Frustrated investors in physical gold and its derivative asset classes have fumed quietly as a mal-regulated market for counterfeit gold and silver (futures contracts, certain ETFs) leads precious metals prices around by the nose for the exclusive enrichment of an elite cadre of financial institutions. Entities such as Goldman Sachs, HSBC, Barclays, J.P. Morgan, and others are able to issue contracts deemed to represent millions of ounces of gold for future sale or purchase anonymously, and without limit. These paper representations of gold, while notionally tied to the prices of silver and gold, have the effect of suppressing the prices of the physical commodities because they represent exponentially more gold and silver than is physically available, thus creating a supply scenario that is utterly false.
It is impossible to have a rational discussion about the practice with anyone in the mainstream financial media, as the idea that gold and silver prices are manipulated for profit in broad daylight is more or less universally dismissed as ‘conspiracy theory’. This despite recurring cases of market manipulation and fraud on the parts of these cornerstone institutions, who enjoy a different standard of justice wherein felony misconduct is settled with cash in lieu of incarceration of those responsible.
And so we are stuck in an era where, while global demand for real assets is crumbling because paper assets perform better, the prices of real assets are thus naturally drawn downward as the global inventory of capital prefers paper derivatives over real assets.
A similar profound corruption exists in equity markets, where, according to author Scott Patterson who wrote Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market, states that up to 75% of the volume of trading in NYSE and NASDAQ stocks is conducted by High Frequency Trading companies that seek only to earn the spread between the bid and ask among different market makers by holding the stocks they buy for mere seconds, if that. This means real investors – those who buy shares in a company planning to sell them at a point in the future at a profit, pay more per share as these fleet-footed machine traders front-run large buy orders detected via sophisticated software. While it is pennies per trade, the fact that the practice is permitted underscores the absence of integrity by regulators who should be concerned with a market the is fair and free from parasitic middlemen.
In other words, three quarters of all stocks traded are bought and sold just to clip the real investors – the other 25% of the volume – for a couple of pennies on every trade. The parasitic, zero-value HFT market making industry is three times the size of the legitimate investment market. Do regulators do anything to curb this? Absolutely not, according to Patterson. How can a nation built by investors willing to take on risk do wo when they are targeted by scavengers at every trade?
Quite to the contrary, they seek to aid and abet such hit-and-run predatory market parasites to the direct expense of real investors.
I agree with the mainstream financial media in determining that no conspiracy exists. Its no longer a conspiracy when its a daily crime in progress facilitated by the very government agencies who are supposed to be protecting the public’s interest.
So there’s no reason to believe that gold and silver prices are a fair reflection of genuine market demand and supply by legitimate investors. To think otherwise is, in essence, the height of naiveté.
So What is The Value of Gold?
The result of the absolute corruption of global markets generally, and in the case of precious metals specifically, is that the price of gold does not reflect the value of gold. To understand the value of gold, one must be able to correctly forecast the demand for gold. One of the key incentives to government agencies to NOT enforce logical position size limits or ensure good delivery of gold and silver underlying what are essentially fraudulent contracts to buy and sell gold in the future, is that investors are thus duly dis-incentivized to own gold or silver for investment purposes.
If you subscribe to the theory that volatility attracts investors, because that’s where real money is made, then it makes sense for the gold and silver prices to languish in a range where the possibility of capturing a profit is profoundly diminished, assuming you could exert influence over those prices. When gold was rising throughout the first decade of this century on fundamental drivers that demonstrated clearly that physical gold supply was not keeping pace with physical gold demand, the participation of banks in the futures markets for gold and silver exploded.
In almost every single instance where gold and silver prices were hammered downward in a single day, it was the result of the massive sale of a huge number of contracts on each occasion by unidentified investors. Observers familiar with the standard best practices when unwinding a position for a profit comment regularly that the manner of the sale of such large positions confirms that the seller is not interested in maximizing any profit. By all accounts, those sales have as their sole objective, arrived at through rational deduction, the sudden and dramatic reduction of the quoted gold price.
As I have stated time and again, it strikes me as somewhat apparent that the collusion among the U.S. Federal Reserve Bank, the United States Treasury, and the world’s most elite financial institutions is financed in part by the continued “quantitative easing” program the U.S. government supports to manipulate the data of countless economic indicators to ensure the media interpret them favourably. That a portion of this government counterfeiting is exponentially inflated through the offices of fractional banking by these same banks, and directed to the routine settlement of what amounts to naked short sales of gold and silver for cash in lieu of the metal, is beyond doubt. All of the historic data, when reconciled against the price patterns in precious metals currently, yield the mathematical certainty that such a program exists.
The Future Price of Gold
As in all trading, timing is everything. It doesn’t matter if you’re right about the gold price exploding to $5,000 an ounce if you lose all your money going long the physical metal on such a conviction from 2011 to 2014. And therein lies the rub. Determining when the price of gold and silver are going to throw off the shackles of government supported price suppression is more important than knowing what the future price of gold might be.
And as in all trades, a thing is worth what someone is willing to pay for it. There’s no doubt that the naked shorting of gold through futures contracts is supported by a reverse pump and dump campaign spearheaded by Goldman Sachs’ Jeffrey Currie and abetted by none other than the Wall Street Journal. The headline “Goldman Sachs: Short Gold!” was enough to catalyze a 15% one day drop in the gold price when it appeared on April 10, 2013.
Now, with gold trading sideways and rangebound between $1,200 and $1,400, is there any doubt as to why investors aren’t interested in owning gold? While the chorus of market voices shouting for gold at $5,000 an ounce recedes incrementally, the day when gold can actually reflect its true value in its quoted price will unfortunately have to coincide with the day the United States dollar stops transmitting its own grossly inflated value through controlled media and endless fiat currency fabrication.
And when that day arrives, gold will find favour with investors who will finally realize all those treasurys and U.S. dollar denominated stocks are not worth the paper their printed on. The problem is, we’re only measuring debt and dollar inventory in the trillions. In the current spirit of global monetary fantasy world, we could theoretically keep going into the quadrillions, quintillions, etc. In other words, we might all be dead and gone before gold and silver are able to demonstrate their value in their prices.
