Guest Post: Would It Make Sense For The Fed To Not Manipulate The Gold Price?

Tyler Durden's picture

Submitted by Lucas Jackson

Would It Make Sense For The Fed To NOT Manipulate The Gold Price?

“Oh, what a tangled web we weave
When first we practise to deceive!”

      -Sir Walter Scott, Marmion, 1808
 
I was having a conversation with a client the other day and we were discussing all the machinations going on in the markets and politics today.  Without being too unnecessarily long, let’s review a few of the latest “conspiracy theories” turned “conspiracy facts” shall we:

 

Conspiracy Theory      Conspiracy Fact
The TBTF banks are committing fraud in the RMBS market.   Turns out they were.  Linda Green was quite busy.  Potentially millions of Americans were evicted from their homes by the banks knowingly submitting falsified documents.  Fines were paid and settlements made but not a single banker goes to jail.  Fact.
The TBTF banks are manipulating LIBOR.   True again.  Case is ongoing but manipulating LIBOR had apparently become old hat for many years.  Mid-level executives and traders will be sacrificed but unlikely any CEO or central banker is indicted although they all had to know and approve.
The TBTF banks are facilitating global money laundering activity for Mexican drug cartels.   True.  HSBC.  Again, fines paid and settlements made but not a single person indicted.  DOJ is scared prosecuting anyone at the TBTF might upset the economy.  This position, in my humble opinion, is beyond ridiculous.
The IRS is targeting the President’s political rivals.   True.  Heaven help you (and your wallet) if you decided to exercise your constitutional rights to form a Tea Party or Patriot-type political group.
The Justice Department is wiretapping reporters whose views contradict the storyline the White House wants in the public.   True.  Heaven help you (and your wallet) if you decided to exercise your constitutional rights to form a Tea Party or Patriot-type political group.
The White House lied to the public about what happened in Benghazi.   The uprising was caused by an anti-Islamic video that was circulating on Youtube.  That’s all.  Uhhh, you sure?  This had nothing to do with the very same shady rebels we had been funding?
The Fed, in coordination with other Western central banks is suppressing the price of gold artificially                                                                       ???

 

Et tu, aurum?
 
The big question that many investors want to know is what is going on with the gold price?  The big smash down recently, at some stages reaching 8 sigma down moves on essentially no news (hmmm, fishy, but I’m sure the ‘hear no evil, see no evil, say no evil’ folks at the CFTC are on the case), has many investors tending to their wounds. 
 
However, even with the Fed pumping trillions into the market in an obvious effort to manipulate asset prices, to suggest the Fed, BIS and other central banks are actively conspiring against gold is still seen as heresy.
 
But should it be?
 
When the client to whom I was speaking said, “What proof do you have that the Fed is suppressing the price of gold?”, I got to thinking, why don’t we consider the question from another angle.
 
If I was Bernanke and was risking my entire reputation and a nasty place in history if things go badly, (nice to meet you Herr Von Havenstein) on engineering a recovery and a rising gold price could potentially unravel all my printing largess and solvency schemes, why wouldn’t I manipulate the price of gold?
 
Does it really make any sense at all that Bernanke would leave gold to trade in an open and transparent market?  Hardly.
 
Consider.  The Fed has conjured multiple trillions of digital dollars out thin air in the last five years.  These efforts have propped up the Treasury market, the domestic TBTF banks, the foreign TBTF banks, the ECB, the BOE, every European sovereign bond market, the RMBS market, the CMBS market, the equity market, the housing market and the entire industrial and soft commodity complexes, to name a few.
 
Since the price of gold we see on our Bloomberg screens is set via derivatives and overwhelmingly settled in USD, the ability for central banks and bullion banks to manipulate the price of gold is way too easy.  All the bullion banks have to do is coordinate (as in LIBOR), sell in size and punish anyone in their way. 
 
