Friday, September 9, 2011

Flash Crashes: Silver, Swiss Franc, Gold

A montage of "efficient" markets...enjoy.

First off, silver. The key things to note here, 1) The complete lack of volume the hour prior to the take-down, 2) The volume during the take-down, which is orders of magnitude greater than the previous hour, 3) The fact that this took place Sunday night during very thinly traded hours, and 4) the similarity to the Swiss Franc candle below. Overall, this decline occurred under highly suspicious conditions. Unlike currencies which are overtly manipulated, precious metals take on a more clandestine form, but are blatantly obvious to anyone who follows these markets closely, heck even passively. To date central banks have been unwilling to admit their participation in full, but have indicated various degrees of shenanigans with little media attention. Take a look at GATA for more information on how this has been occurring for years.

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The Swiss, typically a neutral country, has entered the currency war with guns ablazin'. This is how a national currency, and a national people, lose over 8% of their purchasing power overnight, thanks to central banking. 

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A measley 8% you say, let's take a look at the bigger picture:

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Scratch that. We have a decline on the order of 18%, but that took a little over a month. So what exactly are we looking at? Essentially how fast a currency can be devalued when a central bank deems it necessary. Down the road the Swiss will learn that this is a zero sum game and the markets will inevitably overwhelm their target. Defend as they might, they'll eventually be overrun and have wasted a lot of money in the process.

Finally, I'll leave you with gold which has increased from roughly $250/oz ten years ago to over $1900/oz more recently. In one of the more recent peaks it experienced a peculiar smack-down, which of course looks similar to any one of the currency intervention charts. In reality, gold is manipulated, currencies are manipulated, bonds are manipulated. The whole works, so when you think you are making a sound investment in paper assets traded on exchanges where derivatives and margin are commonplace, don't forget that margin can be changed, some central back can sell short with reckless abandon, and of course they rarely never play fair.

(click to enlarge image and uncover the mystery)

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