Our criminal government hits us from all angles. When you read this you will understand why the stock market continues to rise desite the fact that it is on the verge of collapse. Author: "The blatant, unfettered manipulation and intervention in the gold and silver market is sponsored by the Fed and the U.S. Treasury, executed by the big bullion banks and fully endorsed by the CFTC."

---

Blatant Gold/Silver Manipulation Reflects The Complete Corruption Of The U.S. System

October 30, 2015 Financial Markets, Market Manipulation, Precious Metals, U.S. Economy, bullion banks, Comex, FOMC, gold manipulation, rate hike, silver

The morning of the FOMC (Federal Open Market Committee) announcement on Wednesday (Oct 28) gold was up $14 overnight, close to $1080 and the cartel’s dreaded 200 day moving average.  The “premise” was that the market was expecting another rate hike deferral.

My friend called me that morning and I told him to not get excited because when the FOMC policy decision hits the tape, they will annihilate gold and push the S&P 500 up toward 2100.  I was only 10 pts off on the S&P call, as the S&P 500 closed at 2090, up an absurd 24 points.  Gold was taken to the cleaners:

What’s incredible is not one mainstream media analyst or reporter questions this market action. If the premise behind the gold sell-off was a “hawkish” FOMC statement and the threat of a rate hike in December (yawn), then the exact same premise should have caused a big sell-off in stocks. Since when does the threat of tighter monetary policy not hit the stock market?

Just to recount the play-by-play in gold, the moment the FOMC announcement hit the tape, the Comex computer system was bombarded with sell orders. At this point in the trading day, the ONLY gold/silver market open is the Comex computer Globex system. In the first 30 minutes 29.6k contracts were unloaded – 2.6 million paper ounces. In the entire hour after the announcement 50.5k contracts were unloaded – 5.1 million ounces. Note that the Comex is showing around 200k ounces to be available for delivery.

The blatant, unfettered manipulation and intervention in the gold and silver market is sponsored by the Fed and the U.S. Treasury, executed by the big bullion banks and fully endorsed by the CFTC (Commodity Futures Trading Commission).

Dan Norcini vomited up a theory that the hit on Wednesday was a product of long side (hedge fund) liquidation.  That view proved to be utter scatological regurgitation from an analyst who’s analysis and views have gone completely off the rails.  As it turns out, open interest increased by over 4,000 contracts on Wednesday.  So much for that “long liquidation” idiocy.

The manipulation of the gold and silver market is a nothing but a product of complete systemic corruption.  The only way that the Fed and the politicians can claim that the economy is “fine” and QE “worked” is to make sure that the one piece of obvious evidence which would say otherwise is kept highly restrained.

I’ve told colleagues for years that the only way the elitists will let the Comex default, causing gold and silver to launch in price toward Pluto, is when they know they can no longer support their fraud.

If I’m wrong, how else to do you explain the fact that the front-running candidate to be the next President of the United States is openly a criminal and traitor who should be devoting her entire resource base toward defending herself from being thrown in jail forever?  This person, by the way, issues a statement today giving the U.S. economy an “A.”

On a positive note, I do believe that this country is in its 9th inning and there will be no extra innings in this game.   Gold and silver do appear to be back in an uptrend, with a lot of pressure from the part of the world that demands physical delivery.

Original Here: http://investmentresearchdynamics.com/blatant-goldsilver-manipulation-reflects-the-complete-corruption-of-the-u-s-system/

Here uber economist Paul Craig Roberts is interviewed for his views of Washington’s pressure on Russia and where it all may end. PCR responded that western financial institutions, e.g., the World Bank, IMF, and SWIFT currency transfer bank have been exploitive of the rest of the world, which therefore may soon abandon them. Asked what may happen to Russia, PCR explains that the “stupid” people running Washington have unknowingly invited all manners of “black swans,” i.e., unexpected events of large magnitude and grave consequences. For example Russia could retaliate for pressure on the ruble by delaying payment of its debts to European banks in 2015, which would promptly crash virtually all of them. Alternately, Russia may buy gold on the paper-gold COMEX and demand payment in bullion, as is anyone’s right. And if they are ever refused, COMEX (representing 80 times more paper gold than its supposed bullion bank) would crash, whereupon the demand for (and dollar price of) gold bullion would sky rocket. Another thing Russia could do would be to use its dollar holdings to buy up all the western world’s (greatly devalued) rubles and subsequently demand that any one dealing with Russia must either buy revalued-in-dollars rubles or be members of the BRICS countries, which would pay with their own currency at mutually agreed exchange rates. Finally, although PCR doesn’t think he would do it, Putin could announce that Russia will no longer sell energy to NATO, which would result in its instant disintegration as a military threat.

---

 Original Here

Today Dr. Paul Craig Roberts warned King World News that the Russians are going to unleash what he called the "ultimate black swan" against the West.  Dr. Roberts also discussed how a terrifying series of events would then bring the Western financial system to it knees as the banking system completely collapses.

Dr. Roberts:  “I was listening to the news today and there were all these self-righteous people just happy as all get out that they had finally stomped Russia into the ground and ‘Russia is now finished,’ and Russia was broken and ‘would soon be an American vassal state where it belongs.'  And I was listening to this rot and got to thinking, ‘How can people be so utterly stupid?’  But they are, and they are just as stupid in Washington.

And in the meantime, as part of this process, Eric, we may see Russia unleash black swans that bring down the Western house of cards….

Blogger's Note: There is an audio interview associated with this which could not be embedded here.  So you must click the link below to play it.  The photo below the link is an image of the functional audio that you will find at the new site.

http://kingworldnews.com/dr-paul-craig-roberts-12-20-14/

You will also find Doctor Roberts' very impressive curriculum vite here.

This is an exceptionally comprehensive interview with Paul Craig Roberts on the subjects most important today. Highly recommended by this blogger.

---

Dollar is The Weak Spot for US-Paul Craig Roberts
By Greg Hunter On October 19, 2014

By Greg Hunter’s USAWatchdog.com                                                                    Original Here

 

Former Treasury Secretary Dr. Paul Craig Roberts says all U.S. financial policy revolves around propping up the dollar.  Dr. Roberts contends, “I’ve always said the whole system is rigged.  It’s a house of cards, and the weak spot is the dollar because they cannot print foreign currencies for which to buy dollars.  So, if there is a worldwide run on the dollar, they lose control then.  In the meantime, they have all these things they can do to counteract the direction of the markets, and I expect them to continue doing that.”

So, if propping up the dollar is the top priority, then suppressing the gold price is a close second.  Could the COMEX or LBMA simply run out of metal sold below mining cost?  Dr. Roberts says, “Well, a lot of people think that, particularly people who think there is no gold left in Fort Knox or in the New York Fed.  They think all that has been lent out and used up.   If they’re right, then the policy they have in naked shorts in gold to drive down the price just increases the demand in Asia for more bullion.  If that is true and they don’t have a way to make those deliveries, then they are producing the crisis for themselves by holding down the gold price.  Whereas, if they let the price rise, it might temper the demand for gold in Asia and remove that problem.”

Dr. Roberts goes on to say, “The reason they want to hold the gold price down is they are afraid of its impact on the dollar.  The reason why they had to suppress the gold price is they had to protect the dollar from quantitative easing (QE) because they were printing trillions and trillions of new dollars.  This was worrying people around the world who hold dollars because the dollar was increasing, but not the goods and services in the American economy.  So, when the gold price took off, the Fed said this endangers QE because if the dollar is declining in value relative to gold, it must also be declining in value relative to other currencies.  Once the exchange rate starts collapsing, we lose control.  So, we’ve got to suppress gold.  I don’t know which side of the equation will play out first.  I don’t know if they will run out of gold to deliver to India and China, or people will say this is a rigged scheme and we are just not participating anymore.”  Roberts adds, “Again, I don’t know how this will play out, but we keep seeing developments that indicate that people are not content to play in rigged markets.”

On the Ukraine crisis, Dr. Roberts says, “Putin is saying, look you are pushing too far.  Because we are reasonable doesn’t mean you can walk all over us.  Don’t get the idea that because we (Russia) haven’t slapped your face that we are going to permit this forever.  You are being very, very aggressive to somebody who can stand up to you, and we are prepared to do that. . . .So, that is the message that he gave.”

On the Islamic State in Iraq and Syria, Dr. Roberts says, “We have lost control.  We now have a new enemy that is our own creation.  Not only that, but now the Taliban says it is uniting with the Islamic State.  So, after 13 years, we couldn’t defeat the Taliban, and we are going to bleed to death over there.  We are already bankrupt and busted, and we are talking about carrying this fight on another 30 years.  Who’s going to pay for it?  The Americans working part time jobs at Wal-Mart?  Do they think they can print money for thirty years and the world won’t flee the dollar?”

On the U.S. dollar, is the world getting ready to dump it?  Dr. Roberts, who holds a PhD in economics, says, “I think on the whole, that there is a risk that it could be dumped all at once, but it’s going to be dumped anyhow, even if slowly, and it’s already started.  When you see the Russian/Chinese agreements and the Russian/Indian agreements, what you are witnessing is people moving away from using the dollar to settle trade between one another.”

Join Greg Hunter as he goes One-on-One with Dr. Paul Craig Roberts.

(There is much more in the video interview.)

https://www.youtube.com/watch?v=lJN4TkcvhmU

Dr. Roberts is a prolific writer, and you can get his analysis and articles for free on his website PaulCraigRoberts.org. Dr. Roberts has zero advertising, and if you would like to help him keep the site running, you can donate by clicking here.

Do not believe the news reports that our economy is picking up. Not only are the statistics being fudged, but "the Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011." Naked short-selling means selling something on the market that you neither own nor have borrowed. It is illegal on the stock and bond markets, but it is permitted for gold futures. How convenient for our corrupt govenment! Normally selling off gold is a sign of investors' confidence in the markets. In reality the dollar is doomed to crash sooner than later. So don't be fooled; buy gold (or silver) now while it is arificially depressed. When the dollar crashes the value of gold (and silver) will instantly double or triple, and the riggers will own plenty of them. Why shouldn't you?

---

Rigged Gold Price Distorts Perception of Economic Reality — Paul Craig Roberts and Dave Kranzler

---

September 22, 2014 | Original Here                                            Go here to sign up to receive email notice of this news letter

Rigged Gold Price Distorts Perception of Economic Reality

Paul Craig Roberts and Dave Kranzler

The Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011. The latest containment effort began in mid-July of this year, after gold had moved higher in price from the beginning of June and was threatening to take out key technical levels, which would have triggered a flood of buying from hedge funds.

The Fed and its agents rig the gold price in the New York Comex futures (paper gold) market. The bullion banks have the ability to print an unlimited supply of gold contracts which are sold in large volumes at times when Comex activity is light.

Generally, on the other side of the trade the buyers of contracts are large hedge funds and other speculators, who use the contracts to speculate on the direction of the gold price. The hedge funds and speculators have no interest in acquiring physical gold and settle their bets in cash, which makes it possible for the bullion banks to sell claims to gold that they cannot back with physical metal. Contracts sold without underlying gold to back them are called “uncovered contracts” or “naked shorts.” It is illegal to engage in naked shorting in the stock and bond markets, but it is permitted in the gold futures market.

The fact that the price of gold is determined in a futures market in which paper claims to gold are traded merely to speculate on price means that the Fed and its bank agents can suppress the price of gold even though demand for physical gold is rising. If there were strict requirements that gold shorts could not be naked and had to be backed by the seller’s possession of physical gold represented by the futures contract, the Federal Reserve and its agents would be unable to control the price of gold, and the gold price would be much higher than it is now.

Gold price manipulation is used when demand for delivery of gold bullion begins to put upward pressure on the price of gold and hedge funds speculate on the rising price of gold by purchasing large quantities of Comex futures contracts (paper gold). This speculation accelerates the upward move in the price of gold. The TF Metals Report provides a good description of this illegal manipulation of the gold market:

“Over a period of 10 weeks to begin the year, the Comex bullion banks were able to limit the rally to only 15% by supplying the “market” with 95,000 brand new naked short contracts. That’s 9.5MM ounces of make-believe paper gold or about 295 metric tonnes.

“Over a period of just 5 weeks in June and July, the Comex bullion banks were able to limit the rally to only 7% by supplying the “market” with 79,000 brand new naked short contracts. That’s 7.9MM ounces of make-believe paper gold or about 246 metric tonnes.” http://www.tfmetalsreport.com/comment/429940

In previous columns, we have documented the heavy short-selling into light trading periods.
See for example: http://www.paulcraigroberts.org/2014/07/16/insider-trading-financial-terrorism-comex/

The bullion banks do not have nearly enough gold in their possession to make deliveries to the buyers if the buyers decide to stand for delivery per the terms of the paper gold contract. The reason this scheme works is because the majority of the buyers of the contracts are speculators, not gold purchasers, and never demand delivery of the gold. Instead, they settle the contracts in cash. They are looking for short-term trading profits, not for a gold hedge against currency inflation. If a majority of the longs (the purchasers of the contracts) required delivery of the gold, the regulators would not tolerate the extent to which gold is shorted with uncovered contracts.

In our opinion, the manipulation is illegal, because it is insider trading. The bullion banks that short the gold market are clearing members of the Comex/NYMEX/CME. In that role, the bullion banks have access to the computer system used to clear and settle trades, which means that the bullion banks have access to all the trading positions, including those of the hedge funds. When the hedge funds are in the deepest, the bullion banks dump naked shorts on the Comex, driving down the futures price, which triggers selling from stop-loss orders and margin calls that drive the price down further. Then the bullion banks buy the contracts at a lower price than they sold and pocket the difference, simultaneously serving the Fed by protecting the dollar from the Fed’s loose monetary policy by lowering the gold price and preventing the concern that a rising gold price would bring to the dollar.

