GoldMoney and its end-of-day price 'manipulation' (updated) (again)

[UPDATE: After reading this article, you may find the reply from GoldMoney, here, interesting.]

[UPDATE 2: But despite GoldMoney's reply, the story continues.]

GoldMoney is something of a darling of the precious metals community. It is a way of having a claim to ownership of gold, silver, platinum or palladium physical metal, and having it stored in a secure vault in a choice of three countries. It's not especially cheap (with premiums of 2.49% for small USD gold purchases, and 3.99% for silver, you're certainly not getting your bullion for sp(r)ot(t) price). But the premiums are not too much higher than on-line bullion vendors and coin shops, and the storage costs - at least for gold - are not extortionate.

An ambition of GoldMoney was to make gold money in a very practical way. The company foresees a time when online payments will routinely be made in gold, and had offered a facility for clients to make and receive such payments to each other. I say 'had offered', as this aspect was withdrawn on 21 January this year. So GoldMoney is no longer gold money. It's just a glorified bullion dealer.

Part of its popularity no doubt stems from the near perma-presence of its spokesperson, James Turk, on the silverogosphere. It seems like hardly a day goes by without Mr Turk popping up on KWN, Casey Research, or one of a multitude of other sites, to regale listeners and readers with tales of $10,000 gold in ten days or $600 silver in a fortnight (I am paraphrasing here for effect - but only slightly). Mr Turk actually no longer owns GoldMoney, contrary to what many seem to think, but rather acts as their paid spokesperson and consultant. GoldMoney is in fact owned by a collection of investors including Doug Casey (Ed Steer's boss), David Tice, IAMGOLD (a large Canadian mining company) and our old friend, Eric Sprott. I will leave you to draw your own conclusions about the ties between the silverogosphere, the big physical metal investors and GoldMoney and its spokesman, as that is a story for another day...

Today's little mystery concerns a curious effect that I've followed on GoldMoney's charts for some time. Now, GoldMoney's advertised prices are supposedly at spot (with the premium then added on at the time of purchase). Thus, their USD/oz chart is identical to the Kitco USD/oz chart. Gold priced in other currencies should therefore follow the normal convention of converting that currency into USD according to the current exchange rate, followed by a conversion of USD into gold at spot price.

But what I've noticed is that on days when there is a big fluctuation in the GBP/USD pair (e.g. of more than, say, half a cent) then something odd happens after 18:00 GMT. See if you can spot the difference in these two charts, which cover exactly the same time period (clue: look at the end of each of the blue lines):












As is obvious, there is a spike up (of around £7/$10) in the GBP chart at around 18:00 GMT which is not replicated on the USD chart. Now on that day (10 February), the GBP had weakened considerably against the USD, so the gain in gold priced in GBP is not unexpected. What is unexpected is that although the GBP weakened gradually throughout the day, this chart implies a sudden devaluation. However, a check of the USD/GBP chart for that day shows that no such sudden devaluation took place.

Further, one can check the GBP/gold chart for 10 February on any other website, and one will find that this spike is simply not there. It only appears on the GoldMoney charts.

The effect works in the other direction too. Check out these charts from yesterday, a day when the GBP strengthened significantly against the dollar:












Same effect, different direction. The downspike (of around £5/$8) on the GBP chart is not replicated on the USD chart. But the USD/GBP charts for yesterday show no corresponding sudden USD devaluation against the pound. The GBP strengthened against the USD throughout the day. And, as with the first example, the GBP/gold charts available elsewhere show no such downspike.

I have posted just two examples here, but please be assured that this happens every time that there is a substantial shift in the GBP/USD pair. Knowing this has actual predictive power: I knew yesterday that this was going to happen, and was ready and waiting to get the screen grab when it did.

Unfortunately, I have not worked out a useful way of profiting from this effect. Although a genuine arbitrage opportunity most definitely exists, knowing that this spike is coming is not much use unless the spike will be greater than the premiums for buying. In other words, had I sold my gold just before the downspike yesterday, and then bought it back immediately after the spike had finished, I would indeed have benefited from a £5 arbitrage (roughly 0.5%). But I also would have had to pay a 2 - 3% premium on my new purchase, which more than wipes out my hypothetical gain. I suppose a change in the USD/GBP pair of more than 3% in a day might make it worth one's while to capitalise on this, but such days are mercifully rare in the FOREX markets.

Anyway, I digress. This trait is germane to GoldMoney and GoldMoney alone. It is subtle, and not avowed (I can find no mention of it anywhere on the GoldMoney site). Now, GoldMoney presents its prices as following spot, but it is obvious that this is not always the case for purchases in GBP, and perhaps other currencies too.

