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XMFSinchiruna (27.97)

Gold Manipulation, Currency Intervention, and the Death of Free Market Capitalism

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54

February 29, 2012 – Comments (46) | RELATED TICKERS: CEF

In a fascinating departure from prior rhetoric on the topic, the IMF today explicitly endorsed currency intervention by emerging-market central banks as a legitimate and even credibility-enhancing policy tool.

http://www.bloomberg.com/news/2012-02-29/imf-staff-backs-currency-intervention-as-a-policy-tool-in-emerging-markets.html

“The crisis has taught us that policy makers need to deliver more than stable consumer prices if they are to achieve sustained and stable growth, and that the instruments at their disposal include more than just the policy interest rate,”according to the report, whose authors include IMF Research Department Deputy Director Jonathan Ostry. For emerging markets “there are potentially two policy targets: inflation and the exchange rate."

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In a word, the report offers a playbook for global competitive currency devaluation as a means of absorbing and adapting to the ongoing campaign of balance-sheet largesse by the Fed and the ECB. This week, it was the ECB's turn with its injection of $513 billion in net new liquidity to alleviate credit market fallout from Greece's "selective default".

http://www.upi.com/Business_News/Analysis/2012/02/29/Economic-Outlook-ECB-bails-out-a-bailout/UPI-38041330522925/

Of course, when the ECB is itself supplied with massive and -- in the words of former Dallas Fed VP Gerald O'Driscoll -- "incomprehensible" currency swaps from the U.S. Federal Reserve, it is clear the Fed played a key role in the ECB's latest bailout. As O'Driscoll alleged in December, the Federal Reserve "is engaged in a bailout of European banks". He added: "This Byzantine financial arrangement could hardly be better designed to confuse observers"

http://online.wsj.com/article/SB10001424052970204464404577118682763082876.html?_nocache=1325091067684&user=welcome&mg=id-wsj

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I submit that central bank currency intervention comes in two distinct flavors: opaque and clandestine.

Even when currency interventions are explicit, as in the case of Switzerland's memorable effort to cap its currency's appreciation against the Euro last September, they are far from transparent with respect to the precise process employed. For example, soonafter Switzerland launched its offensive, media outlets were forced to speculate that the bank was employing leveraged derivatives on the Forex market to defend its line in the sand, since an admission of same would never have been divulged by the bank itself.

http://www.reuters.com/article/2011/09/08/us-swiss-snb-intervention-idUSTRE78726I20110908

Furthermore, it is my contention that such interventions routinely entail a clandestine component. Fools will recall the blatant take-down of gold that accompanied the Swiss central bank's announcement.

http://www.fool.com/investing/general/2011/09/13/is-gold-being-suppressed.aspx

As a review, recall gold analyst and trader Dan Norcini's observation that a highly irregular volume of 4,000 COMEX gold contracts (valued at $740 million) traded over the course of a single minute on the evening of the intervention, precipitating a major selloff in gold on the day of a major development that was -- unequivocally -- enormously bullish for gold on a fundamental level.

Even the head gold trader at Goldman Sachs conceded:

"The immediate aftermath was in complete contradiction to prior recent episodes of intervention and what anyone would have expected. Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven "currencies" we saw a 50 usd collapse in minutes. The source of this flow seems hard to pin down with some speculating over whether "authorities" were concerned about the signals of an accelerating gold price and its impact on other fragile markets."

Hinde Capital CEO Ben Davies pronounced: "The central banks will all have been in on knowing ahead of time that the Swiss were going to announce this. So there was central bank selling because they really didn't want the price of gold to skyrocket on what is incredibly bullish news for gold."

The Gold Anti-Trust Action Committee (GATA)'s Chris Powell observed: "... no central bank acknowledged the intervention against gold. It is still a covert action in the currency war. At least the currency war itself is starting to be acknowledged."

http://gata.org/node/10388

Remember when Belgium's central bank admitted to having loaned out 41% of its gold? Ever wonder why they might engage in such an activity for a reported 0.3% return?

http://www.fool.com/investing/general/2011/06/29/lifting-golds-veil-of-secrecy.aspx

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For a sample indication that clandestine intervention in the gold market is -- and has historically been -- within the playbook of central bankers for their execution of currency interventions (regardless of whether other elements of the effort are merely opaque or utterly clandestine themselves), consider this significant recollection by former Fed chairman Paul Volcker of a particular currency intervention in 1973 (when he was undersecretary of the Treasury for international monetary affairs):

"That day the U.S. announced that the dollar would be devalued by 10 percent. 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." 