Since mid-July, nearly every night in the US the price of gold remains steady or drifts higher. This is when the eastern hemisphere markets are open and the market players are busy buying physical gold for which delivery is mandatory. But as regular as clockwork, following the close of the Asian markets, the London and New York paper gold markets open, and the price of gold is immediately taken lower as paper gold contracts flood into the market setting a negative tone for the day’s trading.

Gold serves as a warning for aware people that financial and economic trouble are brewing. For instance, from the period of time just before the tech bubble collapsed (January 2000) until just before the collapse of Bear Stearns triggered the Great Financial Crisis (March 2008), gold rose in value from $250 to $1020 per ounce, or just over 400%. Moreover, in the period since the Great Financial Collapse, gold has risen 61% despite claims that the financial system was repaired. It was up as much as 225% (September 2011) before the Fed began the systematic take-down and containment of gold in order to protect the dollar from the massive creation of new dollars required by Quantitative Easing.

The US economy and financial system are in worse condition than the Fed and Treasury claim and the financial media reports. Both public and private debt burdens are high. Corporations are borrowing from banks in order to buy back their own stocks. This leaves corporations with new debt but without income streams from new investments with which to service the debt. Retail stores are in trouble, including dollar store chains. The housing market is showing signs of renewed downturn. The September 16 release of the 2013 Income and Poverty report shows that real median household income has declined to the level in 1994 two decades ago and is actually lower than in the late 1960s and early 1970s. The combination of high debt and decline in real income means that there is no engine to drive the economy.

In the 21st century, US debt and money creation has not been matched by an increase in real goods and services. The implication of this mismatch is inflation. Without the price-rigging by the bullion banks, gold and silver would be reflecting these inflation expectations.

The dollar is also in trouble because its role as world reserve currency is threatened by the abuse of this role in order to gain financial hegemony over others and to punish with sanctions those countries that do not comply with the goals of US foreign policy. The Wolfowitz Doctrine, which is the basis of US foreign policy, says that it is imperative for Washington to prevent the rise of other countries, such as Russia and China, that can limit the exercise of US power.

Sanctions and the threat of sanctions encourage other countries to leave the dollar payments system and to abandon the petrodollar. The BRICS (Brazil, Russia, India, China, South Africa) have formed to do precisely that. Russia and China have arranged a massive long-term energy deal that avoids use of the US dollar. Both countries are settling their trade accounts with each other in their own currencies, and this practice is spreading. China is considering a gold-backed yuan, which would make the Chinese currency highly desirable as a reserve asset. It is possible that the Fed’s attack on gold is also aimed at making Chinese and Russian gold accumulation less supportive of their currencies. A currency linked to a falling gold price is not the same as a currency linked to a rising gold price.

It is unclear whether the new Chinese gold exchange in Shanghai will displace the London and New York futures markets. Naked short-selling is not permitted in the Chinese gold exchange. The world could end up with two gold futures markets: one based on assessments of reality, and the other based on gambling and price-rigging.

The future will also determine whether the role of reserve currency has been overtaken by time. The US dollar took that role in the aftermath of World War II, a time when the US had the only industrial economy that had not been destroyed in the war. A stable means of settling international accounts was needed. Today there are many economies that have tradable currencies, and accounts can be settled between countries in their own currencies. There is no longer a need for a single reserve currency. As this realization spreads, pressure on the dollar’s value will intensify.

For a period the Federal Reserve can support the dollar’s exchange value by pressuring Japan and the European Central Bank to print their currencies with which to support the dollar with purchases in the foreign exchange market. Other countries, such as Switzerland, will print their own currencies so as not to endanger their exports by a rise in the dollar price of their exports. But eventually the large US trade deficits produced by offshoring the production of goods and services sold into US markets and the collapse of the middle class and tax base caused by jobs offshoring will destroy the value of the US dollar.

When that day arrives, US living standards, already endangered, will plummet. American power will have been destroyed by corporate greed and the Fed’s policy of sacrificing the US economy in order to save four or five mega-banks, whose former executives control the Fed, the US Treasury, and the federal financial regulatory agencies.

---

This is not the first time that Paul Craig Roberts and his colleagues have exposed flagrant rigging of the Comex (paper) gold market downward by market insiders. One possible motive for such manipulation "...is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar..." Blogger's recommendation: Buy real gold metal (not paper) now, because sometime in the not too distant future such rigging will no longer work, whereupon the value of gold metal will double or triple over night...

---

Insider Trading and Financial Terrorism on Comex

---

July 16, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Paul Craig Roberts and Dave Kranzler

July 16, 2014. The first two days this week gold was subjected to a series of computer HFT-driven “flash crashes” that were aimed at cooling off the big move higher gold has made since the beginning of June. During this move higher, the hedge funds, who typically “chase” the momentum of gold up or down, built up hefty long positions in gold futures over the last 6 weeks. In order to disrupt the upward momentum in the price of gold, the bullion banks short gold in the futures market by dumping large contracts that drive down the price and make money for the banks in the process.

As we explained in previous articles on this subject, the price of gold is not determined in markets where physical gold is bought and sold but in the paper futures market where contracts trade and speculators place bets on the price of gold. Most of the contracts traded on the Comex futures market are settled in cash. The value of the contracts used to short gold and drive down the price is well in excess of the actual amount of physical gold that is kept on the Comex and available for delivery. One might think that regulators would pay attention to a market in which the value of contracts outstanding exceeds by several multiples the amount of physical gold available for delivery.

The Comex gold futures market trades 23 hours per day on a global computer system called Globex and on the NYC trading floor from 8:20 a.m. EST to 1:30p.m. EST (the 8:30 a.m. opening time on the face of the graph below is a draftsman’s error). The Comex floor trading session is the highest volume trading period during any 23 hour trading period because that is when most of the large U.S. financial institutions and other users of Comex futures (jewelry manufactures and gold mining companies) are open for business and therefore transact their Comex business during Comex floor hours in order to achieve the best trading execution at the lowest cost.

The big hedge funds primarily trade gold futures using computers and algorithm programs. When they buy, they set stop-loss orders which are used to protect their trading positions on the downside. A “stop-loss” order is an order to sell at a pre-specified price by a trader. A stop-loss order is automatically triggered and the position is sold when the market trades at the price which was pre-set with the stop-order.

