There has been considerable hoopla and celebration,
following Deutsche Bank’s legal
settlement , in a U.S.-based litigation against this Big Bank regarding
precious metals manipulation. The enthusiasm surrounds Deutsche Bank’s pledge
to “cooperate” in providing evidence to be used against the other defendants
in that litigation: HSBC and the Bank of Nova Scotia (and possibly UBS, as
well).
It is painful to be a naysayer here. The extreme, perennial,
manipulation and suppression of precious metals prices is one of the more
odious blotches on what we call “markets”. However, there is unfortunately no
basis for renewed optimism that this current litigation will have any
meaningful impact on precious metals manipulation – with respect to either
silver or gold.
There are several reasons for not considering this to be
the turning point in precious metals markets which several commentators have
suggested. The most important reason here is the subject matter of the
manipulation itself. The lawsuit which reaped this settlement is based
exclusively on manipulation of the silver fix (and gold fix).
As has been explained
previously , manipulation of the silver and gold “fix” is only the tip of
the iceberg regarding the manipulation of precious metals markets. Of far
greater significance are the following categories of fraud and manipulation:
- 1) Naked shorting
- 2) Bullion “leasing”
- 3) Algorithm manipulation
Naked shorting is an endemic form of fraud in our
pseudo-markets, due to lack of regulation and enforcement of this crime. We
can only assume that this is particularly egregious in precious metals
trading, as the short positions in these metals is grossly disproportionate
to shorting activity anywhere else in the spectrum of commodities.
So-called bullion leasing is a form of fraud and
manipulation which has been discussed by many other commentators, as well as
in previous
commentaries . “Gold generates no income.” This tautology is true with
respect to any commodity.
The only way to produce revenues from any commodity is to
use it (i.e. consume it), or sell it. In either case, it requires
surrendering possession. Consequently, there can be no legitimate business
purpose in “leasing” any commodity, only nefarious ones. In the case of
(central bank) bullion leasing, the fraudulent modus operandi is well known.
…central banks stand ready to lease gold in increasing
quantities should the price rise.
- Testimony of [Federal Reserve] Chairman Alan
Greenspan , July 24th, 1998
So what? Central banks “stand ready” to temporarily
transfer possession of their gold to some third party. In what way does that
counteract a rising gold price, the clear intent of Chairman Greenspan’s
testimony? There is no legitimate way in which such a transaction
could impact bullion markets.
The illegitimate way is well known. Western central banks
“lease” their gold to “traders” (i.e. the Big Banks). The bankers then short
the gold onto the market (manipulating the price lower), thus requiring them
to transfer permanent ownership of that gold, should the party on the
other end of the transaction take delivery of the metal being traded.
The gold is gone, forever, but it remains on the books of
the central banks: the phantom “gold
reserves” of which Western governments continue to boast. Countless,
thousands of tonnes of gold have been leased onto the market during this era
of manipulation. We don’t know the precise level of fraud with respect to
central bank bullion “leasing”, because (of course) these institutes of financial
crime permit no full, public audits of their books, ever.
Algorithm manipulation is undoubtedly now the most
important category of precious metals manipulation, just as it is with
respect to price manipulation throughout our markets. This has been well
established in previous
commentaries .
So-called “HFT trading” (i.e. computerized algorithm
trading) now dominates all trade activity, in all markets. The evidence of
manipulation, particularly in U.S. markets, has now been clearly revealed and
defined through research
into this form of market crime. That research showed that:
a) 75% of all U.S. equities were subjected to significant
levels of algorithm price manipulation.
b) This manipulation is not only endemic, it is systemic.
This algorithm manipulation was strongly “correlated”, meaning it was being
controlled by a single Invisible Hand – the Big Bank crime syndicate which
regular readers know as the
One Bank .
Throughout the last, five years of relentless price
suppression, we have seen clear technical “break-outs” in the price of gold
and silver, only to see prices quickly reverse.
It is true that even legitimate markets occasionally send
false (technical) signals. However, both gold
and silver
have been priced at only small fractions of any minimum, rational price which
we could possibly assign. When strong, bullish technical indicators are
accompanied by strongly bullish fundamentals, legitimate markets never
reverse in such a manner.
This is why the mainstream media (a tentacle of the One
Bank) invests so much time and effort with their own, gibberish analysis
of gold and silver, creating their own, bogus “fundamentals” which they then
hype as an “explanation” of the absurdly fraudulent prices of silver and
gold.