The only possible conclusion is that GoldMoney is regularly carrying out its own little - and sometimes not so little - 'end of day' currency adjustment. Now that's a bit cheeky, especially as clients are not warned about this. Imagine you had just bought some gold priced in GBP at 19:59 GMT on 16 February, and then immediately lost £5 per ounce thanks to GoldMoney's idiosyncratic little currency adjustment. It would hardly seem fair, would it?

More to the point, it is difficult to describe this cheeky end-of-day currency adjustment which is (a) not avowed, and (b) not done by anyone else, as anything other than a form of price manipulation. The irony of this darling of the silverogosphere effectively manipulating its price on an end-of-day whim is not lost on me.

I should stress that I do not think for one minute that GoldMoney is doing anything illegal here. I just think it's curious that they are so hush-hush about it.

Food for thought.

11 comments:

Jeanne d'Arc said...

Oh, and by the way, I always find it hilarious that GoldMoney is audited by exactly the same company which audits SLV, a fact rarely quoted by the silverogocult. So I won't point that out here. Oh, damn - I just did...

Boefke said...

I never understand in the first place why people prefer such products over physical gold in your hands.

To me it's al searching for risk.T he persons behind this Goldmoney-thing should therefore be watched and appreciated for what they are. Businessman in the precious metal sector. Sole mandate: making profit.

This is absolutely no problem for me. It's their way of making a living. But as I speak this words, how many people outside this blog really do know?

KJ said...

Interesting stuff - they sb putting out an explanation if they are aware it's an issue or non-issue if you will. Not sure what prompted you to notice but great catch.

Looking forward to the connect the ties post - first thought of costata's post on fofoa recently - recent Ed Steer commentary where talks with Sprott & Turk...on the smartphone so will copy/paste the relevant quote later - something about Sprott/Turk agreeing they knew jpm would deliver pslv's recent purchase quickly and without 'delay'.

Paper money profit peddlers - glorified salesmen - no need to rehash what I've pointed out previously - imo, these guys are worse than all the other peddlers - atleast they don't call for the demise of the system but straight up sucking you in for a paper trade -

KJ said...

Btw, what's the minimum redemption amounts for goldmoney gold/silver again?

Bron said...

I'm at a loss to explain this. It seems they have a live second by second US spot price feed and FX rate and thus live GBP gold price as the GBP price doesn't move lock step with USD price.

I could understand that if they weren't doing much GBP gold volume they may intermittently update the FX rate depending on their deal flow (see here for how Perth Mint operates http://www.perthmintbullion.com/blog/blog/12-02-09/How_Are_Perth_Mint_Gold_And_Silver_Spot_Rates_Calculated.aspx), but then we should see smaller intra day jumps.

KJ said...

here's the link:

http://www.caseyresearch.com/gsd/edition/tune-outbuy-goldbe-happy-bill-bonner

"I was talking to Eric Sprott yesterday...and asked him how he was making out getting all the silver from his last offering in PSLV. He told me that they had already received it...and we both agreed that Ted Butler had been right on his call that JPMorgan et al would make sure that the silver purchased for this offering was delivered in a timely manner...as 'da boyz' didn't want to run the gauntlet of negative public opinion by taking ten weeks to deliver this batch, like they did last time."

forgot Butler was the kingpin in that little steam room session.


Goldmoney - need minimum 30,000 oz's of silver and 400 oz's of gold to redeem and take possession. Would be interesting to know what % of customers are below that limit and how many ounces this amounts to and as a % of total ounces of gold/silver in 'control' of Goldmoney.

Victor The Cleaner said...

Test - apologies for the spam. Victor

Victor The Cleaner said...

Alright. With a blogger or google account, you can post here. If you have an openID/wordpress account, the captcha is always flase, and you cannot write comments.

Victor

Warren James said...

Good troubleshooting Victor. (we've been hunting for a way to switch off the Captcha, but to no avail - apparently the site needs to be whitelisted but I've never been able to locate the right administration screen - one of those Google mysteries).

Look forward to seeing bits of your current set of theories - as far as I can see you are on the pulse in terms of interpreting the controlled rise of the gold price (as it relates to Freegold).

I'm not sure the Turdites are quite ready for your research, but well done for trying to reach them.

Regards,
Warren

Victor The Cleaner said...

Well - if you grow up with Zero-Hedge and TF, then what do you know? Funny thing is most of them don't even care (I know this from the wordpress stats).

Regards,

Victor

Dr. Peter T said...

Astute analysis. Thanks. For what it's worth, wouldn't touch the 'scheme' with a barge-pole. Boefke is spot-on, ofc. If you don't hold it in yr own hands, you don't own it- and in that day ,as Another wisely forecasts, there will be NO honour nor integrity. (No preaching to the converted intended)