John Ward Gold manipulation

CRASH 2: There is no convincing market explanation for gold’s volatility last week.

The MO has changed, but the authorities are once again trying to make gold look unattractive

I’ve been blogging on and off about the gold market for nearly six years now. The truth is that I know only a fraction about the sector compared to experts, but at the same time this is about 1000% more than I knew at the outset. However, despite understanding the mechanics a lot more now (and being generally a bloke who poo-poohs conspiracy theory) I am as convinced as ever that the gold market has been subject to massive manipulation over the years. Not in a planned, global scam basis…because as I say, I believe in almost none of the ‘it’s all a plot’ stuff – if only because the motives never seem to bear examination. But certainly, as and when powerful forces deem such to be necessary, the market has been massively ‘directionalised’ – that awful euphemism for ‘bent’.

All markets are manipulated at one time or another. It might be hedge funds, manufacturers, miners, governments, central banks or indeed anyone doing it. And for much of the time, it is entirely legal. When ECB boss Jean-Claude Trichet buys euros (as he clearly did this morning) or Greek junk bonds to stave of the inevitable death scene, we think of it as normal. When Arabs stop producing oil for a week or two to get the price up, everyone gets in a tizzy about it – but nobody suggests they should be tried in the Hague as war criminals. Currencies, commodities, companies and sometimes whole sectors are subject to artificial support: QE is a massive manipulation of the market for stocks, indirectly. Selling one’s own currency is manipulation of a debt…and as long as there’s a market for American debt, this is market manipulation.

But gold is different. Gold (and silver to an extent) is the only thing with a mythical significance, prized by whole cultures for decorative or religious purposes, and remembered as what money was before some con artist came along and invented paper money. It is also the only substance bought as much by ordinary people as a universal hedge against disaster as it is stored by governments as a sign that their credit is AAA. And so when the Elites start messing about with its real value, I take exception to that: for it’s almost like an additional tax – a way of stopping people doing one thing, and forcing them in another direction.

From 2002(ish) onwards the evidence is reasonably strong for suggesting that the US sold vast deep reserves of gold to the Chinese. And certainly, after 2006 – when, whatever they say now, it became obvious to most senior Fed observers and even Gordon Brown that Greenspan’s eternal growth curve was bollocks – America began artificially capping the price of the shiny amber metal. At times, this was to defend the US Dollar against growing awareness of American decline (blimey – defending the Buck – remember those days?). At other times it was an obvious ploy to stop investors panicking about a market crash by carrying off gold to them thar hills. But always, it involved gold not behaving in a commonsense way.

Commonsense lies behind most of my analyses. A great deal of bollocks deconstruction is spotting that moment when somebody says or writes something counter-intuitive, and not letting it pass. Most government cock-ups round the world start because, at an important meeting somewhere, nobody had the bottle to tell somebody, “That is utter crap, and here’s why”. A vast number of the excuses for gold’s odd behaviour over the years have been allowed to gain ground because nobody shouted “Bollocks!” at the key moment.

Gold has been manipulated over the last six days. I am sure about this, because first, the motive is obvious and desperate; and second, because the ‘explanations’ for this have ranged from the risible to the comical.

‘One explanation is the dollar’s rally since the Federal Reserve’s announcement of “Operation Twist” last week,’ opined one hack. In a world where the Buck is so obviously tottering off its pedestal, this lacks credibility for me. In the aftermath of a squibette as damp as Bernanke’s Twist, it lacks everything.

At one site last Thursday, a headline suggested that gold’s price had been ‘tainted by the association with other industrial metals’. That is a daft suggestion, and deserves to be pilloried. Today, I read (in another of those sub-heads one increasingly sees at ‘live’ issues on news sites) ‘Gold slaughtered in flight to safety’. As a statement lacking even the semblance of sanity, it has to be up there with Tessa Jowell’s 2005 assertion that giving yobs more access to alcohol would decrease drunkenness. Earlier today, the FT suggested that much of the Gold sold had been ‘to cover losses elsewhere’. This is at least a hypothesis, but ask yourself this: if you wanted to get the creditors off your back, would you sell your best asset? Sometimes, circumstances force us to do this; but we aren’t at the 1929 stage yet, or anywhere near it. It doesn’t make sense.