Take losses?  No problem, more fiat can be conjured post-haste.  So long as no one is taking physical delivery, the band(k) plays on.  (Actually, physical demand delivery IS becoming a major new problem for the banks but this is a topic for a different note.)
 
A quickly rising gold price upsets this fiat-engineered, centrally planned, non-market based recovery.  Gold left to its’ own devices would signal the unwinding the rehypothecated world of shadow banking where latent monetary inflation goes to summer (think of it as the monetary Hamptons where only the Wall Street elite get to play). 
 
It would signal the true rise of many emerging market countries at the expense of their creditors in developed markets. 
 
But most importantly, it would signal a huge lack of faith in the US dollar.  A currency backed by nothing more than faith in central banking.
 
A faith which is dying a little every day.  Just ask the Japanese or Europeans how confident they are in their own Oracles of Delphi.  This loss of faith in central banking immediately translates into a loss of faith in the currency and just as quickly works its magic on bond prices – meaning lower bond prices and higher rates.
 
So without being too ranty, I’ll end this one short today.  Just remember, the next time someone is questioning why the Fed would be manipulating gold, turn the question around and ask them what incentive Bernanke has to NOT manipulate the price of gold.
 
And fortunately for Bernanke, as the list above illustrates, he’s living in Washington D.C. at exactly the right moment to do whatever he wants, lie about it and get away with it.

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kliguy38's picture

Does it matter????   They ARE!!! Consider it a gift and accumulate your physical

JJ McApe's picture

yeah yeah, i wonder who bought at 1800 (considered it a gift) and is now holding the bag?

gold is everything else than a sureshot.

NotApplicable's picture

I had to quit reading when I hit the line about "Bernanke risking his entire reputation and a nasty place in history if things go badly."

For someone talking about conspiracy theories, this author sure doesn't understand how history works. Why would he EVER think that history is static?

On any given day in the future, history will be written however they wish it to be portrayed, in order to empower yet another ruse.

Only chumps believe in a history that aligns with their views of the present.

Manthong's picture

And if they didn’t manipulate VIX, people might become suspect or lose faith in the stock market.

Pure Evil's picture

People at office water coolers actually talk about gold prices being manipulated by the FED?

Incredulous!

Al Gorerhythm's picture

Gold manipulated?!!!!! Incredulous? No....... It's... http://www.youtube.com/watch?v=D58LpHBnvsI

Supernova Born's picture

I hope Ben doesn't spend all his limitless manipulating money in one place.

It might make the world think the US dollar is a fraud of limitless magnitude.

TwoShortPlanks's picture

The FED isn't manipulating the Gold Price, their owners are!

And those no good Chinese who need to build Gold Reserves for next years devaluation; they have nice new buldings and offices ready for the big Banks to move across.

See, it so perdy! https://www.google.com.au/search?q=shanghai&source=lnms&tbm=isch&sa=X&ei=tOanUYKBGsbJiAfW4YCwDg&ved=0CAcQ_AUoAQ&biw=1093&bih=494

Especially at night; the smog gives it that...Blade Runner ambiance.

boogerbently's picture

WTF,

The entire article next to the "Conspiracy Theory" points is obscured by an ad.

What gives ?

noless's picture

Yeah, one of guest posters the tylers drop on here has released a couple articles recently which mimic some of my more lucid rants(within days of me posting..), with a few slight alterations(which don't material impact the sentiment or meaning..)

I wasn't going to bring it up because primarily Its not like i hold it together enough to maintain credibility, so whatever. Still though.

Cacete de Ouro's picture

Here is some proof:

Terry Smeeton of the BOE held back the gold fix price in the 1980s by selling HMT EEA gold into the fix. Oliver Page, later at the FSA, monitored Smeeton's manipulation as part of BOE risk control. Presently, there is no transparency on how and when the BOE enters the gold fixing through the Bank's agent (the chairperson). You think they don't act through the chair? :)

Presently, the Bank of England acts as the clearer of last resort in the LPMCL clearing system (AURUM). After the 6 clearers have netted their trades (ie cleared between themselves), the BOE 'sorts out' the net clearing figure using its gold stock. So it can come to the rescue with 'physical' which isnt really physical, and bail out the 6 clearers when needed.

