FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 10 August 2016

Bullion Investors Versus The Machines

from Money Metals Exchange

Precious metals prices fell sharply on renewed concerns the Federal Reserve will be raising interest rates sometime this fall. Friday's jobs report painted a picture of healthy growth, fostering a new round of speculation that Janet Yellen and the FOMC will withdraw stimulus.

Investors have seen this a thousand times before. The reaction in gold and silver markets was almost as predictable as the sunrise. When markets continually respond to highly managed data from the Bureau of Labor Statistics - or some other bureaucracy - in a machine-like way, you have to assume it's because most of the trading is actually done by high frequency trading machines (HFTs).

The algorithms calculated the Fed probably would not hike any time soon when employment missed expectations by a mile in early June. Precious metals rallied.

Gold and silver prices stumbled the following month when the same report showed much better than expected data. It was rally time again in late July when the GDP data turned out to be a big disappointment. Now there is "good news" on jobs and the machines responded by selling.

It's been going on for years. Actual humans grow tired of the constant whipsaw around Fed policy expectations and some ask more fundamental questions. For instance, do we have free markets when what matters most is government data and how the central planners at the Federal Reserve might respond to it?

It is this kind of question that separates bullion investors from high frequency trading algorithms which dominate trading in the futures markets. Machines can scan the headlines and respond in milliseconds by placing a buy or sell order on the COMEX. They aren't concerned about how much physical metal there is backing a futures contract. And they can't worry about their children and order some silver bars to set aside for them.

Bullion investors ask more philosophical questions and, unlike machines, they can be skeptical of the headlines.

Friday's jobs report is a good example. In July, the U.S. economy lost more than a million jobs versus June according to the raw data. As is often the case, "Seasonal adjustments" by government economists turned far from stellar data into "good news."

People buy physical metal because they look past the headlines and ask more meaningful questions. They wonder what the consequences for all of this reliance on fudged data will be and why a tiny group of bankers with a dubious (and corrupt) track record is governing their money.

Unfortunately, in the short run, the superficial Fed rate hike "computer query" the HFTs are constantly running has a big impact on metal prices. The questions bullion investors are asking won't always govern price discovery in metals until, suddenly, they are the only ones that matter.

About the Author:

Clint Siegner

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Metals Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Precious Metals


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Rising Tide Does Not Lift All Ships
Comments on Feyerabend’s ‘Against Method’, Part II
News Blog
New Seasonal Outlook Updates from NOAA and JAMSTEC - Let's Compare Them.
Infographic Of The Day: Driving Into A Battery Powered Future
Earthquake Risk - Location Matters
Investor Alert: Be On The Lookout For Investment Scams Related To Hurricane Matthew
Lost In Translation: Five Common English Phrases You May Be Using Incorrectly
The Size And Scope Of Samsung's Business
Immigration Is The Top Worry For Britons
People Killed By Russian Airstrikes In Syria
Have You Taken These 4 Simple Steps To Improve Your Trading?
14 October 2016: ECRI's WLI Growth Index Insignificantly Declines
Mom Breaks Down In Tears When Son With Autism Meets Service Dog
Rail Week Ending 15 October 2016 Paints A Negative Economic View
What Is The New Normal For U.S. Growth?
Investing Blog
FinTech Is Taking A Bite Out Of Banks
Options Early Assignment - Should You Worry?
Opinion Blog
US 2016 Election: Will US-China Relations Change
Prop. 51 Versus A State-Owned Bank: How California Can Save $10 Billion On A $9 Billion Loan
Precious Metals Blog
How Will The Election Outcome Impact Precious Metals?
Live Markets
21Oct2016 Market Close: Major US Indexes Close Flat On Low Volume, Crude Prices Resume Climb, US Dollar Stabilizes In Mid 98 Handle, Yes, Most Investors Are Worried Which Way This Market Will Go
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved