The Gold Index Game

Posted at 6:09 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The industry indices of the exchanges are decided upon by a committee of the exchange made up of members of that exchange. The proceedings of their discussions which impacts huge trading is sealed under secrecy in Canada. Secrecy that is from anyone but the members who are also members of the exchange. In some cases, trading members. That is the index game.

The members of the exchange on the index committee decide on what companies are added to their gold index. The members of the exchange on the index committee decide on what companies are deleted from the gold index. The proceeding of these meetings are sealed under secrecy.

If a company is dropped by secret decision of the members of the exchange on the index committee then all the following (tracking) funds have to sell on the same day. Since a tracking fund must track it cannot buy or sell early or late. If the tracking fund did then it would not be tracking for those early execution days in violation of its prospectus.

Member’s temptation to sell the shares short to the tracking funds that must buy then buy the companies from the tracking funds that must liquidate, as a product of a drop from the index, might be bought to cover their shorts. This temptation must be huge in the dark time in finance. There is generally a week between declaration of index fund and the day the tracking fund must buy or sell. It certainly explains the huge volume contra trend short term moves that take place exactly on the day tracking funds must ask.

This is what you just saw today in my opinion.

Here is an example of a company that was both added and deleted between different indices. I know Mr. McEwen wanted badly to be in major indices, but he will learn. Personally, I never want to hear the word index because I know exactly how the game works. An index is like owning a boat. The day you get out of it is really the best day of your life.


MUX. volume 27,000,000 plus
Ranging appprox. 8.7%