In 1999, the BOE, Bundesbank, Banque de France and ECB vetoed an IMF proposal to distinguish between gold and gold receivables, a veto which to this day has caused havoc for anyone trying to interpret central bank balance sheet figures.

A new gold pool was discussed in depth by the BIS governors in 1979/1980 and only stalled at that time due to German and French political issues. It was revived in 1983 by Fritz Leutwiler and took the form of a method to transfer gold to the Saudis without letting the gold price increase.

Thats just for openers...

Al Gorerhythm's picture

Let's simplify things, eh?

US debt (give or take) is  $18 Trillion.

US gold reserves (give or take, WTFKnows?) 8,133.5  tons or 261,498,100 oz (Dec 2012, WGC:  short tons converted to troy ounces). 

$18,000,000,000.000,000.00 (Trillion) redeemed for 261,498,100 troy ounces, or reduced:

18,000,000 divided by 261.4981 = 68,834.1521 

Simplified, if the dollar debt alone was redeemable in gold, the price of gold in US $ph(m)oney... = 1 : $68,834.15, per ounce, give or take.

Bubble?

 

Prince Eugene of Savoy's picture

If those who bought phyzz at $1800/ and are now upset, then they didn't dollar cost average and gambled. Buy using an easy installment plan, and hang on to your phyzz.

nope-1004's picture

I didn't buy any at $1800, but I gotta say that it probably doesn't matter much if buying physical because TODAY it looks like a paper loss but that magical hour fast approaches when you will either wake up and gold will be $3000/oz or it will be banned.  Something drastic is going to happen, and the potential failure of the banking system and the Fed is never taken fully into consideration when looking at the day to day price gyrations of a manipulated competitor to the Fed and their paper junk.

I'd rather buy at $1800 and hold it for a few years than be a day late when it's at $1400.  And the truth is no one knows the future, so you can say that today is the bottom but it could be $1000 in a week.

My point is the paper price is a con.  Dealers and miners are waking up to that reality.

 

Al Gorerhythm's picture

I don't think these guys will "wake up" even if the price is $3000.00. They'd rejoice if it was banned though. Their game could go on.

EINSILVERGUY's picture

I never much thought about purchasing a firearm. I grew up in the country but never developed an affinity for hunting but don't have a problem with the people that hunt deer and feral hogs becuase most I know make productive use of the animals. I bought a 3030 in 2008 after Obama was elected because I started re-thinking a need to be more self reliant. Late last year I was in an Academy and had been watching this administration and the debt clock, riots in Greece and reading ZH. I decided  I needed to prepare more so bought a carbine and lots of ammo. I remember telling my Brother in law that I really didn't see the need to buy it but thought "it better to have it and not need it than to need it and not have it. "  Same goes for Gold and Silver.  Best to have it at whatever price you paid becuase one day it will happen that there are bids and no offers.  If you are willing to hold it for 5-10 years then ultimately you will do better. I don't think we have that much time, maybe 1-2 years but if I ever question what I'm doing, I simply go look at the debt clock and ask myself has anything changed?

FEDbuster's picture

Having read a bunch of SHTF fiction and several economic collapse history books over the past couple of years, I would suggest you concentrate on water and food.  Without water and food supplies there is really no point to guns and gold.  If you believe that it will never get to the point where food and water are hard to come by, then keep buying bullion and bullets.  I continue to stockpile "beans".

Al Gorerhythm's picture

Yeah, yeah. And who's holding money of substance? Who's manipulated the price down from the high with paper promises to deliver, which are leveraged to the physical 100 times over? Ask the Germans the same question and you will receive a look of utter incredulity. Are you from planet Krypton or something? What kind of disingenuous argument of yours, is that.