http://www.fool.com/investing/general/2011/09/13/is-gold-being-suppressed.aspx

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Fast forward to today, February 29, 2012. Gold and silver investors will remember this leap-year day just as they do September 6, 2011. They are one and the same! This was a high-stakes week for central bankers, who are busy combatting the unthinkable scenario of a failure by Europe to contain fallout from Greece's credit event. Europe brought out the bazooka with its massive portfolio of loans to banks. Cognizant of the meaningful exposures of U.S. financial institutions to those same contagion risks, Ben Bernanke took full advantage of his conveniently timed pulpit today to bolster the high-stakes effort by hailing the underlying currency swaps as "very successful". He also painted a rosier picture of state of the American economy than he has, I would argue, since the onset of the global financial crisis. Although I welcome the snippets of improved economic data, I also hasten to point out that the bond market has not corroborated those indicators as yet. Dan Norcini commented today: "I refuse to believe ANY talk about an improving economy as long as the bond market does not start a solid downtrending move."

http://traderdannorcini.blogspot.com/2012/02/bernanke-tries-talking-down-commodities.html

And not for nothing, but did anyone happen to notice where the Euro/Swiss Franc exchange rate stood today? You guessed it! The Swiss central bank found itself backed right up against its explicit line in the sand. See the following 3-month chart:

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1330565941099&chddm=91146&q=CURRENCY:EURCHF&ntsp=0

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And just like the last time this occurred as blatantly, gold observers the world over are crying foul over this latest clandestine intervention in gold (and silver).

Jean Marie Eveillard, who oversees $50 billion in assets for First Eagle Funds, was not exactly shy in leveling his allegation that surreptitious intervention in the gold market by central banks offers an insightful context through which to consider market dynamics like those of today's drubbing.

Eveillard told King World News:

"Usually I don’t have much to say for bullion regarding day to day trading. But a move of $75 is somewhat striking. Central banks acknowledge they intervene in foreign exchange markets. They (central banks) sort of don’t exactly deny, but they are very quiet about the fact that obviously they also intervene in the gold market"

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/29_Eveillard_-_Desperate_Central_Banks_Intervene_in_Gold_Market.html

John Embry of Sprott Asset Management offered his speculation into the potential strategy behind Bernanke's statements today:

"Central planners can’t announce they are going to have constant and massive QE or everything would go to the moon. So the idea is floated around that QE3 is off the table."

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/29_Embry_-_Gold_%26_Silver_Smash_Temporary%2C_Oil_to_Super-Spike.html

As GATA noted today, Richard Hastings of Global Hunter Securities offered MarketWatch this perspective on Bernanke's potential strategy, suggesting the comments may have been "designed to take out some of the inflation in the industrial and commodity side of the markets right now, since the Fed does not want inflation to creep up and threaten its ultra-low rate policy at this time".

http://gata.org/node/11044

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Conclusions:

1. Gold price manipulation is all too real. Much to the chagrin of those who have preferred to vilify and ridicule anyone who proposed the notion rather than engaging in a thoughtful review of the evidence amassed by GATA and others, the intervention events have only grown more obvious as the bull market has matured and the stakes for central bankers have grown. I have been entirely convinced for several years now that the bullion banks have engaged in market-rigging activity (as CFTC Commissioner Bart Chilton himself conceded). I held out for quite some time before conceding for myself that the central banks were directly involved (indeed in a coordinating role!), but I for one have now seen all the evidence I need to conclude that central banks -- including the U.S. Federal Reserve -- do indeed engage in periodic gold price manipulation.

http://caps.fool.com/Blogs/reviewing-the-documentary/363004

http://www.fool.com/investing/general/2010/04/05/is-your-safe-haven-a-house-of-cards.aspx

http://caps.fool.com/Blogs/incredible-discussion-of/170243

http://www.fool.com/investing/general/2010/10/27/the-silver-manipulation-bombshell.aspx

2. Gold is Money. If gold were anything other than money, then central banks would have no incentive to engage in surreptitious manipulation of the gold market in concert with its coordinated monetary interventions. If gold were anything other than money, it would not represent a frequent corollary to coordinated attempts by central bankers to intervene in currency exchange rates. It was price appreciation in gold that concerned central bankers when Switzerland announced its intention to aggressively seek devaluation of its currency; not oil, nor copper, nor wheat, nor ... It was gold, and by association silver, because gold is utterly unique in the financial world -- in Greenspan's words -- as "the ultimate source of payment".

http://www.fool.com/investing/general/2009/09/23/biggest-market-opportunity-gold.aspx

3. Gold price manipulation is a form of managed retreat for the purveyors of fiat currency devaluation. Central banks wield immense power, but they can only delay or temporarily derail the bull market in gold that results from their fully entrenched monetary policy of balance-sheet expansion and competitive devaluation. The existence of manipulation is all the reason in the world why margin and leverage have no place in a successful long-term investment strategy in gold or silver. Patient, unleveraged longs, meanwhile, stand to eek their well earned-reward for their perseverance. 

Stay long and strong!

46 Comments – Post Your Own

#1) On February 29, 2012 at 10:11 PM, XMFSinchiruna (27.97) wrote:

Please note: I will host a live Q&A right here on my blog tomorrow (Thursday) at 3pm with Alexandria Minerals CEO Dr. Eric Owens.

Please take some time to consider questions you would like to ask of him, or e-mail them to me if you won't be free at 3pm EST, and make a point to take part in the discussion.

