On the issue of PM price manipulation

[jim4silver]

I know this issue gets debated non-stop, but I read something not too long ago that makes sense to me as a PM bull and believer in manipulation.

I cannot remember the article or the writer, but he said something to the effect that (I believe this guy is/was a professional futures trader) when someone wants to sell a large position in any commodity AND wants to get the most value from what they are selling, they sell the position in STAGES. In other words they don't just dump the whole position at once. To dump it at once causes an instant drop (like we see in the gold and silver markets when thousands of contracts get sold at once), which would NOT bring the seller the most value from their sale.

This makes sense to me, and I don't understand why any PM holder, whether individual, corporate or government, would not want to make the maximum profit they can from their sale. To simply dump large amounts at once shows an intent to drop prices quickly versus making the most profit based on the article I read. I don't see how anyone can argue with this logic, especially since we see large "dumps" in gold and silver all the time. Such large traders would not be making such "mistakes" when selling if their goal was maximized profits and not simply smashing PM prices.

I am curious to see what our non-manipulation friends here say to this info.

PS Yes I know paper PM's could in theory just as easily be "manipulated" upwards, but unfortunately those who are "manipulating" seem to favor dropping prices much more than raising them it seems.

Just my opinion.


Jim

 

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[TheCoinKid]

I know this issue gets debated non-stop, but I read something not too long ago that makes sense to me as a PM bull and believer in manipulation.

I cannot remember the article or the writer, but he said something to the effect that (I believe this guy is/was a professional futures trader) when someone wants to sell a large position in any commodity AND wants to get the most value from what they are selling, they sell the position in STAGES. In other words they don't just dump the whole position at once. To dump it at once causes an instant drop (like we see in the gold and silver markets when thousands of contracts get sold at once), which would NOT bring the seller the most value from their sale.

This makes sense to me, and I don't understand why any PM holder, whether individual, corporate or government, would not want to make the maximum profit they can from their sale. To simply dump large amounts at once shows an intent to drop prices quickly versus making the most profit based on the article I read. I don't see how anyone can argue with this logic, especially since we see large "dumps" in gold and silver all the time. Such large traders would not be making such "mistakes" when selling if their goal was maximized profits and not simply smashing PM prices.

I am curious to see what our non-manipulation friends here say to this info.

PS Yes I know paper PM's could in theory just as easily be "manipulated" upwards, but unfortunately those who are "manipulating" seem to favor dropping prices much more than raising them it seems.

Just my opinion.


Jim

There's no doubt that large traders (large relative to the security's/commodity's overall trading volumes) must sell in stages to not overly-influence a downward price movement. I'm certainly not a large trader, but even I've had to sell certain very thinly-traded stock investments in stages, in order to maximize my profits (some companies with a very small public float may not have more than a handful of stock trades all day). This strategy, as you stated, is perfectly logical.

I'm also sure that large investors sometimes have a need to dump large positions at one time for various reasons unrelated to price manipulation (to avoid an anticipated quick drop in price, to free up cash for another hot investment, to meet margin calls, debt coming due, payroll needs, etc.).

If price manipulation is the expected reason for some large investor dumps, my question is: what does the large investor have to gain by dumping shares and lowering the market price?

Does manipulation still occur, my guess is, to some extent, YES, but I don't think it happens like it once did (Think of Bunker alledgedly trying to corner the silver market in 1980; I don't believe manipulation to that extent could ever occur again).

 

[Jason in Enid]

It would be more desirable to push the market down because they know it's coming back up shortly. So they sell a large amount at price X, then re-buy it all at price X-2, wait for the price to rebound then sell for a profit and repeat.

 

[TreasurePirate69]

I totally agree that this is a logical strategy to use if someone wanted to manipulate prices. That's really all I have to say on the matter.

 

[TheCoinKid]

It would be more desirable to push the market down because they know it's coming back up shortly. So they sell a large amount at price X, then re-buy it all at price X-2, wait for the price to rebound then sell for a profit and repeat.