You ever heard of LIBOR, Cypress, MF Global, TARP, QE1 -2-3-4-?-?-???, The Federal Reserve, Fractional Reserve Banking, Ledger Entry loans? Derivitives? If you are on this site I'd bet that you have. Maybe you're not trying to be deceptive at all. It might be that you are simply as dumb as you portray, because after the destruction of purchasing power of the dollar by 98% or so since its inception, there is no excuse in these times of information access, for a mature adult to hold the belief that irredeemable credit notes are mponey of substance or certificates of honest intent. There is only one reason to be enamoured and that is you are a paper chasing bug bereft of foresight. I can't wait for the day that you and your kindred, myopic, dullards, join the ranks of starving billionaires, collectively digging for flecks of gold in some mud hole in exchange for a bag of white rice.

Here's some guys who didn't deserve it,  http://pavlopoulos.files.wordpress.com/2010/06/starving-billionaire1.jpg but you, you've got it coming.

Long-John-Silver's picture

yeah yeah, i wonder who bought at 1800 (considered it a gift) and is now holding the bag?

gold is everything else than a sureshot.

 

I paid $300 an ounce (for Gold Eagles) when I started acumulating. I've been buying all along and I have a few Gold Eagles I paid $1,700 for. I'm still very far ahead of any other investment I could have perused. I remember people telling me I was crazy to invest in Gold (Eagles) at $300 each.

auric1234's picture

I bought at $2015. No regrets.

When funny paper money breaks down, we'll see who got it right and who didn't.

 

Caviar Emptor's picture

God save our Central Bank
Long live our Central Bank
God save The Bank
Send her victorious
Happy and glorious
Long to reign over us
God save The Bank

Silveramada's picture

the price of gold is fixed???   ___>>>>>

just google "London fix" and see how a fist of dinosaurs of the old school european oligarchy decide twice a day, in the Rothchilds building nothing less, what the price should be fixed at over the phone!!! WTF

 

also see this

for a fresh message from cpt benny...

http://zysites.com/silververitas/

papaclop's picture

It is great if you are just accumulating metal or mining stocks. I am, however, sick of JP Morgan et al manipulating markets, selling metal they don't have, screwing small investors and raking in billions while eating from the taxpayer trough whenever their risky trades turn against them. Meanwhile, the glorious CFTC does nothing. This country is being run by slimy bankers like Jamie Dimon and Lloyd Blankfein.

Supernova Born's picture

Like playing poker with a guy (B.S. Bernanke) that makes his own chips and can go "all in" every hand.

seek's picture

"It was probably a mistake to allow gold to rise so high."
-- Paul Volcker, ex Federal Reserve Chairman in looking back at the rise of gold from $35 to $850 during the 1970s, per "Paul Volcker: The Making of a Financial Legend" by Joseph B. Treaster

(Italics added)

Bring the Gold's picture

Yeah it's willful ignorance to say the CB's aren't manipulating gold. That our paid Shillery.

You can debate the wisdom of gold in the modern oligarch banker world, but the manipulation of gold prices? That should be a non-starter it's a freaking fact. Just read FED info from 1960's London Gold Pool to Volcker to Greenspan in the late 1990's.

Also, use your brain folks.

Bullionaire's picture

Seriously.  Some folks are as lazy as Doug Casey.

All the evidence of gold interventions one could possibly want is right here:

 

http://gata.org/node/12601

 

One simply needs to click the link, and those on the page which opens, for the full monty.  But don't. Forget gold.  More for the rest of us.  Thanks.

 

BigJim's picture

Generally, I like Casey, but on this subject he's peculiarly obtuse.

cornflakesdisease's picture

I he acknowledges the obvious, he will not be excepted by the boys on the other side of the field.

Supernova Born's picture

Government doesn't just need to control gold.

It needs to control/ban/regulate/tax ANY asset that could act as "money". Alcohol, tobacco, firearms, silver, marijuana, prescription drugs and so on.

CPL's picture

Why would there need to be a government?