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#2) On February 29, 2012 at 10:40 PM, Sturmudgeon (< 20) wrote:

I thank you, Sinch, for all you do to educate such as I.

Thanks!

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#3) On February 29, 2012 at 10:42 PM, Sturmudgeon (< 20) wrote:

Perhaps it should be obvious, Sinch, but is that Pacific Time?

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#4) On February 29, 2012 at 10:54 PM, XMFSinchiruna (27.97) wrote:

Nope... that's 3pm Eastern Standard Time (EST) tomorrow (Thursday), here on my blog:

http://caps.fool.com/Blogs/ViewBlog.aspx?t=01006124249416869148

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#5) On February 29, 2012 at 11:07 PM, Sturmudgeon (< 20) wrote:

Thanks...  my 'world' is out here in NE Washington State.

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#6) On February 29, 2012 at 11:13 PM, motleyanimal (93.53) wrote:

I waited all day for this and you sure did some extraordinary analysis.

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#7) On February 29, 2012 at 11:33 PM, Valyooo (99.63) wrote:

You used the word clandestine. Therefore rec

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#8) On February 29, 2012 at 11:45 PM, SN3165 (< 20) wrote:

Thanks Sinch. Good writeup, manipulation were exactly my thoughts when I noticed the big sell-off... looking forward to the live chat tomorrow.

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#9) On March 01, 2012 at 12:15 AM, cbwang888 (25.91) wrote:

What is next after 5% fat finger selling commodities across the board? CME raise margin requirements? Or It is LME turn to trigger a flash crash?

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#10) On March 01, 2012 at 1:18 AM, Valyooo (99.63) wrote:

Theres one problem, though.  Of course there is price manipulation of gold and silver; I would never argue against that.

But, things sell off on what is supposedly good news all the time.  That's just called being overbought.  It was priced in already.

Consider the fact that right now outside of my 401k, the only investment I have is bullion.  So I am on the same side as you all.  But when something drops on good news, it was just usually overbought is all.

I think the market was ready to punish gold on ANY announcement other than "we are going to print 1 trillion in new money starting tomorrow"

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#11) On March 01, 2012 at 7:43 AM, XMFSinchiruna (27.97) wrote:

Valyoo,

Silver had just broken out through meaningful technical resistance to generate breathing room for additional upside. See Norcini's silver analysis. Silver is the greater tell here from a technical standpoint.

Yes, several factors came into play. It was the end of the month, so in the money traders were esger to lock in gains. And yes, gold had come quite far, such that yesterday's plunge did little technical damage at all. Those factors worked to Bernanke's advantage. But to have the supposed trigger be an absence of QE, when in fact QE is alive and well in Europe's massive bailout funded in part by Fed currency swaps, holds not a drop of water.

QE is alive and well, also, in the Fed's surreptitious activity in the bond market.  Jim Rogers has alleged that Bernanke is lying about it, and CNBC's Larry Kudlow agreed: 

http://www.fool.com/investing/general/2011/10/14/rogers-and-kudlow-agree-qe-is-already-under-way.aspx

Who needs a public campaign of QE when you can get the same job done in the dark?

And no one seems bothered that the Fed vehemently resists an audit?

So while I completely understand your point, and by no means would I ever seek to characterize every selloff in precious mtals as a manipulation event, I have zero doubt personally that central bankers played a role in this one. You can rest assured that Switzerland was again engaging in huge currency intervention to hold the line at Euro 1.20, and major disruptions of currency positions will naturally send capital to gold. Given the stakes at play in containing European contagion, Bernanke and Pals could ill afford to have gold spiking.

The spin doctors were out in full force yesterday. Draghi all but declaring victory over the European crisis, and Benny the Bernanke pairing a bond-market-challenged snapshot of American recovery with self-congratulatory praise of his currency swap program. This was, in my view, a collective stage show designed to lend maximum support through the power of public perception to the high-stakes European bailout to contain the fallout of Greek default.

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#12) On March 01, 2012 at 8:21 AM, XMFSinchiruna (27.97) wrote:

And for those who really understand what is going on in global derivative markets this week, the real impetus behind the intervention in gold can be found right here:

http://www.marketwatch.com/story/dollar-turns-up-after-ruling-on-greek-cds-2012-03-01-81160

The dollar turned up slightly against the euro on Thursday after the International Swaps and Derivatives Association ruled that no "credit event" has yet occurred amid Greece's efforts to restructure its debt holdings.

All credit to Jim Sinclair for correctly forecasting that the ISDA would reach this determination, and for laying out the full breadth of implications thereof. Check his archives over the past few weeks for more.

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#13) On March 01, 2012 at 9:00 AM, CheapHessian (< 20) wrote:

I know the news was conventionally seen as dollar positive, but an easy way to make the dollar weaker is for the FED to buy Euros or Euro debt through swaps or IMF. 

