Tuesday, September 13, 2011

Given Time, Gold And Silver Interventions Will Prove Futile Once Again

"There are no markets anymore, just interventions."
 -Chris Powell, GATA

As investors flee debt and debt-related instruments, Gold stands undisputed as THE safe asset to own and preserve wealth.  The debt pushers, the western central banks, understandably feel otherwise as defenders of their fiat money system.  The chart below demonstrates the desperation of these banks to sully Gold. 

The LBMA opens daily at 3AM est.  Note the weakness in Gold the last five trading days following the LBMA open.  This is no coincidence.  This is blatant intervention in the Gold market. 

The Japanese Central Bank intervened twice in August to weaken the Yen.  Gold soared following both interventions.  The Swiss National Bank [SNB] intervened last week to weaken the Swiss Franc by selling the franc and buying the Euro.  Surprisingly, Gold fell following the intervention.  Clearly the western central banks learned a lesson from the Japanese yen interventions.  Gold must be corralled, Gold must not be allowed to perform as a currency.  Ask Bumbling Ben Bernanke, "Gold is not money."

Up until the intervention last week, the Swiss Franc was considered the safest of the fiat currencies.  A great deal of Euros, and Dollars, seeking safety were flowing into the Swiss Franc prior to being converted into Gold.  The SNB intervention blew up this sound monetary safety net to the dismay of many Gold investors.  But like all currency interventions these days, this disruption should prove temporary in short order.

Gene Arensberg in a post at the Got Gold Report had the following to say regarding the latest market intervention(s):

The Swiss apparently got tired of the Franc being a ‘safe haven’ in a world of no such thing, so they hitched their paper currency to a much sicker inmate in the currency leper colony, the Euro, with a 1.20 upper limit. Then they made really, really sure that traders would believe it, causing a blitzkrieg exodus from the formerly safe paper to other monetary non-safety. The momentary mayhem resolved itself in a much cheaper (devalued) franc -- and a higher greenback in minutes, which stood in as the suddenly least sick member of the asylum.

One gets the impression that the wealth that has flown into U.S. dollars did so not because dollars are more desirable than the “CHF” (Swiss Franc), but instead dollars were merely a liquid place to run to in a time of crisis. U.S. dollars are the convenient foxhole in an air raid, with the foxhole occupants looking all around for somewhere better to escape to. Dollars may be a earthen depression one can hide in temporarily, but some likely will travel to a better fortified air raid shelter in gold and silver. Trouble is that a great deal of wealth in Europe had migrated to the CHF precisely because it was ‘safe.’ The message of this past week: “Think again, Mr. Wealth, no ‘paper’ and no bureaucrat or central bank promise is safe anywhere in the world. It was not in the past, it is not safe now, and certainly will not be safe looking ahead. In a global printing press currency war there are no saver prisoners taken, but also, eventually, no winners.”

It may not sink in right away for everyone, but the desperate move by Switzerland to tie its monetary heritage to a possibly dying currency is yet one more nail in the post Bretton Woods floating fiat currency experiment coffin. Let’s label this particular nail the capricious central banker nail and be glad we trust hard assets, not governments and central bankers.

It may not manifest immediately or even visibly at first, but Switzerland’s action is very supportive of precious metals, especially of gold. The propensity of wealth still parked in the former banking powerhouse and all across the continent of Europe to buy gold just got a boost … in size.

SNB intervention in the franc is every reason to buy Gold [and Silver].  And this is precisely why Gold has been  hit by the western central banks in what can best be described as a "global currency intervention".  With the last fiat safe haven now sunk, Gold and Silver are left as the ONLY monetary safe havens standing, despite what Bumbling Ben Bernanke may suggest.  With confidence in the global fiat money system now growing dimmer by the day, the western central banks are ever more desperate to silence the TRUTH that Gold and Silver possess.  Allowing Gold and Silver to continue to rise as the fiat currencies race to debase is not only detrimental to the western central banks financial system, but because of their derivatives exposure they have gained over the years suppressing the prices of Gold and Silver, many western banks could be wiped out completely by skyrocketing Gold and Silver prices.

Despite the financial news headlines, Gold is not currently being sold to cover global equity losses, nor is Gold being sold because the US Dollar "appears" to be gaining strength.  Any selling in Gold [and Silver] is being done in the fractional banking markets in London and New York.  ONLY paper Gold is being sold in a desperate effort to stop the inevitable explosion in the price of Gold and Silver.

Interventions in the Gold market are no longer a big secret.  Many thanks to the folks at GATA.  These interventions are now being recognized [see chart above] and the western central banks are now standing accused of manipulating the prices of Gold and Silver.

Aware of Price Manipulation, China Fighting Dollar With Gold
by Alex Newman 
Information cited in a leaked 2009 diplomatic cable from the U.S. embassy in Beijing shows the Chinese regime knew about American and European suppression of gold prices to maintain dollar hegemony, but that it was buying more of the precious metal anyway. The purpose of increasing its gold reserves, according to report cited in the document, was to encourage other nations to do likewise while making China’s currency more appealing internationally. Another effect of the strategy, analysts noted, would be to weaken the U.S. dollar’s status internationally.

