How Gold Spoofing Manipulates Markets & Hurts Investors

 

Gold spoofing is a deceptive market practice that involves artificially inflating the prices of gold and selling it at higher prices to make a profit. While gold spoofing isn’t permitted by law, it still occurs. Below, we cover the basics of gold spoofing to provide you with a better understanding of what to look out for when making investment decisions.

How Does Spoofing Work?

Spoofing occurs when a buyer places orders for a substantial amount of gold and then cancels the orders once the market reacts. It’s a practice that results in artificially inflated prices. The buyer then cancels the orders and sells some or all of the gold for the higher prices and makes a significant profit in the process.

What Does Gold Spoofing Do to the Market?

Gold spoofing makes it difficult for investors to get a fair price. For example, if they’re looking to buy gold bars, Scottsdale investors may shy away from gold purchases altogether if they notice high prices and assume such prices will remain high for a while. Other times, investors may lose significant amounts of money from gold spoofing. For instance, they might place gold bars for sale and assume they’ll make a nice profit, only to be surprised when market rates return to normal. Market manipulation also impacts market stability and undermines trust.

Signs of Gold Spoofing and Market Manipulation

The good news is that alert investors can usually spot signs of possible market manipulation. Look for things such as unusual shifts in trading volume or sudden spikes without advance notice. If there are expected market shifts, key market individuals usually alert investors about things like market disruptions or mine issues that could affect prices.

Other signs include:

  • Frequent order cancellations, especially of large orders
  • The spread of misinformation to influence investor behaviors
  • Selling or buying that suddenly benefits certain investors and seems to be based on information not readily available to other investors
  • Online posts from other investors who are suspicious of recent market spikes

 

Other Forms of Gold Manipulation

Gold prices can also be influenced by pump-and-dump schemes. In this instance, prices are influenced by false or misleading information. The result is often significant losses for investors if they quickly sell their gold at discounted rates or sell gold they were otherwise planning to keep. Wash trading refers to the practice of buying and selling the same gold assets to create the impression of increased market activity. Insider trading involves the use of information not available to the public to buy and sell.

What to Do if You Suspect Gold Manipulation

If you suspect gold spoofing or any other form of gold manipulation, start by documenting what you notice. Record dates, times, and market reactions. Report such activities to the relevant authorities, such as the Securities and Exchange Commission (SEC). Consult with a financial advisor or legal expert familiar with precious metals to determine if there are actions you can take if you have experienced losses. Also, stay alert and be aware of any market news that suggests gold prices may be artificially influenced by any of the schemes mentioned above. 

 

Whether they need expert advice on precious metals markets or they’re looking for the best place to sell gold in Scottsdale, precious metals collectors reach out to the trustworthy professionals at First National Bullion. We can answer all your questions and help you find all the information you need on how precious metals can be a valuable part of your portfolio. Give one of our experienced dealers a call today.

 

The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.