Apart from what Ben did say and didn't say... it is stupid to react to it.  The powers that be believe in economic behaviorism or more popularly known as animal spirits.  It's not good enough for us to make the best decision for our self-interest, but we need artificial incentives by the government and central banks to guide us.  Central Banks moves are calculated and use statements to move the market where they want it to go.

 Speculation the take down yesterday was because of crude prices, and crude didn't even move.  That tells me the Central Banks have less room to maneuver and the dollar is even weaker than it is conventionally believed to be.

I concur on this is a good place for a dollar negative entry point.

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#14) On March 01, 2012 at 9:02 AM, CheapHessian (< 20) wrote:

 I know the news was conventionally seen as dollar positive, but an easy way to make the dollar weaker is for the FED to buy Euros or Euro debt through swaps or IMF.   

Apart from what Ben did say and didn't say... it is stupid to react to it.  The powers that be believe in economic behaviorism or more popularly known as animal spirits.  It's not good enough for us to make the best decision for our self-interest, but we need artificial incentives by the government and central banks to guide us.  Central Banks moves are calculated and use statements to move the market where they want it to go.  

Speculation the take down yesterday was because of crude prices, and crude didn't even move.  That tells me the Central Banks have less room to maneuver and the dollar is even weaker than it is conventionally believed to be. 

I concur on this is a good place for a dollar negative entry point.

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#15) On March 01, 2012 at 9:03 AM, CheapHessian (< 20) wrote:

 I know the news was conventionally seen as dollar positive, but an easy way to make the dollar weaker is for the FED to buy Euros or Euro debt through swaps or IMF.   

Apart from what Ben did say and didn't say... it is stupid to react to it.  The powers that be believe in economic behaviorism or more popularly known as animal spirits.  It's not good enough for us to make the best decision for our self-interest, but we need artificial incentives by the government and central banks to guide us.  Central Banks moves are calculated and use statements to move the market where they want it to go.  

Speculation the take down yesterday was because of crude prices, and crude didn't even move.  That tells me the Central Banks have less room to maneuver and the dollar is even weaker than it is conventionally believed to be. 

I concur on this is a good place for a dollar negative entry point.

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#16) On March 01, 2012 at 9:08 AM, XMFSinchiruna (27.97) wrote:

Wow... huge news for Trevali today!

http://af.reuters.com/article/metalsNews/idAFL2E8E11F820120301

Trevali Mining Corp said on Thursday that commodities trader Glencore International Plc will acquire a 7.8 percent stake in Trevali through a private placement deal worth $18 million.

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#17) On March 01, 2012 at 9:30 AM, Valyooo (99.63) wrote:

I never said that QE is not alive and well.  It obviously is.  What I said was that I think gold had come so far that unless bernanke ANNOUNCED a lot more printing, gold would drop.

The government prints new money every single year, even in years when gold finishes lower than where it started.  How is it possible for gold to end a year lower than where it started, if there is more money in the system?  Because it was overbought at the beginning of the year.  Inflation will ALWAYS be alive and kicking.  it has been for many many years, way before ben bernanke, so I am not quite sure why bernanke is seen as the guy responsible for all of this.  It is just the way the system is designed.  You make some very good points, but the market trades on anticipation, and announcements, not behind the scenes workings, you know what I mean?

 

I have a question for you, maybe too philosophical for this blog, but can gold ever really outpace monetary inflation?  A gold bar today is worth a gold bar tomorrow.  But a profitable business will be worth more because it will be bigger and stronger.So to me, gold is, over the long term (since it tends to be quite volatile intra-year), quite a conservative investment.  Gold will go up if the amount of money in the system goes up.  But, so will stocks, because there will be more dollars to chase them as well.  But stocks also have growth.

So, how could gold really outpace stocks in the longer term?  It would seem that in order for gold to outpace stocks 1) stocks would have to be temporarily way overvalued 2) There would have to be a severe manipulation in the reported quantity of gold, that people are setting the price of gold way below its true price because they think the supply is much, much larger than it really is, and in order for that true price to become realized, the veil would have to be lifted on that truth.  I am not saying that these two things have not, are not, and will not happen.  But is there a third way gold  can outpace stocks that I am missing?

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#18) On March 01, 2012 at 9:43 AM, XMFSinchiruna (27.97) wrote:

Valyoo,

I apologize that I simply don't have time for the discussion today. I am interviewing Agnico-Eagle CEO Sean Boyd this morning, writing up an article, and conducting the live Q&A with Alexandria's Eric Owens at 3pm. Thanks for understanding.

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#19) On March 01, 2012 at 11:24 AM, Valyooo (99.63) wrote:

Oh, right I forgot about that.  Yeah, I figured that the question was something you would not have time to get around to ASAP, but it is something that has been boggling my mind for a while and is kind of annoying that I can't figure it out on my own, and you're the only person I trust with this stuff.  For what it's worth, when clients come into the bank and tell me they are starting to learn about miners, I tell them to google you and read all of your blogs if they want to get up to speed.

Good luck with the interview.

