View Full Version : Gold price manipulation/control proof
<center>Gold price manipulation proof
(slightly revised from original Jan 2007 article)
</center>
There's really not much to say, since the raw charted data is so obvious, but there are some facts.
The correlation between the European Central Bank's gold purchase and sale activity (http://sdw.ecb.int/search.do?type=free&q=gold%2breceivables) and the gold price in Euros is -.71. That means that 71% of the gold price changes since 1999 can be explained by ECB actions alone.
The left hand scale on both charts is in metric tonnes. One metric tonne is about 32,150 troy ounces of gold.
As just one example of the very large size of ECB gold operations, during the gold price increase from early April 2006 to the peak in mid May 2006, the ECB sold 1,000 metric tonnes of gold. That translates to about 31 million troy ounces. During the fall from mid May 2006 to a bottom in June 2006, they bought back 1,875 metric tonnes, which is approximately 60 million troy ounces.
Just for reference, the total supply of gold per the World Gold Council (http://www.gold.org/) in 2005 was 3,953 metric tonnes or about 127 million troy ounces.
The total gold price increase from about 325 to 500 Euros caused the average ECB gold inventory to drop about 1200 metric tonnes or about 39 million troy ounces.
The quantity of gold trading by the ECB dwarfs the total 500 metric tonne sale limit of the Washington Agreement.
For those who might point out that futures trading quantities are far larger, that's true. But not only are they only paper trades and physical gold is seldom delivered, but also there are thousands of different traders and none consistently trade in quantities similar to the ECB.
The data is published by the ECB anywhere from 1-2 weeks behind the events, so it's not useful for trading. Here (http://www.ecb.int/press/pr/wfs/2008/html/index.en.html) is the weekly data link for 2008.
Some might prefer to look at the data as evidence of control, as opposed to manipulation.
The huge majority of the ECB trades are in the "receivables", or "paper gold" area. For proof, simply repeat the search in the first point above and drop the word receivables.
The gold trading record of the ECB, since 1999
http://www.nowandfutures.com/images/ecb_weekly_gold_long_term.png
The close-up gold trading record of the ECB
http://www.nowandfutures.com/images/ecb_weekly_gold.png
"So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System."
-- Alan Greenspan, Chairman of the Federal Reserve.
Source: (http://www.federalreserve.gov/fomc/transcripts/1994/940322Meeting.pdf) Federal Open Market Committee (FOMC) meeting minutes from March 22, 1994 (page 41)(note that the source is a large pdf file).
"Central banks stand ready to lease gold in increasing quantities should the price rise."
-- Alan Greenspan, testimony to Congress on July 24, 1998 (http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm)
Gold Market Lending (http://www.blanchardonline.com/beru/lending_research_report_index.php), an excellent treatment of many issues in this area from Blanchard and Company, Inc.
(edit/add for this paragraph)
Lastly, we do not mean in any way to imply that the ECB will win on the longer term with its control or manipulation of gold. Central banks, etc. did not win during the last gold bull market in the 1970s. Our primary intention is to show that control or manipulation exists, and that it should be taken into account for both traders and investors.
Note for researchers and the curious:
The ECB data for gold and receivables purchases and sales is both here (http://sdw.ecb.int/search.do?type=free&q=gold%2breceivables) and is also linked in the first bullet above. It brings up a search page in the ECB's database. Just check/select the first option ( the key is "ILM.W.U2.C.A010.Z5.Z0Z" as of late July 2008), and then click the "show selected data" button just above it. That will bring up the actual weekly data going back to 1999, which is in millions of Euros.
The only adjustments we've made to that raw data is to convert the values into troy ounces using the Euro gold price on the quarter ending date (the ECB only revalues its gold quarterly), and then converting to metric tonnes using a factor of 32,151 troy ounces per metric tonne. There are undoubtedly some minor discrepancies due to the conversion process, but not enough to materially change the results.
Also, Empirically observed covariation is a necessary but not sufficient condition for causality. (http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation)
(And I'm not a big believer in coincidences... and it's also now known why I wear a tinfoil hat)
The Outback Oracle
07-25-08, 06:37 PM
Thanks Bart, your posts are always most informative.
Now, maybe i am missing something here? It just looks like while the Gold price is going up the ECB were selling and when the Gold price is going down they are buying. So, rather than "manipulating" the market, do their activities amount more to a smoothing operation. Perhaps also acting like a half-smart trader?
Thanks Bart, your posts are always most informative.
Now, maybe i am missing something here? It just looks like while the Gold price is going up the ECB were selling and when the Gold price is going down they are buying. So, rather than "manipulating" the market, do their activities amount more to a smoothing operation. Perhaps also acting like a half-smart trader?
You're most welcome Oracle, and I may be wrong but it appears that you're reading it backwards. Most of the sales take place either concurrent with or slightly before peaks, and the buys are very close to bottoms.
And overall, as gold has gone up in price and especially since early 2006, they have sold almost 2000 metric tonnes.
Of course, one could interpret that as control or smoothing but:
Given the behavior of most central banks in the '70s in selling tonnes of gold near highs
That gold is one of the primary tips to the broad populace that big inflation is afoot.
The links I cited
That they and other "elite" consider it a "barbarous relic"
That Greenspan did actually say "Central banks stand ready to lease gold in increasing quantities should the price rise."
That Milton Friedman noted that "Inflation is always and everywhere a monetary phenomena" and if central banks aren't primarily responsible for money growth, then who is? (rhetorical)
That the buys & sells are measured in millions of ounces
That Paul Volcker stated "It was probably a mistake to allow gold to rise so high." per "Paul Volcker: The Making of a Financial Legend" by Joseph B. Treaster
... and many other things I could cite, I choose to interpret it as manipulation rather than control or smoothing. And yes, as metalman noted today on another thread - it's uugggly.
edit/add - on your trading observation, while its true that it could also be interpreted as "good traders", in my opinion there's a truly major moral and/or ethical issue with a major player like a central bank with tens of millions of ounces trading in "free" markets. Why does it need money from trading profits for one? - it can print all it needs.
The Outback Oracle
07-25-08, 07:30 PM
Thanks Bart, and looking at it out of my other eye i see your point...particularly lately!!!That is fuuugly!
Thanks Bart, and looking at it out of my other eye i see your point...particularly lately!!!That is fuuugly!
Cool and indeed... passing it along would be appreciated. :cool:
Due to a few misunderstandings, I just added the following paragraph to the original article:
Lastly, we do not mean in any way to imply that the ECB will win on the longer term with its control or manipulation of gold. Central banks, etc. did not win during the last gold bull market in the 1970s. Our primary intention is to show that control or manipulation exists, and that it should be taken into account for both traders and investors.
Bart,
Interesting little comment (http://solari.com/blog/?p=1424#comment-56167) by Catherine Austin Fitts on her site.
Precious dealers report that they have all buyers and no sellers. Wholesalers will not sell at these prices. That means that there is no market at these prices — a symptom of a very forceful manipulation.
I believe that the housing bill provided rich resources to do so — and now a series of steps are being taken to deleverage the financial system and drive resources back into the dollar.
Bart,
Interesting little comment (http://solari.com/blog/?p=1424#comment-56167) by Catherine Austin Fitts on her site.
Thanks.
Catherine Austin Fitts is spot on, yet again. Paper gold is just paper gold and is far easier to manipulate or control than physical.
Bart,
I don’t really know how to start this. I’ll try anyway…
When I read your gold price manipulation post I stumbled over the sheer volume of the supposed gold sales and buy backs. Selling 1000 tonnes in a month would literally unhinge the gold market. These huge swings also didn’t really make sense to me. Why would the ECB sell hundreds of tonnes in one month only to buy them back in the following month? I began to dig a little deeper into the ECB data. I started off with the ILM.W.U2.C.A010.Z5.Z0Z series, did a little spreadsheet work and arrived at first at a very similar chart. Then I noticed that all the small changes to the previous week correspond exactly to the central bank gold sales that are published in the weekly financial statements. You can find them here:
http://www.ecb.eu/press/pr/wfs/2008/html/index.en.html
The BIG changes, however, are caused by the quarterly revaluation of the ECB’s gold stock. Unfortunately, the younger statements for the revaluation weeks just lump sales and revaluation together. The older statements specify the amount of tonnes sold as well as the EUR/USD exchange rate and the revalued price of gold in euros for the following quarter. This gives some insight and allows partly for reconstruction.
