The Game Has Changed – The Achilles Heel Exposed
Originally posted 6 October 2009
IN A DISCUSSION I HAD EARLIER this week with Dr. Jim Willie, we discussed how the prices of gold and silver have been arbitrarily managed for years. In this discussion, I contended that, while the prices of gold and silver have been closely managed, the growing “off-take” of physical bullion is inflicting great damage on price managers. We can see manifestations of this reality in that price corrections [sell-offs] are much shallower and shorter lived than they were even last year. Jim asked me if I could provide any “hard data” or minutia showing the amounts of physical metal being taken off the market in recent weeks.
Unfortunately, I cannot. The reason for this was best encapsulated in comments by GATA Secretary / Treasurer Chris Powell back in April, 2008 in Washington, D.C. when he opined:
“Indeed, the disposition of Western central bank gold reserves is a secret more closely guarded than the blueprints for the manufacture of nuclear weapons.”
With the micro details being withheld or obscured, the proof to the thesis that price managers are hemorrhaging physical bullion is more “macro” in nature. So here’s a review of the macro picture (or “known-knowns” in Rumsfeld-ian double-speak), starting with a daily chart of gold for Sept. 8, 2009:
And now here’s a chart of silver over the exact same time period:
Now, I’d like everyone to see the two charts overlaid:
The charts from Sept. 8 were not cherry picked – they typify the intra-day “rigged” relationship of gold and silver over the past number of years. The real evidence that a shortage of physical metal exists and is ongoing is as follows:
1] The prices of gold and silver have tripled over the past 6 years. This in it self, given that we know prices are arbitrarily “set” – is evidence of rear-guard activity.
2] The U.S. mint has suspended production of Silver and Gold American Eagles on numerous occasions
3] Over the past couple of years, premiums being paid for small bars and coins [due to lack of availability] have been as much as 10 – 60 % over the ‘posted’ futures prices.
4] European Central Banks have been unable or unwilling to fulfill their quotas [roughly 130 – 150 metric tonnes sold in the last year of the recently expired Washington Agreement allowing for 500 metric tonnes of sales per year]. The ineffectiveness of the Washington Agreement to suppress the gold price – as it once did – is a very likely reason why the specter of I.M.F. gold sales has recently been rekindled.
5] Central Banks like China and Russia are now publicly acknowledged buyers of gold bullion for reserve diversification – even two years ago they WERE NOT. Call this the China / Russia “put” under the price of gold. (ie: THESE ARE HUGE NEW PLAYERS ON THE BUY SIDE FOR PHYSICAL.)
6] As the Russians sent representation to GATA’s Gold Rush 21 conference in Dawson City back in 2005, Chinese sovereign wealth funds have met with GATA on at least 3 occasions (lengthy conference calls) since the spring of 2008 to get the scoop on how the gold price has been suppressed – giving more credence to the notion that the Chinese are learning how the market rigging game is played, largely with fraudulent futures / derivatives.
7] Flowing from , the Chinese have publicly stated that their State run enterprises may unilaterally walk away from losing derivatives bets with un-named banks.
8] Fed Governor Kevin Warsh – responding to a GATA FOIA request – recently acknowledged that the Fed is indeed involved in gold swaps, reversing 2001 denials that they were involved in the same. This revelation flies in the face of sworn testimony provided by [then] Fed Chairman Alan Greenspan [a perjurer?] to Rep. Ron Paul back on Feb. 24, 1999:
“Last summer on a couple of occasions here when you were talking before the committees on securities and on derivatives you mentioned something that was interesting. You said that central banks stand ready to sell gold in increasing quantities should the price rise, which I thought was rather interesting.
Then I followed up with a letter to you to ask you whether or not our central bank might not be involved in something like that, in the gold market. And you did answer me and stated that since the 1930’s the Federal Reserve has had no authority to be involved with the gold markets.”
To which Pinocchio, err….Greenspan responded,
“…The issue of buying and selling gold as the price changes is indeed exactly what we used to do. We used to, at a certain thing called the gold points, which was the price of gold plus the transportation cost differentials, we, that is, the United States Treasury, stood ready to buy and sell gold at a spread, as indeed all other participants in the gold standard did. So in that regard that was exactly what was happening.
But, needless to say, since we have gone off the gold standard, and especially since 1973, there has been basically a general float of the dollar vis-à-vis gold, which means that the gold price is like another commodity’s price.”
Isn’t this LYING TO CONGRESS?
Gold Swaps have long been proven by GATA to be a primary means by which Central Banks nefariously mobilize sovereign gold stocks – creating stealth supply to sell into the physical market to suppress the gold price.
A note on the gold and silver derivatives game from my good friend Rhody:
“Futures contracts were introduced in gold and silver for the first time in 1974 in Winnipeg, Canada as a trial system. It worked so well, it was shipped to New York the next year and that began the paper gold, multiple selling of each ounce system…
The BIS [Bank for International Settlements] issued data on the status of silver derivatives held by member banks this year. It was 111 billion dollars. The world produces $10 billion in new silver each year, of which ALL but $1 billion is consumed by industry. That means that these $111 billion represent debt instruments backed by only $1 billion of investor held silver. That’s a 100 to 1 ratio. Keep in mind that the $111 billion does not count the derivatives held outside the banking sector.
There could easily be an additional $100 billion of derivative silver debt held by hedge funds, mines, jewelers and investors. This is why I say that each ounce of real silver is sold over 100 times, and by that, I mean it could be 200 times. And the guys who sold the derivatives are not the same guys who hold the $1 billion in real silver.
You must understand that the Western centric financial system in all its parts is a complete fraud.”
These things – taken together – should reinforce to ANYONE who’s paying attention, that while the prices of gold and silver are STILL arbitrarily set by price managers, THE GAME HAS CHANGED. Access to (or a lack of) physical metal is the Achilles Heel of the price rigging game and only real question is how quickly the price managers retreat and whether the melt-up remains orderly?
Got physical precious metal yet?