Gold price not 'suppressed' by spoofing and manipulation, here's why
Manipulation of the markets through spoofing distorts prices on a short-term basis, but has very little impact on the long-term trends, said Peter Hug, global trading director of Kitco Metals.
“It does distort pricing on a short-term basis, but does it materially hurt a retail investor on a longer trend? If the market is on a downtrend, it will stay in that downtrend. If the market is in an uptrend, it will stay in that uptrend,” he said.
JPMorgan was recently fined $920 million for illegal spoofing charges that included thousands of fake order trades.
“Spoofing is illegal. [JPMorgan] put in market orders that give the market an impression that they had side trades to do at a certain price. People saw those orders laying on the ledgers and traded in anticipation of those orders being filled then expecting the price to go either higher or lower,” he said.
Hug stressed that the act of spoofing could be done with the intent of moving prices higher or lower, not just in one direction.
“You’re making the assumption that spoofing only goes one way. If JPMorgan was laying in a trade to try to get the market lower, you could argue that they artificially depressed the price, but I’m sure they did it both ways, they spoofed to the upside,” he said. “Everybody assumes spoofing was done to drop the price. There’s no reason to believe that spoofing wasn’t done the other way around and cause price increases.”
Even if prices were artificially moved, the “manipulated” price would only remain on the market for a brief moment, before other market participants would eventually correct it, Hug noted.
“The point being is that, when the trade was pulled or executed, the market will always find its value. There are buyers and sellers of this market that are massive, including the central banks,” he said.