I cleaned the data manually as good as possible and got a much smoother picture. My first chart shows the amount of gold in tonnes sold over the ECB’s life time:
http://www.noah-research.de/typo3temp/pics/d71d2337bc.gif
With only two exceptions, a swap that expired in the week ending 3/15/02 and one cb melting coins into bars in the week ending 8/1/03, there were only sales, no buys. I can see increased activity last summer, noticeably with the highest sale ever of almost 60 tonnes in early May, though nothing of the dimension you are suggesting. According to my research the ECB sold a total of 1667 tonnes since 1999. The rule that sales volumes rise with price increases holds true.
The next chart shows a close up of the last 18 months. It looks a bit like every time the price of gold in euros gets ahead of the value that’s assessed for the quarter some selling comes in, but I’m not sure about this.
http://www.noah-research.de/typo3temp/pics/b50af85f8a.gif
The ECB sold about 404 tonnes in the last 18 months. The financial statements say that all sales are consistent with the CBGA that came into effect September 27, 2004. The CBGA limits cb sales to 2500 tonnes over a five year period, that’s on average 500 tonnes per year. The numbers that I arrived at are indeed right within that frame.
The ECB’s cumulative gold sales suggest a loose correlation between sales volumes and the price of gold in euros:
http://www.noah-research.de/typo3temp/pics/47fc43d02b.gif
My last chart shows the inverse relationship between the amount of gold held by the ECB and the stock’s valuation in euros:
http://www.noah-research.de/typo3temp/pics/d765c56e95.gif
In 1998 the ECB announced that it will hold 15% of its reserves in gold (http://news.bbc.co.uk/1/hi/business/the_economy/128846.stm) with gold being valued at market prices. Since then gold has more than doubled and I’m sure they could have sold a lot more without breaking that rule. They sold less than 10% of the original stock. I’m inclined to think the ECB is rather gold friendly.
Well, that’s my 2 cents on this fascinating subject. I’m not saying that there is no manipulation in the gold market. In fact, the market right now makes me think strongly that there’s something fishy going on. My point is rather that I cannot identify the ECB as the culprit, at least not from this data after a closer look. I’m in debt to you for giving me a most interesting topic to ponder. Thank you!
-digger.
metalman
08-18-08, 07:05 PM
well done, digger! appropriate choice of handle, too :D
i'm not a fan of gold price manipulation because gold prices move in lock step with silver during these supposed central bank manipulations. are the cb's manipulating silver on the side at the same time? how? why?
phirang
08-18-08, 07:23 PM
Bart,
I don’t really know how to start this. I’ll try anyway…
When I read your gold price manipulation post I stumbled over the sheer volume of the supposed gold sales and buy backs. Selling 1000 tonnes in a month would literally unhinge the gold market. These huge swings also didn’t really make sense to me. Why would the ECB sell hundreds of tonnes in one month only to buy them back in the following month? I began to dig a little deeper into the ECB data. I started off with the ILM.W.U2.C.A010.Z5.Z0Z series, did a little spreadsheet work and arrived at first at a very similar chart. Then I noticed that all the small changes to the previous week correspond exactly to the central bank gold sales that are published in the weekly financial statements. You can find them here:
http://www.ecb.eu/press/pr/wfs/2008/html/index.en.html
The BIG changes, however, are caused by the quarterly revaluation of the ECB’s gold stock. Unfortunately, the younger statements for the revaluation weeks just lump sales and revaluation together. The older statements specify the amount of tonnes sold as well as the EUR/USD exchange rate and the revalued price of gold in euros for the following quarter. This gives some insight and allows partly for reconstruction.
I cleaned the data manually as good as possible and got a much smoother picture. My first chart shows the amount of gold in tonnes sold over the ECB’s life time:
http://www.noah-research.de/typo3temp/pics/d71d2337bc.gif
With only two exceptions, a swap that expired in the week ending 3/15/02 and one cb melting coins into bars in the week ending 8/1/03, there were only sales, no buys. I can see increased activity last summer, noticeably with the highest sale ever of almost 60 tonnes in early May, though nothing of the dimension you are suggesting. According to my research the ECB sold a total of 1667 tonnes since 1999. The rule that sales volumes rise with price increases holds true.
The next chart shows a close up of the last 18 months. It looks a bit like every time the price of gold in euros gets ahead of the value that’s assessed for the quarter some selling comes in, but I’m not sure about this.
http://www.noah-research.de/typo3temp/pics/b50af85f8a.gif
The ECB sold about 404 tonnes in the last 18 months. The financial statements say that all sales are consistent with the CBGA that came into effect September 27, 2004. The CBGA limits cb sales to 2500 tonnes over a five year period, that’s on average 500 tonnes per year. The numbers that I arrived at are indeed right within that frame.
The ECB’s cumulative gold sales suggest a loose correlation between sales volumes and the price of gold in euros:
http://www.noah-research.de/typo3temp/pics/47fc43d02b.gif
My last chart shows the inverse relationship between the amount of gold held by the ECB and the stock’s valuation in euros:
http://www.noah-research.de/typo3temp/pics/d765c56e95.gif
In 1998 the ECB announced that it will hold 15% of its reserves in gold (http://news.bbc.co.uk/1/hi/business/the_economy/128846.stm) with gold being valued at market prices. Since then gold has more than doubled and I’m sure they could have sold a lot more without breaking that rule. They sold less than 10% of the original stock. I’m inclined to think the ECB is rather gold friendly.
Well, that’s my 2 cents on this fascinating subject. I’m not saying that there is no manipulation in the gold market. In fact, the market right now makes me think strongly that there’s something fishy going on. My point is rather that I cannot identify the ECB as the culprit, at least not from this data after a closer look. I’m in debt to you for giving me a most interesting topic to ponder. Thank you!
-digger.
Well, gold isn't sold into a vacuum: the effect of buying euros and selling gold (what the ECB is basically doing when it sells) is very, very situationally-sensitive: for example(ceterius paribus), if the ECB buys euros and sells gold and then the Fed does a repo with the ECB, you could negate the positive euro sentiment at the instant of the transaction(delta_t) while pushing gold down.
The motivations for this are a function of balance of payments, elections(ahem ahem), macro/micro, etc.
Lukester
08-18-08, 07:31 PM
Metalman - I think the thesis regarding that is, they don't have to manipulate silver as well, as silver (at least since the onset of this bull market) is "tethered" to gold by long historic association (i.e. may be a commodity metal but consistently "acts" pricewise largely with the monetary AU metal), so market interventions can limit themselves to simply manipulate gold and allow the silver to "follow". If this were true, it would suggest Ted Butler's long trumpeted manipulation of silver was largely ineffective as it's movements seem much more closely linked to the gold price than to silver's COT actions. I have no idea if Butler is wrong or right, other than a personal bias, which is a tendency to conclude a collusive silver short is not correct and silver merely follows whatever nefarious push-pull is occurring from "interested parties" in the gold market - but WTFDIK. Awesome research by Digger.
[ p.s. - and Spartacus is welcome to tell me I'm all wet on this topic, only I'm on his "ignore" list. ;) ]
well done, digger! appropriate choice of handle, too :D i'm not a fan of gold price manipulation because gold prices move in lock step with silver during these supposed central bank manipulations. are the cb's manipulating silver on the side at the same time? how? why?
metalman
08-18-08, 08:05 PM
Metalman - I think the thesis regarding that is, they don't have to manipulate silver as well, as silver (at least since the onset of this bull market) is "tethered" to gold by long historic association (i.e. may be a commodity metal but consistently "acts" pricewise largely with the monetary AU metal), so market interventions can limit themselves to simply manipulate gold and allow the silver to "follow". If this were true, it would suggest Ted Butler's long trumpeted manipulation of silver was largely ineffective as it's movements seem much more closely linked to the gold price than to silver's COT actions. I have no idea if Butler is wrong or right, other than a personal bias, which is a tendency to conclude a collusive silver short is not correct and silver merely follows whatever nefarious push-pull is occurring from "interested parties" in the gold market - but WTFDIK. Awesome research by Digger.
[ p.s. - and Spartacus is welcome to tell me I'm all wet on this topic, only I'm on his "ignore" list. ;) ]
fact is neither one is manipulated... gold, oil, silver, etc. are all in the black boxes in short financial/long commodities and short dollar/long euro-yen, and other similar trades of 3000 usips all doing the same thing at the same time like a herd of sheep chasing a bucket of feed.