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#20) On March 01, 2012 at 6:30 PM, XMFSinchiruna (27.97) wrote:

http://www.mineweb.com/mineweb/view/mineweb/en/page103855?oid=146427&sn=Detail&pid=102055

Reported massive 31 tonne sell order triggered gold and silver price collapse

"Ordinarily if a seller wanted to get the best price for his metal he would seek to finesse the selling over time, hunting out liquidity (finding people who are the other side of his sell order) and thereby ensure he gets the best possible profit. This seller was clearly simply out for effect. "

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#21) On March 01, 2012 at 6:49 PM, rfaramir (29.57) wrote:

"IMF today explicitly endorsed currency intervention by emerging-market central banks as a legitimate and even credibility-enhancing policy tool"


Ouch. That's exactly backwards. Fraud diminishes your credibility. Currency intervention definitionally defrauds current holders of the currency.


But I see how statists could see this as enhancing the credibility of developing countries: show us that you'll "play ball" and rape your citizens at roughly the same rate as we rape ours and we'll consider you good team members (of the Tyrannical Statists League).


"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."


Translation: we raped dollar-holding purchasers of Japanese goods really good, but, oh rats, we forgot to cheat speculators in gold. (Holders of gold wouldn't be hurt by short-term intervention in its price, only the 'weak hands' of speculators, as this action is fundamentally bullish for gold.)


"But a move of $75 is somewhat striking."

A huge understatement!


"Prices are a mechanism for carrying out the rationing function and are a fast, effective conveyor of information in a society in which fragmented knowledge must be coordinated." (http://mises.org/daily/5923/A-Tale-of-the-Reinvention-of-Capitalism)


No matter how "opaque and clandestine" the gold price manipulation is, prices will ferret it out.

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#22) On March 01, 2012 at 7:29 PM, XMFSinchiruna (27.97) wrote:

http://www.gata.org/node/11052

 

Another gold fund manager, Gabelli's Caesar Bryan, today tells King World News that yesterday's bombing of gold was done by a not-for-profit seller, the strange sort of selling that keeps turning up at strategic moments in the market, and he's starting to wonder if it has something to do with central bank intervention.


 

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#23) On March 01, 2012 at 7:32 PM, XMFSinchiruna (27.97) wrote:

http://www.gata.org/node/11051

"Looks like a large seller of gold in the market, as a 10,000 contract traded, down-ticked the price by $40 per ounce, and represents 1 million ounces of gold sold. Roughly 200,000 contracts trade per day, but unusual to see such a large single trade. Not likely due to contract expiry either. Bernanke isn't really helping either, but we haven't seen any either-size transactions post the one big trade, so hopefully will see the price decline settle down. Shortly after the 10,000 order, which was closer to 11,000 contracts, looks like one size seller out there. Sold 1.8 million ounces of gold on the day. Smells like a liquidity squeeze."

That kind of selling certainly gives the impression of someone with immensely deep pockets trying very hard to drive the price down while a congressional committee was taking testimony from the world's leading central banker, Federal Reserve Chairman Ben Bernanke, who, perhaps not so coincidentally, also has immensely deep pockets.

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#24) On March 01, 2012 at 7:35 PM, XMFSinchiruna (27.97) wrote:

http://www.gata.org/node/11051

"Looks like a large seller of gold in the market, as a 10,000 contract traded, down-ticked the price by $40 per ounce, and represents 1 million ounces of gold sold. Roughly 200,000 contracts trade per day, but unusual to see such a large single trade. Not likely due to contract expiry either. Bernanke isn't really helping either, but we haven't seen any either-size transactions post the one big trade, so hopefully will see the price decline settle down. Shortly after the 10,000 order, which was closer to 11,000 contracts, looks like one size seller out there. Sold 1.8 million ounces of gold on the day. Smells like a liquidity squeeze."

GATA's commentary: 

"That kind of selling certainly gives the impression of someone with immensely deep pockets trying very hard to drive the price down while a congressional committee was taking testimony from the world's leading central banker, Federal Reserve Chairman Ben Bernanke, who, perhaps not so coincidentally, also has immensely deep pockets."

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#25) On March 01, 2012 at 7:59 PM, XMFSinchiruna (27.97) wrote:

http://jessescrossroadscafe.blogspot.com/2012/03/single-large-seller-smashed-gold-market.html

There are a variety of reasons to liquidate a large position.

But whatever the reason, no experienced trader would take a very large position into a thin market and then just dump it at the market, if they wanted to achieve some sort of reasonable economic benefit from selling that position.  One does not do this unless they were under significant duress, or have some motive other than profit. Such a trade is called 'selling against yourself.' 

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#26) On March 01, 2012 at 10:05 PM, XMFSinchiruna (27.97) wrote:

http://www.gata.org/node/11053

 Salinas Price says: "If I saw the price declining little by little, day after day, that would be a worrisome signal. That would mean the market is not eager to acquire more gold or silver, but that's not the case. ... When I see that kind of collapse in gold, I know it's not the natural market doing that. Nobody getting rid of their gold and silver is going to dispose of it in that manner. They are going to do it little by little. This seller was definitely not interested in losses. What they were interested in was suppressing the price."

