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Private Briefingwith WILLIAM PATALON III, Executive Editor
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Chief Investment Strategist
20-year seasoned market analyst and professional trader with highly accurate track record. Specialty in Asian markets.
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30-year merchant banker, math- ematician, and author. Has a knack for being bearish at exactly the right time.
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30-year CBOE trader, market maker, and retired hedge fund honcho. Helped launch the Volatility Index in 1993.
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30-year veteran analyst of business, economics, and financial markets. Award-winning author of "Contrarian Investing."
If you've ever suspected gold prices are being manipulated, you're not alone--and you're right, they are.
Against the backdrop of fiscal mismanagement, political incompetence, and failed austerity measures, the world's biggest traders have all bet heavily on gold. Lately, they've been pulling out all the stops to get what they want while laughing all the way to bigger bonuses.
Today, I want to talk about who "they" are and share a few tricks you can use to capitalize on their actions without being taken to the poorhouse.
Let's begin with the concept of manipulation itself.
In order to understand the players, you have to understand their motivations. You'd think it's all about profit, but that's not entirely true.
The financial markets are like a football game in that there is a constant flow of energy between participants. Sometimes the game gets very aggressive, leading to smash and bash tactics intended to crush the opposing "team."
Other times, the game is much more subtle, with all kinds of complicated feints and patterns being run to wear down the other side to the point where they make mistakes.
Neither changes the objective -- which is, of course, to win.
Traders, especially the big ones acting on behalf of mega hedge funds, large-scale private funds, institutions, and various central banks, do the same thing. They attack the markets with all the ferocity of a top-tier coach orchestrating the most effective combination of plays and players in an all-out effort to win the game that literally starts each day when the opening bell goes off.
If they want to push prices higher, they can work to build momentum to the point where computerized arbitrage programs kick in with "buys" of their own. If they've had enough, they can quietly begin selling into strength, hoping to slip out the back door as the new partygoers are enticed in the front.
If they want prices to move lower, they can simply walk away from the "bid," a tactic used with amazing success and alarming regularity. Absent consistent buying, sellers have no choice but to lower their "ask"...until the buyers come back.
Or, perhaps they will even try to move the markets with a few well-placed comments in the cyber-ether.
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