Gold Manipulation or Lack of Liquidity?

Gold 400 oz Bars

On Wednesday there was once again a sharp price fall in gold causing gold trading  to stop for 20 seconds. Naturally people are calling this manipulation. But is that really the issue? Is it simply the fact that trading stops because of the lack of liquidity. Who is behind the manipulation is of course not known, just speculated. But the problem may simply lie in a common problem that is impacting all markets – liquidity is simply still at about 50% of 2007 levels.

For 20 seconds, the gold trade was suspended..An automatic stop was triggered after the gold price had crashed due to a massive selling They immediate call any such decline in gold manipulation but nobody has any reason for the massive gold sales. Selling 150,000 ounces with a market value of $ 190 million is not really that big is the overall world of finance. The market liquidity simply withdrew and that is indicative of a bear market. We saw the withdraw of market-makers and liquidity in the stock market for the 1987 crash with the Brady Commission convened to investigate the alleged manipulation. The truth is, not a single such alleged “manipulation” was every discovered since investigations began with the 1907 crash.

All such extreme sell-offs seem to be accompanied by allegations of manipulations. But rationally looking at this, the seller will actually hurt themselves because they are not achieving the best possible price. Every manipulation I have witnessed in the metals has been driving the price UP and spinning the story of shortages to get the people to buy as they sell into every high and then the market crashes. You would not shot a market here in this manner to make money. This is more indicative of liquidation based upon price action without regard to liquidity.

On 12 September and 11 October, the gold trade was stopped for the same reason.Trading on the Chicago Board of Trade is stopped automatically if no more liquidity is available in the entire market. Typically, the five to ten seconds for the trading is stopped preventing price movements that are excessive.

The UK’s Financial Services FSA has started on Tuesday early explorers because of manipulation of the gold price. The gold promoters always claim it is manipulation  and somehow not real, yet the price continues to decline slowly spiraling down. There is no “manipulation” organized to force the price down. This is simply a bear market and there has been steady liquidation of commodities in general. A manipulation is apparent only when that single commodity is moving counter-trend to the group.