Wednesday, October 5, 2011

Silver & Gold Plunge: The Simple Explanation Is The Fraudulent Manipulation Of Markets

"The Good News Is: September Is Over. The Bad News Is: October Has Begun"
 -Art Cashin

Why is the gold price down when there is so much financial turmoil?
From Seabridge Gold management
First, last week's Federal Reserve FOMC meeting did not produce a plan for further expansion of the Fed's balance sheet. Some investors in gold clearly expected such a development. The aggressive selling of gold began on Wednesday after the FOMC statement was released.

Secondly, as the debt situation in Europe continued to deteriorate, European securities fell sharply, forcing European gold holders to liquidate in order to reduce leverage. Much of the selling pressure on gold over the past week has originated in Europe. Widespread reductions in Euro Zone growth estimates and open disagreement and confusion over the next tranche of Greek bailout funding contributed to an abrupt downturn in markets. Gold performed its traditional role of providing emergency liquidity.

Perhaps most importantly, investors began to anticipate a disorderly Greek default and interpreted it as a possible Lehman moment. Investors, like generals, tend to fight the last war. All of us remember that, in the fall of 2008, the authorities let Lehman go into an unplanned bankruptcy with immense unintended consequences. Gold fell in response. When the Troubled Asset Relief Program (TARP) passed Congress, it recapitalized the banking system, contained the Lehman contagion effect and gold began to recover, closing higher on the year. Would a Greek default or the failure of a major European bank trigger a similar crisis of confidence in the financial system? And would a dysfunctional Euro Zone be able to produce a TARP response quickly enough? Anticipating that gold could fall in such a circumstance before effective money printing could be implemented, gold was sold.

It looks to us as if gold is waiting at the cross-roads to see what happens in Europe.

From Bill Holder, for GATA
Gold is now signalling that the long forecasted currency crisis is here and now. Believe me when I say that if "they" could have held Gold down further "they" would have. The physical off take of late has been remarkable and a primary reason that Wall St.'s paper games have done so little damage. Yes, the recent correction has been painful but pales in comparison to the 2002, '04,'06 and '08 smackdowns. Gold is finally being "seen" for what it really and THE safe haven that it is.

It has been said that Gold's recent correction was in part caused by traders selling Gold to pay margin calls on other assets which I believe is partly true (along with cartel help). But, think about what "they" are really admitting. "They" are telling you that investors are looking to Gold for liquidity and selling what is "up". "They" are admitting that Gold is doing what it always has done, namely allow holders liquidity during "hard times". The next step in my opinion is a mass awakening to Gold. This "awakening" has already happened but it is still very early and has been obscured by the Fed's purchases of Dollars. These Fed purchases are the only reason that the Dollar has any "safe haven" perception OR bids. This will not last for long because the currency crisis is already so big that Treasury bonds will be called upon for liquidity.

This sell down will occur while the Treasury is in maximum "borrowing mode" as it is now. Treasuries cannot be a safe haven as they are THE most over owned asset in the history of the planet AND the most over issued. Treasury bonds ARE the definition of supply and potential future supply. Gold on the other hand is very very finite in it's supply. I might add that it is much more "finite" than those in power would want you to think. Gold also has real demand as evidenced by the real off take as opposed to paper trading back and forth.

It is important to understand this role that Gold is displaying. Gold is being "voted" on every day as all assets are by investors. It has now taken on the role as the ultimate metal and has for 10 years been acting as the ultimate "money". Anyone can say what they want but Gold has for 10 years outperformed ALL paper monies and only recently become "the most expensive" metal. Gold is telling you that the currency crisis has arrived . The fact that everything is now computerized and "much faster" than ever before tells me that the unwinding of the currency markets cannot be far behind AND will end in a "lightening fast event!

To get more from Bill Holder and GATA go here:

Consider for a moment what Bill Holder has just suggested.  "If" Gold is really being sold because it is "up" to raise "cash", what will be left to sell for "cash" once all the "available" Gold is sold? 

