Fri Post #3:Bloomberg reports the obvious. Says Gold Price "Manipulated For A Decade", repeatedly slammed lower.

Bloomberg is out with a story headlined "Gold Fix Study Shows Signs of Decade of Bank Manipulation" and confirms what many have long suspected about Gold and Silver manipulation in the market.

The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say…

“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”

The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.

The report identified patterns that are suspicious in the extreme. And with the revelations about fixing in other markets, such as Libor, have all but confirmed that the market is being blatantly manipulated in the minds of many investors

Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behavior. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. The moves weren’t replicated during the morning call and hadn’t happened before 2004, they found.

Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.

There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards, Abrantes-Metz said in a telephone interview this week.

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The connection between the manipulation of LIBOR and the manipulation of Gold/Silver raised on CNBC

Yesterday we introduced you to the LIBOR scandal.

What was exposed is the fact that the benchmark interest rate, which is set in London by a small group of relatively unknown individuals... which affects wealth as a benchmark of value around the world... a benchmark tracked by the US Federal Reserve and the financial system, has been exposed to have been subject to manipulation by some of the big Banks, with the silent acquiescence of the government and their central banks.

This, as faithful readers know, is exactly what is alleged to be occurring in the Gold and Silver markets.

And with the revelations by Barclay's of their involvement in LIBOR (a market estimated to be as large as $800 Trillion dollars), how long before it is revealed that the EXACT same manipulation is going on in the Gold and Silver markets?

Today that very topic was raised on CNBC.

Gold and Silver manipulation is no longer the preserve of the tin foil hat brigade.

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Thur Post #1: History Channel Examines Questions about Gold in Fort Knox

Is Fort Knox empty?

The U.S. supposedly holds the world's largest reserve of Gold. But there hasn't been an audit of the Gold in storage in decades.

Futures contracts on Gold account for more than 100 times the amount of physical gold on the planet.

Critics contend that the United States has probably leased and lent the Gold that is supposedly in Fort Knox into the market as a way of manipulating the Gold price, supporting the value of the U.S. Dollar and supporting the validity of all these futures contracts. They also content the Gold has been used Gold swaps with foreign governments and Central Banks.

There have also been suggestions that the United States may have also leased and lent the phyisical Gold they hold for other nations as part of those manipulations.

If these rumours are true and the U.S. ever had to scramble to buy Gold back to meet the demands of foreign gold redemptions, $5,000-an-ounce doesn't look so unrealistic anymore.

Republican Presidential candidate Ron Paul Paul isn't so sure the nation's supply of Gold is all accounted for and thinks it might not exist at all.

He has introduced legislation that would require an independent count of the 5,000-plus tons of gold bullion that's sacked away in the Kentucky vault, as well as smaller amounts held in government facilities in Denver, West Point, and New York City. Paul also wants a lab to test the bars, to prove it's as pure as the U.S. Treasury Dept. says.

Recently the History Channel started to examine the issue and you can watch one of the few mainstream media's examination of this issue.

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Smack Down

Older readers will recall that Paul Volcker was the Chairman of the US Federal Reserve from August 1979 to August 1987.

He is widely credited with ending the high levels of inflation seen in North America in the 1970s and early 1980s.

Most recently he was Chairman of the Presiden Barack Obama's Economic Advisory Board from February 2009 until January 2011.

In 2004 he did an interview with the 'Nikkei Weekly' newspaper.  They were talking about when the US dollar was devalued against the yen in January of 1973.

What stands out in the interview was a comment Volcker made about central bank intervention to control the price of Gold:

• "That day the U.S. announced that the dollar would be devalued by 10%. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."

We bring this up because tomorrow in the start of the extra-ordinary 2 day US Federal Reserve Federal Open Market Committee Meeting (FOMC).

The meeting is extra-ordinary because it is rare that the Committee Meeting is ever longer than a day.  But last month current Fed Chairman Bernanke announced that it would be expanded to two days and it is widely expected that the Committee will use this meeting to facilitate in depth discussions of non-traditional Fed market activities.

In other words, Quantitative Easing 3.

The banking cabel loves to smack down gold and silver prior to a market operation. That way, if the metals rally, they have less opportunity to break out and run even higher.

Former Fed Chairman Alan Greenspan made a famous comment in 1998 which reinforced this practice.  He said,

• "Central banks stand ready to lease gold in increasing quantities should the price rise."

Today we saw a massive raid on both Gold and Silver in keeping with this philosophy as Gold dropped by $35.70 to $1776.40  and Silver fell by $1.67 to $39.11.

 

But while the manipulated 'spot price' of Gold/Silver fell today, we were presented with further evidence that things in Europe are getting worse.

 

In a shocking move demonstrating just how bad things are in Europe, the Financial Times is reporting the major European industrial company Siemens has pulled €500 million form a large French bank and deposited the money straight to the Eurpean Central Bank.

 

The implications of this are stunning.

 

It means that even European companies now refuse to work directly with their own banks, and somehow the ECB has become a direct lender/cash holder of only resort to private non-financial institutions.

