The notion that a secretive group of banks manipulates gold prices downward in the futures market is an old one.
For some it continues to exist despite the sharp break-out of gold prices, which would indicate otherwise.
Hard Assets Investor (HAI) has investigated the accusation on many occasions and refuted it. It seems people frequently mistake bank-assisted commercial hedging for something more sinister.
Moreover, HAI has pointed out that if there’s any manipulation in the market right now, it’s going in the other direction.
HAI: Here’s the scoop, people. The single largest trading block in the U.S. gold futures market, measured by net open interest, isn’t made up of banks. It’s, instead, an amalgam of commodity trading advisers and other large fund-runners.
Here’s a bigger news flash: These money managers are long. Very long. Fully 99 per cent of their exposure is long. They’re buyers. Big buyers.
Who’s big on the short side? Commercial producers and users of gold. Net exposure for these traders, however, isn’t as lopsided as the money managers’ stake. About 70 per cent of the exposure maintained by commercial traders is short.
Swap-dealing banks are also net short. Though their concentration is heavier – 83 per cent of their exposure is short – their position size is only half that of commercial accounts.
It seems to me that any notion of overconcentration most appropriately applies to fund-runners, not banks.
It’s a good point. For the actual players in the gold market, there’s a lot more money to be made by promoting gold than recommending caution.
Want to get into gold? Here are 11 ways to play the gold game.
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