23 February 2013

Gold Price Manipulation

Having reported in the last newsletter about the four market manipulation tactics, Gold-Carry-Trade, The Gold Pool, Gold Sales of Central Banks and Derivative Trading, we would like to explain why the precious metal markets are manipulated and how market manipulation works.


The WHY first. Gold is a always mirroring the value of a currency. Meaning a high gold price indicates weakness in the currency. You need to spend more paper money at a price of $2,000 to buy an ounce of gold in comparison to a price of $500.


Historically the Central Banks have an interest in a low gold price as it states a strong paper currency. But the downside of course is one can't print trillions of paper dollars without having the gold price sky rocking.


This is the 'WHY'. This is why Central Banks and the big players manipulate the gold (and silver) price with different tactics.


HOW market manipulation works in the modern days is through the massive sale of derivatives, meaning futures and options. Try to imagine what the price of a share, metal, bond does is you’d be able to sell this product massively, even if you don’t have it. This is how big banks like Goldman Sachs can sell 2,000,000 oz of gold on paper without the need to own physical gold.


And the 'Gold Cartel' as Bill Murphy (Chairman of GATA) calls the executing banks usually attack the gold price around 3 AM NY time. These sudden price drops are not natural; they are manufactured but often
pressure other market participants to decrease their positions.

As you see on these three charts from this week:

Gold Price Manipulation

These attacks are very effective if the Gold Cartel trades derivatives and physical gold. But of course the physical gold is often bought from Asian and Middle Eastern buyers.


So these market price manipulations have one target: To delude the public of the true value of gold (and silver) by artificially selling more gold that is not there. And of course it's fear that they try and program into peoples hearts with the attempt to tell people a savings account is safer than gold and silver.

Ed Wener writes about this practice: So you decide who won this battle. Gold, which lost nothing in value, or the Central Bankers who are emptying their vaults to live one more day.

He continues to write: Over the past decade we’ve seen the Gold price in US Dollars rise from $250 to over $1900 just two short weeks ago. Impressive as this is, it only tells us part of the story. The part that is missing is the Gold, the thousands of tonnes of Gold that has flowed from Western Central Banks to their Asian and Middle Eastern rivals. This gold was not sacrificed lightly. Western Central Bankers, despite their feigned indifference, know precisely the value of this Gold and the whereabouts of
every ounce in their possession. However, they are even more reluctant to give up their fiat currencies, the source of their personal power and wealth.


So let us not mourn the drop in price but rather celebrate another victory. There are more battles ahead but the enemy is weaker, its stores depleted, its morale broken, its options limited.

Author: celticgold.eu

Older Bloomberg Article discussion on ‘The Gold standard’ Newer How to Survive a Currency Crisis