The only other "liquid" asset that is "up" are US Treasuries.  If the majority of global debt is denominated in US Dollars, and US Dollars are becoming hard to come by, will US Treasury debt be sold next to raise "cash"?

Will the global debt crisis become so severe that the debt of the US Treasury, held by central banks around the world, have to be sold to raise the cash to cover the sovereign debt that has come due?  Will mutual funds have to sell their Treasury holdings to raise "cash" to cover redemptions?

Bumbling Ben at the Fed is not as concerned about deflation in asset prices, as he is concerned about a deflation of DEBT. 

"Deflation" is defined as a "drop" in the money supply, "Inflation" is defined as a "rise" in the money supply.  If all money is created by way of debt, is it any wonder that Bumbling Ben is going to such great lengths to lower interest rates in the hope that it will create more debt [money]?

No wonder the central banks are determined to use "new debt" to replace the old debt.  No wonder the central banks are so scared of "debt default".  A default on the debt would remove debt [money] from the system.  This can not be allowed to happen or a "great deflation" WILL occur.  Thus, dying debt MUST be replaced with fresh debt.

Old, or new, it is still DEBT!  Money created out of thin air, by issuing debt.  That in a nutshell is our monetary system.  That is why, though interested parties may have been forced to sell their Gold to raise cash, ultimately the price of Gold will rise further whether the debt supply shrinks or grows.  That is why Gold is THE asset to own in an inflationary environment AND a deflationary environment.  GOLD IS MONEY.

The Great Commodities Heist [ABSOLUTE MUST READ]
Written by Jeff Nielson
It is all so very simple when we view “the big picture”. Bankrupt and near-bankrupt Western governments are stealing billions of dollars worth of various commodities from commodity-producers around the world. The evidence goes well beyond merely suggestive – into the realm of absolutely conclusive.

What makes this scenario so unequivocal is that we have the equivalent of “signed confessions” of the crimes these governments are committing. Exhibit “A” is the monetary policy titled with the vile euphemism “competitive devaluation”. It is the deliberate attempt by governments to destroy the value of their currencies – as fast as possible (i.e. “competitively”).

Destroying the value of our currencies as rapidly as possible means exactly the same thing as raising prices as fast as possible. Which brings us to global commodity markets. If our governments (primarily Western governments) are deliberately trying to raise prices as fast as possible with their excessive money-printing, how can commodities prices have tumbled so far?

Arithmetic tells us there is only one possible answer. Global commodity markets have been fraudulently manipulated lower through the use of the primarily “paper” futures markets. Given the scope and magnitude of this commodities take-down, it can only be the result of coordinated actions by many governments and (of course) the multinational bankers who pull their strings.

The “prime suspects” are all of the Western deadbeat-debtors (who are nearly all large importers of commodities) and any/all major commodity importers – with Japan and now China being the obvious culprits. The arithmetic here is absolute: as long as our governments engage in competitive devaluation all prices of everything can only go higher.

There is but one exception to this simple equation: any good and/or service for which there is excessive supply. The obvious example here is the U.S. housing market. With the most grossly over-supplied housing market in human history (and in addition a market saturated with fraud), the downward price-pressure caused by this massive housing glut currently exceeds the upward inflationary pressures of competitive devaluation.

The situation in commodity markets is also unequivocal: stockpiles of virtually all commodities are either at historical averages, below historical averages, or already at critical levels. In other words, in terms of economic fundamentals there is no downward pressure on prices – only (additional) upward pressure. There can be no rational/economic explanation for the severe plunges in commodity prices other than the fraudulent manipulation of markets.

Indian Silver Demand Leads to Supply Issues, Capacity Stretched, Higher Premiums - Asian Bullion Demand Remains Strong
From Zero Hedge
Physical demand for silver remains high and is being reflected in a slight uptick in premiums. GoldCore have seen continuing coin and bar demand and physical buyers are not being deterred by the latest sell off on the COMEX market. Those buying silver continue to expect silver to rise to $50/oz and many expect silver to rise to over $140/oz which is the real record (CPI inflation adjusted) high from 1980.