I'm trying to follow you. Say the market was at $22 and they sell at an average price of $20 (due to the impact of the large dump), they would need a repurchase price of below $20 (including round- trip transaction costs) to make it worth their while.

Maybe you're saying the quick price drop resulting from the dump scares the "weak hands" into selling, further decreasing the market price.

Just trying to understand.

 

[Jason in Enid]

I'm trying to follow you. Say the market was at $22 and they sell at an average price of $20 (due to the impact of the large dump), they would need a repurchase price of below $20 (including round- trip transaction costs) to make it worth their while.

Maybe you're saying the quick price drop resulting from the dump scares the "weak hands" into selling, further decreasing the market price.

Just trying to understand.

Lets say the market is at $22. I can't make a giant dump without drawing a lot of scrutiny and probably getting spanked for it. So I dump it in several successions, say the first at $22, the next at $21, the next at $20.50 . Now, the market has interia and movements don't instantly stop when the massive sell is done, so it's going to keep going down a little more before it stops or starts to rebound. This means they can rebuy all that PM (and probably more) at $20 or even less. Eventually, that market is going to rebound and they can do it all again making that profit over and over again.

 

[jim4silver]

Lets say the market is at $22. I can't make a giant dump without drawing a lot of scrutiny and probably getting spanked for it. So I dump it in several successions, say the first at $22, the next at $21, the next at $20.50 . Now, the market has interia and movements don't instantly stop when the massive sell is done, so it's going to keep going down a little more before it stops or starts to rebound. This means they can rebuy all that PM (and probably more) at $20 or even less. Eventually, that market is going to rebound and they can do it all again making that profit over and over again.

Jason,

I can see the real possibility of your theory, but it would make more sense for them to let it run up further before smashing it down (they would profit more on the long and short side), like they did when silver went up to 48 in 2011 to be smashed back down as fast as it went up. I have no facts to base this on, but I believe the "manipulators" were riding silver up at that time. Some will say they simply stopped manipulating down and let nature take its course but I disagree with that.

The price action now seems designed for one of two things: to allow for cheap purchase of physical (relative to past few years and cost of production) and some speculate China is the big short and are doing it to keep bullion cheap so they can keep loading up. Or instead, as some speculate the manipulation is to keep the gold (and maybe silver) price in check (defend the dollar). I don't know what the reason is myself, but if they were doing this solely for profit, they would make much more letting the price travel further up before riding it down. Presumably there is a floor price and they know what that is. Unlike stocks, PMs will never go to zero. Perhaps that is why we have not seen below 18? Since they can only push it down so far, why not let it ride up to even 35 then pull the plug? Unless they are afraid once the bull run starts up again it won't be so easy to stop?

I don't think physical PMs will ever go up that much unless there is a serious problem with lack of physical supply, or the manipulators decide to go long for a while. I am betting on option 2 before option 1.

PS Of course any dollar devaluation or collapse would make PMs skyrocket, but I don't think that will happen for a while (if at all).

Just my opinion.

Jim

 

[Marchas45]

My guess is, they are manipulating the PM's to TRY and protect the dollar but I'm sorry to say, the dollar is going to lose a lot of value pretty shortly when Interest Rates start to climb and the Dollars come home to roost. Keep Stacking

 

[rockygulchJoe]

I think along the same lines as Marchas45.
So im down at my LCS to stack advantage of some sub$20 plata, I'm shooting the... whith the old timer at the shop, he whips out one of the new Benjamins and starts going on how worried he is about the big blue strip running down the center of the new bill, thinking it's has something to do whith tracking.
Well I bring up the subject of metal manipulation, and he is like "No No No" he didn't even want to go there. The funny thing as he is reluctantly getting me some tubes out of the safe he ses
"I dont know why the price is so low"

I just shook my head as I carted the silver away.

None so blind as those who
"will not see"