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/
American Financial Markets Have No Relationship To Reality — Paul Craig Roberts and Dave Kranzler
November 4, 2014 | Original Here Go here to sign up to receive email notice of this news letter
American Financial Markets Have No Relationship To Reality
Paul Craig Roberts and Dave Kranzler
As we have demonstrated in previous articles, the bullion banks (primarily JP Morgan, HSBC, ScotiaMocatta, Barclays, UBS, and Deutsche Bank), most likely acting as agents for the Federal Reserve, have been systematically forcing down the price of gold since September 2011. Suppression of the gold price protects the US dollar against the extraordinary explosion in the growth of dollars and dollar-denominated debt.
It is possible to suppress the price of gold despite rising demand, because the price is not determined in the physical market in which gold is actually purchased and carried away. Instead, the price of gold is determined in a speculative futures market in which bets are placed on the direction of the gold price. Practically all of the bets made in the futures market are settled in cash, not in gold. Cash settlement of the contracts serves to remove price determination from the physical market.
Cash settlement makes it possible for enormous amounts of uncovered or “naked” futures contracts — paper gold — to be printed and dumped all at once for sale in the futures market at times when trading is thin. By increasing the supply of paper gold, the enormous sales drive down the futures price, and it is the futures price that determines the price at which physical quantities of bullion can be purchased.
The fact that the price of gold is determined in a paper market, in which there is no limit to the supply of paper contracts that can be created, produces the strange result that the demand for physical bullion is at an all time high, outstripping world production, but the price continues to fall! Asian demand is heavy, especially from China, and silver and gold eagles are flying off the shelves of the US Mint in record quantities. Bullion stocks are being depleted; yet the prices of gold and silver fall day after day.
The only way that this makes sense is that the price of bullion is not determined in a real market, but in a rigged paper market in which there is no limit to the ability to print paper gold.
The Chinese, Russians, and Indians are delighted that the corrupt American authorities make it possible for them to purchase ever larger quantities of gold at ever lower prices. The rigged market is perfectly acceptable to purchasers of bullion, just as it is to US authorities who are committed to protecting the dollar from a rising price of gold.
Nevertheless, an honest person would think that the incompatibility of high demand with constrained supply and falling price would arouse the interest of economists, the financial media, financial authorities, and congressional committees.
Where are the class action suits from gold mining companies against the Federal Reserve, its bullion bank agents, and all who are harming the interest of the mining companies by short-selling gold with uncovered contracts? Rigged markets–especially on the basis of inside information–are illegal and highly unethical. The naked short-selling is causing damage to mining interests. Once the price of gold is driven below $1200 per ounce, many mines become uneconomical. They shut down. Miners are unemployed. Shareholders lose money. How can such an obviously rigged and manipulated price be permitted to continue? The answer is that the US political and financial system is engulfed with corruption and criminality. The Federal Reserve’s policy of rigging bond and gold prices and providing liquidity for stock market speculation has damaged the US economy and tens of millions of US citizens in order to protect four mega-banks from their mistakes and crimes. This private use of public policy is unprecedented in history. Those responsible should be arrested and put on trial and they should simultaneously be sued for damages.
US authorities use the Plunge Protection Team, the Exchange Stabilization Fund, currency swaps, Federal Reserve policy, and purchases of S&P futures to support an artificial exchange value of the dollar and to provide the liquidity needed to support stock and bond prices, with the latter so artificially high that savers receive negative real interest rates on their saving.
The authorities have created a financial system totally out of sync with reality. When the authorities can no longer keep the house of cards standing, the collapse will be extreme.
It is a testament to the complicity of economists, the incompetence of financial media, and the corruption of public authorities and private institutions that this house of cards was constructed. The executives of the handful of mega-banks that caused the problem are the people who are running the US Treasury, the New York Fed, and the US financial regulatory agencies. They are using their control over public policy to protect themselves and their institutions from their own reckless behavior. The price for this protection is being paid by the economy and ordinary Americans – and that price is rising.
The latest orchestrated takedown of the gold price is related to two events (see the graphs below). One is that the Federal Reserve decided to boost the upward spike in the dollar’s exchange rate from the Fed’s announcement of the end of Quantitative Easing (QE). The Fed’s announcement of the end of dollar creation in order to support bond prices lessened the rising anxiety in the world about the US dollar’s value when the supply of new dollars continued to increase faster than the US output of goods and services. The Fed reinforced the boost that its announcement gave to the dollar by having its bullion bank agents drive down the gold price with naked short-selling.
Naked short selling was also used to offset the effect on the gold price by the Bank of Japan’s surprise announcement on October 31 of a massive new program of QE. Apparently, the Bank of Japan either has been pressured by Washington to inflate Japan’s currency in order to support the dollar’s value or is applying a policy based on the Keynesian Phillips Curve that 2-3% inflation stimulates economic growth. Japan has been in the economic doldrums for a long time and is now reduced to pre-Reagan “snake oil” prescriptions in a desperate attempt to revive its economy.
Japan’s announcement of infinite money creation should have caused the price of gold to rise. To prevent a rise, at 3:00 AM US Eastern Time, during one of the least active trading periods for gold futures, the electronic futures market (Globex) was hit with a sale of 25 tonnes of uncovered Comex paper gold contracts, which dropped the gold price $20 dollars. No legitimate seller would destroy his own capital by selling a position in this way.
The gold price stabilized and moved higher, but at 8 AM US Eastern Time, and 20 minutes prior to the opening of the New York futures market (Comex), another 38 tonnes of uncovered paper gold futures were sold. The only possible purpose of such a sale is to drive down the price of gold. Again, no legitimate investor would unload a huge amount of his holdings in this way, thereby wiping out his own wealth.
Allegedly, the United States is the home of scientific economics with the predominance of winners of the Nobel Prize in economics. Despite these high qualifications, the price of gold, silver, equities, and bonds that are set in the US bear no relationship to economic reality, and American economists do not notice.
The divergence of markets from economic reality disturbs neither public policymakers nor economists, who promote the interests of the government and its allied interest groups. The result is an economy that is a house of cards.
For additional reading see: http://investmentresearchdynamics.com/the-system-is-terminally-broken/
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.
