This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Not Your Grandfather's Bank Holiday

This comes amid an internal inquiry at the Commodity Futures Trading Commission about whether the daily setting of gold and silver prices in London is subject to manipulation, thus raising the question of whether anything is safe.

The short answer from Rickards is, "There is almost certainly manipulation in the gold market." He notes the CFTC, if it launches an investigation, is likely to find little at fault with the price-setting process in London. "It's very much like the old specialist system on the NYSE, and it's very old-school, with a lot of discretion being applied based on the buy and sell orders in the books of dealers. I think it is extremely unlikely that there is manipulation going on in that ring."

Manipulation, he says, can and does occur in futures markets and Comex gold futures markets, where arbitragers can "paint the tape" -- issuing sell orders at the end of the day that are below the prevailing market price, which has the effect of taking the entire market down.

When that happens, Rickards says, there is a an arbitrage between the futures market and the physical market. "So if I see futures going down a couple of bucks and I'm an arbitrager -- I'm not a manipulator, I'm just a hedge fund trying to make a living -- I might buy the futures and sell the physical [gold assets] because I think the futures are cheap and the physical is at a premium and I have an almost risk-free trade."


Who would do this kind of thing? Some point to the Fed or the Treasury, but Rickards thinks China is a far more likely candidate. "We know that China is out to buy thousands of tons of gold, and we know that the market is thinly traded," he said. "It has been going on for years and will continue to go on for years until China acquires the gold they need."

None of this affects individual investors per se who typically do not, or perhaps should not, trade in the gold futures markets.

"The little guy has to be careful," says Rickards. "If you are going to buy gold I would say just buy your gold and put it away as I think it's going to do extremely well. There is very little doubt that with inflation coming and the money printing that is going on around the world, that gold is going higher. I just tell people buy their gold, put it in a safe place and don't read the papers or worry about daily volatility."

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs