In a strange twist of events, the judge presiding over a criminal trial involving allegations of spoofing in US gold and silver futures against a Swiss trader commencing in Connecticut this week, has charged the Government with “manipulation”, and thrown out a Department of Justice request to have indictments broadened against the trader to include specifically, manipulation.

Please be aware the following article has been partially retracted: "US gold and silver futures markets "easy" target."

This article has been retracted to correct relevant details regarding Andre Flotron who will appear next week in a criminal trial in CT, USA.

Central banks have a long and colorful history of manipulating the gold price. This manipulation has taken many shapes and forms over the years. It also shouldn't be surprising that central banks intervene in the gold market given that they also intervene in all other financial markets. It would be naive to think that the gold market should be any different.

Deutsche Bank and UBS have agreed to pay $30 million and $15 million respectively to settle the civil charges in the case, while HSBC will pay $1.6 million, the CFTC said.

All three banks received reduced penalties from the CFTC for providing significant assistance in the investigations, which relate to activity that dates back as far as 2008. UBS self-reported the alleged misconduct by its traders to the regulator, the CFTC said.

The alleged activity saw manipulation of a range of precious metals contracts, including in gold, silver, platinum or palladium futures, as well as in S&P E-mini futures.

German philosopher Arthur Schopenhauer said that “All truth passes through three stages: First it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident.”

The manipulation of the gold price has moved close to the third stage, as recent class action lawsuits for over $1 billion have been filed in New York and Toronto against six major bullion banks and have been approved to proceed. Another class action lawsuit is being formed in London.

These lawsuits will have a major impact on gold as the paper price diverges from the physical price.

Andre Flotron, formerly a senior precious metals trader with UBS, was arrested in New Jersey last week by the US Department of Justice (DoJ). The DoJ has charged Flotron with spoofing gold futures on the CME (COMEX) from July 2008 until November 2013.

A junior trader, who agreed to cooperate with the US government in return for avoiding criminal prosecution, told the DoJ that Flotron demonstrated how to spoof gold futures in July 2008 as preparation for the witness moving to the UBS precious metals desk in Singapore.

Now I must ponder/wonder how those people who sold million/billions short when gold was breaking out.?? It happened twice where it looked like abject manipulation on Aug 18th & Aug 25th - both Fridays - both at similar times of the day.

I must ask them or the entities they represented (as no sane trader or poor person would be worth asking)

Did you get value for your money when you blew it away?

The answer is that there really is no true market for gold, just a rigged game consisting of physical gold and paper gold trading side by side as if they were one and the same.

In some ways, this doesn’t matter, because regulators have shown no appetite to enforce the law. The message to manipulators is that this is a big boy’s market and players can do whatever they want as long as it’s not too blatant.

More broadly, where does the price of gold go from here?

It is my understanding the CME ruled yesterday’s silver flash crash excessive, and repriced all trades below $15.45 to this more fair price. Well ironically enough, although last night silver bounced back to $16, this morning in the aftermath of the flash crash, silver traded down below last night’s adjusted low, proving once again, there is no such thing as a bad tick.

But this doesn’t explain why someone would choose to sell a whack of silver futures at 6pm. It wasn’t like it was a badly traded 100 lot. More than 6,000 futures traded. Why on earth would anyone need to sell almost half a billion dollars of silver at the most illiquid time of the day? It almost makes me sympathetic to the tinfoil hat wearing precious metal bulls who are convinced governments are nefariously conspiring to keep gold and silver down.

Silver futures prices on the COMEX futures trading platform briefly plummeted at approximately 7:06am Singapore time yesterday, with the price for the front month (most active) September silver contract falling from a US$16.06 quote down to a low of US$14.34 all within a 1 minute interval. The futures price then recovered nearly all of its losses in the subsequent 2-3 minute period. High to low, this COMEX silver futures contract saw its price fall by just over 10.7%, before rebounding nearly 11%.

During this time when the COMEX price crashed, there was nothing fundamentally happening in the wider financial markets, or indeed in the physical silver market, to justify these price gyrations in COMEX silver futures prices. Which all goes to show that the COMEX ‘paper’ futures silver prices is completely detached from the physical silver market, and that COMEX silver futures prices have no anchoring in the real silver market.