Best of Dennis…
Dennis is still tending to his health and hopes to be back writing very soon. When looking at past articles and deciding which one to repost for this week, I came across this one. Almost 5 years later and it could pass as a brand new article. I encourage you to read it again. This article was originally posted on January 19, 2017.
Does Market Rigging in the Metals Signal a Buying Opportunity?
Central Banks are rigging the metals markets. Does it signal a buying opportunity? Will they ever be prosecuted for this illegal activity?
I recently interviewed good friend Ed Steer who writes Ed Steer’s Gold and Silver Digest, a daily must-read. We discussed an article written by Peter Warburton in 2001 outlining the relationship between central banks and investment banks rigging the metals market price:
“…(Central Banks) incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value.
Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.“
Eight major players are blatantly manipulating the price of all precious metals; making billions from their illegal activity. So far, despite a preponderance of evidence presented by the Gold Anti-Trust Action Committee (GATA), the government takes no action.
Bloomberg published information from court documents in a recent lawsuit:
“A cache of documents from Deutsche Bank AG include what a group of silver investors claim is a “smoking gun”: private electronic chats showing traders from numerous banks conspiring to rig prices from 2007 to 2013, according to a court filing in New York…“
Using electronic media they worked together to rig silver prices.
- On Oct. 15, 2010, a UBS trader wrote, “Gonna bend this silver lower.”
- “You are short right…haha…we are one team one dream,” a Barclays trader wrote on April 6, 2011.
- On April 1, 2011, a UBS trader commented on plans to manipulate silver transactions with Deutsche Bank, according to the court filing. “If we are correct and do it together, we screw other people hard,” the trader wrote.
I recently wrote about a bill in the House of Representatives to fix Social Security. A major emphasis is changing and/or eliminating Cost of Living Increases (COLA).
The need to protect your retirement nest egg from inflation is growing by the day. If the best inflation protection on the planet, precious metals, is being artificially held down in price what should an investor do?
I contacted Ed Steer. I asked his opinion on the smoking gun and the implication for those who need to protect their life savings from inflation.
DENNIS: Ed, thank you for taking the time to help our readers. As a member of the GATA committee, I know you are on top of the situation. The smoking gun appeared. Will this change the “big boys” continual market manipulation?
ED: Hi Dennis…well, nothing much has changed since we last spoke. The largest 8 traders, mostly U.S. banks and brokerage houses, are still mega-short the precious metals. This “silver disease”, as silver analyst Ted Butler calls it, has spread to other commodities such as copper, crude oil and the grains.
The “smoking gun” you refer to with the Deutsche Bank revelations has confirmed that the silver market is rigged – as is the gold market, so it’s no stretch to imagine that they’re managing prices in other markets.
You ask if these revelations will matter. You can’t tell on the surface that things are different, but the fact that the price management scheme is so widely known…and talked about everywhere now, certainly puts JPMorgan [and Canada’s Scotiabank in silver] under the spotlight.
These revelation bombs are falling closer and closer to the real ‘Ground Zero’ in the price management scheme – JPMorgan – and the CME Group that enables them.
Is all this illegal? Hell yes, but neither the CME Group nor the CFTC will do a thing about it even though it’s obvious in their own data.
DENNIS: I’m concerned about retirees dealing with high inflation. The government wants to cut back and/or eliminate COLA adjustments in social security. Precious metals have a history of rising ahead of the inflation rate. Many people, including yours truly, felt high inflation and metals prices would be soaring long before now. Do you see any signs that we might move back to free market pricing?
ED: Free market pricing? Well, nobody knows what the true free market price of the precious metals really is, because there never has been a free market in them since they were discovered…and now traded.
If the precious metals were allowed to trade freely, we would see an immediate price adjustment in ALL commodities. If you keep precious metal prices, plus copper and crude oil under control, keeping a lid on the others is easy, as per Peter Warburton’s famous words you quoted.
All price management schemes eventually end – and when this one does, as it surely will, we’ll have brand new prices for everything. A big unknown is whether the powers-that-be will allow market prices to prevail, or whether they’ll just retreat to a much higher price level for the precious metals – and control them at higher price points.
No one knows exactly when this will happen, but the gold price has been under the control of the COMEX futures market since 1974. The longer they keep prices suppressed, the higher they will go when the downside price management scheme is terminated.
The powers-that-be also know that once they allow commodity prices to rise to [hopefully] free-market prices, it’s a genie that they won’t be able to either control, or put back in the bottle until the ensuing short-covering rallies in the COMEX futures market burn themselves out.
The other question then becomes, what happens to all other paper investments as this worldwide rush into hard assets is going on? They’ll most likely crash and burn. It’s a real dilemma for the powers-that-be – and it just gets worse as more time goes by.
DENNIS: The US Debt Clock has added a dollar to gold ratio. Currently it’s just over $9,000 oz. as compared to $28.76/oz. in 1913. The dollar to silver ratio is over $1,000/oz. Any publication touting metals prices skyrocketing to those numbers might find themselves investigated by the SEC. Ed, is it possible for eight big traders to manipulate the market by such huge amounts?
ED: In a precious metals short-covering rally in the COMEX futures market anything is possible, especially since their respective prices have been managed lower for about 45 years.
Silver analyst Ted Butler, who’s an authority on all things silver-related, estimates that JPMorgan has amassed a staggering 550 million ounces of physical silver [a third of all visible above-ground physical inventory] since they engineered the price decline in that precious metal starting on May 1, 2011 when it touched US$50 per ounce.
They’re not only keeping the price suppressed in the futures market, they’re using that advantage to buy physical silver at the prices they, themselves set! How crooked can you get?
They’re still accumulating and they aren’t going to be selling it for $100 an ounce.
DENNIS: One last question. What would you tell readers who are concerned about funding their retirement and making sure they have ample funds to pay their bills for the rest of their life?
ED: Inflation is coming whether we want it or not – and it’s not going to be just a little bit of inflation. Central banks will move heaven and earth to ensure that it happens. The first place it will show up will be in precious metal prices, along with their associated equities.
A portion of your retirement savings in them, whatever portion you feel comfortable with, will go a long way to not only preserving your wealth, but also your future purchasing power.
Gold closed higher by 8.47 percent in U.S. dollar terms in 2016 – and silver by 14.82 percent. The gold stocks closed up 64 percent – and the silver equities by 123 percent. What will these gains be like when gold is back at its old high of US$1,900 per ounce, or silver at US$50?
As silver analyst Ted Butler said in his Saturday, January 7, 2017 column… “Just as there is a mechanical feature to positioning on the COMEX for futures contracts, there is also a mechanical feature to physical metal ownership. It is the reality of what will happen to price once a rush to physical metal develops by investors and industrial users alike that is so exciting. No one recognizes this better than the market master (and crook) JPMorgan and fully explains why the bank came to own a third of all the investable silver in the world. Say what you wish about JPMorgan, but no one would ever accuse it of being dumb or not looking ahead, certainly not me. Don’t listen to what I say, heed what JPMorgan has done.”
Sage advice, in my opinion. And I eat my own cooking here, as I’m “all in” personally – 100 percent of my investment portfolio is in precious metals, mostly silver. That is certainly not an investment strategy that I recommend to anyone else.
I wish a happy and prosperous New Year to you and all your readers.
Dennis: Thanks Ed.
I think we can summarize things easily. Inflation looms on the horizon, and when it comes it won’t be pretty. The need for all investors to have adequate inflation protection is growing by the day. I don’t plan on selling my metals anytime soon!
For more information, check out my website or follow me on FaceBook.
Until next time…
Dennis
“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken
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My husband tends to complain about the precious metals I insisted we buy when I cashed out my IRA.
If the price were to get close to what we paid from 2009 to 2011 (average is around 28, I think) then I think he would just sell it to buy a new piece of farm equipment or perhaps a good diesel storage tank.
And, maybe, considering the crazy digitized world planned for our future, a good haybaler and a diesel storage tank might be a better place for that value to be.
I don’t follow the silver/gold market now that we are “here.” I just wonder how anyone survives without fresh eggs from healthy chickens.
Personally, I’m glad the price has not skyrocketed. I like having my shiny silver rounds in their little tubes safely tucked away where only we know.
Just in case.
Maggie…hold all hard assets closer than close…especially whatever silver you have…your husband will soon realize (I’m sure once again) how he married up…silver will become more than precious…sooner rather than later.
$28 an ounce will be considered the basement in the third Gold/Silver bull market of my lifetime.
https://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
Silver is the very tip of the inverted pyramid…your wealth is in your land, home, location, and ability to STAND…silver will be your ‘money’ at some point…not the soon to be worthless ‘fiat currency’.
There is no counter party risk with Physical Gold & Silver in your (well armed) hands.
I believe that and deep down inside, so does he. But with inflation at levels we would not have imagined five years ago, seeing the prices skyrocket for everything except precious metals causes serious doubt.
I have a speculation for you here.
It is rather reliably reported that the Chinese have accumulated 20,000 tons, or more of physical gold. Some No doubt from open market.
Consider that they are quite clever and can see the stash sitting on the COMEX.
In an ongoing stealth operation accumulate a position, smack the price down at the appropriate time and stand for delivery.
Recall the stress many months back when COMEX had to rush around to get bullion lined up to show they were still in the business??
ursel doran,
Lots of buzz about the Chicoms coming out in desperation to buy time with their massive Gold holdings being revalued to 10k or much higher to back their Evergrande popping fiat paper???
The CCP Chicom Crime Family & the TLPTB (L=Luciferians) Banksters Crime Families are in a dubious alliance…
Bible prophecy is inevitable but the twists and turns coming up will be on His timing and path…not the powers and principalities timing or path.
There are more cracks in the Chicom economy than in the Three Gorges Dammed Dam.
I’ve listened to Ed steer a few times and he’s a decent analyst, but i swear he can’t go one full minute without mentioning Ted Butler. I have no idea what that’s about.
Being able to buy silver at its current price of$30 (with premiums) is a gift. Future prices will be staggering (in (worthless FRNs).
Purchasing power protection and no counter party risk….most excellent!