The bullion banks who are members and directors of Comex have access to the computers used to clear Comex trades, which means they can see where the stop-loss orders are set. When they decide to short the market, they start selling Comex futures in large amounts to force the market low enough to trigger the stop-loss orders being used by the hedge fund computers. For instance, huge short-sell orders at 2:20 a.m. Monday morning triggered an avalanche of stop-loss selling, as shown in this graph of Monday’s (July 14) action (click on graph to enlarge):

In the graph above, the first circled red bar shows the flash crash that was engineered at 2:20 a.m. EST, a typically low-volume, quiet period for gold trading. 13.5 tonnes of short-sales were unloaded into the Comex computer trading system. The second circled red bar shows a second engineered flash-crash right before the Comex floor opened at 8:20 a.m. EST. This was triggered by sales of futures contracts representing 27.5 tonnes of gold. A third hit (not shown) occurred at 9:01 a.m. This time contracts representing 40 tonnes of gold hit the market.

The banks use the selling from the hedge funds to cover the short positions they’ve amassed and book trading profits as they cover their short positions at price levels that are below the prices at which their short positions were established. This is insider trading and unrestrained financial terrorism at its finest.

As shown on the graph below, on Tuesday, July 15, another flash-crash in gold was engineered in the middle of Janet Yellen’s very “dovish” Humphrey-Hawkins testimony. Contracts representing 45 tonnes of gold were sold in 3 minutes, which took gold down over $13 and below the key $1300 price level. There were no apparent news triggers or specific comments from Yellen that would have triggered a sudden sell-off in gold — just a massive dumping of gold futures contracts. No other related market (stocks, commodities) registered any unusual movement up or down when this occurred:

Between July 14 and July 15, contracts representing 126 tonnes of gold was sold in a 14-minute time window which took the price of gold down $43 dollars. No other market showed any unusual or extraordinary movement during this period.

To put contracts for 126 tonnes of gold into perspective, the Comex is currently reporting that 27 tonnes of actual physical gold are classified as being available for deliver should the buyers of futures contracts want delivery. But the buyers are the banks themselves who won’t be taking delivery.

One motive of the manipulation is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar, as we’ve described in previous articles on this topic. And, of course, the banks make money from the manipulation of the futures market.

The Commodity Futures Trading Commission, the branch of government which was established to oversee the Comex and enforce long-established trading regulations, has been presented with the evidence of manipulation several times. Its near-automatic response is to disregard the evidence and look the other way. The only explanation for this is that the Government is complicit in the price suppression and manipulation of gold and silver and welcomes the insider trading that helps to achieve this result. The conclusion is inescapable: if illegality benefits the machinations of the US government, the US government is all for illegality.

---

The team of Paul Craig Roberts and Dave Kranzler expose and analyze the latest market manipulations wherein the prices of gold and stock market futures were simultaneously manipulated. The following links explain and analyze several recent prequels:

Is the Fed’s ability to manipulate the price of gold running out? http://impactglassman.blogspot.mx/2014/01/former-assistant-secretary-of-treasury.html 
Why is the Fed tapering? http://impactglassman.blogspot.mx/2014/01/why-is-fed-tapering-what-will-unravel.html

---

Market Manipulations Become More Extreme, More Desperate

---

February 7, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Paul Craig Roberts and Dave Kranzler

In two recent articles we explained the hows and whys of gold price manipulation. The manipulations are becoming more and more blatant. On February 6 the prices of gold and stock market futures were simultaneously manipulated.

On several recent occasions gold has attempted to push through the $1,270 per ounce price. If the gold price rises beyond this level, it would trigger a flood of short-covering by the hedge funds who are “piggy-backing” on the bullion banks’ manipulation of gold. The purchases by the hedge funds in order to cover their short positions would drive the gold price higher.

With pressure being exerted by tight supplies of physical gold bars available for delivery to China, the Fed is growing more desperate to keep a lid on the price of gold. The recent large decline in the stock market threatened the Fed’s policy of taking pressure off the dollar by cutting back bond purchases and reducing the amount of debt monetization.

Thursday, February 6, provided a clear picture of how the Fed protects its policy by manipulating the gold and stock markets. Gold started to move higher the night before as the Asian markets opened for trading. Gold rose steadily from $1254 up to a high of $1267 per ounce right after the Comex opened (8:20 a.m. NY time). The spike up at the open of the Comex reflected a rush of short-covering, and the stock market futures looked like they were about to turn negative on the day. However, starting at 8:50 a.m., here’s what happened with Comex futures and S&P 500 stock futures:

At 8:50 a.m. NY time (the graph time-scale is Denver time), 3,225 contracts hit the Comex floor. During the course of the previous 14 hours and 50 minutes of trading, about 76,000 total April contracts had traded (Globex computer system + Comex floor), less than an average of 85 contracts per minute. The 3,225 futures contracts sold in one minute caused a $15 dollar decline in the price of gold. At the same time, the stock market futures mysteriously spiked higher:

As you can see from the graphs, gold was forced lower while the stock market futures were forced higher. There was no apparent news or market events that would have triggered this type of reaction in either the gold or stock market. If anything, the trade deficit report, which showed a higher than expected trade deficit for December, should have been mildly bullish for gold and bearish for the stock market. Furthermore, at the same time that gold was being forced lower on the Comex, the U.S. dollar index experienced a sharp drop in price and traded below the 81 level of support. The fall in the dollar is normally bullish for gold.

The economy is getting weaker. Fed policy is obviously failing despite recent official pronouncements that the economy is improving and that Bernanke’s monetary policies succeeded. A just published study by Jing Cynthia Wu and Fan Dora Zia concludes that the the positive impact of the Federal Reserve’s policy of quantitative easing is so slight as to be insignificant. The multi-trillion dollar expansion in the Federal Reserve’s balance sheet lowered the unemployment rate by little more than two-tenths of one percent, raised the industrial production index by 2 percent, and brought about a mere 34,000 housing starts. http://econweb.ucsd.edu/~faxia/pdfs/JMP.pdf

The renewal of the battle over the debt ceiling limit is bullish for gold and bearish for stocks. However, with the ongoing manipulation of the gold price and stock averages via gold and stock market futures, the normal workings of markets that establish true values are disrupted.

A rising problem for the manipulators is that the West is running low on gold available for delivery to China and other Asian buyers. In January China took delivery of a record amount of gold. China has been closed since last Friday in observance of the Chinese New Year. As China resumes purchases, default on delivery moves closer.

One way for the Fed and bullion banks to hold off defaulting on Chinese purchases is to coerce holders of gold futures contracts to settle in cash, not in delivery of gold, by driving down the price during heavy Comex delivery periods. This is what likely occurred on Feb. 6 in addition to the Fed’s routine price maintenance of gold.

As of Thurday’s (Feb. 6) Comex report for Wednesday’s (Feb. 5) close, there were about 616,000 ounces of gold available to be delivered from Comex vaults for February contracts totaling slightly more than 400,000 ounces, of which delivery notices for 100,000 ounces were given last Wednesday night. If the holders of the other 300,000 contracts opt to take delivery instead of cash settlement, February contracts would absorb two-thirds of Comex gold available for delivery.

