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Wednesday, June 4, 2014

Insider says: gold price manipulation is common practice

While you may have known it since the beginning, it's significant that the media is unable to maintain the pretense of their being a  disconnect between gold-as-money and it's turning the tide against its mortal enemy - paper - upon which triumph is always achieved.

Wednesday, June 4, 2014, 8:47
Thesis: In order to safeguard its
own financial interests provide
banks the entire gold market on
its head!
Compared to the Financial Times explains a former London bullion dealers that banks repeatedly defend their own derivative positions by short-term market intervention.

The uncovered by the UK regulator FCA [Financial Conduct Authority...CV] case, the gold price manipulation by traders Barclays Bank gave the impression that there had been an individual case. 

Now, there are significant opposition from London to this hypothesis.

In Financial Times (FT) is a professional trader describes the targeted influence on the gold price-fixing in London as "routine". The banks defended regularly own gold trading positions that were inspired by the Gold Fixing, as in the case of Barclays Traders Plunkett . He speaks of self-interest, in particular when trading digital options.

"If I were in the FCA, I would see all the banks who trade digital products. This could be just the tip of the iceberg - there is a massive problem with exotic derivatives and price thresholds, "an unnamed hedge fund manager says, according to FT.

Digital options are now widespread in the precious metals sector, especially in the context of forex trading. This gold is traded under the symbol XAU as a currency. In these transactions, there is a payoff if a pre-determined price at maturity is not reached or not reached. If not, the option expires worthless.

Issuers of these betting slips have thus at maturity a large financial interest in that certain price thresholds are not met or forfeited as many options worthless.

A former precious metals trader of a large investment bank explained (anonymous) that among market participants for a long time the agreement had existed, that buyers and sellers of digital options to defend their positions when reference price and option barrier 
approach heavily shortly before maturity. Say: Let there be attempts to manipulate the reference price in the short term in their own sense. 

What responsibility do the top managers of the banks in this game? 

The ex-trader against FT: As a manager, he would expect from its dealers that they were defending the financial interests of his house.