Lukester
08-18-08, 08:35 PM
fact is neither one is manipulated... gold, oil, silver, etc. are all in the black boxes in short financial/long commodities and short dollar/long euro-yen, and other similar trades of 3000 usips all doing the same thing at the same time like a herd of sheep chasing a bucket of feed.
Metalman - you probably know more about this than I, but that does not sound like a full assessment. Silver (and gold) are currently mispriced in the market. You need only look at Charles Mackay's gold/oil chart to see that if gold is grossly mispriced right now relative to oil, silver is out in the twighlight zone of comparative market pricing. That is not properly encompassed in your description - what glitch is causing the black box trading which you suggest sets market prices consistently over time, to effect such a consistent mispricing?
metalman
08-18-08, 08:54 PM
Metalman - you probably know more about this than I, but that does not sound like a full assessment. Silver (and gold) are currently mispriced in the market. You need only look at Charles Mackay's gold/oil chart to see that if gold is grossly mispriced right now relative to oil, silver is out in the twighlight zone of comparative market pricing. That is not properly encompassed in your description - what glitch is causing the black box trading which you suggest sets market prices consistently over time, to effect such a consistent mispricing?
hello? where you been the past few weeks? what do you think that 20+% oil/silver/gold/platinum/etc. correction was about?
Bart,
I don’t really know how to start this. I’ll try anyway…
...
Very nice job digger, and I'm glad your work seems to confirm mine in the sense of manipulation/control actually existing. It also has kicked off a rather lively discussion of the area too. :cool:
I'm also aware of the weekly gold only report, rather than using ILM.W.U2.C.A010.Z5.Z0Z, but the full link is also the source of some of the ECB Open Market Operations data I use. In a previous article, I linked the weekly data you noted and the link changed... and I got assailed for it so just specifying ILM.W.U2.C.A010.Z5.Z0Z seemed the best answer overall since it does have the full history.
As far as your actual results, we apparently are using differing periods to re-value the gold price (the quarterly period) that the ECB uses so its completely understandable that the charts would be different.
And I prefer to always use the raw data rather than trying to clean it in any way, so I believe that the picture you present does not fairly represent what actually occurred.
Additionally, as far as numbers like hundreds of tonnes being way too high and difficult to believe, I ask that you consider both facts like the LBMA monthly gold clearing data (which shows an approx. average of 20-35 million ounces per month that are traded, which is well over 500 tonnes), and also trading volumes of gold futures on the COMEX, whose daily volume just today for example was well over 10 million ounces.
My point here is that the recent 500+ tonne amount I cited from the raw and uncleaned ECB data is well within a believable range, considering just the volume data from the two major exchanges where gold is traded, swapped, etc.
For others, it may not be completely clear in your post that by far the majority of those buys & sells represented in my charts are in paper gold, not physical gold. I think that you understand though, just by your use of the word swap, although your 1,667 tonne value does only cover physical gold, not physical plus paper gold. If you repeat the search with the original link ( http://sdw.ecb.int/search.do?type=free&q=gold%2breceivables ) and simply remove the word "receivables", you'll see some of what I mean by physical vs. paper gold.
The Washington agreement 500 tonne limit to physical gold sales by CBs does indeed apply and your 1,667 tonne physical sale number checks well with both my data and data from elsewhere.
And just in case, I am in no way saying that the ECB's actions are the only factor in determining the gold price. I am saying that the correlation (r squared) is .64, which is very far from negligible. I also am saying that the ECB does have a significant effect on gold and other prices, much like I'm also saying that the recent ESF intervention actions had a significant effect on the USDX index.
Behind the scenes actions and poorly known factors can and very definitely do have an effect.
Lukester
08-18-08, 09:15 PM
hello? where you been the past few weeks? what do you think that 20+% oil/silver/gold/platinum/etc. correction was about?
Don't understand your point. They all corrected down together, not substantively relative to each other?
fact is neither one is manipulated... gold, oil, silver, etc. are all in the black boxes in short financial/long commodities and short dollar/long euro-yen, and other similar trades of 3000 usips all doing the same thing at the same time like a herd of sheep chasing a bucket of feed.
I don't doubt that the black box folk and "sheep momentum" are significant factors too, but I also ask that you look at who or what or what factors actually cause the various original changes that then cause the black boxes to fire.
Even digger's analysis (with cleaned data) shows that the ECB actions are a factor.
metalman
08-18-08, 09:26 PM
Don't understand your point. They all corrected down together, not substantively relative to each other?
exactly the point. all of these commodities... together... are part of a bunch of dollar and stock trades by the funds. when the dollar rallied and it looked like the financials were recovering, the big boxes all went whir, whir, whir, and sent all the commodities to the stop point that all the boxes were set to... more or less. when it looked like the dollar was on its way down again and fannie and freddy common shareholders about to get boned, so maybe a lot of others, too? so the big black boxes go rrrr, rrrr, rrrr, and take up the commodity and other positions again. gold, silver, etc. recover. not oil, tho.
Bart,
I’m glad to have someone knowledgeable as you to discuss this subject.
we apparently are using differing periods to re-value the gold price (the quarterly period) that the ECB uses
I’m using the last business day of each quarter as the point of revaluation. Until September 2003 the ECB even stated in its weekly financial reports (wfr) the dates of the revaluation and the new values, like here (http://www.ecb.eu/press/pdf/wfs/2003/fs031003en.pdf):
“The net impact of the revaluation on each balance sheet item as at 30 September 2003 is shown in the additional column “Difference compared to last week due to revaluations”. The gold price and the principal exchange rates used for the revaluation of balances were as follows:
Gold: EUR 329.986 per fine oz.
USD: 1.1652 per EUR
JPY: 128.8 per EUR
Special drawing rights: EUR 1.2251 per SDR” [emphasis mine]
It has been the same every quarter since the beginning and I have no reason to assume the procedure has changed. The day applicable for revaluation is the last business day of each quarter. Raw data from the ILM.W.U2.C.A010.Z5.Z0Z series confirm this. The big weekly changes in the euro amount of gold and gold receivables always occur in the first week of a new quarter with no exception. My best choice was to stick to the original ECB procedure. Until 2003 I used the original ECB data, from the end of 2003 to today I calculated end of quarter revaluation prices myself by using historical EUR/USD and gold price quotes.
What periods do you use?
LBMA monthly gold clearing data (which shows an approx. average of 20-35 million ounces per month that are traded, which is well over 500 tonnes
The LBMA is the biggest market for physical and it’s true that on average 20 million ozs (around 660 tonnes) per month are cleared there. But remember, this volume mainly consists of private transactions. Only about 1/3 of all the gold in existence is held by central banks. The other 2 thirds are held in private.
by far the majority of those buys & sells represented in my charts are in paper gold, not physical gold.
The wfrs disclose transactions in gold and gold receivables and are consistent with the raw data. It typically reads like this:
“Items not related to monetary policy operations
In the week ending 8 August 2008, the decrease of EUR 14 million in gold and gold receivables (asset item 1) reflected the sale of gold by one Eurosystem central bank (consistent with the Central Bank Gold Agreement that came into effect on 27 September 2004).”
Again, in order to get an idea of the amount of gold sold by the ECB, paper as well as physical, one has to adjust for the distorting effect of the quarterly revaluations. If you don’t you get huge swings in the hundreds of tonnes. I applied the quarterly revaluations to the raw data of ILM.W.U2.C.A010.Z5.Z0Z and voilà, even the amount of tonnes in stock are relatively consistent. I’m reluctant to consider the quarterly swings in the raw data (euro amount of gold and receivables) as actual transactions, either in gold or in gold receivables. They are simply caused by the revaluation procedure.
but the full link is also the source of some of the ECB Open Market Operations data I use
Would you mind explaining this a little further?
Thank you, digger.
I’m using the last business day of each quarter as the point of revaluation.
We're using the same end of quarter dates for valuation, so it appears that the only difference is between my use of the raw data vs. you doing some additional cleaning.
The LBMA is the biggest market for physical and it’s true that on average 20 million ozs (around 660 tonnes) per month are cleared there. But remember, this volume mainly consists of private transactions. Only about 1/3 of all the gold in existence is held by central banks. The other 2 thirds are held in private.
I'm not sure what you're driving at here. The ECB sales are primarily paper, not physical. The LBMA is also involved with leasing and forwards, etc. too (paper gold, which is not reported).
My original point is that the 500+ tonne ECB paper gold sale is not that large when one considers the size of the entire world's gold trading - paper plus physical. When just COMEX trades well over 100,000+ 100 oz contracts (10 million ounces) per day, a 500+ tonne sale or buy by the ECB in a month is not of extraordinary size in any way. COMEX trades more in less than two days than the LBMA clearing data trades show they trade in a full month.
