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http://www.goldbullioninsider.com/0811/how-gold-price-rigged.php

The first paragraph is the one I really want to understand.

Chapman then discusses how the COMEX is manipulated. "In the COMEX you can sell gold that you don't have (by shorting). Or you can also buy derivatives - betting that gold will go down," Bob explains, "that forces the derivative writer to go into the market and sell. As long as they don't go naked. Now some of them go naked - what percentage? It's hard to say. Because there is no regulation, it's an opaque market, and nobody knows what is going on behind the scenes. "

Jones: "Naked means that they don't even put up the few percentage points to leverage the buy - there is no money?"

Bob confirms, "Right. Exactly. And that's what they've been doing and getting away with and the professionals can't make any money because every time they make a trade they lose!" Chapman estimates that two thirds of the volume of physical gold traded on the COMEX is now gone. And on top this factor - there is speculation about a raid on the COMEX with a lot of people demanding delivery. "How much?" Chapman asks. "We don't know yet but we will know by the 29th of December because that is the last day that the December contracts trade."

On the COMEX if you want physical delivery of your contracts you have to declare by November 28th. If more than 16% of gold contracts are declared for physical delivery - then they'll have to borrow gold.

Jones: "Your saying there is 2/3 less volume in the COMEX because they have rigged it to make it unprofitable, so everybody's leaving it - which then kills the game for those rigging it! "

Bob: "Absolutely. And it also means the cash market will get stronger and stronger because they'll go to London, Dubai, they'll go to ETFs all over the world (there is one trade in the NYSE symboled "GLD" and that's where they are going to go because they are tired of losing money."
Comments  
Hi,
The first paragraph is the one I really want to understand.

Chapman then discusses how the COMEX is manipulated. "In the COMEX you can sell gold that you don't have (by shorting). Or you can also buy derivatives - betting that gold will go down," Bob explains, "that forces the derivative writer to go into the market and sell. As long as they don't go naked. Now some of them go naked - what percentage? It's hard to say. Because there is no regulation, it's an opaque market, and nobody knows what is going on behind the scenes. "

It's informal speech here, and I don't really see any mistakes.

I'll let someone else explain the detailed financial aspects of this, if they want to.

Is it really just the term 'go naked' that you don't understand? I found this apparent explanation via Google, at
http://www.derivativesstrategy.com/magazine/archive/1999/1299col5f753.asp?print
If, as reported, Cinergy chose not to buy firm transmission, presumably because it was deemed expensive at the time, the company had, in effect, taken a bet on the weather. Rather than hedge using weather derivatives—again, an expensive proposition—the company decided to go naked. This is equivalent to self-insuring what is actually a market risk. In the long run, weather hedges may become more affordable, and a market may develop to insure extreme market risk directly.
Best wishes, Clive
Chapman then discusses how the COMEX is manipulated. "In the COMEX you can sell gold that you don't have (by shorting). Or you can also buy derivatives - betting that gold will go down," Bob explains, "that forces the derivative writer to go into the market and sell. As long as they don't go naked. Now some of them go naked - what percentage? It's hard to say. Because there is no regulation, it's an opaque market, and nobody knows what is going on behind the scenes. "

I don't understand what was meant by "they" and why it says "as long as"--Is he talking about derivatives or gold futures?

"Writer", should it be singular?
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Hi,
Chapman then discusses how the COMEX is manipulated. "In the COMEX you can sell gold that you don't have (by shorting). Or you can also buy derivatives - betting that gold will go down," Bob explains, "that forces the derivative writer to go into the market and sell. As long as they don't go naked. Now some of them go naked - what percentage? It's hard to say. Because there is no regulation, it's an opaque market, and nobody knows what is going on behind the scenes. "

I don't understand what was meant by "they" It refers to 'the writer'. 'They' is often used in this way, where the gender is unknown or not important. eg Whenever a student come into the classroom late, they get into trouble with the teacher.

and why it says "as long as"--Is he talking about derivatives or gold futures? As I said above, 'they' refers to 'the derivative writer'.

"Writer", should it be singular? Singular is fine. It refers to one writer, who represents all writers.

Best wishes, Clive
Ah!

Okay, now it makes sense.

Thank you a million time.
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Wait, I just want to make sure I understood correctly: He says the government can naked short sell or buy derivatives so that derivative traders are forced to short sell or, sometimes, naked short sell into the market in order to manipulate the price of gold. As long as they don't naked short sell, derivative traders are within the law and are not harmful to the futures market and to them.

It's really hard to understand what he means exactly. It's kinda vague, or am I really stupid?

Thank you.
Hi,
I don't have enough financial expertise to comment further on this.

I will, however, offer my opinion that this is the kind of activity that has contributed to the current global economic crisis.

Best wishes, Clive
Ok, thank you. I will try to find another source for more in-depth information.
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