Blockchain, Reign and the Paper Parade
Gold, ETFS and how blockchain will change the way gold is bought, sold and held in the future.
For years, global financial regulatory bodies have talked a big game over their determination to stamp out market manipulation. Unfortunately, it seems as though their oversight efforts have drifted ever further into the little guy’s lane, arguably leaving sufficient space for the entrenched players of the finance world to go about their business in whichever way they see fit. Sadly, the allure of quick profits can sometimes turn even the most moral investor short sighted in the face of large gains.
I have no doubts as to the vast array of tools and techniques presumably on offer to traders operating within the walls of our oldest institutions, however in this article I’ve chosen to shine the spotlight on ‘Spoofing’ - The art of placing buy or sell orders with zero intent to execute the transaction in order to manipulate markets in favour of pre-existing positions. It’s basically just a very certain helping hand.
As a result, several institutional pillars of the banking sector have found themselves in some rather sticky situations, as they too wandered a tad far into the culpable abyss. It just so happened that some rather ‘questionable’ trading activity between the years of 2009 and 2015 finally came back to haunt them, resulting in some seriously expensive court cases .
Several former precious metals traders have pleaded guilty to manipulating the prices of Gold, Silver, Platinum and Palladium futures contracts between 2009 and 2015. According to certain participants, the senior traders at the banks would enlighten newcomers as to the endless money making possibilities offered by the simple addition and retraction of strategically and nefariously placed buy and sell orders. They also noted that it happened hundreds of times, always with the knowledge and consent of their supervisors . Overall, the past decade of spoofing and manipulation scandals have culminated in over one billion US dollars worth of settlements for the convicted banks in order to resolve several government investigations into their highly dubious conduct . Of course, none of this bodes well for their reputation, but then again, who cares about reputation when you’re simply meeting expectations and churning absurd amounts of profit.
Ultimately, insights like these only really open the door to more conduct and systemic manipulation related questions. One must have sympathy for the retail investor who faces monopolistic powers consistently exerting illegal influence upon global markets and completely neutralising natural market forces.
However, in spite of all these increasingly common albeit disturbingly disappointing realities, we mustn’t get stuck dwelling in the past, and should instead turn our focus to the significant potential that lies ahead. Thanks to the constant suppression of silver and most other precious metals prices over the last several decades we’re now faced with a very rare opportunity.
Just like most things in our world, when oppression and restriction is removed after months, years or even decades of limitation it almost always results in an enormous swing to the opposite side of whatever the subject may have been. In this case, the inflation adjusted Silver price is currently only 10% higher than the 1917 peak of just under US$20 per troy ounce. If that isn’t alarming enough, the current US$22.50 silver price represents only 18% of the all time inflation adjusted highs of US$125 set all the way back in 1980 at the end of the stagflation crisis. That’s a staggering 550% upside, just to reclaim the 1980 highs . Considering the prevailing macroeconomic conditions, and the eerily similar sentiment to the 1970’s I can’t help but acknowledge Silver’s largely untapped, yet so heavily suppressed value.
One also shouldn’t remain oblivious to the exceptionally high, and rapidly increasing industrial demand for Silver as this too will most likely add copious amounts of fuel to what could become a seriously explosive fire of insatiable silver buyers. While it’s still entirely possible that we could see further attempts at manipulation of the silver price, the likelihood of such events is rapidly diminishing as more and more pressure is piled onto guilty parties. At some point, things will change. The bough will break, the price will escape and the returns will be great. All good things inevitably come to an end, and silver will most certainly be there to attend.
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