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#27) On March 01, 2012 at 10:07 PM, Valyooo (99.63) wrote:

But people sell stocks in huge chunks at times too, creating massive short term price plunges...isn't this similiar?  Dont you remember May 05 2010?

ALso, this happens on the buy side too...even by experienced buyers

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#28) On March 01, 2012 at 10:10 PM, XMFSinchiruna (27.97) wrote:

Perhaps Brazil did not appreciate yesterday's gold operation:

 http://www.gata.org/node/11055

 

SAO PAULO, Brazil -- Brazil has declared a fresh "currency war" on the United States and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country's struggling manufacturers.

Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not "sit by passively" as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.

"When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper, and it creates unfair competition for businesses in Brazil," he said on Thursday after announcing changes to the so-called IOF tax.

 

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#29) On March 01, 2012 at 11:32 PM, XMFSinchiruna (27.97) wrote:

Valyoo, You are incorrect. Sellers do not regularly behave the way that one massive seller of gold behaved. All the information is there for you in the links. 

1 million ounces of gold = $1.7B worth of gold sold by a single seller in a single transaction.

That's the trigger transaction, and from there the cascading follow-on action indeed likely does represent the sort of "normal" market dynamics that you're picturing.

I have zero doubt of foul play here. If you are unconvinced, that is totally fine. Just please understand I have no interest in debating the issue further. I'm exhausted, and this is an extremely busy time for me. Thank you for understanding.

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#30) On March 02, 2012 at 6:53 AM, XMFSinchiruna (27.97) wrote:

http://resourceclips.com/2012/03/01/auguries-—-the-great-and-powerful-oz/

 US$421 billion of fresh liquidity at 1% with notional collateral to prop up a doomed monetary union. That’s a good day’s easing and the stuff goldbugs’ dreams are made of. So what’s the real explanation for Wednesday’s gold collapse? GATA says it’s a heavy hand on the scale, and it has evidence to back up its claim. CIBC reported, “Looks like a large seller of gold in the market, as a 10,000 contract traded, down-ticked the price by $40 per ounce and represents 1 million ounces of gold sold. Roughly 200,000 contracts trade per day, but unusual to see such a large single trade. Not likely due to contract expiry either. Bernanke isn’t really helping either, but we haven’t seen any either-size transactions post the one big trade, so hopefully will see the price decline settle down. Shortly after the 10,000 order, which was closer to 11,000 contracts, looks like one size seller out there. Sold 1.8 million ounces of gold on the day. Smells like a liquidity squeeze.”

 

Sinclair said of the latest European bailout, “We know the money that’s been coming into the ECB has been coming in from two places. It’s been coming in from the IMF and from swaps done by the US Federal Reserve. (This money flows, in order, through these entities) Federal Reserve (to the) IMF, IMF (to the) ECB, ECB (to the) member banks. (This is) pure QE on a global scale. [Wednesday] does qualify as one of the biggest injections of liquidity into the system in the history of the system. Today was a cover-up by the US Federal Reserve and by the mainstream media of one of the largest injections of liquidity into the system that has ever occurred.”


 

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#31) On March 02, 2012 at 10:36 AM, XMFSinchiruna (27.97) wrote:

Many thanks to Ed Steer for linking to this blog post within his Gold & Silver Daily report.

http://www.caseyresearch.com/gsd/edition/gold-manipulation-currency-intervention-and-death-free-market-capitalism

To anyone not yet subscribed to Ed's column, it is required reading for precious metal investors.

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#32) On March 02, 2012 at 11:56 AM, XMFSinchiruna (27.97) wrote:

Dennis Gartman joins the chorus:

 From The Gartman Letter by Dennis Gartman

Friday, March 2, 2012

http://cloud.thegartmanletter.com/

Moving on to the gold market, we remain bullish of gold in yen terms, and having made that statement yet again, we note something wholly out of the ordinary on our part: the prospects that something manipulative and perhaps even nefarious took place Wednesday in the gold market.

The market's plunge may not have been solely the result of pure market forces, but may have been the result of a very real effort to "manipulate" the market lower ... perhaps on orders of a central bank hoping to break the market in order to buy gold more cheaply after the surge of selling, or perhaps on the order of a government wishing to drive gold down for the "optics" of weaker gold prices.

 We are not given to the belief in manipulation and indeed in the past have spoken against that possibility, risking being taken to task by the folks from GATA and the like. (Again, we wish to say quite clearly that we are great friends with GATA's founder, Mr. Bill Murphy, and shall always be so, looking forward every few months to raising a toast with Bill at meetings we are fortunate enough to attend together. However, it is GATA's rank-and-file that cause us the greatest concerns, to the point that several had made rather stark threats against us which we found both amusing and disconcerting.)