Demand from western buyers remains minimal as buyers remain a contrarian few with the majority of investors and savers having no allocation to silver whatsoever.

However, this is not the case in Asia where both gold and silver are held in far higher esteem and appreciated for their wealth preservation qualities.

Indian demand has been very significant in months and has accelerated in recent days after the sell off and tentative signs of a bottoming.

Heightened physical demand for silver from the Indian subcontinent is causing “supply issues” according to UBS this morning. UBS note that airline capacity to deliver the precious metal is being “stretched” and premiums are unsurprisingly on the rise.

With gold having risen 17% year to date but silver flat so far in 2011, many in Asia are seeing silver as better value at these price levels. Also, many buyers in Asia cannot afford gold at these prices and thus are buying silver instead as silver again fulfills its roles as “poor man’s gold”.

The physical silver market remains tiny vis-à-vis equity, bond and currency markets and even a small increase in allocations to silver could lead to sharply higher prices. As ever buyers should focus on value rather than price and use silver as a wealth preservation tool rather than simply for capital gains.

John Embry - Silver is Completely Flushed out to the Downside

"My coin guy came over to see me yesterday and I asked him, ‘How’s your silver market these days?‘ He said, ‘I just got three boxes of maple leafs in or about 1,000 coins.‘ I asked him how they were selling and he said, ‘They are going out the window, all but 50 coins are gone.‘ I asked him what price he was selling them and he said, ‘$38 an ounce.‘ That’s with the paper price $30 to $31. So the smart guys know this is a rig job and they are getting their hands on what silver is available as fast as they can.”

London Trader - Physical Demand for Gold has Been Insatiable
The Asians have been buying like crazy, all through this take down they have been buying. We have seen massive premiums and bottlenecks in supply, they simply cannot get enough physical metal as the prices have dropped. The demand has literally been insatiable. As I have stated before, the central bank gold, which was used to sell the market down, has gone to vaults in Asia. That’s a one way trip, it doesn’t come back into the market....

“There is also strong demand from India. If we get a pit close above $1,705, there are a massive amount of shorts that will be tripped up and be forced to cover. This will give additional impetus to the upside.

So the Western central banks got together, leased out some gold and the bullion banks sold the gold. The central bank gold being unloaded by the bullion banks is not to get the best price, but to smash the price. The smartest way to sell the gold would be to do it in the liquid sessions. But the pattern during the decline was they were selling it in the overnight session when things are quiet. This was no different that what we saw at the end of April, beginning of May on that coordinated smash.

You have to ask the question, why would anyone sell at the most illiquid times? It is not to get the best price, it is to move the market in the direction you want to move it. The commercials are now competing with funds that are coming in to buy and they are continuing to compete with the physical buyers and those buyers have been accumulating in size during the entire decline since gold dropped below $1,775.

As it stands today, there are an unbelievable amount of physical orders that have not been filled. Some of the buyers might have believed there would be more downside action. When gold was briefly down at $1,530, almost no one got any physical gold. No one was even getting fills at $1,585 on the second and third dip, the orders down there were not filled. Those physical buyers are watching right now and if they lose patience, they may very well move their orders higher. If that turns out to be the case, it will put even more pressure to the upside in gold.”

Is a Move Up in Precious Metals Likely at the Moment?
By P. Radomski
There is no doubt that like everything else, the bull run in gold will eventually come to an end, but we’re still a long way off. We see the sharp decline as an opportunity rather than a warning. It is a good time, for those who wished all along that they had bought gold, to do it on dips. Nothing that has taken place over the past weeks lessens our long-term optimism about gold. The same fundamentals are still in place. The situation in Europe continues to deteriorate daily. Greece is on the cusp of default and larger EU members look sure to follow. Meanwhile, political gridlock is the situation in Washington and QE III is coming, and with it, further decline in the purchasing power of the dollar (not necessarily right away, of course). The Swiss National Bank just instituted a peg with the Euro to slow down inflows of global investors seeking a safe haven – costing franc holders 25% of their position in the course of a week. Central banks are still buyers and not sellers of gold.

Where Is Gold Headed in Q4?

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