The secret cabal that is the London Gold Fix is once again being blamed for manipulating the gold market as the price of the metal fell $10 within 10 minutes earlier in the day. The selloff started at 10:22 a.m. EST today when prices were trading at $1,287.70 an ounce and by 10:26 the market hit its session low at $1,274.60 an ounce. According to one website commentary, in 10 minutes 18,000 contracts valued at around $2.3 billion were sold in gold and silver, which drove prices down. The commentary ends with the line: “Thank you London Gold Fix.” While this makes a great catch line, it is total crap because it’s not even accurate. First of all, the London Gold Fix doesn’t exist anymore. The telephone auction process was disbanded in March 2015 and was replaced with an electronic auction process managed by ICE Benchmark Administration on behalf of the London Bullion Market Association. The second auction of the day, which is referred to as the PM Gold Price, was finished well before gold’s selloff started. LBMA has the PM Gold Price at $1.285.75 an ounce. The LBMA updated its prices at 10:02 a.m. So, the only question I have is how the hell does an organization that doesn’t even exist anymore impact the price 20 minutes after the auction ended? This is why I dismiss manipulation talk as garbage, a lot of people use outright false information to promote their idea of market manipulation.
I don’t dispute the fact that both gold and silver saw some heavy selling pressure but it is more technical in nature. Disappointing U.S. data Monday helped push gold to a significant resistance point at $1,290.
Just a quick point: after rally following the weaker-than-expected data, nobody came out saying that someone buying 12,000 contracts valued at $1.6 billion boosted prices in 15 minutes.
The price couldn’t go above a key level and someone prudently took some profits off the table. There is nothing sinister in this and again, I am going to point out that it is a function of a healthy marketplace. Even with the selling pressure this morning, gold is still showing modest gains, up 0.31% for the day.
Instead of looking for conspiracies around every corner, traders and investors should be looking at important support and resistance levels. It will be a lot more profitable for you in the end.
And for those of you who are going to say that just a mouth piece for manipulators (of course, I'm sure people will come up with more colorful descriptions), well I’m not. Despite the strong selling pressure, gold is holding initial support above $1,270, which is a good signs of strength and could lead to higher prices. If prices hold then it is an indication of strength as investors are coming in and buying on dips at elevated levels.
However, for those who are a little more conservative, you might want to wait to see if there is more downside momentum. The next major support level is around $1,264. If this breaks, then you might want to prepare for an ultimate test of $1,250, which represents gold’s 50-day moving average.
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