 

It's overhead to a situation resolves itself with free market trades like that.  I have two cans of beans, you have a one foot length of copper tube.  We see the deal is square.  We trade.  So do you want to saw 15% off the top of the tube and I'll spoon four scoops into a wrapper then we hand it over?

 

That's trade.  Where does a government fit into that situation?  It doesn't.  Its overhead and unnecessary.

 

bullionbaron's picture

It would make more sense for them to revalue Gold to many multiples of the current price and use the Central Bank holdings as the collaterall so desperately for the system to remain solvent...

NotApplicable's picture

Ha! As if criminals had any desire, let alone ability to manage this system. They only know how to do one thing, destroy sustainability and use the ensuing "fog of war" to steal everything in order to further empower their control over society.

Solvency is simply not an option.

RockyRacoon's picture

You might be right if there were any gold in Ft Knox.

Bring the Gold's picture

Unless of course the goal here is to destroy national currencies and replace them witha  supranational currency which will be backed by gold (held in private or BIS/IMF hands) just long enough to restore confidence before starting the fiat scam alll over again.

It's been done, many, many times, just not on this scale.

A. Magnus's picture

People who deny that gold is being manipulated are the same assholes who think your taxes actually RUN the government; they don't, instead your taxes go towards paying the INTEREST on the national debt.

Clueless fucking navel gazing dipshits and fucktards, all of them...

Thisson's picture

Not true.  If the gold price was being suppressed, there would be shortages because it would be hoarded.  Gold is readily available if you are willing to pay for it.  Ergo, no price suppression is occurring.  If they are manipulating the market, they are doing it in both directions!

Bring the Gold's picture

You means like the ones reported on multiple exchanges? Like calls to deliver being settled quietly for cash way above and beyond the spot price? Things like that? You know things like that, that are being reported?

Bay of Pigs's picture

Might be the dumbest comment you've ever made here.

Go Tribe's picture

It is being hoarded, in backwardation, right?

Al Gorerhythm's picture

100:1 promises to deliver. They're using Credit Notes for false purchasing power. There is no intent to honestly deliver. There is no way they can deliver. No manipulation!!!? Sheesh!

auric1234's picture

I already have trouble buying it in single ounce quantities. I can't imagine how small giants manage to buy it by the tonnes.

Btw if gold price was falling because of market force dynamics, it would mean people are desperate to get rid of their gold. Stores would be full of surplus stocks, and they would sell at spot price (or close).

 

samcontrol's picture

i can,t get a single coin in Argentina, yet i can get bullion.
There is no bullion shortage .

the shortage world wide has gone from one onz to 5 .. Big f deal.

disclosure. have made some changes latly. most of my wealth is now in real estate and paper silver.

MeelionDollerBogus's picture

?

There are shortages at the quoted lower paper prices.

The higher prices show there's some availability but not READILY available. There's still waiting just less waiting as the refills are quicker at a higher price - showing you're wrong.

Showing that at higher prices gold is more available and at lower prices gold is NOT available. That's the OTHER guy's claim of SHORTAGE ... your anti-answer fails.

papaclop's picture

Good luck finding gold or silver at the paper price. It costs more for real metal.

FeralSerf's picture

Nonsense. Tulving has it for essentially (except for his buy-sell margin) the paper price. He pays all shipping and insurance.

Examples: OPM kilo bars Au: buy spot -$17/oz, sell spot +$11.95/oz

1,000 oz COMEX Ag bars: buy spot -$0.30/oz, sell spot +$0.59/oz

SILVERGEDDON's picture

Doesn't matter either way.

Situation normal, all fucked up beyond repair.

Buy the fucking dips, bitchez. 

Seasmoke's picture

This is why I am all in on Gold. I looked across the table and I see a guy who is a physical wreck. I see no way out for him,other than fraud and manipulation . So i am convinced there is no smarter play. If I am wrong. I will be dead in 50 years and it will not matter.