The Comex gold inventory has been a big source of gold shipments from the West to the East, resulting in a decline of the Comex gold inventory by over 4 million ounces–113 tonnes–during the course of 2013. We know from reports from Swiss bar refiners that the 100 ounce Comex gold bars are being received by these refiners and recast into the kilo bars that the Chinese prefer and shipped to Hong Kong. With the amount of physical gold in Comex vaults rapidly being removed, the Fed/bullion banks use market ambush tactics such as those we describe above to augment and conserve the supply of gold available for delivery.

Readers have asked if gold can continue to be shorted on the Comex once no gold is left for delivery. From what we have seen–the fixing of the LIBOR rate, the London gold price, foreign exchange rates, the price of bonds and the manipulation of gold and stock market futures prices–we don’t know what the limit is to the ability of the Fed, the Treasury, the Plunge Protection Team, the Exchange Stabilization Fund, and the banks to manipulate the markets.

Paul Craig Roberts is a former Assistant Secretary of the US Treasury for Economic Policy.  Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.

Why Is The Fed Tapering? What will unravel? The financial system or American power? Roberts and Kranzler team up again to provide an answer.

---

Why is the Fed tapering?

---

January 30, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Why is the Fed tapering?

Paul Craig Roberts and Dave Kranzler

On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.” http://www.paulcraigroberts.org/2014/01/17/hows-whys-gold-price-manipulation/

In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.

As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down today (January 30, 2014).

When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded. But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened:

8:21AM: 1766 contracts sold
8:22AM: 5172 contracts sold
8:31AM: 3242 contracts sold
8:47AM: 3515 contracts sold

Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including yesterday’s Comex trading session.

The yellow arrow indicates when the Comex floor opened for gold futures trading. There was not any news events or related market events that would have triggered a sell-off like this in gold. If an entity holding many contracts wanted to sell down its position, it would accomplish this by slowly feeding its position to the market over the course of the entire trading day in order to avoid disturbing the price or “telegraphing” its intent to sell to the market.

Instead, today’s selling was designed to flood the Comex trading floor with a high volume of sell orders in rapid succession in order to drive the price of gold as low as possible before buyers stepped in.

The reason for this is two-fold: Driving down the price of gold assists the Fed in its efforts to support the dollar, and the Comex is running out of physical gold available to be delivered to those who decide to take delivery of gold instead of cash settlement.

The February gold contract is subject to delivery starting on January 31st. As of January 29th, 2 days before the delivery period starts, there were 2,223,000 ounces of gold futures open against 375,000 ounces of gold available to be delivered. The primary banks who trade Comex gold (JP Morgan, HSBC, Bank Nova Scotia) are the primary entities who are short those Comex contracts. Typically toward the end of a delivery month, these banks drive the price of gold lower for the purpose of coercing holders of the contracts to sell. This avoids the problem of having a shortage of gold available to deliver to the entities who decide to take delivery. With an enormous amount of physical gold moving from the western bank vaults to the large Asian buyers of gold, the Comex ultimately does not have enough gold to honor delivery obligations should the day arrive when a fifth or a fourth of the contracts are presented for delivery. Prior to a delivery period or due date on the contracts, manipulation is used to drive the Comex price of gold as low as possible in order to induce enough selling to avoid a possible default on gold delivery.

Following the taper announcement on January 29, the gold price rose $14 to $1270, and the Dow Jones Index dropped 100 points, closing down 74 points from its trading level at the time the tapering was announced. These reactions might have surprised the Fed, leading to the stock market support and gold price suppression on January 30.

Manipulation of the gold price is a foregone conclusion. The question is: why is the Fed tapering? The official reason is that the recovery is now strong enough not to need the stimulus. There are two problems with the official explanation. One is that the purpose of QE has always been to support the prices of the debt-related derivatives on the balance sheets of the banks too big to fail. The other is that the Fed has enough economists and statisticians to know that the recovery is a statistical artifact of deflating GDP with an understated measure of inflation. No other indicator–employment, labor force participation, real median family income, real retail sales, or new construction–indicates economic recovery. Moreover, if in fact the economy has been in recovery since June 2009, after 4.5 years of recovery it is time for a new recession.

One possible explanation for the tapering is that the Fed has created enough new dollars with which to purchase the worst part of the banks’ balance sheet problems and transfer them to the Fed’s balance sheet, while in other ways enhancing the banks’ profits. With the job done, the Fed can slowly back off.

The problem with this explanation is that the liquidity that the Fed has created found its way into the stock and bond markets and into emerging economies. Curtailing the flow of liquidity crashes the markets, bringing on a new financial crisis.

We offer two explanations for the tapering. One is technical, and one is strategic.

First the technical explanation. The Fed’s bond purchases and the banks’ interest rate swap derivatives have made a dent in the supply of Treasuries. With income tax payments starting to flow in, fewer Treasuries are being issued to put pressure on interest rates. This permits the Fed to make a show of doing the right thing and reduce bond purchases. As a weakening economy becomes apparent as the year progresses, calls for the Fed to support the economy will permit the Fed to broaden the array of instruments that it purchases.

A strategic explanation for tapering is that the growth of US debt and money creation is causing the world to turn a jaundiced eye toward the US dollar and toward its role as world reserve currency.

Currently the Russian Duma is discussing legislation that would eliminate the dollar’s use and presence in Russia. Other countries are moving away from the dollar. Recently the Nigerian central bank reduced its dollar reserves and increased its holdings of Chinese yuan. Zimbabwe, which was using the US dollar as its own currency, switched to Chinese yuan. The former chief economist of the World Bank recently called for terminating the use of the dollar as world reserve currency. He said that “the dominance of the greenback is the root cause of global financial and economic crises.” Moreover, the Federal Reserve is very much aware of the flight away from the dollar into gold, because it is this flight that causes the Fed to manipulate the gold price in order to hold it down and in order to be able to free up gold for delivery.

The Fed knows that the ability of the US to pay its bills in its own currency is the reason it can stand its large trade imbalance and is the basis for US power. If the dollar loses the reserve currency role, the US becomes just another country with balance of payments and currency problems and an inability to sell its bonds in order to finance its budget deficits.

In other words, perhaps the Fed understands that a dollar crisis is a bigger crisis than a bank crisis and that its bailout of the banks is undermining the dollar. The question is: will the Fed let the banks go in order to save the dollar?

Paul Craig Roberts is a former Assistant Secretary of the US Treasury for Economic Policy.

Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.

---

Former Assistant Secretary of the Treasury, Paul Craig Roberts, and former Wall Street bond trader, Dave Kranzler, deduce how and why the Fed has been manipulating the price of gold, and they come to the stunning conclusion that the Fed has been stealing gold bullion loaned to them by foreign banks and selling it cheap to China. They further believe that the Fed has very little physical gold left, the selling of which has been the source of their cash to continue Quantitative Easing. When they finally run out of gold the "too big to fail" banks will fail anyway, and the currency markets will depreciate the dollar, making Chinese products much more costly for American consumers. Take heed America ...because you will not hear this from the "mainstream" media until it is too late.

