OPINION
“There are insiders here who are in a position because of their inside
knowledge to benefit from this intentional manipulation that is ongoing.
These people, I suspect, are accumulating physical gold at artificially
depressed levels.
Certainly we’ve noticed some of these suspects converting at very
attractive prices their holdings of GLD into physical. This typically gets
reported in the mainstream media as Soros, or name another elite, selling or
reducing their stake. And this just isn’t right. For the most part these
entities are converting their (paper) gold into physical (gold) in lots of
100,000 (shares of GLD). They have the wealth to do that.
So that’s the real picture, and of course that’s not a bearish
activity, that’s bullish. But the mainstream media continues this propaganda
of gold being in a bear market, when the reality is it’s paper gold being
manipulated down, and it’s physical gold that is being hoarded at a frenetic
pace. There is an enormous ongoing bull market in physical (gold) which
exactly matches the manipulated paper bear market that we are seeing on the
Comex.”
- William Kaye, former Wall Streeter (Paine Webber, Goldman Sachs), now Hong
Kong hedge fund manager
King
News interview
by Michael J. Kosares
There is quite a bit of speculation as to who might be benefiting from
gold’s seemingly organized retreat. Some say the price has been driven down
to fulfill Germany’s repatriation at lower prices. Then there are those who
believe that others could be attempting get ahead of Germany knowing that
physical availability is limited. In keeping with this line of thinking,
there have been persisntent rumors of future Swiss, Dutch and Mexican
official repatriations in the works.
The physical evidence, as reported here over the past several weeks,
points to China as the chief culprit in the physical delivery game channeling
massive amounts of gold through its London-Switzerland-Hong Kong pipeline
(GLD liquidations) The reported deliveries through that pipeline do not match
China’s reported imports. That might mean there’s a glitch, or delay, in the
reporting mechanism, or it could mean that the gold is going elsewhere.
Kaye has an interesting take on the situation. John Paulson liquidated a
portion of his GLD holdings (some 30 metric tonnes) and converted to swaps on
the over the counter market (another paper instrument) — but this is small
potatoes made large by the mainstream press, as are Soros’ maneuvers and the
rest of the hedge fund demand. By comparison China’s imports, according to
some market watchers, are on the order of 2500 tonnes, nearly the equivalent
of the annual global mine production.
If there is value in monitoring the hedge funds and global banks, it has
to do with watching and emulating how a very savvy and well-connected segment
of the market is reacting to the global currency wars and on-going physical
gold deliveries. The trouble with this kind of analysis – attempting to get a
grip on what’s going on in the paper gold market — is that you never know the
other side of the trades booked on the Comex, as they are mostly offset in
London’s foggy over the counter market. A trading desk, for example, might be
long on the Comex, but short in the London OTC — so its book is level. On the
other hand, if it is long on Comex and short in London, it might be because
of upcoming delivery obligations in London, and that could get cumbersome.
Since the London OTC trades there are private contracts, we simply don’t get
the full story. As a result, the door is open to all sorts of speculation,
none of which can possibly be on sound footing simply because a good portion
of the evidence is missing.
Any traction we can gain is usually based on anecdotal evidence that
points us in a direction, but never quite gets us to the end of the yellow
brick road. For example, if you look closely at the timing of the two biggest
stair-step downtrends in the gold market, they came just after Venezuela’s
repatriation announcement in August, 2011 and Germany’s in January, 2013.
What should have been bullish events became bearish instead. It’s difficult
to believe that the timing of the announcements and the stiff down legs is
simply a coincidence, but it is also impossible to prove that it isn’t. So,
once again, speculation becomes rife, and there are as many theories on the
internet on coincidences such as these as there are labels on chocolate chip
cookies. What we do know for certain however is that at this time large
amounts of bullion are being mobilized and headed, most assuredly, to strong
hands whether they be European or Asian.
Of course, for the prospective gold buyer, whether adding to
existing holdings or getting started, it all gets down to a matter of belief:
First, whether or not you believe in gold as a “measure of wealth” as
Richard Russell so elogquently puts it (see below); and
Second, whether or not you believe that the gold will be there for you to
acquire should Kaye and those in agreement with him turn out to be right.
After all, the pressure on existing physical supply is not occurring in a
vacuum. We are in the middle of a jolting restructuring of international
reserve assets.
On behalf or our family and the crew at USAGOLD, I would like to take this
opportunity to wish all of you a very Happy Thanksgiving. It has not been the
best year for gold from a price perspective, but corrections are events to be
expected — and a sure sign of a healthy market. I do not believe that gold’s
secular bull market is over by any stretch, and even if the gold price is
being managed for nefarious purposes, it cannot be restrained for long. To
support that contention, please consider the overt official restraints of the
late 1960s (the London Gold Pool) and the mid-1970s (U.S. Treasury and IMF
sales). Both efforts collapsed in a heap and gold rose in multiples. Both
events represented the calm before a major monetary storm.
All the best, MK
____________
If you are looking for a gold-based analysis of the financial markets and
economy, we invite you to
subscribe to our FREE newsletter – USAGOLD’s Review
& Outlook, edited by Michael J. Kosares, the author of the
preceding post, the founder of USAGOLD and the author of “The ABCs of Gold
Investing: How To Protect And Build Your Wealth With Gold.” You can opt out
any time and we won’t deluge you with junk e-mails.