 

However, a note we received yesterday from a very longstanding friend and client of The Gartman Letter caught us off when it raised the very real possibility that something untoward took place Wednesday morning. Our friend, whom we've known for years and is not given to such speculation but who is at the center of such events, wrote:

"Dear Dennis, hope you are well. Regarding yesterday's action in the precious metals, I have a different take on this than you do. As I have very intimate details of yesterday, I think it was indeed official selling. At the London fixing, an order came in to sell 3 million ounces of gold and it was explicitly ordered to be done in just a few minutes. No investor or speculator would 1) handle it this way and 2) do it at the fixing only.

"This [has] happened this way three times in the last year, yesterday being the fourth time. Ben Bernanke had done nothing yesterday to trigger this the way it happened. I [have done] this now for 30 years and this was no free market yesterday. We will find out one day."

We offer this explanation as it stands, but certainly it has our interest piqued. It may be idle speculation on our friend's part. It may even be wrong. But certainly it is interesting and worthy of some consideration. We shall leave it at that and we wish not to comment any further ... to the press, to clients, or to anyone else; nor shall we.

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#33) On March 02, 2012 at 12:56 PM, XMFSinchiruna (27.97) wrote:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/2_Whistleblower_Maguire_-_US_Entity_Interferes_in_Gold_Market.html

This morning, in an exclusive interview, London whistleblower Andrew Maguire told King World News that the launch of a physical gold and silver exchange in China was interfered with and subsequently killed by a New York based entity with very powerful Chinese connections. Maguire also said Wednesday’s smash in gold and silver was blatant maniuplation. Here is what Maguire had to say about the situation: “Well, Eric, it couldn’t have been more blatant (intervention in the gold market) could it? Talk about not worrying about hiding your footprints. This was obviously sanctioned somewhere at a higher level because the amounts of contracts, paper contracts that hit the market, all at once, within seconds of each other, this was not normal trading.”

“We were seeing massive order flows. We were seeing every single bid being hit. The offers were just massive. I mean we were seeing 10’s and 20 thousand contracts at a time being unloaded by single individuals. 

This would be the agents that control the markets. I don’t believe for a minute it was genuine selling. This was 100% paper orchestrated selling and it had nothing to do with the physical market whatsoever. They came in with massive sell orders, creating absolute panic in the marketplace.”

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#34) On March 02, 2012 at 1:50 PM, XMFSinchiruna (27.97) wrote:

Jim Sinclair's latest:

Dear Friends,

The history of this period will focus attention on two economic clutch type events. These events will have mandated the need for the construction of a new monetary system utilizing a virtual reserve currency traded only by central banks. This reserve currency will be related to gold via a global Western world M3.

 

An economic clutch type event is one that by its occurrence allows the world to shift gears and change into a new economic velocity and direction.

 

The first economic clutch event took place when the decision was made that the US Federal Reserve and US Treasury would not support a rescue of the prestigious investment firm of Lehman Brothers. By doing this, they threw that institution and all of its transactions in which it was the deficit other party into default via bankruptcy.

 

Before then the entire OTC derivative debacle had a simple but extremely controversial solution. The tactic would have been similar to the means of nullifying the effect of the historic failure of the Savings and Loan Institutions during the last great housing recession. This at hand solution was to net the entire global derivative problem into a singular institutions named the Derivative Bank. At that time all OTC derivatives which were established would be returned to the instance of establishment when obligations netted almost zero. It was the institution of Lehman as a bankruptcy that removed the ability to net out to near zero from the daisy chain of global derivatives. To bring the daisy chain of OTC derivatives to net the winner would have to place their paper winnings into the pool and the paper losers would have placed their paper losses back into the pool. This would have reduced the entire loss to only part of the earnings on the banking institution from 1991 (the birth of the derivative use globally) rather than the more than now 20 trillion dollars worth of liquidity required to fund the winners who have benefited mightily from that windfall we financed.

 

The forced flushing of Lehman Brothers is therefore the economic clutch event that brought quantitative easing to provide the rescue funds to finance the winnings of the global Western world financial system. The downshift was from 5th gear to 1st gear that nearly blew up the world economic engine.

 

We now have had the 2nd Western world economic clutch event that will shift the gears directly from the plodding along in 1st gear economically into reverse gear, therein blowing the transmission and engine simultaneously. This event is the ISDA blessing of the credit event which reduced the value of Greek debt to its holders by 70% without triggering a default. They have now made it virtuous to walk away from the once lest risk loans, loans to Western governments. Such a walk away is now deemed a credit event, not the dirty D word, default.

 

A pattern of action has been set in place now which takes QE, the gift from Lehman's economic clutch event, to QE to infinity, the direct result of the Greek economic clutch event that was declared via the International Swaps and Derivative Association. These Gods of Mammon declared 70% of the Greek sovereign debt to be valueless without guilt, sin or consequences.

 

Replacing the lost value from the sovereign credit event (non-default) in this paper selectively to the banking system makes unlimited creation of liquidity an act of virtue and blessedness.