“In these circumstances the call from worried investors does not tend to be ‘get me out of everything except for gold, oh and that other one,’” says Jonathan Spall, head of precious metals sales at Barclays Capital in London. “It is simply ‘sell’.” I’m sorry Jonty dear, but that’s bollocks too.

No matter what short-term circumstances might produce in the way of odd glitches (and they certainly do that, make no mistake) in a situation such as last week, they ought to be completely overwhelmed by the instinct of 75+% of people out there: ‘it’s choking, but at least I’ve got some gold’. But the almost diametric opposite happened.

“There isn’t a single macro, geopolitical or any other event that has occurred in the last three days to give evidence of a reversal in the gold rally,” says James Steel, precious metals strategist at HSBC in New York. Which is another way of saying, “I haven’t a clue as to why this happened”.
Time to get real. There is one institution upon which all the basic tenets of American growth optimism rest, and that is the stock market in New York. The Federal Reserve (and its Treasury, for they are allies) are past the Buck-defending thing. To do that simply makes the ever-present Room Elephant of Debt bigger still. The main game now is to ensure that stock market investors feel safe and sound. QE is based on this principle, and so too is American gold-dumping. For the American psyche, a run from the NYSE is on a par with a run on the banks: it is The End.
Three years ago, the strategy was ‘cap the gold price to make it look less attractive as a bolt-hole’. After a year or more of gold heading for the stratosphere, that isn’t credible. The latest attempt to discourage the gold miner is altogether more sophisticated. One of the things that gives gold its safe haven appeal is, over time, a lack of volatility.  What most unnerved traders and investors last week was the sheer  volatility of gold’s yo-yo’s. The FT also sees this: ‘The large daily swings in prices, combined with a jump in the cost of options – a measure of the market’s expectations of future volatility – is concerning to investors, such as pension funds or central banks, who prize stability in their investments,’ it says in today’s edition.
I think this is right on the money. Gold’s reputation is largely based, as Kipling might have said, on keeping its head when other investments lose theirs. Last week, gold behaved like a metal with bipolar disorder. Some of the trades were enormous, but they were first this way and then that way and then another one entirely. No matter which way one tries to track those moves, they were essentially random. In a way, for those defending Wall Street, that was a stroke of genius: but for the forensic detective, it was also a major giveaway.
There was also something else. CME Group, which runs Comex, the New York exchange where gold futures are traded, said on Friday night it would raise the capital bond required to trade in gold by a whopping 25%. This comes hot on the heels of its August 8th increase of 22%…which was ‘an attempt to temper volatility’. The only other price increase was on the Shanghai exchange….of 2.4%.
An attempt to protect Comex supply logistics make sense. But here’s the rub: in August, the 22% hike made no difference. Last week, therefore, you’d have thought Comex would figure, “Well, we won’t do that again”. But they did. Why? To provide an alibi for further falls in demand? Or to suppress demand?
There’s no sure way to tell. But we have seen the EU quietly introducing ways to block the ordinary investor’s access to gold bullion over the last month. What every developed country fears above anything else at the moment is its citizens running away from the investment model…..and by doing so, breaking it. The reality is that the Bourse/globalist bank construct of developing capitalism has been broken for years: but a dash out of paper to metals would make that glaringly obvious to even the most committed Sun reader. Well, maybe that’s  going a little too far.
I’m out of gold and in gold mining shares now, but my attitude remains the same: ignore the manipulation, and stick with it as long as the call makes sense. Governments around the world would like – for a variety of entirely understandable reasons – to keep us all in banks, bourses and paper. I’m staying out of all that until the dust settles.