Do you dispute the COMEX numbers, or that 500+ tonnes is not that big considering the entire world's gold paper & physical market?
but the full link is also the source of some of the ECB Open Market Operations data I use
Would you mind explaining this a little further?
I not only track total Open Market Operations ( http://en.wikipedia.org/wiki/Open_Market_Operations ) of the Fed but also the ECB and other central banks. That link contains some of the ECB's OMO data I use for other charts and trading & investing aids.
The primary reasons for using it, as opposed to the weekly one, are that it does have the full history of gold & gold receivables and that it didn't change (like the weekly one did).
Do you dispute the COMEX numbers, or that 500+ tonnes is not that big considering the entire world's gold paper & physical market?
No, I don’t dispute Comex numbers. I understand you are saying that high volumes of 500 tonnes+ are “normal” in the gold market. I agree. My point was that LBMA or Comex are entirely different markets and you can’t compare these to central bank sales.
Anyway, let’s go back to your original description of how you arrived at your chart:
Note for researchers and the curious:
The ECB data for gold and receivables purchases and sales is both here and is also linked in the first bullet above. It brings up a search page in the ECB's database. Just check/select the first option ( the key is "ILM.W.U2.C.A010.Z5.Z0Z" as of late July 2008), and then click the "show selected data" button just above it. That will bring up the actual weekly data going back to 1999, which is in millions of Euros.
The only adjustments we've made to that raw data is to convert the values into troy ounces using the Euro gold price on the quarter ending date (the ECB only revalues its gold quarterly), and then converting to metric tonnes using a factor of 32,151 troy ounces per metric tonne. There are undoubtedly some minor discrepancies due to the conversion process, but not enough to materially change the results.
If you do just that your spreadsheet data should look similar to this:
http://www.noah-research.de/fileadmin/user_upload/pics/ECB-gold-data.gif
Just raw data from the ECB, gold price in euros (in this case I used the LBMA pm fixing) and the calculated amount of tonnes. No “cleaning” which referred to the possible amount of gold sold in the revaluation weeks (4 of 52) anyway.
Then your chart should like this:
http://www.noah-research.de/fileadmin/user_upload/pics/ECB-gold-stock07-08.gif
Small nicks? Yes (most likely my EUR/USD or gold rate differs from the ECB’s), but no big swings in the 500-1000 tonnes category.
Could it be that you have an error in your calculation? Your chart looks like you applied the revalued euro gold prices to the past quarters, not forwards, which would be obviously wrong.
-digger
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No, I don’t dispute Comex numbers. I understand you are saying that high volumes of 500 tonnes+ are “normal” in the gold market. I agree. My point was that LBMA or Comex are entirely different markets and you can’t compare these to central bank sales.
I wasn't trying to compare anything to official central bank physical gold sales under the Washington Agreement in anyway. You were the one that brought it up while the original post was referring mostly to paper gold.
I'm glad at least that we're on the same general page about the size of the full world gold market in both paper and physical.
Anyway, let’s go back to your original description of how you arrived at your chart:
...
Could it be that you have an error in your calculation? Your chart looks like you applied the revalued euro gold prices to the past quarters, not forwards, which would be obviously wrong.
-digger
I submit that the errors are more likely in your own calculations, especially since you have not clearly specified whatever cleaning you have done to the raw data, although you did touch on it. But if you or anyone else wants to believe that my calculations are in error by hundreds or thousands of tonnes or whatever, that's fine with me.
Its not germane to the basic point of the initial post anyhow, since you agreed earlier that clear evidence of manipulation (or control if that's a preferred term) exists.
Its virtually moot too, given how the many reports of actual physical shortages don't line up with the very large price drops since the recent ESF and ECB etc. interventions.
I know for myself with certainty that very significant behind the scenes actions do happen. Any further discussion takes away from that very important point, and thanks but no thanks.
I submit that the errors are more likely in your own calculations, especially since you have not clearly specified whatever cleaning you have done to the raw data, although you did touch on it. But if you or anyone else wants to believe that my calculations are in error by hundreds or thousands of tonnes or whatever, that's fine with me.
I stated clearly that I did not touch the data for my last chart. It’s just the raw data as it comes from ILM.W.U2.C.A010.Z5.Z0Z converted into tonnes. I even gave you a picture of the data.
This is not a question of believe. I’m positive. I think your calculations are wrong.
The error that you probably make is to apply the price of gold backwards. You calculate the price of gold in EUR for the end of each quarter and then apply it to this past quarter. It should be applied to the following quarter.
Its not germane to the basic point of the initial post anyhow, since you agreed earlier that clear evidence of manipulation (or control if that's a preferred term) exists.
I did not agree that clear evidence of manipulation exists. That was YOUR interpretation of my chart. I said “I’m not saying that there is no manipulation in the gold market "and that I’m inclined to think the ECB is rather gold friendly.
-digger
I stated clearly that I did not touch the data for my last chart. It’s just the raw data as it comes from ILM.W.U2.C.A010.Z5.Z0Z converted into tonnes. I even gave you a picture of the data.
This is not a question of believe. I’m positive. I think your calculations are wrong.
The error that you probably make is to apply the price of gold backwards. You calculate the price of gold in EUR for the end of each quarter and then apply it to this past quarter. It should be applied to the following quarter.
I did not agree that clear evidence of manipulation exists. That was YOUR interpretation of my chart. I said “I’m not saying that there is no manipulation in the gold market "and that I’m inclined to think the ECB is rather gold friendly.
-digger
And I'm certain you're wrong too, and not only because you completely blew it again on your heinous assumption about how I use the gold price in the calculation.
Another was starting out with the comment about 500 tonnes being out of line, when the actual data from just COMEX shows you completely failed to do your homework correctly about the size of the actual world market. Another was the continuing focus on physical gold, instead of paper gold, which is clearly the topic.
There are others but its not worth going further when you started with incorrect assumptions, noted the use of "cleaned" data, attempt to divert, tried to re-characterize your initial "I’m not saying that there is no manipulation in the gold market" comment, and finished with another wrong assumption.
But as I said, feel free to believe what you like. I know for myself with certainty that very significant behind the scenes actions do happen. Any further discussion takes away from that primary and important point, and thanks but no thanks for any further pissing matches when you blew it so many times.
You can have the last word if you must.
And I'm certain you're wrong too, and not only because you completely blew it again on your heinous assumption about how I use the gold price in the calculation.
You have not told me how you exactly use the gold price, but the look of your chart strongly suggests an error and I pointed that out to you.
Back to the drawing board…
This is a chart of the raw data series ILM.W.U2.C.A010.Z5.Z0Z, the ECB Gold Stock valued in EUR:
http://www.noah-research.de/fileadmin/user_upload/pics/1ECB-gold-stock-in-EUR-raw.gif
The curve is moving upwards together with price of gold. The steps in the graph clearly show how the ECB re-values its gold stock every quarter. In the overall picture these steps are not that volatile.
If you convert the data into tonnes it shouldn’t be volatile either. If you get big swings in the amount of hundreds of tonnes then they are likely caused by a discrepancy between the ECB’s price of gold in EUR and the one you use for the conversion.
If you make the mistake of applying the end of quarter price of gold to the past quarter instead of applying it forwards you get a chart like this:
http://www.noah-research.de/fileadmin/user_upload/pics/2ECB-gold-stock-in-tonnes-wrong.gif
Because of the strong resemblance to your own chart I suggested that this is exactly the error you make in your calculations.
Why is it wrong to use the end of quarter price for the quarter that has just passed?
Think of it this way: The last time the ECB revalued its gold stock was end of June 2008. The weekly financial reports that followed as well as the raw data can only use this last revalued price, the one from end of June. We don’t know the end of September price yet. All the data from July and August use the end of June price. There is no other way. Hence the end of quarter price of gold in euros must be applied to the following quarter (Q3 in this case), not to the past quarter (Q2 in this case). Using the end of June price for Q2 is wrong.
Your chart shows some additional spikes. You don’t seem to account for the fact that in some quarters the ECB does its revaluation not exactly at the end of the quarter but a little earlier.
A chart without these errors based on the very same data looks like this:
http://www.noah-research.de/fileadmin/user_upload/pics/3ECB-gold-stock-in-tonnes.gif
There is only one bigger spike in early 1999, a one day oddity that is not further explained in the ECB’s weekly financial reports. Again, this is PURE UNTOUCHED RAW DATA.
