One can hardly read the alternative financial press or gold sites without coming across articles that claim gold and silver manipulation is proven. It’s allegedly no longer just a conspiracy. Because, now we know that, well, ummm, something…
So let’s look at what we know.
We know that JP Morgan is going to pay a hefty fine to government regulators.
Every once in a while, they go after a major corporation when the politics demand blood. If we had a penny for every time a corporation was forced to pay a fine for an act it did not commit, we could buy a lot of gold with it. And if we had another penny for every time a corporation paid a fine for committing an act that should not be a crime, we would have a gold hoard to rival Mansa Musa of the medieval Mali Empire.
So what did JP Morgan do?
According to Zero Hedge, “…all the ‘tinfoil’ conspiracy theories involving the JPMorgan commodity trading desk have been confirmed…”
That would be incredible, as these tinfoil hats have said that the banks have been suppressing the gold price for decades, by thousands of dollars. This is supposedly done either not-for-profit in service to the Federal Reserve, or alternatively to make money.
The tinfoil hats also accuse the banks of selling short gold and silver futures, naked (we have debunked this one, and we have the data to prove it).
Naturally, the tinfoil hats also include a series of massive frauds on bank audited financial statements. Being short gold and silver, JP Morgan would be losing mass quantities of dollars, so it would have to lie. Teams of accountants, and internal and external auditors would have to be in on the game.
None of the above was confirmed by the ruling today. It confirmed that traders committed a different criminal act. They pled guilty to something else entirely.
Spoofing is defined as sending orders to a market, that one does not intend to be filled.
For example, if you want to sell a silver futures contract at $23.50, then you put in several bids to buy at $23.30, $23.35, $23.40, and $23.45. These extra bids may convince other traders that there is more demand in the market than there truly is.
The purpose is to get one of them to buy your contract at your offer price of $23.50. Then you cancel the bid orders.
There is, of course, a risk that sellers could take your bids at any time. If your goal was to sell silver at $23.50, then you’re probably not happy that you just bought more at $23.45.
We will not address the question whether spoofing should be a crime. We just note that a market maker must, by the nature of market making, send both bids and offers in rapid flurries and then withdraw them.
Anyways, spoofing is what the former JP Morgan trader said he did. The criminal charges sound like he took money from widows and orphans, embezzled client funds, and ran a Ponzi scheme:
“commodities fraud, conspiracy to commit wire fraud, commodities price manipulation, and spoofing”
Most importantly to gold and silver traders, does this prove that the price of gold would be $10,000 and silver would be $300 but for manipulation? And this is the smoking gun?
The Motte & Bailey Fallacy
It’s the fallacy known as Motte and Bailey. A logical fallacy is an argument that is not what it seems, and fails to prove its point. For example:
From proposition A, we know that some frogs are green. Which means that some frogs aren’t. And therefore the conclusion in C does not logically follow. Kermit may or may not be green.
The Motte and Bailey Fallacy is a type of bait and switch. It is named for a medieval keep design, with an inner and highly defensible motte and an outer hard-to-defend bailey. People wanted to be in the bailey, not confined to the motte.
The Fallacy in Action Here
In arguments, the bailey is the provocative statement.
In this case, “gold ought to be $10,000 but trades at a mere $1,900 due to a long-term conspiracy to suppress its price.” This proposition is indefensible. Indeed, it has been debunked. Not to mention it beggars belief that thousands of people, over a period of decades, could keep such a big secret. And multibillion dollar fraud on major banks’ balance sheets that was hidden for decades? Preposterous. That’s not how the system works.
The motte is where the arguer retreats, when pressed.
In this case, “Look, a JP Morgan trader pled guilty to spoofing!” Even if it’s true that this trader entered spoof orders, that does not prove the grand suppression conspiracy theory. The way catching a kid stealing penny candy at the corner store doesn’t prove that his dad committed murder.
We will leave you with three thoughts.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 25.23.
The projected lower bound is: 21.37.
The projected closing price is: 23.30.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 24.2697. This is not an overbought or oversold reading. The last signal was a sell 11 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 40.44. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 24 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -201.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAG= closed down -1.180 at 23.370. Volume was 8,900% above average (trending) and Bollinger Bands were 56% narrower than normal.
Open High Low Close Volume 24.340 24.560 23.000 23.370 39,516
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 24.43 25.42 19.85 Volatility: 34 49 57 Volume: 3,952 790 198
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAG= is currently 17.7% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods.
Our volume indicators reflect very strong flows of volume out of XAG= (bearish). Our trend forecasting oscillators are currently bullish on XAG= and have had this outlook for the last 3 periods.