Saturday, April 13, 2013

Gold Smash, Desperation & Goldman's Muppets

Friday was an amazing smash in Gold orchestrated by Western central banks and help from Goldman Sachs who encouraged their client's (who they derisively refer to as "muppets") to go short gold even as they're own traders were likely accumulating.

I've discussed for the passed two years that I was anticipating a "bifurcation" between gold and silver's paper price vs. its physical price as a result of price manipulation by central banks and bullion banks to artificially keep the price low. Readers may recall this is directly related to the quantitative easing that is now prevalent around the world. Central banks do not want people to see gold and silver as a viable alternative to fiat money as they, in effect, devalue money through ongoing printing. A rising gold price is a clear message to even unsophisticated investors that their savings are declining in value.

So far I've been somewhat but not entirely correct. Premiums are going up on gold and silver coins as well as even "junk silver" reflecting a new dynamic. But so far, the Comex and the London fix is still considered the "official" gold price.  As a result, so far in the markets (as opposed to coin stores), instead of having two markets, one for paper and one for physical, we are seeing no sellers of physical at the current prices. Friday's price was an entirely paper price. So what we may see in the near future is not rising prices but a shortage of physical gold both in contracts that can be delivered as well as coins available at your local coin shop.

The link below is to an audio interview with Andrew Maguire that I highly recommend. Pay attention to what he says about Goldman Sachs.
Andrew Maguire on the gold smash

KWN has provided some fantastic interviews with important information supporting what I have said above. Highlights from those interviews are printed below:

From Bill Haynes:

“Eric, last week we sold more gold and silver than we normally sell in a whole month.  On Friday alone it was astounding because we sold as much physical bullion as we would normally sell in an entire week.  There is a great deal of big money coming into the market on this decline.

If buying continues at the rate we saw on Friday, there will be immediate shortages of product....
“We will see instant shortages of silver products such as silver rounds, 10 ounce bars, 100 ounce bars, silver eagles, and silver maple leafs if this relentless demand continues.  Silver eagles and silver maple leafs are already seeing delayed delivery. 

In other words, the mints can’t keep up with the demand for those coins.  The US Mint could easily have another record year of 40+ million ounces of American Silver Eagle sales.  I would also add that there are already premiums on 90% silver coins that we haven’t seen in decades.

But the buying is coming in huge for both gold and silver.  The physical gold market is on fire as well.  Our largest 7-figure order this week was specifically for one ounce gold bars.  There was also big buying of American Gold Eagles.  This massive buying is taking place in the entire metals industry right now. 

This matches what many posters at TFMetals have said when they visited their local coin stores all over North America.

 From Dr. Paul Roberts:

“This is an orchestration (the smash in gold).  It’s been going on now from the beginning of April.  Brokerage houses told their individual clients the word was out that hedge funds and institutional investors were going to be dumping gold and that they should get out in advance.

Then, a couple of days ago, Goldman Sachs announced there would be further departures from gold.  So what they are trying to do is scare the individual investor out of bullion.  Clearly there is something desperate going on....
“I have assumed from the beginning that it is the Fed’s concern with the dollar because the dollar is being printed in huge quantities at the same time that other countries are abandoning the use of the dollar as international payment.

The exchange value of the dollar is (being) threatened, and if that collapses the Fed loses control over interest rates.  Then the bond market blows up, the stock market blows up, and the banks that are too big to fail, fail.  So it’s an act of desperation because they’ve got to establish in people’s minds that the dollar is the only safe place, it is the only safe haven, not gold, not silver, and not other currencies.

And to help protect this policy they have convinced or pressured the Japanese to inflate their own currency.  The Japanese are now going to print money like the Fed.  They are lobbying the ECB to print more.  So I see this as a dollar protection policy.

...I know where the gold is coming from in the market, it’s just paper.  It’s naked shorts, there is no gold there.  If somebody wanted to take delivery on those contracts nobody would be able to provide it.  I don’t know what the source of the (physical) gold is.  Some people are saying that the actual stocks available for possession are rapidly declining.”
This gold business (smash in price) is something to do with the dollar.  They are trying to save this Federal Reserve policy of negative real interest rates.  You can’t do that if the dollar loses value relative to gold because it implies it should be losing value relative to other currencies.