Bottom line is the huge transactions that you suggest are manipulations are caused by an error in your calculation as explained.
You keep telling me that I focus on physical gold though I’m using the same raw data as you. In an earlier post I told you that both the raw data as well the weekly financial reports refer to gold and gold receivables. That’s what I use. Gold receivables are things like swaps and FRAs (paper gold in your words).
On a personal note I want to let you know how very disappointed I am. I know your website for years and really, really liked it. I was all excited to meet you here on iTulip. The way you easily get personal and put words in my mouth has somewhat turned me off. I still hope we can work this out together.
-digger
.
Digger,
Clearly bart has a strong emotional response on this issue.
There have been more posts on this subject by bart than pretty much all his other posts for many many months.
I am sure it is not personal.
Take the information offered in the spirit of learning - agreement is purely optional.
Digger,
Clearly bart has a strong emotional response on this issue.
There have been more posts on this subject by bart than pretty much all his other posts for many many months.
I am sure it is not personal.
Take the information offered in the spirit of learning - agreement is purely optional.
Thanks c1ue.
There is indeed sometimes a large level of frustration etc. involved in my whole attempt to simply show that there are many things going on behind the scenes of which most are unaware.
And I know you and others are probably tired of seeing this quote, but it truly does sum up where I'm coming from, or at least trying to.
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
I second that... ;)
Another interesting News Item - The Disconnect Between Supply and Demand in Gold & Silver Markets (http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets)
There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don't have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal. Normally, if a banker’s bank knows that its customer-bank has firm orders, it would extend the smaller bank a bigger line of credit. Not now.
By refusing to extend lines of credit, the big bullion banks are essentially rationing a very thin supply. Most physical silver, for example, is being reserved for industrial and fabrication use, and investors are simply not able to get any, without waiting for months. Investor oriented shops are bare, and the U.S. Mint has suspended coin production. All available supply seems to be reserved for industrial users. You cannot substitute paper claims for real silver, in industrial use, because paper doesn’t have the physical properties of silver. So, it seems that all available supply is being diverted to industrial users, and, to a lesser extent, aside from the squeeze on lines of credit, also to jewelry fabricators. But, investors are left out in the cold. They can accept paper claims, or nothing. The most interesting mistake that the manipulators have made is in not supplying the U.S. Mint, which has run out of silver, proving that there is a severe shortage.
Meanwhile, by refusing to extend Indian bank lines of credit, Indian jewelry demand for both gold and silver is being stymied. India is not being allowed to drain away precious metals, in the amounts that are warranted, given the low prices and the numbers of unfilled orders that are sitting on desks in India. World bullion banks, in other words, are managing deliveries of physical gold and silver to artificially reduce the quantities delivered, under the excuse that the “Indians have run down their credit lines.”
The happiest fact of bullion bankers’ lives is that western markets are, with the exception of some fabrication and industrial demand, almost 90% paper based. The huge COMEX futures market almost never sees an ounce of real silver or gold ever change hands. It is all paper, shuffled back and forth. These paper markets are being flooded with paper based "claims" to alleged gold and silver, supposedly being held in big bank vaults in London and New York City. The market is overwhelmed with paper claims, and the big bullion banks (maybe, with the Federal Reserve providing the money?) are paying big bucks to secondary derivatives dealers to get them to lease this artificially created “gold and silver.” In a normal market, one who leases a thing of value must pay for it. But, now, derivatives dealers are being paid to lease both gold and silver. Then again, it may not be a thing of value, if it is fake…
That being said, the paper claims may have a lot of value, whether or not they are fake. Derivatives dealers can write futures contracts, options, etc., according to CFTC rules, because paper "claims" to vault-stored silver and gold can be used as the legally mandated "cover" for futures contracts. To understand the nature of paper claims, we must travel back in time, for a moment, to a class action against Morgan Stanley (MS (http://seekingalpha.com/symbol/ms)). According to the complaint, Morgan Stanley claimed that it bought physical silver, on behalf of various clients, and was storing it, in safe-keeping, in its vault in New York. Allegedly, Morgan Stanley defrauded its clients from Feb. 19, 1986, and Jan. 10, 2007. According to the complaint, it never bought any silver, but, all the while, continued to charge clients big fees for storing the imaginary metal. Morgan Stanley is one of the biggest investment banks in the world. It is one of the major players in precious metals. Yet, according to the lawsuit, the paper claims to vaulted silver it issued to clients was nothing more than a lie. One of Morgan Stanley’s defenses, interestingly enough, was that everything it did simply followed “standard industry practices.” For more information, see here (http://www.reuters.com/article/fundsFundsNews/idUSN1228014520070612).
.
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(continued)
Spartacus
08-20-08, 04:10 PM
goldmoney is claiming there's no shortage of 1,000 oz LBMA good delivery bars, so I don't know what to make of this.
There may also be issues of what is considered by whom to be a shortage.
I remember the incident where CEF purchased Silver and Gold, but the Silver delivery would not be done for 6 months. One of CEF's officers became aware of the buzz that this delay was because of a Silver supply crunch (shortage) and told Dave Morgan this was not because of any shortage but was the planned and agreed upon procedure to get through the audit process. Lots of others pointed to that, at the time, as an example of Silver shortage.
So there should be some skepticism as to whether there is a shortage ... BUT ...
the US mint is still not doing the full, legally required amount of Silver coinage, 5 months after announcing rationing. How long does it take to lay on new supply - the rationalizations and denials are becoming more and more questionable, even for diehard non-conspiracists.
(James Turk) Another interesting News Item - The Disconnect Between Supply and Demand in Gold & Silver Markets (http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets)
Lukester
08-20-08, 06:39 PM
Another interesting News Item - The Disconnect Between Supply and Demand in Gold & Silver Markets (http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets)
This was in fact posted yesterday here (where it did not elicit much of any comment):
http://www.itulip.com/forums/showthread.php?p=44222#post44222
Didn't see it there --
I posted it here because of the discussion on gold price manipulation. My question for you is whether this constitutes an equivalent to "Failure To Deliver? (http://itulip.com/forums/showthread.php?t=4392)"
Lukester
08-20-08, 07:28 PM
It probably does Rajiv - but as this entire discussion arises from the actions of a market which is rife with potentially naked short selling the emergence of that failure to deliver in the retail PM market end can not be described as introducing an entirely new factor. Just that it has shifted potential "failures to deliver" towards the much more highly "visible" retail market where it becomes ever more difficult to hide. Looky looky - look at all the scurrying cockroaches run run run! ... but they're bloody quick little runners aren't they? I think it will be a while before this could trigger any panic hoarding in the PM's, but it's hard to argue the current events have the potential to make all the PM market players start getting all "twitchy". :D
Didn't see it there - I posted it here because of the discussion on gold price manipulation. My question for you is whether this constitutes an equivalent to "Failure To Deliver? (http://itulip.com/forums/showthread.php?t=4392)"
Another interesting News Item - The Disconnect Between Supply and Demand in Gold & Silver Markets (http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets)
...
Indeed... and COMEX trades over 10 million ounces in an average day, and actual physical warehouse stocks are less than that. I haven't done similar calculations for all the stock market index futures contracts, but I strongly suspect that more stock index futures are traded in a day or week than stocks actually exist too.
I wish the times we live in were not quite as "interesting".
Article in Financial Sense by Rob Kirby Some interesting stuff about JP Morgan participation in this
Wake-Up Call (http://www.financialsense.com/Market/kirby/2008/0825.html)
Gold Interest rate Swaps
<iframe src="http://www.financialsense.com/Market/kirby/2008/0825.html" title="Gold Int Rate Swaps" height="600" width="800">><br /> </IFRAME</HTML></iframe>
And for those who aren't enamored of the tinfoil hat or smoke filled back room side of "conspiracy", here's another definition of conspiracy:
A joining or acting together, as if by sinister design: a conspiracy of wind and tide that devastated coastal areas.
There really are issues with supply of most types of gold & silver, and that's extraordinary - regardless of the causes.
Luke,
since your post (http://www.itulip.com/forums/showthread.php?p=44813#poststop) refers to intervention in the precious metals markets I take it to the “Gold Price Manipulation Proof” thread where I think it belongs.
At a certain point elaborate arguments about the "effectiveness" of intervention begin to appear perhaps just a wee bit academic…
Yes, I have noticed this too. The original threads usually start out with some meaty “proof” posts. After I have shared my own analysis which may contradict the original thesis the discussion gets to an ever more philosophical level, e.g. into how to interpret Occam’s Razor. How come? Who dragged us there?
Now these threads have come down to discussing whether manipulation is generally likely or possible while I’m still waiting for a substantial reply to my core analysis (http://www.itulip.com/forums/showthread.php?p=44402#poststop).
To have an opinion on manipulation is one thing. To back it up with proof is another thing. None of these threads are about opinions on market manipulation. They are about two very specific “proofs”.
Butler’s commentaries are not related to any of them. Using them and all sorts of other material to back up the ECB or the ESF case is like saying “yesterday I saw a red car and even took a photo of it and that proves that all cars are red”. I will stay with these two specific issues and not divert into the general manipulation discussion.
This extract illustrates why attempting to demolish Bart's thesis here on the actual mechanisms of that intervention may do our general cause more harm than good.
When reconstructing the two “proofs” myself I found that one, the ECB gold price manipulation with huge buy and sell transactions, is based on an error in the calculation. There’s a zero chance that this is actually happening as described. The other “proof” is based on certain assumptions that I don’t necessarily agree with. I defend my case just like other people defend theirs and I certainly try to stick to the facts.
Luke, what is our general cause (course)? Is it to proof manipulation at all cost even when the underlying data or the interpretation thereof is flawed? Should contradicting analysis therefore not be posted? I kindly disagree. I think that adhering to something that is so obviously flawed like the gold price manipulation proof (http://www.itulip.com/forums/showthread.php?t=4640) causes harm, not the rebuttal (http://www.itulip.com/forums/showthread.php?p=44402#poststop) that straightens the facts. What’s the problem anyway? Abolish a wrong thesis and start again if you feel you have to prove something. That would be just fine.
That Mish spends so much time posturing within the (highly popular) position that "conspiracy mongering is the realm of the mentally deficient” … We've seen that Mish grandstanding elsewhere with enough regularity in the past to recognize the trademark style. Anointing yourself as a "conspiracy debunker" is an artifice - it's popular, and lends "ersatz instant credibility".
Here comes Mish again and I don’t really understand what it has to do with me. Mish’s position is not mine. Also, before I judge a person I would want to read some of his own posts. Unfortunately, I couldn’t find any on iTulip. Sorry, but I will neither join the highly popular campaign against this one person nor can or will I defend him. I don’t even have an interest in taking a side.
I’m not anointing myself as a “conspiracy debunker”. That’s something you assigned to me. All I did was sharing my research with other members and discussing it. This research happened to contradict another member’s research. Out of it came a lively discussion that I believe is beneficial to many readers. At one point I was corrected by another member and that took us all a step further. That’s how it should be and I was thankful for that. And isn’t that exactly the point of discussing something in a public forum anyway?
Digger
.
Believe and posit what you like digger. Ignoring or protesting against the actual facts and the simplest answers per Occam's Razor etc., as well as moving posts to another thread, is your right.
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)
Ignoring or protesting against the actual facts...l
How about some real facts as opposed to empty accusations?
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
-- Arthur Schopenhauer (1788-1860)
And this also applies to ... guess what?
And while I’m at it here is what really strikes me as odd:
Your original Gold price manipulation thread (http://www.itulip.com/forums/showthread.php?t=847) goes back to January 2007. Articles as published with Savehaven (http://www.safehaven.com/article-6760.htm) and FSU (http://www.financialsense.com/fsu/editorials/bart/2007/0123.html) at this time claimed:
“the ECB sold 1,800 metric tonnes of gold. That translates to about 58 million troy ounces. During the fall from mid May 2006 to a bottom in June 2006, they bought back 2,345 metric ounces”.
That’s now down to 500-1000 tonnes per trade and the correlation to the euro gold price dropped from .97 to .71.
The original chart
http://www.safehaven.com/images/bart/6760_a.gif
looked quite a bit different from the one you use in the current thread:
http://www.nowandfutures.com/images/ecb_weekly_gold_long_term.png
What had changed? You never gave an explanation, the chart just miraculously changed. But if you compare the two charts you can easily conclude that the new version with its big 3-months-swings now takes the quarterly revaluations of the ECB into account. The old version did not. So there was already an error back then. You never commented on it, you just corrected it with a new version that had its own error.
I was even more stunned when I found out yesterday that someone already hinted at your error. The very last post (http://www.itulip.com/forums/showthread.php?p=9818#poststop) in the January thread by DrSpec said:
After reconstructing Bart's analysis, I got pretty much the same results. However, after further research, I discovered that the ECB names a gold price in Euros only once per quarter. After that, all their numbers for the value of their gold holdings are based on that quarterly gold price.
When you calculate their gold holdings (tonnes) based on this quarterly price, the picture changes completely. The ECB gold holdings are on a steady decline and they do not appear to be involved in buy backs, at least not on the basis of the data that they publish.
Again:
The ECB gold holdings are on a steady decline and they do not appear to be involved in buy backs, at least not on the basis of the data that they publish.
The first gold manipulation thread ended here and there was no further discussion on the topic. It would have been nice to see a small thank you note to DrSpec for giving some help on the subject, but no.
18 months later you opened a new thread with similar conclusions from a just as wrong data model.
Why?
In the light of your frequent use of words like “facts”, “proof” and “ideology” my experience has been, well… a little “Orwellian”.
By now everybody who reads these threads has probably formed his own opinion and I’ve pretty much said all I wanted to say on these two topics. Before it gets too frustrating and exhausting I leave it there.
I wish you good luck, Bart.
Digger
.
I leave it there.
I hope you do.
And if you had actually read both my articles on the ECB, you would see that I admitted that I made a mistake on the original one.
Funny how you completely missed that, but I expected it since its in keeping so very well with that Schopenhauer quote, and the dancing around on the dollar intervention thread too.
But feel free to continue your heinous assertions and using your "cleaned" data, as well as ignore the 10 million oz. per day Comex trading volume, the various physical shortages, GATA evidence, your spin on manipulation/control, failing to actually read my articles and see I admitted to an error, etc.
I'm sorry that you apparently don't understand the relationship of the Schopenhauer quote to the various interventions and manipulation / control, but there's little I can say or do about it other than to note that it applies to them.
It also has not escaped my attention that you continue to avoid the Occam's Razor concept... and the actual ESF Euro account changes... and the actual ESF SDR changes, both recently and in early 2005 that "surprised" so many.
I'm confused - if the ECB's gold holdings are steadily falling, presumably in the context of the recent gold rise, would not that actually show that the ECB is a net gold seller?
And that net gold sales should theoretically increase supply and keep prices low?
If the argument was that the ECB was trading gold then the supply issue would invalidate it.
But the assertion is that the ECB is manipulating the price of gold down.
For me personally, it is not that I necessarily see proof of manipulation; that proof is unobtainable barring a memo from the ECB to the Fed found wrapped around some cigars.
It is that gold is still understood by some to be a fair indicator of (inverse) purchasing power, and a rapid rise in gold price makes it difficult to obscure actual purchasing power depreciation through inflation.
And I DO believe there is both purchasing power depreciation going on and attempts to obscure such.
I'm confused - if the ECB's gold holdings are steadily falling, presumably in the context of the recent gold rise, would not that actually show that the ECB is a net gold seller?
And that net gold sales should theoretically increase supply and keep prices low?
If the argument was that the ECB was trading gold then the supply issue would invalidate it.
But the assertion is that the ECB is manipulating the price of gold down.
For me personally, it is not that I necessarily see proof of manipulation; that proof is unobtainable barring a memo from the ECB to the Fed found wrapped around some cigars.
It is that gold is still understood by some to be a fair indicator of (inverse) purchasing power, and a rapid rise in gold price makes it difficult to obscure actual purchasing power depreciation through inflation.
And I DO believe there is both purchasing power depreciation going on and attempts to obscure such.
Since roughly 1999, the ECB has been a net seller of physical gold per the Washington Agreement and a net seller of paper gold per their actual stats.
And yes, theoretically increasing supply and keeping prices lower than they would have been without the sales is my actual point. Whether its called manipulation or control matters little to me overall - the basic point is that its occurring in large quantities.
I believe the stats show that the ECB is a trader, and I do believe that its manipulation of course too. The gold price is one of the strongest, if not the strongest, indicators and proof of inflation and excess money creation on the part of central and other bankers, and its in their vested interest to see that it is not over valued... to say the least.
I'm confused - if the ECB's gold holdings are steadily falling, presumably in the context of the recent gold rise, would not that actually show that the ECB is a net gold seller?.