---

Is the Fed’s ability to manipulate the price of gold running out?

---

January 21, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Is the Fed’s ability to manipulate the price of gold running out?

Paul Craig Roberts interviewed on USAWatchdog by Greg Hunter

http://usawatchdog.com/fed-they-do-not-have-any-more-gold-paul-craig-roberts/

---

Blogger's Note: The following video is what you would find, together with selected text, at the link above.  It is long and chatty.  By contrast, the article below the video is long only because it treats the highly detailed evidence of gold-market rigging by the Federal Reserve.  Both are on the same subject, so take your choice.

http://youtu.be/p0rGaWcRiNo

---

The Hows and Whys of Gold Price Manipulation

---

January 17, 2014 | Original Here                                              Go here to sign up to receive email notice of this news letter

Paul Craig Roberts and Dave Kranzler.

The deregulation of the financial system during the Clinton and George W. Bush regimes had the predictable result: financial concentration and reckless behavior. A handful of banks grew so large that financial authorities declared them “too big to fail.” Removed from market discipline, the banks became wards of the government requiring massive creation of new money by the Federal Reserve in order to support through the policy of Quantitative Easing the prices of financial instruments on the banks’ balance sheets and in order to finance at low interest rates trillion dollar federal budget deficits associated with the long recession caused by the financial crisis.

The Fed’s policy of monetizing one trillion dollars of bonds annually put pressure on the US dollar, the value of which declined in terms of gold. When gold hit $1,900 per ounce in 2011, the Federal Reserve realized that $2,000 per ounce could have a psychological impact that would spread into the dollar’s exchange rate with other currencies, resulting in a run on the dollar as both foreign and domestic holders sold dollars to avoid the fall in value. Once this realization hit, the manipulation of the gold price moved beyond central bank leasing of gold to bullion dealers in order to create an artificial market supply to absorb demand that otherwise would have pushed gold prices higher. The manipulation consists of the Fed using bullion banks as its agents to sell naked gold shorts in the New York Comex futures market. Short selling drives down the gold price, triggers stop-loss orders and margin calls, and scares participants out of the gold trusts. The bullion banks purchase the deserted shares and present them to the trusts for redemption in bullion. The bullion can then be sold in the London physical gold market, where the sales both ratify the lower price that short-selling achieved on the Comex floor and provide a supply of bullion to meet Asian demands for physical gold as opposed to paper claims on gold.

The evidence of gold price manipulation is clear. In this article we present evidence and describe the process. We conclude that ability to manipulate the gold price is disappearing as physical gold moves from New York and London to Asia, leaving the West with paper claims to gold that greatly exceed the available supply.

The primary venue of the Fed’s manipulation activity is the New York Comex exchange, where the world trades gold futures. Each gold futures contract represents one gold 100 ounce bar. The Comex is referred to as a paper gold exchange because of the use of these futures contracts. Although several large global banks are trading members of the Comex, JP Morgan, HSBC and Bank Nova Scotia conduct the majority of the trading volume. Trading of gold (and silver) futures occurs in an auction-style market on the floor of the Comex daily from 8:20 a.m. to 1:30 p.m. New York time. Comex futures trading also occurs on what is known as Globex. Globex is a computerized trading system used for derivatives, currency and futures contracts. It operates continuously except on weekends. Anyone anywhere in the world with access to a computer-based futures trading platform has access to the Globex system.

In addition to the Comex, the Fed also engages in manipulating the price of gold on the far bigger–in terms of total dollar value of trading–London gold market. This market is called the LBMA (London Bullion Marketing Association) market. It is comprised of several large banks who are LMBA market makers known as “bullion banks” (Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorganChase, Merrill Lynch/Bank of America, Mitsui, Societe Generale, Bank of Nova Scotia and UBS). Whereas the Comex is a “paper gold” exchange, the LBMA is the nexus of global physical gold trading and has been for centuries. When large buyers like Central Banks, big investment funds or wealthy private investors want to buy or sell a large amount of physical gold, they do this on the LBMA market.

The Fed’s gold manipulation operation involves exerting forceful downward pressure on the price of gold by selling a massive amount of Comex gold futures, which are dropped like bombs either on the Comex floor during NY trading hours or via the Globex system. A recent example of this occurred on Monday, January 6, 2014. After rallying over $15 in the Asian and European markets, the price of gold suddenly plunged $35 at 10:14 a.m. In a space of less than 60 seconds, more than 12,000 contracts traded – equal to more than 10% of the day’s entire volume during the 23 hour trading period in which which gold futures trade. There was no apparent news or market event that would have triggered the sudden massive increase in Comex futures selling which caused the sudden steep drop in the price of gold. At the same time, no other securities market (other than silver) experienced any unusual price or volume movement. 12,000 contracts represents 1.2 million ounces of gold, an amount that exceeds by a factor of three the total amount of gold in Comex vaults that could be delivered to the buyers of these contracts.

This manipulation by the Fed involves the short-selling of uncovered Comex gold futures. “Uncovered” means that these are contracts that are sold without any underlying physical gold to deliver if the buyer on the other side decides to ask for delivery. This is also known as “naked short selling.” The execution of the manipulative trading is conducted through one of the major gold futures trading banks, such as JPMorganChase, HSBC, and Bank of Nova Scotia. These banks do the actual selling on behalf of the Fed. The manner in which the Fed dumps a large quantity of futures contracts into the market differs from the way in which a bona fide trader looking to sell a big position would operate. The latter would try to work off his position carefully over an extended period of time with the goal of trying to disguise his selling and to disturb the price as little as possible in order to maximize profits or minimize losses. In contrast, the Fed‘s sales telegraph the intent to drive the price lower with no regard for preserving profits or fear or incurring losses, because the goal is to inflict as much damage as possible on the price and intimidate potential buyers.

The Fed also actively manipulates gold via the Globex system. The Globex market is punctuated with periods of “quiet” time in which the trade volume is very low. It is during these periods that the Fed has its agent banks bombard the market with massive quantities of gold futures over a very brief period of time for the purpose of driving the price lower. The banks know that there are very few buyers around during these time periods to absorb the selling. This drives the price lower than if the selling operation occurred when the market is more active.

