're stuck early 2000s it was Switzerland we got them to sell about 2000 tons but the problem is we have now run out of suckers to sell the gold in one day the holders of paper gold will realize that they will never get delivery because there ain't any gold to deliver against it and they will sit there with a piece of paper and when there is comics or what the bullion bags would in all the people dealing called they will default and at that time they just won't be any gold available and the gold price would obviously shoot straight up and will be very hard to buy gold one of the core lessons of history is that the market is more powerful than governments and when this bubble we're living and currently pops it doesn't matter how much they try to manipulate it gold will not be manipulated to that extent so we'll break out what are the manipulative now or not [Music] you you you

Channel: Real Vision

Views: 36,737

Keywords: Real Vision, Real Vision Finance, Real Vision Television, Finance, Trading, Economy, Investing, Trade Ideas, Stock Market, Investments, Economics, Stocks, Gold, Precious Metals, Gold Standard, Bullion, Gold Mining, Gold Investment, Commodities, Gold Price, Grant Williams, Commodities for Beginners, Documentary, manipulation, gold price manipulation, jp morgan gold manipulation

Id: zpJLARG-GEc

Length: 14min 47sec (887 seconds)

Published: Thu May 16 2019