Sure, the ECB has been a net gold seller and thats what they said all along. Gold sales occured within the framework of the Washington Agreement.
And that net gold sales should theoretically increase supply and keep prices low?
That would certainly be true if the gold was dumped on the market.
If the argument was that the ECB was trading gold then the supply issue would invalidate it.
But the assertion is that the ECB is manipulating the price of gold down.
The idea is that by trading big positions rising prices are intentionally capped. Of course, the buy backs would equally provide support. The whole game would then be played like the one on the Comex. But that is not what I think the ECB does.
For me personally, it is not that I necessarily see proof of manipulation; that proof is unobtainable barring a memo from the ECB to the Fed found wrapped around some cigars.
Exactly. Maybe we can look at Trichet's minutes in 50 years from now. For now we have to work with actual data and it finally comes down to whether a relatively steady sale of gold that had been announced beforehand by the CBGA can be considered a manipulation.
It is that gold is still understood by some to be a fair indicator of (inverse) purchasing power, and a rapid rise in gold price makes it difficult to obscure actual purchasing power depreciation through inflation.
And I DO believe there is both purchasing power depreciation going on and attempts to obscure such.
I believe that too, but not as outlined in the original post of the thread.
.
And if you had actually read both my articles on the ECB, you would see that I admitted that I made a mistake on the original one.
If that's indeed the case please accept my apologies. I read both your ECB gold price manipulation articles and did not see that. Maybe you want to point to that specific post.
How about the mistake in the current analysis? Wouldn't it make sense to just give up a concept that's based on another error? Of course everybody could still believe the ECB is a big trader but the official data just doesn't prove it. Could we finally agree on that basis?
Digger
.
And if you had actually read both my articles on the ECB, you would see that I admitted that I made a mistake on the original one.
If that's indeed the case please accept my apologies. I read both your ECB gold price manipulation articles and did not see that. Maybe you want to point to that specific post.
Again, it was in the article - not a post.
Please continue making a fool of yourself by proving you didn't even read it carefully enough. That's interesting evidence of the care you take in research - again.
Again, it was in the article - not a post.
Please continue making a fool of yourself by proving you didn't even read it carefully enough. That's interesting evidence of the care you take in research - again.
Actually, I offered an apology if I had indeed overlooked the part in your article where you admitted your mistake. I asked you to point it out to me since I still cannot find it. You have not done so. Instead you replied with another low shot that speaks for itself. Honestly, I'm getting sick of this. Play your games with somebody else. Over and out.
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Over and out.
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You keep saying that, but never leave.
The data that you keep missing is in the article - http://www.nowandfutures.com/articles/20070122gold_price_manipulation_proof.html
I'm sorry that you continue to fail to see it - and the applicability of that failure to see it that is quite the comment on the rest of your research. When and if you are able to find it, I will accept an apology.
Okay, I see. This is from your own website:
"We have therefore added a light grey line to our two charts showing our best guess of the value of tonnes on hand every week, assuming that a fixed gold value was used. The quarterly dates chosen for that fixed gold value were the closest week ending dates to the 15th of January, April, July and October. (August 2007 - switched the gray and black lines to reflect that we were incorrect in our initial assumptions, and thanks again to alert and knowledgable readers who point out our inadvertent errors.) "
Though no word of that on iTulip, just a new thread. I guess that's what caused the confusion. Anyway, time for another big revision I'd say.
Anyway, time for another big revision I'd say.
I'm glad to see you'll be making some changes.
I also notice there's no apology for your poor research and heinous accusations, nor an admission that you said you read the articles and obviously didn't.
I also notice that you didn't leave after the "over & out".
I also notice you still have nothing substantive to say about the ESF Euro or SDR balances and the dollar interventions.
Again, it was in the article - not a post.
Please continue making a fool of yourself by proving you didn't even read it carefully enough. That's interesting evidence of the care you take in research - again.
Reminder of the rules here: treat your fellow members with respect. That, among other things, means no name calling. Disagreement makes iTulip more interesting than your average echo chamber site, but insults turn everyone off.
Reminder of the rules here: treat your fellow members with respect. That, among other things, means no name calling. Disagreement makes iTulip more interesting than your average echo chamber site, but insults turn everyone off.
Fair enough Fred, wilco.
To have my work questioned, as if I'm lying or worse, will always be an issue for me.
Is there an ignore function or any plans for one?
<center>Gold price manipulation proof
(slightly revised from original Jan 2007 article)
</center>
There's really not much to say, since the raw charted data is so obvious, but there are some facts.
The correlation between the European Central Bank's gold purchase and sale activity (http://sdw.ecb.int/search.do?type=free&q=gold%2breceivables) and the gold price in Euros is -.71. That means that 71% of the gold price changes since 1999 can be explained by ECB actions alone.
The left hand scale on both charts is in metric tonnes. One metric tonne is about 32,150 troy ounces of gold.
As just one example of the very large size of ECB gold operations, during the gold price increase from early April 2006 to the peak in mid May 2006, the ECB sold 1,000 metric tonnes of gold. That translates to about 31 million troy ounces. During the fall from mid May 2006 to a bottom in June 2006, they bought back 1,875 metric tonnes, which is approximately 60 million troy ounces.
Just for reference, the total supply of gold per the World Gold Council (http://www.gold.org/) in 2005 was 3,953 metric tonnes or about 127 million troy ounces.
The total gold price increase from about 325 to 500 Euros caused the average ECB gold inventory to drop about 1200 metric tonnes or about 39 million troy ounces.
The quantity of gold trading by the ECB dwarfs the total 500 metric tonne sale limit of the Washington Agreement.
For those who might point out that futures trading quantities are far larger, that's true. But not only are they only paper trades and physical gold is seldom delivered, but also there are thousands of different traders and none consistently trade in quantities similar to the ECB.
The data is published by the ECB anywhere from 1-2 weeks behind the events, so it's not useful for trading. Here (http://www.ecb.int/press/pr/wfs/2008/html/index.en.html) is the weekly data link for 2008.
Some might prefer to look at the data as evidence of control, as opposed to manipulation.
The huge majority of the ECB trades are in the "receivables", or "paper gold" area. For proof, simply repeat the search in the first point above and drop the word receivables.
The gold trading record of the ECB, since 1999
http://www.nowandfutures.com/images/ecb_weekly_gold_long_term.png
The close-up gold trading record of the ECB
http://www.nowandfutures.com/images/ecb_weekly_gold.png
"So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System."
-- Alan Greenspan, Chairman of the Federal Reserve.
Source: (http://www.federalreserve.gov/fomc/transcripts/1994/940322Meeting.pdf) Federal Open Market Committee (FOMC) meeting minutes from March 22, 1994 (page 41)(note that the source is a large pdf file).
"Central banks stand ready to lease gold in increasing quantities should the price rise."
-- Alan Greenspan, testimony to Congress on July 24, 1998 (http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm)
Gold Market Lending (http://www.blanchardonline.com/beru/lending_research_report_index.php), an excellent treatment of many issues in this area from Blanchard and Company, Inc.
(edit/add for this paragraph)
Lastly, we do not mean in any way to imply that the ECB will win on the longer term with its control or manipulation of gold. Central banks, etc. did not win during the last gold bull market in the 1970s. Our primary intention is to show that control or manipulation exists, and that it should be taken into account for both traders and investors.
Note for researchers and the curious:
The ECB data for gold and receivables purchases and sales is both here (http://sdw.ecb.int/search.do?type=free&q=gold%2breceivables) and is also linked in the first bullet above. It brings up a search page in the ECB's database. Just check/select the first option ( the key is "ILM.W.U2.C.A010.Z5.Z0Z" as of late July 2008), and then click the "show selected data" button just above it. That will bring up the actual weekly data going back to 1999, which is in millions of Euros.
The only adjustments we've made to that raw data is to convert the values into troy ounces using the Euro gold price on the quarter ending date (the ECB only revalues its gold quarterly), and then converting to metric tonnes using a factor of 32,151 troy ounces per metric tonne. There are undoubtedly some minor discrepancies due to the conversion process, but not enough to materially change the results.
