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Is There A Golden Leak At The Fed?

by: Bill Cara March 22, 2007 | about stocks: GLD    

Bill Cara

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Just how open is the Federal Reserve Open Market Committee? One look at the chart below and you begin to wonder.

click to enlarge
gold

As readers know, I josh at the notion of “Friends & Family” of HBB, the Fed and the Administration. The problem is we’ll never discover the truth if there are in fact leaks and insider trading. Not at that level.

The instant I saw that the FOMC had decided to remove the bit of language about the "additional firming that may be needed," a change the market interpreted as a signal the Fed is talking tough but actually moving closer to cutting interest rates, I knew the gold price would rocket.

But this FOMC meeting started Tuesday, and anybody knowing then what the world knows now would be in possession of found money. So, I ask, can anybody explain why gold rocketed north just before the FOMC convened Tuesday and then, obviously, again yesterday after the rest of us got the word?

Anybody can buy gold and silver on 1 pct margin, 24 hours a day, with no liquidity patches, and no commissions. That means that a $10,000 investment gets the owner a $1 million position. So if you know in advance there is likely to be a pop of +1.5 pct on the gold price, and your margin requirement is just 1 pct, that’s quite a return. In fact on a one-day $10,000 investment, the found money works out to be over $15,000.

When it comes to money, I have a simple rule: trust no one but yourself. I learned that rule after spending five years as an independent auditor. Follow the money; ask the questions. Give no one - and I mean no one - the benefit of the doubt.

By the way, I am accusing nobody. I'm just pointing to the charts.

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This article has 6 comments:

  •  
    Mar 22 04:38 PM
    Proof please? You accuse the staff of the Federal Reserve of criminal misconduct. Such a charge requires proof, not simply an allegation.

    Otherwise your statement is nothing more than libel which deserves to be ignored, if the people you wrongly accuse don't choose to exercise their civil remedies against you.
    Reply
  •  
    Mar 22 05:01 PM
    Hi, Ben Bernanke!
    Reply
  •  
    Mar 22 05:54 PM
    Come off your high horse, Nova Law, you know very well that this is going on all over Wall Street and small investors are getting a gift when professionals show us the charts of suspicious acitivity. Allegation is the stuff of politics and government officials don't have the right to sue over them. Don't they teach that at Villanova?
    Reply
  •  
    Mar 23 05:38 AM
    Malkiel, I actually know some staff members at the Fed in DC. Certainly none of the members of the FOMC, of course. In social conversations one thing that always struck me was just how conscious of security the institution is, and how conscientious about their work that these people are. Their financial lives are literally an open book for the Inspector General to review should there ever be any hint of misuse of inside information. Yet Cara casually paints them all with the unsupported allegation of insider manipulation.

    Cara's allegation of criminal misconduct is indeed the same kind of "crying" that he is wont to do when his predictions prove wrong, as they so often do. Here we are at the end of March, and back in January Cara predicted that we would be at $750 an ounce in the metal. As usual, he was wrong. His excuse? That the Fed is selling its gold reserves!

    www.billcara.com/archi...

    With Cara, it's always somebody else's fault, it's always a conspiracy, and as always, he produces NO facts to support his opinions.
    Reply
  •  
    Mar 22 10:07 PM
    Malkiel,
    Why don't you offer the proof that "this is going on all over Wall Street"?
    Does it ever happen - there are convictions to prove that it does.
    Is it common? No, not as you make the claim.
    But, if you've got the goods, just post it up and then the prosecutions can begin.

    The claim seems to be the "crying in the beer" song of the trading losers. Just another excuse.
    Reply
  •  
    Mar 23 11:22 AM
    Perhaps we should take Cara up on his advice - trust no one but ourselves and "Give no one - and I mean no one - the benefit of the doubt" - and not listen to his conspiracy theories.
    Reply
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