On a day where gold and silver are once again surging to the upside, James Turk spoke with King World News about what is so unbelievable about today.

Is It This Easy To Predict The Gold Price?
James Turk:  “I have an amusing story to tell, Eric. Anyone who trades gold will appreciate it. Earlier today when the Apr Comex gold contract was up 1% from Friday’s close, I sent a message on the internal Goldmoney system saying: 

“Gold is up 1%, so the algos are out. With Comex option expiry tomorrow and OTC option expiry ending Thursday, we are probably at a short-term top for gold.”

Literally minutes later gold was hit by a wave of selling by these “algos.”…

I use this short-hand term for “algorithms,” which are a mathematically derived set of trading rules executed by computers. 

We’ve all heard the news reports about high-frequency trading in the stock market, where trades are entered by computers based on mathematical models. These algos are not the same as high-frequency trading, but the principle is the same. They are both computer-based trades that originate from proprietary ‘black-boxes.’ They are trading models that are known only to their creators. But these two approaches to using computers to trade have entirely different objectives.

Unmasking The Con Artistry Of Central Banks
High-frequency traders are out to make a profit by scalping small margins that exist between buyers and sellers. But the objective of the algos that we see in the gold market is not focused on profit. The algos are instead focused on capping the gold price. And we saw clear evidence of that today. But here’s the important question: How did I know the algos had started when April Comex gold was up 1%?

Here Is How The Con Works…
It was not a good guess. Today was not a one-time event. This capping of the gold price has been going on for years. To my knowledge it was first discovered years ago by James McShirley. I had the good fortune in 2011 to meet James, who is an experienced commodity trader, and have been following his work since then. Seasoned commodity traders have a natural knack for picking up and recognizing recurring patterns as James has done with what he calls the “1% rule.” Namely, a rising gold price will be stopped on any day when the active Comex contract rises 1% from the previous day’s close.

There are exceptions, but the times that gold has been stopped for the day at a 1% price jump has far exceeded the exceptions over the years that I have been watching this rule being applied. Of course occasionally the algos get overrun because the buying is too intense, which I usually note occurs when the spread between spot gold and the active Comex contract becomes too backwardated. That by the way didn’t happen today. Spot was only 30-cents above the April contract for most of the day. It takes a bigger backwardation for the algos to say “enough is enough” and retreat to cap gold at higher price levels. They tend to “circle-the-wagons” at 1.5%, and if still overrun, again at 2%.….more here