The Financial Times quoted a person with direct knowledge of the matter as saying that the group had withdrawn the money partly because of concerns about the future financial health of the bank and partly to benefit from the higher interest rates paid by the ECB.

Consider the dynamics going on right now with Gold and Silver.

You just had the European Central Bank, the Swiss National Bank, the Bank of England and the US Federal Reserve act in concert to try and suppress the price of Gold/Silver while the SNB devalued the Swiss franc.

Then the group of central banks collectively put together a bailout liquidity facility in place to keep the Europen Union banking system from collapsing and also moved to try and supress Silver and Gold.

And now you have the big smack down in advance of the FOMC meeting.

At some point Silver and Gold are going to have a "snap-back" reaction in its price that could be quite breathtaking.

 

The massive emergency funding programs being put in place will eventually have to be monetized by central banking printing presses and transferring liabilities from the banks to the Taxpayers - just like in 2008.

 

It's going to get really interesting over the next 3 months.

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On Gold and Silver's dramatic drop this morning

Both Gold and Silver plunged dramatically this morning.

As recently as last month we posted that "Gold is still cheap because you can bet it hasn't even begun it's ascent. Nor has Silver. But make no mistake... it will continue to be a wild roller coaster ride involving wild swings."

And the reason for those wild swings?

Over the past year this blog has tried to lay out for you just how the metals markets are heavy influenced by manipulation... particulary manipulation by central banks and their proxies.

Last week we profiled one of the US Embassy cables from China released by Wikileaks that show this manipulation is recognized worldwide, even in China.

The US Embassy cable reported that, according to China's National Foreign Exchanges Administration, "The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro."

The biggest fear in China right now is the fallout from the fierce competition that is emerging in the West as the big countries battle to devalue their own currencies against one another.

One country that has exempted itself from this practice has been Switzerland. This made the swiss currency a "flight to safety" currency on the same order as Gold.

Until this weekend, that is.

Yesterday Switzerland announced that they would buy unlimited quantities of foreign currencies to prevent the franc from rising above 1.20 Swiss francs to the euro.  In this way the Swiss National Bank (SNB) hopes to contain the meteoric rise of its currency, a rise that threatens its exports and economy.

This basically means Switzerland has moved to peg the erstwhile safe-haven franc to the euro and the last 'safe haven currency' in the West is now a carry-currency.

Gold now stands alone as the only island of stability in a world of fiat insanity.

It, therefore, should come as no surprise about what happened next.

With all Western central banks now actively managing a debasement of their currencies, what we witnessed this morning was an attempt to actively manage a debasement of gold too.

Take a look at this trading chart for Gold. Note the sudden divergence from the regular trading pattern (click on image to enlarge)...

The dramatic drop is an unmistakable attempt to prevent gold from moving beyond $1900/oz.

So what happened here?

In the span of 1 minute an enormous spike of 4,000+ contracts were dumped on the market in the middle of the evening during a time period in which gold trading is not normally known for this sort of volume.

Ask yourself the logical question.  If this was a hedge fund blowing out of a long gold position, why wait for such a low liquidity environment in which to execute such a massive trade knowing full well that by so doing, one would be guaranteed the worst possible exit price for the trade?

And since the price of gold has been rising and not falling, why would any gold long be forced to unload a position? It certainly is not under any duress from price action.

The next question that must then be raised is if this were a hedge fund doing the selling to establish a fresh short position, why would they sell in such size at such an hour guaranteeing themselves to be filled with a fresh short position at the worst possible price by selling into a hole?

The logical answer is that they would not do such a thing.

As the morning has moved along we now know that the Swiss National Bank, in an attempt to mitigate the "negative" effect on francs priced in gold, sold a massive amount of gold futures at the same time.

In total 7,000 contracts (700,000 ounces, nearly 22 metric tons!) were dumped on the Globex while London and NY were closed!

What we are witnessing today is exactly the same strategy that was employed with Silver in May: maximize the downward impact and collateral damage by executing the attack at a time of minimal liquidity.

Don't be surprised to see a number of margin increases leveled against Gold traders over the next few days.

Two things are certain here.

• The roller coaster ride is Gold/Silver will continue to be wild. 
• Gold & Silver may go down temporarily, but the rise in the metals is only just beginning. The manipulations can only temporarily quell the price in the face of voracious demand.

Presumably this is why Kazakhstan's Central Bank has just announced it intends to buy all of the gold that Kazakhstan's mines produce for the next 4 years.

As we have said before, if these Central Banks are buying Gold and Silver, do you really think we are in a bubble?

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Sat Post #3: Wikileaks on China and Gold

In case you missed it earlier this week, news came out that Wikileaks published their entire US State Department cable database.

As people pour through the massive data dump, the first nuggets (excuse the pun) of information are starting to surface.

And a gem of information has been uncovered in this US Embassy cable. Here is what the US Embassy in China had to say:

• 3. CHINA'S GOLD RESERVES
  
  "China increases its gold reserves in order to kill two birds with one stone"
  
  "The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."

China is ecstatic that the price of Gold is being suppressed by the Americans.  They fully intend to take advantage of it.  As they note, "suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency."

China has every intent to grow their reserves at these fire sale prices. And if things play out in the direction they are currently heading, $1900/oz will be considered cheap.

