Guest Post by Jesse
“Gold has worked down from Alexander’s time. When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory.”
Bernard M. Baruch
Asia continues to add significant amounts of gold bullion to their wealth reserves.
Wall Street and its sycophants would like us to consider gold to be just ‘a pet rock’ or ‘like trading sardines.’ And yet central banks have turned to be net buyers, and Asia and the Mideast continue to buy bullion in record amounts. Talk to the Chan.
One of the few coherent things Alan Greenspan said was that statists of all persuasions, both right and left, have ‘an almost hysterical antagonism towards gold.’ This is because gold resists their will to power over others.
So why isn’t gold ‘working’ at this moment in history?
“We hypothesize that, having learned from the misadventures of the 1960s, the policy elites, well-versed in the practice of financial engineering and market manipulation, would have seen no need to dump stocks of government gold reserves onto the market, 1960s style, to keep the price in check.
Instead, synthetic gold, sourced in pyramids of credit extended to bullion bankers by central banks with little or no claim on physical substance, have provided a more efficient, better-camouflaged form of intervention. COMEX synthetic gold and related over-the-counter derivatives are traded in macro strategies implemented by hedge funds, high-frequency trades, and commodity funds in pair trades with interest-rate, currencies, equity futures, or even more exotic offsets. The volumes traded are huge, and bear little resemblance to actual flows of physical metal.
We suspect that shorting gold has come to seem like a riskless proposition as long as there is confidence in the Fed. Synthetic gold is the perfect substance for a carry trade: an easy borrow with very low carrying cost and little upside basis risk. Such a hypothesis, in our opinion, does much to explain the incongruity of a declining gold price while fundamentals for paper currency, and the U.S. dollar in particular, obviously deteriorate; while demand for physical gold has exceeded new mine supply for several years running; and while above-ground 400-ounce .995-gold bars located in London, New York, and other financial capitals (in cohabitation with speculative trading activity in paper markets) have steadily dwindled and disappeared into Asian financial centers reformulated as .9999 kilo bars.”
The dumping at market of very large amounts of paper assets into quiet market hours has been well documented in many places. It is a well worn market manipulating strategy abused by some very large trading desks, often playing with other people’s money. Citi privately called it their ‘Dr. Evil Strategy.’
It is funny how the systematic rigging of so many financially related markets has been revealed, but the blatant manipulation of the precious metals market, which is certainly knowable by anyone with a basic knowledge of the markets and a computer terminal, is so willfully ignored. A love of money, lust for power, and a lack of integrity will alloy to make people hypocrites.
When we see such trash articles being written, and passed along mindlessly by those who yearn to warm themselves by the fires of the oligarchs, we know that gold has cast a cold fear into the hearts of those who would be kings, and their privileged servants.
And considering the long, cynical rally in paper assets that culminated in the financial crisis of 2008, when people start believing in the power of fraud and willful distortion of markets, we can only say as we did then, this will end badly.
A man cannot serve two masters. He will love the one and come to hate the other. You love what you serve.
Thousands of Gold and Silver Futures Contracts Dumped at Market Open
This calculated slamdown was a little enthusiastic even by current market standards, or lack thereof.
About seven thousand gold futures contracts, representing about 21.8 tonnes of paper gold, were dumped at market in less than one minute driving the price down to $1,080.
Several thousand contracts were bought back in the following two minutes.
No legitimate profit-oriented sellers would operate in this manner, since they are selling against themselves. You do not dump large volume without limit into a quiet market unless you are trying to disrupt the price.
A similiar operation happened in silver.
Who would suspect a thing? Certainly not the regulators, or even some market ‘reformers.’ Not when something is so obvious.
Oh, well done.
Zerohedge thinks that it might be another HFT inspired ‘flash crash.’
I think this is another conveniently timed, clumsy attempt to clear out more of the August open interest and give a nice shot to the gut for any foolish enough to still buy options on the Comex. The next precious metals option expiry is on the 28th July.
Jesse