Also, Empirically observed covariation is a necessary but not sufficient condition for causality. (http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation)
(And I'm not a big believer in coincidences... and it's also now known why I wear a tinfoil hat)
Hi Bart,
a couple of links I keep visting now and then, they can be handy if you want to know how many ounces of gold the ECB and/or Euro area countries hold (ie. who sold how much when ;) ):
http://sdw.ecb.europa.eu/browseSelection.do?DATASET=0&node=2018793&SERIES_KEY=127.RA.M.U2.N.8.812A.N.A1.G&BOP_ITEM=812A&REF_AREA=&trans=N
(see #4.9):
http://sdw.ecb.europa.eu/reports.do?node=100000258
(see #7):
http://sdw.ecb.europa.eu/reports.do?node=100000215
Hi Bart,
a couple of links I keep visting now and then, they can be handy if you want to know how many ounces of gold the ECB and/or Euro area countries hold (ie. who sold how much when ;) ):
http://sdw.ecb.europa.eu/browseSelection.do?DATASET=0&node=2018793&SERIES_KEY=127.RA.M.U2.N.8.812A.N.A1.G&BOP_ITEM=812A&REF_AREA=&trans=N
(see #4.9):
http://sdw.ecb.europa.eu/reports.do?node=100000258
(see #7):
http://sdw.ecb.europa.eu/reports.do?node=100000215
Thanks xela, cool links. I usually get my country data of physical from the World Gold Council but they're usually quite late.
And by the way, the ECB sold a very substantial amount of paper gold quite recently... and I'm sure digger would call it a coincidence, as well as calling a similar purchase a few months ago (and not near the end of a quarter) another coincidence. Maybe he'll invent another fake data set to entertain me.
A big failure so far by the European Central Bank in their most recent gold manipulation/control game. They sold over 1000 tonnes of paper gold... and the price went up, and to an all time record high in Euros.
http://www.nowandfutures.com/images/ecb_weekly_gold.png
A big failure so far by the European Central Bank in their most recent gold manipulation/control game. They sold over 1000 tonnes of paper gold... and the price went up, and to an all time record high in Euros.
http://www.nowandfutures.com/images/ecb_weekly_gold.png
Hi Bart, just a heads up;
Data is updated now and shows the ECB and the Euro area bought gold (physical) 107.000 resp. 967.000 ounces :)
( link (http://sdw.ecb.europa.eu/browseTable.do?DATASET=0&node=2018793&BOP_ITEM=812A&REF_AREA=&SERIES_KEY=127.RA.M.AT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.BE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.DE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.ES.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.FI.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.FR.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.GR.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.I2.N.8.812A.N.A1.G&SERIES_KEY=127.RA.M.IE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.IT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.LU.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.NL.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.PT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.U2.N.8.812A.N.A1.G&SERIES_KEY=127.RA.M.4F.N.8.812A.N.U4.G) as data table)
Hi Bart, just a heads up;
Data is updated now and shows the ECB and the Euro area bought gold (physical) 107.000 resp. 967.000 ounces :)
( link (http://sdw.ecb.europa.eu/browseTable.do?DATASET=0&node=2018793&BOP_ITEM=812A&REF_AREA=&SERIES_KEY=127.RA.M.AT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.BE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.DE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.ES.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.FI.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.FR.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.GR.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.I2.N.8.812A.N.A1.G&SERIES_KEY=127.RA.M.IE.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.IT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.LU.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.NL.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.PT.N.8.812A.N.U4.G&SERIES_KEY=127.RA.M.U2.N.8.812A.N.A1.G&SERIES_KEY=127.RA.M.4F.N.8.812A.N.U4.G) as data table)
Thanks. :)
Here's my update which includes physical, swaps and other receivables, and it appears that net net they have actually sold a little over the last few weeks.
http://www.nowandfutures.com/images/ecb_weekly_golda.png
Finster
03-11-09, 04:09 PM
Okay, so if the ECB bought gold, what did they buy it with? Or conversely, if it sold gold, what did they sell it for?
Euros? Dollars? Francs? Yen? Renminbi?
Is anyone about to argue it doesn't matter? :p
Okay, so if the ECB bought gold, what did they buy it with? Or conversely, if it sold gold, what did they sell it for?
Euros? Dollars? Francs? Yen? Renminbi?
Is anyone about to argue it doesn't matter? :p
Ruh roh... I'm still recovering from the last most excellent Fin, and elect to take the path involving discretion being the better part of valor...
Finster
03-11-09, 04:41 PM
Ruh roh... I'm still recovering from the last most excellent Fin, and elect to take the path involving discretion being the better part of valor...
http://users.zoominternet.net/~fwuthering/Posts/GetOutOfFinFreeCard.gif
:D
http://users.zoominternet.net/%7Efwuthering/Posts/GetOutOfFinFreeCard.gif
:D
Finster, the kind and merciful... as opposed to Ming the Merciless. :eek: :D
And in that case, my answer is that it doesn't matter and that it was probably in Euros as a best guess.
Finster, the kind and merciful... as opposed to Ming the Merciless. :eek: :D
And in that case, my answer is that it doesn't matter and that it was probably in Euros as a best guess.
WAG: € -> $ -> AU :)
Finster
03-12-09, 10:38 AM
Finster, the kind and merciful... as opposed to Ming the Merciless. :eek: :D
And in that case, my answer is that it doesn't matter and that it was probably in Euros as a best guess.
One out of two ain't bad! Yeah, it was probably euros. But it matters a lot! If the ECB were to sell several hundred tons of gold for euros, then not only is it dumping gold onto the market, but it is also absorbing several hundred tons of gold's worth of euros from the market. This would reduce the supply of euros and exert upward pressure on their value. Econ 101.
In contrast, if some entity were to conduct a similar transaction in dollars, it would exert upward pressure on the value of dollars. The difference is that the former transaction would tend to increase the value of euros, the latter the value of dollars, resulting in opposite impacts on the exchange rate. And by the same token, the former would depress the price of gold in euros more than the price of gold in dollars, while the latter would depress the price of gold in dollars more than the price of gold in euros.
Of course this refers to the immediate impacts. Sustained actions of this type can result in the opposite reaction; as the gold reserves of the selling entity are depleted, its wherewithal to back its issue (euros, dollars or whatever) is impaired and the ultimate value of that issue is diluted (inflated). Then the price of gold in that issue, rather than falling, rises.
Spartacus
03-17-09, 07:53 AM
small update:
http://goldmoney.com/en/commentary/2009-03-15.html
goldmoney is claiming there's no shortage of 1,000 oz LBMA good delivery bars, so I don't know what to make of this.
There may also be issues of what is considered by whom to be a shortage.
I remember the incident where CEF purchased Silver and Gold, but the Silver delivery would not be done for 6 months. One of CEF's officers became aware of the buzz that this delay was because of a Silver supply crunch (shortage) and told Dave Morgan this was not because of any shortage but was the planned and agreed upon procedure to get through the audit process. Lots of others pointed to that, at the time, as an example of Silver shortage.
So there should be some skepticism as to whether there is a shortage ... BUT ...
the US mint is still not doing the full, legally required amount of Silver coinage, 5 months after announcing rationing. How long does it take to lay on new supply - the rationalizations and denials are becoming more and more questionable, even for diehard non-conspiracists.
(James Turk)
One out of two ain't bad! Yeah, it was probably euros. But it matters a lot! If the ECB were to sell several hundred tons of gold for euros, then not only is it dumping gold onto the market, but it is also absorbing several hundred tons of gold's worth of euros from the market. This would reduce the supply of euros and exert upward pressure on their value. Econ 101.
In contrast, if some entity were to conduct a similar transaction in dollars, it would exert upward pressure on the value of dollars. The difference is that the former transaction would tend to increase the value of euros, the latter the value of dollars, resulting in opposite impacts on the exchange rate. And by the same token, the former would depress the price of gold in euros more than the price of gold in dollars, while the latter would depress the price of gold in dollars more than the price of gold in euros.
Of course this refers to the immediate impacts. Sustained actions of this type can result in the opposite reaction; as the gold reserves of the selling entity are depleted, its wherewithal to back its issue (euros, dollars or whatever) is impaired and the ultimate value of that issue is diluted (inflated). Then the price of gold in that issue, rather than falling, rises.
No question that it had an effect on the gold price but I still believe that the currency used makes little difference.
First, the amounts aren't all that big considering that daily currency trading is around $2 trillion.
Then, 500 tonnes of gold is "only" about a $15 billion transaction.
Also and probably most importantly, most of it is "paper gold" (swaps, forwards and similar) and a swap transaction of that size isn't at all unusual.
I agree that it is Econ 101 and that there was an effect, but it was likely all done within the EC and both sides were in Euros... and even if not, I submit that the currency effect was minimal due to both the scale and that it was paper gold.
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