A primary example of this type of intervention occurred on December 18, 2013, immediately after the FOMC announced its decision to reduce bond purchases by $10 billion monthly beginning in January 2014. With the rest of the trading world closed, including the actual Comex floor trading, a massive amount of Comex gold futures were sold on the Globex computer trading system during one of its least active periods. This selling pushed the price of gold down $23 dollars in the space of two hours. The next wave of futures selling occurred in the overnight period starting at 2:30 a.m. NY time on December 19th. This time of day is one of the least active trading periods during any 23 hour trading day (there’s one hour when gold futures stop trading altogether). Over 4900 gold contracts representing 14.5 tonnes of gold were dumped into the Globex system in a 2-minute period from 2:40-2:41 a.m, resulting in a $24 decline in the price of gold. This wasn’t the end of the selling. Shortly after the Comex floor opened later that morning, another 1,654 contracts were sold followed shortly after by another 2,295 contracts. This represented another 12.2 tonnes of gold. Then at 10:00 a.m. EST, another 2,530 contracts were unloaded on the market followed by an additional 3,482 contracts just six minutes later. These sales represented another 18.7 tonnes of gold.

All together, in 6 minutes during an eight hour period, a total amount of 37.6 tonnes (a “tonne” is a metric ton–about 10% more weight than a US ”ton”) of gold future contracts were sold. The contracts sold during these 6 minutes accounted for 10% of the total volume during that 23 hours period of time. Four-tenths of one percent of the trading day accounted for 10% of the total volume. The gold represented by the futures contracts that were sold during these 6 minutes was a multiple of the amount of physical gold available to Comex for delivery.

The purpose of driving the price of gold down was to prevent the announced reduction in bond purchases (the so-called tapering) from sending the dollar, stock and bond markets down. The markets understand that the liquidity that Quantitative Easing provides is the reason for the high bond and stock prices and understand also that the gains from the rising stock market discourage gold purchases. Previously when the Fed had mentioned that it might reduce bond purchases, the stock market fell and bonds sold off. To neutralize the market scare, the Fed manipulated both gold and stock markets. (See Pam Martens for explanation of the manipulation of the stock market: http://wallstreetonparade.com/2013/12/why-didn’t-the-stock-market-sell-off-on-the-fed’s-taper-announcement/ )

While the manipulation of the gold market has been occurring since the start of the bull market in gold in late 2000, this pattern of rampant manipulative short-selling of futures contracts has been occurring on a more intense basis over the last 2 years, during gold’s price decline from a high of $1900 in September 2011. The attack on gold’s price typically will occur during one of several key points in time during the 23 hour Globex trading period. The most common is right at the open of Comex gold futures trading, which is 8:20 a.m. New York time. To set the tone of trading, the price of gold is usually knocked down when the Comex opens. Here are the other most common times when gold futures are sold during illiquid Globex system time periods:

- 6:00 p.m NY time weekdays, when the Globex system re-opens after closing for an hour;
- 6:00 p.m. Sunday evening NY time when Globex opens for the week;
- 2:30 a.m. NY time, when Shanghai Gold Exchange closes
- 4:00 a.m. NY time, just after the morning gold “fix” on the London gold market (LBMA);
2:00 p.m. NY time any day but especially on Friday, after the Comex floor trading has closed – it’s an illiquid Globex-only session and the rest of the world is still closed.

In addition to selling futures contracts on the Comex exchange in order to drive the price of gold lower, the Fed and its agent bullion banks also intermittently sell large quantities of physical gold in London’s LBMA gold market. The process of buying and selling actual physical gold is more cumbersome and complicated than trading futures contracts. When a large supply of physical gold hits the London market all at once, it forces the market a lot lower than an equivalent amount of futures contracts would. As the availability of large amounts of physical gold is limited, these “physical gold drops” are used carefully and selectively and at times when the intended effect on the market will be most effective.

The primary purpose for short-selling futures contracts on Comex is to protect the dollar’s value from the growing supply of dollars created by the Fed’s policy of Quantitative Easing. The Fed’s use of gold leasing to supply gold to the market in order to reduce the rate of rise in the gold price has drained the Fed’s gold holdings and is creating a shortage in physical gold. Historically most big buyers would leave their gold for safe-keeping in the vaults of the Fed, Bank of England or private bullion banks rather than incur the cost of moving gold to local depositories. However, large purchasers of gold, such as China, now require actual delivery of the gold they buy.

Demands for gold delivery have forced the use of extraordinary and apparently illegal tactics in order to obtain physical gold to settle futures contracts that demand delivery and to be able to deliver bullion purchased on the London market (LBMA). Gold for delivery is obtained from opaque Central Bank gold leasing transactions, from “borrowing” client gold held by the bullion banks like JP Morgan in their LBMA custodial vaults, and by looting the gold trusts, such as GLD, of their gold holdings by purchasing large blocks of shares and redeeming the shares for gold.

Central Bank gold leasing occurs when Central Banks take physical gold they hold in custody and lease it to bullion banks. The banks sell the gold on the London physical gold market. The gold leasing transaction makes available physical gold that can be delivered to buyers in quantities that would not be available at existing prices. The use of gold leasing to manipulate the price of gold became a prevalent practice in the 1990′s. While Central Banks admit to engaging in gold lease transactions, they do not admit to its purpose, which is to moderate rises in the price of gold, although Fed Chairman Alan Greenspan did admit during Congressional testimony on derivatives in 1998 that “Central banks stand ready to lease gold in increasing quantities should the price rise.”

Another method of obtaining bullion for sale or delivery is known as “rehypothecation.” Rehypothecation occurs when a bank or brokerage firm “borrows” client assets being held in custody by banks. Technically, bank/brokerage firm clients sign an agreement when they open an account in which the assets in the account might be pledged for loans, like margin loans. But the banks then take pledged assets and use them for their own purpose rather than the client’s. This is rehypothecation. Although Central Banks fully disclose the practice of leasing gold, banks/brokers do not publicly disclose the details of their rehypothecation activities.

Over the course of the 13-year gold bull market, gold leasing and rehypothecation operations have largely depleted most of the gold in the vaults of the Federal Reserve, Bank of England, European Central Bank and private bullion banks such as JPMorganChase. The depletion of vault gold became a problem when Venezuela was the first country to repatriate all of its gold being held by foreign Central Banks, primarily the Fed and the BOE. Venezuela’s request was provoked by rumors circulating the market that gold was being leased and hypothecated in increasing quantities. About a year later, Germany made a similar request. The Fed refused to honor Germany’s request and, instead, negotiated a seven year timeline in which it would ship back 300 of Germany’s 1500 tonnes. This made it apparent that the Fed did not have the gold it was supposed to be holding for Germany.

Why does the Fed need seven years in which to return 20 percent of Germany’s gold? The answer is that the Fed does not have the gold in its vault to deliver. In 2011 it took four months to return Venezuela’s 160 tonnes of gold. Obviously, the gold was not readily at hand and had to be borrowed, perhaps from unsuspecting private owners who mistakenly believe that their gold is held in trust.