Gold-price manipulation by Western central banks — and the Federal Reserve in particular — has been somewhat of an open secret for decades. But the cable released by WikiLeaks triggered significant interest among metals investors and analysts, some of whom expected the news to cause another surge in gold prices.

“Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the … leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status,” noted the financial analysis site ZeroHedge, adding that the news could encourage more mutual funds to purchase the precious metal. “Putting that into dollar terms is, therefore, impractical at best, and illogical at worst.”

Now even Goldman Sachs talks openly of gold price manipulation
from Zero Hedge
After rallying nearly 100 usd last week from 1795 to 1895 with demand coming from the official sector and some leveraged players rebuilding length following the severe prior correction we traded to new all time highs of 1922 on Tuesday shortly before the Swiss Franc intervention. The immediate aftermath was in complete contradiction to prior recent episodes of intervention and what anyone would have expected. Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven “currencies” we saw a 50 usd collapse in minutes. The source of this flow seems hard to pin down with some speculating over whether “authorities” were concerned about the signals of an accelerating gold price and its impact on other fragile markets. Soon after, much of the losses were recovered but the psychological damage had been done and there followed a series of liquidations from within the leverage space with gold closing down 50 usd on the day. This was then exacerbated by a near 60 usd flash crash within 2 minutes during the Asian session.

Interventions in markets can only be successful if the intervention is aimed in the direction of the market at the time of the intervention.  Trying to change the direction of a market via an intervention may slow that market down temporarily, but given time, the market always has more money than those engaing in the intervention, and will resume it's direction prior to any intervention.

Clearly today's global financial market environment warrants rising Precious Metals prices.  Gold and Silver prices have been rising with a vengeance on fears of global debt instability since July 1st.  Demand for physical Gold and Silver continues to rise unabated.  Have the global debt markets stabilized since the Swiss Franc intervention a week ago?  Hardly, they have become even more unstable.  Desperate times call for desperate measures by the western central banks.

It is not to late to accumulate!

Gold has fallen and tested $1800 three times in the last six trading days.  Volume has fallen steadily over this period.  A close above $1840 should reignite the Gold trade and send Gold back towards recent highs.

Silver, of course, has been pressured relentlessly.  A close back above $41 should put a little pep back in Silver's step.  $43.58 still remains the target launch point for a move in Silver to and through the $50 price barrier.

The free-fall in the Euro has appeared to stop at 1.35.  A close back above 1.3677 may signal a reversal is pending.  A close above 1.3790 will be necessary to send the Euro shorts scurrying.

James Turk - Expect $2,000 Gold Within 45 Days
From Eric King, KingWorldNews.com
“When we started talking about the big move I was expecting this summer, gold was roughly $1,480. From that low to the recent peak at $1,920, gold’s rise was nearly 30%.”

“I was expecting closer to 50% by the end of September and even though we are not at the end of the month and may not reach that 50%, there is a lot more left in this move. Gold is headed over $2,000 and if it doesn’t happen this month, it will probably happen in October.

So look at shakeouts like we have had today as yet another great opportunity to get rid of overvalued dollars, euros, pounds, etc., and trade them in for physical gold. Importantly, Eric, even though the price of gold has risen for many years, it still remains undervalued by all of my historical measures. More importantly, we know things have value because of their usefulness and right now physical gold’s greatest attribute is that it does not have counter-party risk.

Unlike debtors of all sorts, whether individuals, companies or governments, gold does not default. This is one of the main reasons to own physical gold as the world’s financial system unravels around us....

“At the end of the day, Eric, we don’t really know for certain who the big seller was in gold or why gold was under steady selling pressure today, but we do know that the market got a little frothy last week when a new record high was made. So it is not unusual to see a short-term setback to shake out the weak hands who were using leverage to carry positions. That’s the way the markets work and that’s the way it has always worked. Professional traders know that and take advantage of it.

The important thing here is not to lose sight of the big picture. Continue your gold and silver accumulation program like we have been talking about for years, Eric. A couple of years from now, you will marvel at how cheap these gold and silver prices are today.”

When asked about silver specifically Turk replied, “Silver has done alright this summer too, Eric, climbing from $33 to over $40. So here we are back at $40 once again, testing support under the market. If the present pattern is repeated, and we’ve seen this pattern all summer long, sharp selloffs are met with consistent, steady accumulation of physical metal.

It’s this type of action that is a sign an upside explosion is imminent as the paper shorts are eventually forced to run for cover. So looking forward we should be focusing on $50 silver. The key here is to watch resistance in the $42 to $43 area. When that resistance is hurdled on the upside, silver will be ready for the next major leg higher and there is a good possibility that will happen this month.”

1 comment:

  1. It makes a lot of sense for those bastards to do all they can to surpress the price of the metals. They are grasping for straws and their backs are against the wall with few options left. Our patience will pay off big time. No one will believe how high silver will be in a couple years and its all gonna be because of the manipulation. If it was allowed to rise with no manipulation it would be more orderly. My guess is silver would be around two hundred and fifty right now. I can see congress holding hearings in a few years on the silver manipulation when silver is unavailable and industry or the military can't get it. I'm not really into gold but wish it the best.