We Are Close To A Point Where COMEX Price Manipulation Will Become Ineffective

Readers will undoubtedly remember how gold tumbled last Friday on the unemployment report in the U.S. The headlines in mainstream media attributed gold’s decline to the jobs report, as for instance  Gold Declines to Three-Week Low on U.S. Payrolls Data via Bloomberg. The price of gold lost more than 2 pct just minutes after the unemployment report came out. The first chart below shows the astonishing rate of decline on the hourly chart.

One could rightfully ask the question how gold could fall that fast. Related to that, which factors in the real world of supply and demand of gold had changed to justify such a decline?




In his latest update, silver analyst Ted Butler pointed out that a relationship between economic data and the price of gold is non-existent. There is a perception, mostly created by the mainstream media, that the gold price changes because of some news or events. The truth is that the only driver of gold and silver prices are the futures markets. That is where prices are set. Butler has been advocating this idea for four decades. The following is an excerpt from his latest market update in which he reitarates that point:

I hope no one was terribly surprised at the price weakness Friday, or for the past two weeks, or thought for a moment that it had anything to do with the employment report or anything else in the world away from COMEX positioning.

[ … ]

Given that silver is the most manipulated commodity in the world and in history, I fully expect that it can fall further both absolutely and relative to gold in the short term due to the only negative price factor in play, namely, positioning on the COMEX. However, the reciprocal readjustment to decades of price manipulation does not appear to be that far away and, in the long term, silver still looks like a lock for long term outperformance, both on its own and relative to gold.

In other words, gold and silver prices are set in the COMEX futures market for many years. There is no real price discovery in precious metals. So if we would reach a point, somewhere in the future, where this imbalanced situation get restored, then prices will trade much higher than today.

Butler is known for revealing the dynamics behind the COMEX manipulation scheme. Prior to his work, there was no mention about gold or silver price manipulation. In the last two decades, since he has started writing about it on the internet, the subject has got much more attention to the point where Butler appears to be more faithful than ever about a resolution. This quote is also from his latest market update:

Judging by the increasing numbers of commentators and observers now including the developments in futures trading on the COMEX as the prime price influence on gold and silver, I am greatly encouraged. I firmly believe that we are much closer than ever to the point where enough see the COMEX price manipulation to render it ineffective. We are not there yet, but that day will come.

How a possible resolution will play out remains to be seen. Mind that inevitable does not equal imminent. But precious metals market students will admit that prices are indeed disconnected from real world inventories, demand and supply, a situation which arguably cannot last forever.

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing