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Guest Post: Gold Manipulation, Part 2: How They Do It (And How To Hedge It)
Submitted by Martin Sibileau of A View from the Trenches blog,
“…The genius of central bankers was not to forbid gold but to morph it into another fiat currency, by adding a credit multiplier to it. …”
This is the second of three articles I am posting on the suppression of gold. In the first article I showed that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. This second article will show how that suppression takes place. Those familiar with the gold market will likely find nothing new. The third article will examine the implications of this suppression and support the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.
How they do it: The concept
The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation. In its simplest form, gold cannot be printed and, as its supply remains anchored, its price should spike if the supply of fiat money increases. The implicit math behind can be represented as follows:
Given a constant demand for money…
The equation above shows the price of gold, in terms of a fiat currency (in this case, the US dollar) as a function of the relative supplies of gold and the US dollar. In the case of a fiat currency, its supply is the product of two factors: the monetary base created by the respective central bank and the corresponding credit multiplier. This multiplier reflects every single mean by which the original base is expanded, through the banking system and the shadow banking system.
If the equation above was indeed representative of the state of affairs we’re in, there would be no room for manipulation. The supply of gold, in terms of ounces available, could be perhaps capped or confiscated, but not expanded. The price of gold, therefore, could not be suppressed.
Now that we know what cannot be, let’s understand what really is happening. To suppress the price of gold. central bankers, simply, have invented a new currency: Fiat gold. The math involved in it now is:
Given a constant demand for money…
As you can see from the second equation above, the genius of central bankers was not to forbid gold but to morph it into another fiat currency, by adding a credit multiplier to it. With this, it only takes to proportionally expand this credit multiplier faster than the numerator (of the equation) and the price of gold will fall regardless of fundamentals. If they want to go one step further and signal to the public that they can do this with complete impunity and for as long as they please, they then proceed to expand the credit multiplier predictably at specific times of the day (i.e. 8:20am ET).
How they do it: The details
Below, I will describe how the supply of this new currency, fiat gold, is expanded. The motivation for this expansion was already explained in the previous article. Below, I present the steps included in the expansion of the supply of fiat gold. In the next article, I will elaborate on the graph below, addressing its implications and consequences. But today, let’s just look at the mechanics:
The above graph shows the aggregate balance sheets of the central banks, bullion banks and the gold market. Bullion banks handle transactions in precious metals and, in this case, in gold. As you can see, central banks hold gold as part of their assets. However, they can swap their gold holdings for liquidity, for US dollars. This swap is a mere exchange and is shown as step 1, in the graph. The official explanation is that such swaps would have temporary liquidity management purposes, because they remove US dollars from the market (i.e. from the Bullion banks). At a later date, not shown in the graph, the Bullion banks should return the gold to the central banks, and receive US dollars back (including an interest). For this reason, because the swap contract implies the return of the gold at a later stage, central banks are allowed to continue showing the gold they swapped in their balance sheets, as an asset.
Once the physical gold is in the hands (i.e. balance sheet) of the Bullion banks, these banks can create loans against it, supplying the market with fiat gold. This is shown in step 2. Gold is debited and Gold loans are credited. The ultimate amount of gold loans outstanding is obviously a factor of the credit multiplier in fiat gold. The higher the multiplier, the higher the supply of fiat gold in the market and the pressure on the price to come down.
The anxiety around this issue is noticeable and the big questions are: How far can central banks go with this manipulation? How long can it last? Is there a mechanism by which the market should revert to fundamentals? I will devote the next letter to the last question. With respect to the first ones, all I can say is that central banks can go very, very far with the manipulation and can last longer than you or I are willing to believe. Why? Because unlike the case of other currencies and their respective credit multipliers, in fiat gold, the players that demand gold loans are also the ones who transact in gold (i.e. Bullion banks) and dominate the repo market to provide funding (to those ultimately speculating with gold). They are all the same and only a handful. They play a cooperative game among themselves and with the central banks. The public that holds physical gold or the central banks that accumulate physical gold but do not enter into swaps with the Bullion banks cannot force a contraction in the credit multiplier. By their actions (i.e. hoarding of physical gold), all they can do is to force the rest of the central banks and Bullion banks involved to take a higher risk in the expansion of the multiplier. But they cannot force a rush for delivery. They are, by definition, outside of the system.
How can we protect ourselves from the manipulation?
One way to protect ourselves from the manipulation described above is to simply trade the expansion of the credit multiplier for fiat gold. At this point, I remind the reader to read my disclaimer. (My comments are not intended to provide personal investment advice and they do not take into account the specific investment objectives, financial situation and the particular needs of any specific person).
If the supply of fiat gold is a factor of the monetary base in fiat gold and its credit multiplier, one can think of proxies for these factors. In my view, the monetary base is represented not only by the stock of physical gold outstanding, but also by the stock that is to be mined: By the gold miners, collectively. Fiat gold, on the other hand is represented by either futures or gold certificates.
When the manipulation succeeds, the credit multiplier expands. In this case, if I am correct, it should be profitable to be long the promise to deliver gold and short the monetary base of fiat gold. When the manipulation is not successful or a rush for delivery is triggered, the credit multiplier contracts. Here, if I am correct again, it should be profitable to be short the promise to deliver gold and to be long the monetary base of fiat gold. There are many ways to express this trading thesis, but I’d rather leave these speculations to the reader.
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My hedge against gold manipulation is to never part with my stack.
My hedge against your hedge is a doublehedge on that, plus zerohedge.
Hedge.
We may be approaching the point where the only true hedge for Au and Ag is Pb.
Some of this bullshit really needs to be called out...
The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation.
Publicly many central bankers have stated on the record that gold is the ultimate standard for safety, including Greenspan and Bernanke. The idea that they don't acknowledge this is a myth.
The author is also rusty on their calculus because the function he wrote doesn't make any sense.
As you can see from the second equation above, the genius of central bankers was not to forbid gold but to morph it into another fiat currency, by adding a credit multiplier to it.
It should be stated, out of ~4000T of gold coming into the market every year about half of that winds up in jewellery.
Let's look at the actual gold market for a moment... most of the gold currently existing above ground is held in some form of jewellery, estimates of 50%. The current gold supply market yearly is also dominated by jewellery, the remaining 50% (~2000T yr) winds up in industrial use, investor etc.
As the price of gold has gone up, the demand for gold in jewellery has gone sharply down (over the last decade + lowered industrial demand). On the other hand as the demand for jewellery went down the investor interest went up even more sharply...creating a speculators market.
So two things, there is massive amount of gold sitting around out there currently in jewellery that increasingly is recycled into the market as the price moves up, another factor of the higher price is mine supply which also has increased. These two alone are major headwinds for gold.
The higher the multiplier, the higher the supply of fiat gold in the market and the pressure on the price to come down.
Keep in mind, investors & CB's hold a total of around 16% & 18% of the worlds gold respectively, ETFs hold a total of 1700T of gold. So if there is dilution it is a minor part of the market and certainly more then compensated for by investor speculation.
The much better argument for gold is the simple one - currency debasement. All this bullshit sideshow stuff about manipulation just confuses people about the actual fundamentals of gold. Gold hasn't risen for the past ten years because of CB's manipulating the price down! Gawddamn people use your eyes and brains!
What bullshit? What doesn't make sense of the equation??? The equation only states that the price of gold in terms of USDs is a function of the relative supplies of both. That doesn't make sense? What makes sense then?
Who cares about the numbers of tons in jewellery or industrial use?? They are part of the monetary base, not the multiplier! Do you think that providing calculations on volumes will give authority to your claim???
How do you know gold has really risen in the past ten years to where it should have risen? Had there not been manipulation, the rise would not have been from the $300s/oz to $1,600s/oz, but perhaps to the $15,000/oz...WHO KNOWS????
Ask yourself this: What do you think would happen if the stock of Berkshire Hathaway got slammed down $10 every day at 4am ET or 8:20am ET. There would be a massive investigation with people in jail. Do you see the same happening in the precious metals markets?
Over to you....by the way, you sound like my kids trying to come up with an explanation of how Santa Claus is able to make all deliveries in one night...Guess what, there is no Santa Claus! Oh...yes, I forgot, that is a conspiracy theory too!
Does Gernany have it's gold yet?
Just checking.
When was the last time the US audited Fort Knox?
Just checking.
*
gold or gold coated tungsten.... maybe that's how they do it .... roman "silver" coins got down to 1% before the shit hit the fan...
Confundido: "How do you know gold has really risen in the past ten years to where it should have risen? Had there not been manipulation, the rise would not have been from the $300s/oz to $1,600s/oz, but perhaps to the $15,000/oz...WHO KNOWS????"
Comment
You do realize that works both ways. How are are YOU to know that gold shouldn't be much lower because of manipulation? After all, if I were a PM company and I had such inventories and I knew gold were going to $5000/oz, why would I sell it to you at this low price of $1600/oz?
I don't know and nobody knows what the price should be. But the movements that have NOTHING to do with normal practice: Sell off at 4am ET or 8:20am ET are movements to take the price down. You never see, consecutively every fucking day, someone purchasing gold or silver at the same time... or do you??
On the other hand, to your last point, storing a commodity for an increase in the price is absolutely normal and it would be a mistake to think that that is manipulation.
"What bullshit? What doesn't make sense of the equation???"
In a technical sense author tries to write a function and fails.
"Who cares about the numbers of tons in jewellery or industrial use??"
Yeah, who cares about the dominant use of the commodity?
"Had there not been manipulation, the rise would not have been from the $300s/oz to $1,600s/oz, but perhaps to the $15,000/oz...WHO KNOWS????"
There's nothing in the market that suggests this is anywhere within possibility. Even if it was suddenly discovered all the central banks had zero gold, ETF holdings were zero etc., you wouldn't see a move anywhere near that because of the huge supply that would immediately move into the investor market.
Also, everyone here more or less agrees gold is moving up on speculation - so consider the fundamental (jewellery) when looking at whether gold is overbought or manipulated down.
"Ask yourself this: What do you think would happen if the stock of Berkshire Hathaway got slammed down $10 every day at 4am ET or 8:20am ET. "
First, if BRK moved $10 no one would notice. But on your point, yes many stocks move in 'unnatural' ways for a variety of reasons, particularly on OI. Aapl is famous for it's high level of manipulation from huge option market. There are lots of people who devote their trading research to what's called 'max pain.'
Gold as a commodity is heavily hedged on the futures market (all miners have to etc.) so of course you'll see 'manipulation' in the price, but it's two totally separate issues.
Not so fast Cole.....
If I recall my Bernankeisms......I believe he likes the word "Tradition". Not "Safety".
Check the numbers James. Gold scrap has fallen 50% in the last year.
Crap! I shoulda sold the stuff when it was worth $27. Now I'd only get $13.50 of inflated Bernanke Bucks.
You sound a lot like Jon Nadler. How's that Rhodium trade going where you were prostituting yourself on CNN, recommeding a buy at $3000/oz in 2010?
That trade is probably doing about well as trading on the numerous predictions that gold would hit $2k in 2012.
James Cole, you are truly a trollish piece of work.
In one sentence, you manage to spit out two classic Nadlerisms --- that is quite a feat.
Gross error #1: There is NOT ~4000 tonnes of gold coming into the market every year, the true number is ~2600 tonnes as a result of mining. The difference between the two figures is that you deceptively and dishonestly add recycled gold into the total supply, but that gold can only "enter the market" by LEAVING the market in the first place, so the net effect of it is cancelled out. Total annual gold supply is and can ONLY be derived from mining.
Gross error #2: Just like Jon Nadler and other anti-gold shills love to do, you disingenuously dismiss all the gold going into gold jewelry as mere decoration and frippery, when in fact well over half of that "jewelry" is actually INVESTMENT GOLD as well, merely being fashioned into the form of jewelry, as is customary in southern Asia and the Middle East. You could just as easily, and speciously, dismiss all the investment gold that happens to be fashioned into coins as "collectables", when we all know that claiming so would be absurd.
"There is NOT ~4000 tonnes of gold coming into the market every year, the true number is ~2600 tonnes as a result of mining. The difference between the two figures is that you deceptively and dishonestly add recycled gold into the total supply, but that gold can only "enter the market" by LEAVING the market in the first place, so the net effect of it is cancelled out. Total annual gold supply is and can ONLY be derived from mining."
It's the same in all commodities markets, for instance take copper - is recycled copper "leaving" the market?? However you want to look at it it is part of the supply.
Let me try and write this simply... As the price goes up gold that has been purchased in the past is coming back into the market from whoever is selling it. Old gold is not like a used car, it's exactly the same as the new stuff - you're not getting a discount on the old gold (outside of pawnbrokers etc.) so of course it's going to be a drag on the price.
"You could just as easily, and speciously, dismiss all the investment gold that happens to be fashioned into coins as "collectables", when we all know that claiming so would be absurd."
The article is about manipulation as "fiat" gold, since it wouldn't make any sense to argue that this jewellery-investment market is turned into fiat gold we can conclude at least half the annual market demand is not sourced from fiat. Your point here is totally separate to the argument.
And I'm not anti-gold.
Hedgehog
Yes, the manipulation does not matter to me at all. If it has helped keep my cost basis lower through the years, well then that is great.
Never sell your gold.
The ultimate checkmate on the gold manipulation are the manipulators themselves. They WILL destroy all confidence in fiat. Without CONfidence the fiat cannot stand alone with only air under it. Understand this game DOES end. Do not underestimate how CLOSE you may be to the end.......and bullion IN POSSESSION is the ultimate hedge.
+ 1
Gold bullion is independence.
Gold is portable independence.
sssshhhh
dont tell anyone its being manipulated
just buy the fucking dips
(stop talking about fight club for fucks sake)
Better check that DoChen: never trade wealth for fiat. There I fixed it for you. ;)
Indeed you make the general case. I always look forward to your comments on gold. And wealth.
Correct. At some point I may trade gold for some productive farm land out in the country. But as you say, not for fiat dollars.
good one
your wife, kids, etc. will sell it for you when you go tits up
"My hedge against gold manipulation is to never part with my stack."
this
ill part with my silver - one round at a time into werewolf bankster heart
Fuck that Dio...why waste the silver. A wooden stake in the heart will do just fine. Heck, I will hold the bankster down while you drive it in.
You might be confusing werewolves with vampires.
Best to use silver tipped arrows to the heart. Works in either case and they're reusable.
I knew it ! I did confuse the two.
Then again Banksters = Vampires/Werewolves/swine/(insert favorite here) so no matter what mechanism we use to kill them, in the end they are still dead.
"My hedge against gold manipulation is to never part with my stack."
Got Hedge?
gold is going down, the bubble is over
Trenchant analysis. Many thanks.
No, I think he's talking about his boat that runs on Alka-seltzer tablets..
Pulling an iceberg
Writing the 16 trillion dollar check and starting over like a virgin....could happen...but not likely.
We've got fake money flying out the wazzoo.
A_S is a true gold bug
talking the good stuff down, while buying it hand over fist on every fucking dip
thats what i'm talkin 'bout
gettin it on the DL
shiiiit....why would i want any of that barbaric relic?
a penchant for being trenchant :3 ?
Lemme no when it gits to three digits...only then might I be "down" against my WAC...
(I've got 17 Trillion reasons and counting why it's not a bubble)
You go down on horses.....
Surprised you got so many down arrows on your comment, A_S.
All the gold stackers claim they don't care about the price of gold so why care if it's in a bubble? In fact, posters should be giving up arrows out of sheer delight the gold price is coming down so they can accumulate more at a lower price. Guess gold bugs really do care more about making a profit than accumulation. Hmmmm....
No, Michelle, he got all the down arrows (mine included) for repeating the nonsensical and dishonest bit of tripe so beloved by Jon Nadler, namely, that "gold is in a bubble". I challenge anyone to point to any characteristics of the gold chart over the past 10 or 12 years that characterize it as a "bubble", other than the fact that it has been rising (from an incredibly and artificially low base).
Is the price of copper in a bubble because it was $0.05/lb in 1935 and is now $3.50/lb today? Is milk in a bubble because it was $1.00/gallon in 1980 but today is ~$3.50? Is gasoline in a bubble because it was 29 cents per gallon in 1960 but today is $3.85? Are you catching on yet?
My folks bought silver at $13.65/oz
with all my college money
during my senior year of high school
back in 1982
at the end of the last bubble
I bought silver at about $5/oz
I bought gold at about $600/oz
during the 2000's
and sold all my silver holdings the very day
silver hit $50 back in April 2011
and sold all my gold
when gold neared $1900/oz several months later
I know nothing about bubbles.
Setting aside from my skepticism of your (ostensibly) impeccable market timing, the fact that you (purportedly) managed to sell your metals at recent market tops does not in any way define those tops, or those markets, as "bubbles". A top and a bubble are two entirely different and unrelated market phenomena. I would have expected somebody with your apparently very profound market sense and knowledge to understand that elementary fact.
The very fact that the Fed does not want a competing currency, exposes their fiat ponzi scheme, and contradicts the true rate of inflation the government continually lies about is the primary reason why pm's will be suppressed.
Hyperbolic moves up usually indicate tops, yes.
Studying the pm bubbles of past helps identify one.
Tulips anyone?
I only take newly printed unbacked paper.....cause the old musty stuff is just icky.
has michelles parents sold their silver yet?
did they sell it at the top of 50/oz with her?
or are they still holding it?
has she paid off her student loans yet?(now theres a bubble)
Michelle, my mother in laws best friend bought silver coin during the Hunt run up. In fact he had more than, I shit you not, 12 filled to the top five gallon pails of it. Of course silver colapsed but he held it. Because he had no family except a jerk great nephew, he made a deal with my mother in law. She was to take care of him in his elder years and upon his death, live off the earnings until her death and then the principal would go to the nephew. The silver was never to be sold per their agreement. His estate was $700,000 without the silver but all he cared about was those coins. He had built a secret panelled compartment in his house where he kept it. He told her no one knew about the stash but, immediately wanted her to move it when he died. At 72 years of age she knew she couldn't physically move it so she had mr miffed agree to fly to Spokane and help her when the time came. Unfortunately she spent 3 days in the with him before he died and after he passed, she rushed to his house only to find it was gone. This was about 10 years ago. We knew the jerk nephew got it and very likely sold it immediately, all he ever wanted from his great uncle was money. People of the depression era have an innate sense of what has real value. Here was a man not very sophisticated but really knew what mattered.Funny thing is ten years ago I was more impressed with the $700,000 and didn't give a damn about the coins. I was actually relieved it was stolen so my husband wouldn't have to fly to Spokane and hurt his back moving some crazy old man's silly obsession. God what a shithead idiot I was. If I could only go back in time!
Miffed;-)
That's nothing. I selll every day at the exact high and sell every day at the exact low. Of course you can't tell anyone but my real name is Ben Bern...... er forget about that last part.
Copy/paste from JPM troll document. Nice try
Oh, how fucking convenient that you bought close to all time lows and sold at all time highs. You're just a modern day fucking Nostradamus.
Except now, you traded your wealth for paper.
I bet your parents bought you a pony too! How are things on the island Michelle?
you have no sence of reality
noboy knows what price is going to do
gold is in the classic bubble formation
open your eyes silly man, one day your madness is going to explode anyway
who the fuck really cares about a yellow metal
Wow!!
gold definitely in a bubble
i have gold coins from my gramma who didnt turn hers over during the depression
20 dollar coin cost twenty dollars fiat
some of those 20 dollar gold coins are worth 1800 bucks now
thats a bubble
one is worth 40,000 now
numismatic 100 year bubble
but the real bubble is 2000 years long
a bowl of grain used to cost a gold shekkle
i can buy a bag of rice for a buck
still cant eat that gold shekkle
end sarcasm
Michelle
I only did it to see their reaction because i get the impression there are more and more nutty retards commenting here. Well, that idea got stronger just now.
Maybe it was the jews? The latest fantasy of the idiots on this website.
Please die, fucking morons, you are the only problem in this world.
Did someone say "Jews"? This is another story of their loyalty to Israel over any nation they inhabit. Go JEW WORLD ORDER!
http://incogman.net/2013/02/the-story-of-israels-prisoner-x/#more-93546
indeed, it is a story
new world order is also a story
time to start thinking
Glad you're about to start thinking
Jeez I am so sorry I clicked on that link. Feel like I got rickrolled.
"Did Someone say Jews?"
Well did they? I thought I heard someone say Jews! I'm sure I did. Alright whose the guilty party that said Jews? Who uttered that word? I know I didn't dream it. Wait a second, maybe I did. I dream about Jews. I think about Jews when I'm awake. They are on my mind 24/7. Damn all you people afraid of Beeners. It's the Jews you should be worried about I tell ya. Listen to me. Can't you hear it. Jew, Jew, Jew, Jew....................... Quick, run down to your nearest Aryan Nation recruiting office before it's to late.
rc
http://www.bigbendbikersforfreedom.com/
Is that you Krugman?
What I care about is the truth. What A_S said is untruth. I care about not supporting misconceptions.
good, i might actually buy some instead of silver.
'gold' is going down...the 'gold' bubble is almost over
Dude, gold plated tungsten bars has never been cheaper!
I think you're right, but only in the sense that one form of money - gold will be going down in relation to another form of money - silver. The ratio as measured in fiat is 55:1 this morning. I think that's absurd.
Yes but the cocksuckers at CBNCBCCBNCNN told me that it's "range bound". They want me to eat horse too.....it's fucking lean!
I gotta fan! Dude is following me and down voting. Nice! I got a post getting some love in the Putin post....it's about 16 posts down. Go downvote it when you're done with your horse/donkey burger.
Happens alla time. Green!
OT: Check out the one minute candlesticks on the Hang Seng?....wtf?
I know this analysis is true because the diagram shows that the manipulation occurs without any activity in the "market".
Yes, it's THAT obvious!
Last week Eric Sprott was interviewed by Chris Martenson. Mr. Sprott asks the question "where is the Gold coming from and where is it going to"?
When looking at the supply and demand equation he is absolutely correct, the Gold HAS to be coming from somewhere. All you need to do is follow his logic, China and India are buying Gold at a pace somewhere near 2,000 tons per year while mines are producing just shy of 2,500 tons per year. Refiners who purportedly used to reclaim and re refine something like 1,500 tons per year are all of a sudden seeing a drop of 50% of their supply. This only makes sense as "cash for Gold" has been sweeping the streets clean since Gold crossed the "astronomical" level of $1,000 per ounce.
How many more heirlooms and class rings can be left to melt down?
Add to the above that central banks are now buyers of Gold as opposed to sellers and the supply/demand equation has been tipped upside down.
The Gold is coming from somewhere for sure (as it has been for the last 20 years) but where? The answer is obvious and all you have to do is look for where it is "supposed" to be. Namely ETF and central bank holdings. The flip from sellers to buyers by some 900 tons (by central banks) has occurred in a market that even the World Gold Council can only find 4,000 tons of supply.
So...China and India are buying 2,000 tons, central banks are buying 500 tons and the mines produce ...2,500 tons per year. WHAT is left? Where is it coming from? Does it matter? Well yes it does if it's coming from your "stash" represented by a paper receipt but that's a story for another day.
The numbers just don't work and some sort of "hanky panky" is and has been taking place for so many years. Many respected, well known and some even "mainstream" people have come around to the view that GATA has held since 1999.
The Gold market is manipulated! Not breaking news! Slowly but surely the manipulation has become TOO obvious to ignore and people who didn't want to be thought of as conspiratorialist have come out publicly to call a spade a spade.
Go back 5 years in time and virtually NO ONE called the Gold market "manipulated". GATA did and several people who were published there along with a few other "lunatics" but metals manipulation was like the "crazy aunt in the basement", no one wanted to talk about it.
Since then, John Embry broke the ice and wrote in pretty strong terms that Gold was being suppressed. Then Jim Sinclair publicly talked "manipulation", Eric Sprott (who knew the deal but remained low key and didn't "get up on the soap box" until maybe 3 or 4 years ago) are now writing wonderful and completely logical (and supported by facts) pieces proving the manipulation.
Gerald Celente finally came around after getting burned by John Corzine and MF Global. Even Bill Gross, the manager of the largest pool of "debt" money in the world has spoken publicly about the value of Gold in a portfolio. He knows the deal but would probably be "heart attacked" if he ever mentioned "official Gold" and manipulation in the same sentence.
CNBC has even mentioned "manipulation" and "QE to infinity".
Zerohedge came around because they are so smart and really don't care about political correctness.
Hell, even a couple of Fed governors have 'fessed up and admitted that EVERYTHING is manipulated ("everything" by the way includes Gold and Silver).
"Why would Gold and Silver be the ONLY markets not manipulated"? They have THE most obvious "motive" to be manipulated so mere common sense gives you the answer.
It is now OBVIOUS that the metals are and have been manipulated (lower) in price. Common sense tells you they are THE most manipulated markets on the planet!
So why write this? It is again time to put on your 3rd grade thinking cap, "if" Gold and Silver are manipulated and "they" don't want you to own them...well duh! You not only SHOULD own them, for your survival alone you MUST own them! If you believe the government will "protect and provide" for you, then, well, God bless you. If you understand that you must provide for yourself and your family then you understand that you must also "think" for yourself.
The latest correction in Silver and Gold created the most "fear" amongst investors seen since the year 2000. Though a smaller correction than in 2008, the of level of "fear" was unprecedented. The "manipulation" was THE most blatant and lasted longer timewise. Hedge funds are now more short the metals than ever while the commercials are less short than ever. Sentiment is the most horrific, true and real supply and demand are the most lopsided, central bank monetization higher and fundamentals never better than they are now. If we have not already seen the "bottom" it is very very close and the upside will occur rapidly leaving behind forever those that panicked out.
Please understand that you must think for yourself and protect your families on your own. You must follow your "real gut" that tells you something is wrong, REALLY wrong!
A rubber band can only be stretched so far before it breaks, the current rubber band will break when a delivery somewhere does not occur. Once this happens the door will shut, positions frozen in time and no chance to "fix" your position will be allowed. "Supply and demand" will be redefined as in zero supply and unlimited demand. It will be far better to have something that everyone wants than to want something that no one is willing to part with!
http://www.lemetropolecafe.com
You, sir, have obviously never seen a rehypothecated rubber band.
I wonder how the next financial services debacle will be handled. The "people" didn't want the last bailout, so the "fool me once..." effect may take effect and stop further support from government/Fed. Well, it's a pipe dream, but it could happen if the sales of 5.56 pitchforks keeps the current pace. THEN the graph shown in the article will begin to break down. Counterparty risk will be exposed and dislocations in the fiat gold will create a real market pricing for the pretty. Don't know about you folks but I'm heading out to Sam's for a pallet of popcorn.
Could ya check on those pitchforks for me, or do you get those at Tractor Supply?
DP wrote:
""Supply and demand" will be redefined as in zero supply and unlimited demand."
That zero supply (no sellers of physical gold) is really send the price of gold to VERY high levels, as dividing by zero gets you big numbers quickly. More demand / close to zero supply:
$55,000
+1 The naysayers haven't seen anything close to panic buying....yet.
I Want To Believe, really I do, but there is a problem with gold: nobody really knows how much is left in US govt hands. Maybe it's almost all on a boat to China now, or maybe the bastards still have enough phyzz left to suppress the price longer than we can remain alive on this mortal coil.
Whereas: the US Fed govt sold its entire Silver stash in the 60s/70s.
Hold a diversified mix of PMs, and not just gold, Bitchez.
Actually, we do. They only have 466 tons: http://www.silverdoctors.com/treasury-dept-releases-findings-of-ny-fed-g...
However, their war stack is GLD. It's the banksters' source of physical, which they can always buy at paper price and use it to defend paper price.
I have no doubt they can remain in control of the paper market forever. But they cannot force physical sellers to sell at their paper price, short of simply seizing PMs by force and dumping them onto the real phys market.
If they try that now, they better have a lot of diving gear, metal detectors and other tech, because unlike in the 30s, it's not all held by a naive and innocent populace in bank safe deposit boxes just waiting to be pillaged by statist thugs.
I must add this video. Gerald Celente on Corzine : http://www.youtube.com/watch?v=4Jzo9frkcKg
He explains what M.F. stands for.
"The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation"
Let them destroy it, as gold is not an inflation hedge over any reasonable timespan. Gold and inflation have a correlation of approximately zero over the last 40 years, whether it be measured monthly or quarterly, lead or lagged.
Physical gold is universal real money and an untraceable/untrackable store of wealth. THAT is the notion that central bankers would love to destroy.
Agreed, you need to take interest rates into account. Negative real interest rates are supportive of the gold price.
Exactly. The fundamentals driving demand for gold is that natural interest rates are being supressed, and with it bond yields removed, P/E skyrockets... and in this crooked market no profitable investment remains, so why take risk? The obvious choice is you go back to holding money, i.e. gold.
"Physical gold is universal real money and an untraceable/untrackable store of wealth. THAT is the notion that central bankers would love to destroy."
Yeahbut ... what happens when govt makes it illegal for private persons to trade in gold and dealers are unable to sell/buy it to/from you. What then? Export it illegally (and risk confiscation) to sell it to retain anonymity? Where to?
...just saying!
You mean... just like they made it illegal to trade in weed? See how well it worked for them.
Btw you don't "sell" gold. Gold is money. You use it to buy things. If you have nothing to buy, you can save it.
Lotsa folks sell gold. They do it to get some fiat paper to buy stuff. Call it "exchange" if you prefer. Sure, if gold became accepted in shops that need would go away, but realistically it won't happen very soon. How would you pay your grocery bill in gold physical?
So the premise of my comment stands: the govt could make it illegal to buy/sell gold thru dealers. And of course illegal to export it. What then? hhmmm.
On weed... sure, that's a successful black market and I guess that gold physical could go the same way if the above happened. Dunno.
"Sure, if gold became accepted in shops that need would go away, but realistically it won't happen very soon. How would you pay your grocery bill in gold physical?"
Not soon. It's far too expensive as compared to the cost of groceries. Silver on the other hand....
Your logic is flawed by still thinking of GOLD priced in fiat, US fiat no doubt.
Pm's are wealth, fiat is a medium of exchange.
As I see it, silver (and gold) at this time could only be used for regular purchasing of goods and services if it was minted into coins. And to facilitate low-cost purchases, you'd probably have to have coins which were nowhere near solid PM (else the coin would be worth far more than the item being purchased) _or_ they'd need be so small as to be invisible! Not very practical.
Holding PMs as a store of wealth is a completely different matter but several goldbugs in this thread are conflating the two.
Erste Reasearch Group - Gold Report 2012 - Correlation
"Gold has a low correlation to other asset classes. Since 1970, the correlation coefficients have been -0.02 to the S&P 500 index, -0.04 to US Treasuries, +0.19 to the CRB commodity index, and +0.13 to house prices (based on the Case-Shiller index from 2000 onwards). As an asset class with very low correlations, gold is therefore highly suitable for portfolio diversification. A short-term analysis yields similar correlations. The following graph shows the 5Y correlation coefficient of the weekly performances to commodities, bond indices, commodity indices and equity indices. This, too, confirms that gold provides sensible portfolio insurance in terms of efficient risk management."
Gold is most negatively correlated to all other asset classes, especially over the last 10 years. Please see graph on P. 84 of Report for a comparative analytsis over last 5 years. Better own gold.
Since all paper assets are doomed to zero real returns at best, and diversification iz gud, why the fuck would anyone NOT plan for at least 10% gold in their retirement investments...at least. Which for most Middleclassians is about $100,000 worth. Which about no one has yet.
All very silly. Just do the math, schmoes.
In other words: IT DOESN'T MATTER WHAT THE "PRICE" IS. Get it.
That is the Golden wisdom.
+1
You wrote, "why the fuck would anyone NOT plan for at least 10% gold in their retirement investments...at least."
Why? Because so many are fooled by the blatant propaganda that is rein-faux-rced by the years of artificial wealth produced by the anti-Christ of money: Fiat.
The lie is strong. Gold is only for the independent thinkers and future entrepreneurs.
You think most "middleclassians" have $1M set aside for retirement? And for anyone more than 10 years away from retirement, trying to calibrate things in terms of dollars just isn't going to matter.
Just do the research, dood.
For ages 45-54:
Average $249,000
Median $101,000
http://www.dailyfinance.com/2012/11/14/retirement-savings-by-age-how-do-...
Dood. The target is $1M. For those nearing retirement a big chunk is their home equity which is to be sold for a downsized retirement abode. So yes, $1M is there for planning purposes, just not a mark many reach in practice. But $500K+ happens all the time. Then you factor in Social Security and possibly a pension, deferred comp, and/or some life insurance investment vehicles....and that is why anyone lives in Florida or Arizona.
K?
Many middleclassians have closer to $1,000 in retirement funds. If they have even that.
To break this, the miners need to no longer abide by COMEX or other exchange manipulated spot or future prices. They hold the real thing, real physical gold. They need set price themsleves as a direct supplier to end buyer. All it would take is Newmont to say, "we don't consider the paper trade in gold to be the real price. You want our gold, it's $2000." Goldcorp then does this, others do this... game over. Biforcated prices and paper gold prices collapse and real gold prices skyrocket.
and then Eric Holder strings em up for racketeering or something
Miners need the banks, the same banks that manipulate gold. Cannot give you names, but think about who's behind the financing of the mining sector. When there's M&A, there's hedging covenants involved for the leveraged acquisitions. Banksters still rule. They tell miners what to hedge and at what prices.
The trouble is that the banksters own or control many of the mining companies. This problem is going to take a massive shift in the business world to resolve.
Your first sentence is true. The second sentence is in need of expansion...
JPM and Barrick("the world's biggest gold miner" Tm)work in tandem to suppress the mining sector and delay price discovery in the market. Both are arms of the private cartel which operates the so-called "FED". The Blanchard suit brought this fact to light.
That collective criminal entity, which has usurped the powers, and controls the policies of the US government, fuels itself through confiscations of other folks' energy and mineral wealth, and the control and distribution of drugs. All of which requires massive resources - in turn demanding unquestioned allocation of state finances to police the global network via which all of this interconnects and reinforces itself - and great juggling skill to keep all of the balls in the air.
A 'massive shift' is in the process of happening right now: the lynchpin of the mining sector part of the scheme is falling apart. Barrick posted a fourth-quarter loss of $3.06 billion, or $3.06 a share in its final quarter of 2012, compared with a profit of $959 million, or 96 cents, a year earlier. After three decades of controlling sector, it has now run out of room to move, and is facing massive losses in almost every project it has under development. Nat Rothschilds has quit as a director, and investors will soon nuff be running to the exits.
All it takes is one ball dropped, the rest must follow. The jig is up.
you are assuming someone would offer a miner a price in excess of the "London rate" set by the Rothschild?
Only a madman, or genius, would do such a thing?
I am certain most are neither.
If they want the real thing and not paper, they will have to if the miners withhold delivery.
People need to understand that when they buy unallocated gold, or buy into a paper-backed ETF, or keep their allocated gold with a bank that can issue paper against the "reserve", that they are causing the price of gold to fall, because demand for paper increases the multiplier. Demand for paper results in more paper being created rather than raising the price of a finite stock of real metal. I had that "aha" moment the first time I read the GLD (and SLV) prospectus a few years back and realized who the custodians were. GLD was created as a price suppression / multiplier expansion mechanism. Fools wanting to ride the gold wave up buy into ETFs like GLD which diverts their price raising demand away from the physical metal into diluted paper.
Gold will only hit the stratosphere when some very big paper holders "run the bank". If they do so, the response will be swift (they'll end up in prison no doubt).
Take physical delivery anyway, for your own peace of mind if nothing else. Pieces of paper have no intrinsic value and in a world where trust is a scarce resource, who the hell wants IOUs?
but dont tell doktor weiner of monetary metals
my basis/cobasis overlays tell me the metal is there and mf global delivered all metal before it closed shop /<sarc>
Of course it's there. Problem is, for each physical ounce there are like 100 different parties who claim to own it.
One of them is the GLD stockholder, then the Western central banks (maybe even multiple times), then several holders of COMEX futures, then LBMA accounts...
until physical delivery happens all else is manipulatable,-hypothable, leased ect.
GLD is no more than paper fiat at trade value.
moves in price reflect this desire to accumulate as it rise slowly but surely
manipultion is coming from accumulators imo.
who? the wealthy-they make money both ways-naked shorting/phys accumulation.
jpm, china, russia, smart people;and this will not change until the paper game comes to its logical conclusion
the fed will loose control via inflation and lose of confidence of dollar reserve status
and that day of reckoning will give me my savings-just that-accumulation of time spent saving excess human output, not to be destroyed by shalom/banster/cabel of control freaks.
that day is the day i have something rather than nothing.(monetarily speaking)...
not utility like a house or gun, just a sleeping aid and a huge fuck you to the MAN THAT THINKS HE IS ONE UP AND IN CONTROL, until he isn't and mayheim and blood is in the streets. boat ride anyone?
all JMFO
RIGHT ON!
(Excellent post)
=D
Who cares how they manipulate gold and the market. In the end all manipulations fail and the consequences are painful for those holding a fistful of paper products.
Some will feel upset that two weeks ago they bought gold for $30 more than this week, but my answer is "who cares because when the plane is going down nobody really cares about what the parachute they have strapped on, cost them. There isn't a single government which actively supports gold and yet it still is what it is.....the ultimate form of money/commodity/insurance.
All I know is that the Vietnamese government, the Indian government, the central banks, and the computer jockeys like dragging it from pillar to post for their short term profit/agenda fulfillment.
My answer to them is, "keep trying because I'm still buying."
Today on Ebay for physical silver eagles $37.99 2 bids Banksters have already lost control.
This may be a good sign for gold: "Gold Miners Come Clean on Costs After Lost 6 Years: Commodities"
http://www.bloomberg.com/news/2013-02-27/gold-miners-come-clean-on-costs...
Gold miners haven't been account for cost per oz over the years. If they produce they may need higher prices to make it worthwhile.
I've noticed a blog contributor on silverdoctors.com noted this trend of false cash costs for a while.
When reading MSM news on PM, the highlighted facts are basically irrelevant. You've to know that the story is constructed with a purpose. It is either ment to be bullish or bearish. This is what motivates it. If they want to write a bullish story, they look for a bullish excuse. If they want to buy a bearish story, they look for a bearish excuse.
What does tell you something useful are not the facts themselves, but the fact that TPTB want you to buy or sell paper gold. When they want you to sell, you know it's the right time to buy.
Sorry to be a numskull, but is the author saying now is a good or bad time to be long the gold miners?
Yes.
Meh, forest from the trees. Everybody talks their book.
If you don't hold it, you don't own it.
Keiser Report 411 is really good. Talks about permanent backwardation with Professor Antal Fekete,
yeah, well, thanks. fekete started me on the basis/cobasis to the point that i ignored my own old fashioned t.a. in dec/08. it didnt end well. my own charting basis data tells me the banksters found a way to manipulate even the fucking basis
I watched that. Keiser hardly let him speak. Fekete said, in one of his essays, that he once asked P. Volker, right to his face, what contingencies were in place to deal with the disappearing gold basis? Volker gave him a blank stare and didn't say a word. That cracked me up. I would have loved to have been there to see that. The fact is that when gold goes into permanent backwardation, it really is getting close to the point where it will not be available for purchase at any price. Backwardation in gold represents complete loss of confidence in paper assets. The only way to manipulate the basis is to bleed real gold out of the central banks, and that is what Fekete believes is going on with the German repatriation. He is implying that Germany is being given their gold back in order to feed the physical market. Interesting idea.
well, hypothetically, gold could be in backwardation now and we wouldnt know it if the banksters are able to rig the basis and gofo rate. i dont think there will be a warning and no metric i know of can show it now. i.e. i am thinking mf global. that was a delivery default. and nothing.
Seems like the author is saying, in a somewhat convoluted way, that if the manipulation succeeds, go short gold. If the manipulation doesn't succeed go long gold. That's like Will Rogers saying " buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."
I couldnt make heads or tails on his last paragraph. Now I know why. Thanks for clearing it up.
Raymond? I remember you. Did you become veterinarian yet?
http://maxkeiser.com/2013/02/26/gold-confiscation-begins-report-of-2-doz...
SLA waz here
GIABO 2013
the idea that physical metal can somehow be in a bubble because of what a hologram's digital anal leakage looks like on non-existent paper
metal = money
fiat paper = slave coupons (see also: bonds)
... and the best place for capturing a video of a NASCAR crash is from the stands right where the crash happens. Great explanation, terrible advice.
Believing the "published" price in the first place is the equivalent of watching the "news" and believing it.
imo today is a buy(stack day) at new bench mark. s.t. 1600 basis
reason: +1600 close and confirmation today(espec. after shalom testimony), confirmation of new bottom s.t. and long term
same for silver at 29
let er roll again
all markers in place again...
shorts to cover and go long phys(and paper)...
same game, different day
long slog of higher highs and higher lows...
CLICK.
I finally get it. Thanks ... I think ... it's brilliant!
(wanders off to liquor cabinet)
I have a nice stack of gold and silver which will protect me from gold manipulation. Short term I make money trading the manipulative movements of the gold and market, trading gold cfd's.
Curious to know if any Zerohedgers use Goldmoney or Bullionvault, and if they think the " if you don't hod it, you don't own it" thesis applies to these institutions.
Many thanks for any opinions
I use both, but not exclusively. Lots of buckets spread around. Offshore feature of these is nice. My due dili says they legit.
interesting. rothschild has an undisclosed "interest" in bullion vault. just sayin'... mr. due dilli
Proof?
i am not here to do your due dilli. look it up
Always remeber to keep gold.
You can't beat a bankster to death with dollar bills.
It is already 7am on the EST and nobody is awake at ZH. 4am eh here.
The bottom line here is Confidence.
As long as the banksters can keep the Con going and sheeple everywhere go along with it pay-check to pay-check the game will go on as it has. All the multipliers and equations and other gimmicks to come up with fancy explanations just make for more confusion.
There is one Major Factor that wasn't included, and its one that makes this "Game" possible. Where RISK is mentioned here,
<<<< all they can do is to force the rest of the central banks and Bullion banks involved to take a higher *risk*>>>
It needs to be included that these very Same Handful of Banks do Not really carry or consider RISK. These are the Too Big To Fail, Any potential Loss is backed up by We The People, the Taxpayers, as usual. To Big To Fail means any "FAIL" [LOSS] big enough to put them in jeopardy, for some reason, is considered "Not Allowed", and via the New Powers that the Treas. Sec. got in 2009, they along with Any Financial can be Bailed-Out with ease. As long as this Policy exists this "Game" will carry on, and likely the reason this Policy and the New Powers are in place.
There is a web site that publishes the eBay price of gold items, and from that a market-based premium can be tracked over time. Today's US 1oz gold Eagle premium over spot is 14.87% and that premium is up by 3.4%. However, the premium for gold krugerrands is only 2.88%. This tends to suggest that this premium is due to consumer preferences for bullion coin and not necessarily indicative of physical gold vs paper gold pricing issues. The only thing that is lacking from this site is a graph so the premium over time can be visualized.
see: eBay Gold Prices
The purpose of eBay Gold Prices is to provide a true or real gold price indicator for physical gold bullion available for delivery today and to show the premium above the spot gold price for physical gold bullion. Gold coin prices are provided for the American Gold Eagle, Krugerrand, British Sovereign and Candian Gold Maple Leaf Coins based on sales data taken from the US eBay site.
Prices are published every other day around 2AM Pacific Standard Time (GMT -7).
http://goldprice.org/ebay-gold-prices/
The link (eBay PM prices) has not been updated since Sept. 2012...
The fallacy of the thread is as follows: "The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation. In its simplest form, gold cannot be printed and, as its supply remains anchored, its price should spike if the supply of fiat money increases. The implicit math behind can be represented as follows". For equation, refer to article.
What if fiat currency were backed by another (supposed) limited commodity, such as water or oil?
Think about it. WE ALL need water much more then gold for survival. And what about oil or energy? Energy is consumed and taken for granted worldwide much more then gold. Both of the commodities I exampled are much more important to our civilization in terms us use and survival.
I would not call it a fallacy, but a good reason!
And the reason is - Gold destroys central bank, renders them useless. Central bankers, specifically Bernanke, are always being asked questions about gold price at Senate committees. To justify their existance they can not allow gold run wild.
The matter of fact is, fiat currency are not backed by anything other than past credit history of certain governments.
To transport oil or other form of energy requires tools. 1 kilo of gold will fit into the packet and accepted world wide, even as not useful. Gold is trade tool.
Martin gives us a nice, shallow analysis. The gold derivatives market was not created to generate profit for the bullion banks (although that has become a motivating factor), it was created to sop up demand for gold without having to hand over huge amounts of physical gold. It was created to provide a mechanism for the transfer of gold for oil that would not destroy every currency in the world. Because, you see, gold is the only asset oil rich Middle Eastern nations will accept for their precious oil. This is hidden by the so-called "petrodollar" facade. All these oil countries do is take their fiat dollars and convert it into physical gold via the derivatives market. This keeps the price of oil reasonable and slows the flow of phys to the oil sellers. In short, there is still a global gold "standard" of sorts against which all fiat currencies are valued. This system will be kept going for as long as it takes to put the next one into place, a process that started in the early 1970s. This new system will separate gold from fiat. Gold will be held as a reserve asset that is solely a store of value while currencies will be used for transactions. However, in this new system the price of gold will be revalued to so great a price that only large amounts of currency can be traded for a small amount of phys. Once you understand this you will buy gold hand over fist because right now it is a bargain at $1600, $1800, and $2500.
Call me stupid, but I will continue to stack right up to the "holy crap" moment.
'Scuse my ignorance, but if a person wants to "invest" in gold (PMs), why on Earth would he/she buy fiat? That makes absolutely NO sense at all! Playing games with paper gold is absolutely NO different, in operation or in results, from buying pork bellies, or in "speculating" on cattle "futures" contracts.The reasons for buying gold should flatly contraindicate even considering fiat gold.
So my inner accountant says to me that anyone who wants to play with T accts is doing just that - playing. They risk their fiat money by adding a layer of insolvency when they "spend" it on fiat gold.
I guess I'm just not with the program - and would probably make a horrible hedge fund trader - because not only do I think it's idiotic to do, but also financially suicidal. (Insert cartoonish picture here of Fiat Gold certificates with clubs hiding in the shadows in an alley waiting for an "investor" to walk too closely to the end of the alley.)