Western central banks have pushed fractional gold reserve banking to the point that they haven’t enough reserves to cover withdrawals. Fractional reserve banking originated when medieval goldsmiths learned that owners of gold stored in their vault seldom withdrew the gold. Instead, those who had gold on deposit circulated paper claims to gold. This allowed goldsmiths to lend gold that they did not have by issuing paper receipts. This is what the Fed has done. The Fed has created paper claims to gold that does not exist in physical form and sold these claims in mass quantities in order to drive down the gold price. The paper claims to gold are a large multiple of the amount of actual gold available for delivery. The Reserve Bank of India reports that the ratio of paper claims to gold exceed the amount of gold available for delivery by 93:1.

Fractional reserve systems break down when too many depositors or holders of paper claims present them for delivery. Breakdown is occurring in the Fed’s fractional bullion operation. In the last few years the Asian markets–specifically and especially the Chinese–are demanding actual physical delivery of the bullion they buy. This has created a sense of urgency among the Fed, Treasury and the bullion banks to utilize any means possible to flush out as many weak holders of gold as possible with orchestrated price declines in order to acquire physical gold that can be delivered to Asian buyers.

The $650 decline in the price of gold since it hit $1900 in September 2011 is the result of a manipulative effort designed both to protect the dollar from Quantitative Easing and to free up enough gold to satisfy Asian demands for delivery of gold purchases.

Around the time of the substantial drop in gold’s price in April, 2013, the Bank of England’s public records showed a 1300 tonne decline in the amount of gold being held in the BOE bullion vaults. This is a fact that has not been denied or reasonably explained by BOE officials despite several published inquiries. This is gold that was being held in custody but not owned by the Bank of England. The truth is that the 1300 tonnes is gold that was required to satisfy delivery demands from the large Asian buyers. It is one thing for the Fed or BOE to sell, lease or rehypothecate gold out of their vault that is being safe-kept knowing the entitled owner likely won’t ask for it anytime soon, but it is another thing altogether to default on a gold delivery to Asians demanding delivery.

Default on delivery of purchased gold would terminate the Federal Reserve’s ability to manipulate the gold price. The entire world would realize that the demand for gold greatly exceeds the supply, and the price of gold would explode upwards. The Federal Reserve would lose control and would have to abandon Quantitative Easing. Otherwise, the exchange value of the US dollar would collapse, bringing to an end US financial hegemony over the world.

Last April, the major takedown in the gold price began with Goldman Sachs issuing a “technical analysis” report with an $850 price target (gold was around $1650 at that time). Goldman Sachs also broadcast to every major brokerage firm and hedge fund in New York that gold was going to drop hard in price and urged brokers to get their clients out of all physical gold holdings and/or shares in physical gold trusts like GLD. GLD and other gold ETFs are trusts that purchase physical gold/silver bullion and issue shares that represent claims on the bullion holdings. The shares are marketed as investments in gold, but represent claims that can only be redeemed in very large blocks of shares, such as 100,000, and perhaps only by bullion banks. GLD is the largest gold ETF (exchange traded firm), but not the only one. The purpose of Goldman Sachs’ announcement was to spur gold sales that would magnify the price effect of the short-selling of futures contracts. Heavy selling of futures contracts drove down the gold price and forced sales of GLD and other ETF shares, which were bought up by the bullion banks and redeemed for gold.

At the beginning of 2013, GLD held 1350 tonnes of gold. By April 12th, when the heavy intervention operation began, GLD held 1,154 tonnes. After the series of successive raids in April, the removal of gold from GLD accelerated and currently there are 793 tonnes left in the trust. In a little more than one year, more than 41% of the gold bars held by GLD were removed – most of that after the mid-April intervention operation.

In addition, the Bank of England made its gold available for purchase by the bullion banks in order to add to the ability to deliver gold to Asian purchasers.

The financial media, which is used to discredit gold as a safe haven from the printing of fiat currencies, claims that the decline in GLD’s physical gold is an indication that the public is rejecting gold as an investment. In fact, the manipulation of the gold price downward is being done systematically in order to coerce holders of GLD to unload their shares. This enables the bullion banks to accumulate the amount of shares required to redeem gold from the GLD Trust and ship that gold to Asia in order to meet the enormous delivery demands. For example, in the event described above on January 6th, 14% of GLD’s total volume for the day traded in a 1-minute period starting at 10:14 a.m. The total volume on the day for GLD was almost 35% higher than the average trading volume in GLD over the previous ten trading days.

Before 2013, the amount of gold in the GLD vault was one of the largest stockpiles of gold in the world. The swift decline in GLD’s gold inventory is the most glaring indicator of the growing shortage of physical gold supply that can be delivered to the Asian market and other large physical gold buyers. The more the price of gold is driven down in the Western paper gold market, the higher the demand for physical bullion in Asian markets. In addition, several smaller physical gold ETFs have experienced substantial gold withdrawals. Including the more than 100 tonnes of gold that has disappeared from the Comex vaults in the last year, well over 1,000 tonnes of gold has been removed from the various ETFs and bank custodial vaults in the last year. Furthermore, there is no telling how much gold that is kept in bullion bank private vaults on behalf of wealthy investors has been rehypothecated. All of this gold was removed in order to avoid defaulting on delivery demands being imposed by Asian commercial, investment and sovereign gold buyers.

The Federal Reserve seems to be trapped. The Fed is creating approximately 1,000 billion new US dollars annually in order to support the prices of debt related derivatives on the books of the few banks that have been declared to be “to big to fail” and in order to finance the large federal budget deficit that is now too large to be financed by the recycling of Chinese and OPEC trade surpluses into US Treasury debt. The problem with Quantitative Easing is that the annual creation of an enormous supply of new dollars is raising questions among American and foreign holders of vast amounts of US dollar-denominated financial instruments. They see their dollar holdings being diluted by the creation of new dollars that are not the result of an increase in wealth or GDP and for which there is no demand.

Quantitative Easing is a threat to the dollar’s exchange value. The Federal Reserve, fearful that the falling value of the dollar in terms of gold would spread into the currency markets and depreciate the dollar, decided to employ more extreme methods of gold price manipulation.

When gold hit $1,900, the Federal Reserve panicked. The manipulation of the gold price became more intense. It became more imperative to drive down the price, but the lower price resulted in higher Asian demand for which scant supplies of gold were available to meet.

Having created more paper gold claims than there is gold to satisfy, the Fed has used its dependent bullion banks to loot the gold exchange traded funds (ETFs) of gold in order to avoid default on Asian deliveries. Default would collapse the fractional bullion system that allows the Fed to drive down the gold price and protect the dollar from QE.

What we are witnessing is our central bank pulling out all stops on integrity and lawfulness in order to serve a small handful of banks that financial deregulation allowed to become “too big to fail” at the expense of our economy and our currency. When the Fed runs out of gold to borrow, to rehypothecate, and to loot from ETFs, the Fed will have to abandon QE or the US dollar will collapse and with it Washington’s power to exercise hegemony over the world.


Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.

---