If the dollar’s exchange value drops, then the price of imports that come in here (to the US) rise.  So you get domestic inflation, and if you have domestic inflation you can’t have zero interest rates, or negative real interest rates.  So the Fed would lose control and that’s the basis of this policy.

They are trying to destroy gold as a (safe) haven from the dollar in order to carry on the Fed’s policy of negative real interest rates.  That is what is driving the illegal policy of selling naked shorts in order to manipulate a market.  If you and I were to do something like this without the government’s instruction or protection, we would be arrested (laughter ensues).  So the fact that it’s illegal, being done by the authorities, tells me that they are seriously worried about the dollar.”
From Jim Sinclair:

We can clearly see amongst the gold banks and policymakers that there is almost a terror present in their determination to keep the system together.
The only logical conclusion you can come to is there is a major problem out there of a much more serious nature than anything that has been suggested.
 The answer is that everything is not as sound as the central planners would like to have the public believe.
Right now the big money is securing physical gold, and using the cover of the paper market in order to accomplish that.  I would add that bullion banks are doing exactly what they did in 1979.  It’s 1979 all over again and they know a massive up-move is coming in gold, and they are getting prepared for the liftoff.

The character of the gold market for the next few years will be a transition from paper to physical as the arbiter of price.  We are already seeing the inventories of the futures exchanges beginning to decline.  Price appreciation will follow this decline in inventories as sure as day follows night.
 From the Andrew Maguire interview I linked to at the top:

 “Just since the cross (today) of $1,550 into the (London) fix and the breach of $1,500, we are now looking at in excess of 500 tons of paper gold that’s been sold.(on Friday alone)
 “Deliveries in Shanghai alone in March were 283 tons.  In the eight trading days of April, we have seen another 117 tons (of physical gold) delivered.  Today was another 20 tons delivered.  So what we are looking at here is over 400 tons (of physical gold) in less than a month and a half.

Eric, consider that the basis of all of the mainstream media shills coming out and saying, ‘We’re in a bearish market because GLD, the ETF, has dumped around 200 tons since the beginning of the year.  But what we are talking about here is China having purchased and taken delivery of over 400 tons in less than a month and a half.  And since the beginning of the year (that figure) is substantially higher.  It’s probably in the 800 ton range (for the Shanghai Exchange).

So it just amazes me how people concentrate on what’s happening in one paper market.  What we are seeing today is actually a very positive development.  I think we’ve reached a point of capitulation.  I cannot see how the central bank buying cannot overwhelm all of these short sales, despite the leverage.”
 “It’s pure short selling in the paper market, and the focus of all of this all is to reach and target as many long-stops as possible which they have done this afternoon.  Then they can obviously cover these paper short sales.

Historically, in order to succeed when the official sellers have come in, they have relied on being able to back up the paper market interventions with real physical supply, albeit, hypothecated or re-hypothecated, borrowed or leased bullion....
Now the bullion banks are really trading the Fed’s ‘virtual market book,’ but they are constrained.  They are really constrained as to how far they can push these paper prices because the ... Eastern hemisphere central banks, who are competing with each other to buy (physical) bullion, these are the guys that are picking up this discount.  This (smash in gold) results in an exponential ramp-up in their physical buying. 

All they (central planners) are doing is delaying an extremely disorderly rebound (in the price of gold).  Give it a few days because at least 90 tons of central bank buying today was seen below $1,550, into the afternoon fix (in London).  As we cascade down here you can guarantee that what they (Eastern buyers) are doing is ‘spot indexing,’ which is basically locking in the price in the paper market and will allocate that at an upcoming fix (in London). 

So I give it (at the most) two to three days before this has a massive rebound effect, and the short fuel above the market now is at absolutely unprecedented levels.” 

It is my pure speculation that a sell off in GLD was orchestrated to make physical gold available for deliveries. Do I think GLD actually holds all the gold to back up every share of GLD? No. But I do think they have some amount and a huge GLD sell off would allow them to make some physical available. Remember, I have noted in the past that the paper gold to physical is a ration of about 100 to1. If everyone who owns a paper claim to gold wants to take delivery there will not be enough gold to go around!!!

Friday's gold massacre is also likely to set off huge margin calls. I would not be one bit surprised to see the paper gold price drop another $100 in the next one or two trading days. Don't panic. Buy gold at the reduced price while gold coins are still available (if you have the available cash).

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