Note additionally the pattern of silver trading over the
past 5 years. Silver is both a much smaller market than the gold market, with
much more volatile demand. For both of those reasons, the price of silver must
be more volatile than the price of gold, yet over the past five years we see
precisely the opposite pattern.
We see a pseudo-market which is being ruthlessly
suppressed. Further indication of this comes by looking at the technical
break-outs in the price of silver versus break-outs in the gold
pseudo-market. Silver break-outs are instantly attacked, and the price is
hammered lower, while gold break-outs occasionally are allowed to gather a
little momentum, before then being illegally reversed. Indeed, it is
precisely this previously demonstrated omnipotence which prompted the warning
that the current “rally” in gold and silver is a fake-rally.
The fact that silver is held in a much tighter choke-hold
reflects the differences in the fundamentals of these metals. Physical
inventories and stockpiles of silver are undoubtedly much smaller than those
of gold, in relative terms. The price of silver has been suppressed to a much
more extreme degree. This means that the upward price-pressure on silver is
much greater than with gold, and the capacity of the “market” to withstand
any stampede of bullish demand is much more limited.
The Big Bank crime syndicate is much more afraid
of silver than gold, and we see this clearly reflected in the pattern of
price manipulation. The price of silver is never allowed to gain momentum,
for fear that once “lift off” was achieved with silver that there would be no
way to reverse either a price spiral, nor prevent some final, catastrophic
implosion of inventories.
This brings us to the silver fix, and the Deutsche Bank
settlement. The silver fix and gold fix were never anything more than minor
tools of manipulation. At two moments each day; the banking crime syndicate
“fixes” gold and silver prices. This is useful for defrauding contracts based
upon the prevailing “fix” in gold or silver, but it has no significant impact
on overall price manipulation.
Exposing such manipulation will do nothing toward
preventing the continued, systemic manipulation of gold and silver prices,
via the much more potent weapons of naked shorting, bullion leasing, and
algorithm manipulation. Deutsche Bank was never accused of crimes of this
nature in this lawsuit, thus its “cooperation” does not extend to providing
information about such manipulation. However, by settling its own suit, acknowledging
its liability, and “confessing” the manipulation of the gold-fix and
silver-fix by other Tentacles, the One Bank can pretend that
“manipulation” has now been eradicated from these markets.
This brings us to the final reason why the Deutsche Bank
legal settlement is (unfortunately) much ado about nothing. It is the
settlement of a lawsuit, not a conviction for the crime of illegally
manipulating the gold and silver pseudo-markets. Deutsche Bank acknowledged
civil liability for its actions, not criminal guilt.
These fix-manipulation lawsuits were launched in both the
United States and Canada. Do we see the pseudo-regulators or pseudo-justice
officials in either Canada or the U.S. announcing (criminal) investigations
of the obvious crime for which Deutsche Bank has acknowledged its
culpability? No.
Any real “investigation” might stumble upon the more
potent forms of price manipulation discussed previously, and have some real,
lasting impact on the serial manipulation of the prices of these metals.
Civil lawsuits, no matter what their outcome, have no lasting impact on such
systemic criminal activity. All that the victims of manipulation can do is
launch additional suits in the future, since “justice” is a commodity which
no longer exists in markets – the playground of the Big Bank crime syndicate.
As regular readers are already aware, the One Bank is now
able to counterfeit
its bogus “Monopoly money” in literally infinite amounts. No matter how much
of its worthless confetti it is forced to shower upon litigants (now or in
the future), such lawsuits could never have any deterrent effect on these
financial crimes.
Even more appalling, when the Big Banks are
actually caught-and-convicted perpetrating one of their serial Mega
Crimes , such convictions never provide any actual law enforcement. A
token “fine” is paid, and then the Big Banks go right back to committing the same
crimes . Indeed, the U.S. Department of (pseudo) Justice has now formally
proclaimed that it will never punish these corporations for their
corporate crimes.
In the face of such systemic, unobstructed criminality,
the token “victory” in an aspect of precious metals price-manipulation which
has little overall relevance is trivial. Real victories will only come with
real justice. The latter no longer exists in our corrupt nations, thus we
should not be holding our breath for the former.
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Jeff Nielson is co-founder and managing partner of Bullion Bulls
Canada; a website which provides precious metals commentary, economic
analysis, and mining information to readers and investors. Jeff originally
came to the precious metals sector as an investor around the middle of last
decade, but with a background in economics and law, he soon decided this
was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.
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The views and opinions expressed in this material are those of the author
as of the publication date, are subject to change and may not necessarily
reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the
accuracy, completeness, timeliness and reliability of the information or any
results from its use.