Zero Hedge commented on this today as well and they make the connection that anyone with any foresight can see for themselves. To wit: "What happens when "mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes?"

The result will be nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold.

As we have said before, we do not believe a return to the Gold Standard will be a good thing or that it will happen with full gold backed currency.

What WILL  happen is a worldwide rush into Gold and Silver, which will catapult prices parabolically upward.

Casey Research did an excellent paper back in March 2011 titled, "The Driver for Gold You're Not Watching".

It's well worth you time to check it out.

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Wednesday Post #2: Options Expiry Calendar (updated)

It's been a while since we've discussed the manipulations that go on with Silver (and Gold) on the COMEX and newer readers may not be fully aware of some of the times you can expect heavy shorting of the metals.

One of those times is the week before options expiry.

Above is the options calandar for 2011 (click on image to enlarge).  Options for Gold/Silver for September expire on August 25 (tomorrow) which is why the metals have been heavily shorted in the days leading up to expiry.

The next options expiry is on September 27th, which is a Tuesday.  Therefore heavy shorting of Silver/Gold can be expected as early as Thursday of the week before.

Other occasions we see predictable, heavy shorting of the metals is just prior to release of the nonfarm payroll employment numbers.

Nonfarm payroll employment numbers are released monthly by the US Department of Labor as part of a comprehensive report on the state of the US labour market. The US Bureau of Labor Statistics releases preliminary data on the third Friday after the conclusion of the reference week, i.e., the week which includes the 12th of the month, at 8:30 a.m. eastern time; typically this date occurs on the first Friday of the month.

Nonfarm payroll is included in the monthly Employment Situation or informally the jobs report and affects the US dollar, the Foreign exchange market, the bond market, and the stock market.

The shorting of Silver/Gold is done to support the US dollar when these non-farm payroll numbers are released.

Finally... anytime the US Federal Reserve Chairman speaks after a meeting of the FMOC, the metals are usually shorted leading up to his speech.

Two bloggers worth checking out who regularly follow the manipulations of the Gold/Silver markets and provide updates are Ed Steer and Harvey Organ.

From Harvey this evening:

• The bankers again decided in their great wisdom that a raid was necessary to quell the demand for gold and silver. The world awaits Ben Bernanke's speech from Jackson Hole Wy. The market strongly believes that he will initiate QEIII. If he does not, then markets will tank. The fact that a monster raid on the precious metals with regulatory cover was orchestrated seems to indicate that that is where he is heading. I will deliver to you both sides of the story.
  
  The price of gold fell by an unbelievable $104.20 to $1751.10 at comex closing time. The silver price was also whacked to the tune of $1.12 to $39.16. Dennis Gartman liquidated another 1/3 of his positions early today along with yesterday's 1/3. I emailed the CFTC that maybe they should arrest Gartman for inside trading as he obviously knew that another raid was forthcoming today. I will remind everyone that you should not play at the comex. If you want gold or silver line up at the bank and get it. Do not play with paper gold or silver as these crooked bankers will fleece you time and time again. Please try not to use leverage as this is a big sin and again the bankers exploit your weaknesses.
  
  The comex has now decided to raise margin requirements on gold again tonight. It is amazing how this news was leaked. Gold will now become a physical market like silver.

I hope you find the information from these sources helpful. Remember, the funadmental reasons for the influx of money into Gold/Silver are still strong and while the spot price of these metals will fluctuate wildly, their upward price movements will continue significantly. Invest accordingly.

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The attack on Gold mimics May's attack on Silver

As events play out in Gold and Silver, the predictablity of what is occuring is almost comical.

With options expiring this week and Ben Bernanke giving the Federal Reserve's highly anticipated FOMC statements Friday from Jackson Hole, EVERYONE was expecting classic cartel action on both Silver and Gold in the days leading up to Thursday/Friday... and we were not disappointed.

Those who follow the metals have been wondering how long before the same sort of attacks on margins in Gold that Silver saw in May (when margins were hiked 5 times in 8 days to force a selloff).  Even on CNBC last week, Jim Cramer was touting the prospect of margin hikes.

Two weeks ago the CME hiked gold margins by 22%.

Two days ago the Shanghai Gold Exchange jacked their margins by 26%.

This morning Gold plunged by $100/oz, the most since December 2008. Some rationalized that the market was about 24 hours late in processing the news from the Shanghai Gold Exchange hiked gold margins, but in reality the selloff was insiders getting a jump on the next attack.

And that attack is now public after having been widely leaked this morning: the CME has boosted margins in Gold by an additional 27%.

Look for margins to ultimately be raised to 100% cash before things are done. This fast, deep correction is one of the signposts on the way to much, much higher prices for both Gold and Silver.

More importantly look for the blatant and heavy handed bear raids in the metals, although very much anticipated and a source of some profits, to continue.

Remember... nothing has changed in the fundamentals driving both Gold and Silver.

There has never been a time in history when debt problems globally have been this monstrous.  Harry Schultz, the retired but highly respected investor, summed up the calamity we face in his last market newsletter at the start of the year.  He said,  “Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.”

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