 

To assume that other nations facing the same problems will not wish the same treatment is madness. To assume the private sector facing the same problems will not demand the same treatment is madness. Therefore QE to infinity is now deemed an act of virtue and blessedness.

 

A 70% haircut in the value of the Greek sovereign debt does not constitute a credit event defined as a credit default according to the most powerful financial entity on the planet, the ISDA. This group is more financially influential than governments today. This decision by the revered members of the Association's Determinations Committee has acted to prevent the notional value of all the credit default swaps, an OTC derivative, from becoming real value as would occur if the CDSs were called upon to function.

 

The ISDA has, according to MSM, taken offense to being described as secretive in its proceedings. The ISDA said minutes of the meeting of the committee would not be publicly distributed as the decision was unanimous.

 

What has occurred in what is now described as "the successful handling of the Greek problem" by the ECB is in fact a total disaster for mankind in its introduction of QE to Infinity as the blessed settlement to a problem that now is more severe than it was prior to the Lehman event. That problem is that the mountain of OTC derivative has not been attended to, but rather has grown to include the size of all Western world sovereign debt as it is all western sovereign debt that is now threatened by an event of default on a national level. That will simply occur regardless of whatever the ISDA says. Much of it will not be paid, period.

 

This enfranchised QE to infinity sets a floor via Chinese gold acquisitions to any reaction in price. Alf Field's price objective of gold at $4500 is by this 2nd economic clutch event now in the crosshairs of the gold price.

 

Gold prices staying high have now been guaranteed. Further to that, those intelligently managed gold producers internationally will shift to dividend payers of note, transforming the gold industry into the utility type equity of the future. Opinions expressed to the opposite are simple exercises in economic ignorance.

 

Gold's price reactions, when they do occur, will be violent and very short lived. This is fact.

 

Respectfully,
James Sinclair

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#35) On March 04, 2012 at 5:26 AM, XMFSinchiruna (27.97) wrote:

http://comexwehaveaproblem.blogspot.com.au/2012/03/thursdays-intervention-too-big-to-spoil.html

 

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#36) On March 04, 2012 at 5:35 AM, XMFSinchiruna (27.97) wrote:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/3_Eric_Sprott_-_What_Happened_in_Gold_%26_Silver_is_Stunning.html

Today billionaire Eric Sprott told King World News that a staggering 500 million ounces of paper silver traded hands during the takedown in the metals this week.  Eric Sprott, Chairman of Sprott Asset Management, had this to say about what took place the day of the plunge in gold and silver:  “I can only imagine it’s the same forces that for the last twelve years have been at work in the gold market, trying to keep the volatility very large on the downside.  As you are aware, we hardly ever get days when you get an intraday $100 rise in gold.  When we look back at what happened (on Wednesday) we saw huge sell orders in gold and silver.”

“When I look at the silver market in particular, in a 30 minute span we had sellers of 225 million equivalent paper ounces, in a market that in one year the silver miners only produce 800 million ounces.  So again, it’s the paper markets overwhelming the physical market.  It’s stunning to me that on a day like Feb. 29th we traded 500 million ounces of silver.

 

No rational person could believe it had anything to do with the real market for silver....  

 

James Turk always says, ‘It’s a managed retreat here.  The price of gold and silver go up every year, but they don’t want it to get out of hand.’  As everyone is aware, on Wednesday, silver was breaking out, gold was approaching $1,800 and I just think it wasn’t allowed to happen because central banks try to keep control over precious metals so people don’t see them as an alternative to paper currencies. 


 

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#37) On March 04, 2012 at 7:19 AM, skypilot2005 (< 20) wrote:

http://finance.yahoo.com/news/insight-wall-street-fed-face-182249160.html

Insight: Wall Street, Fed face off over physical commodities

3/2/12

Sinch,

Any   thoughts   on this  affecting  prices?

Your  Official   Web  Link   Assistant,

Sky   Pilot

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#38) On March 04, 2012 at 9:34 AM, wolfman225 (70.76) wrote:

I'm in no way an expert in PMs or international monetary manipulation, but.......isn't this somewhat similar to actions by George Soros during the time he was "experimenting" with international currencies and caused the crash of the British Pound as a currency?  He certainly has the "deep pockets" required to facilitate such large single transactions as the $1.7B sell-off mentioned.  I have seen that he is reported to have "tonnes of gold" in his personal reserves.

Is it possible that these maneuvers are the preliminary steps in an attempt by Soros and other international billionare financiers to create a world currency?  Or is my tinfoil hat causing me to see conspiracies everywhere?

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#39) On March 04, 2012 at 9:51 AM, XMFSinchiruna (27.97) wrote:

Wolfman,

It was a central bank intervention. Plain and simple.

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#40) On March 04, 2012 at 11:50 AM, TMFAleph1 (95.98) wrote:

Is it possible that these maneuvers are the preliminary steps in an attempt by Soros and other international billionare financiers to create a world currency?  Or is my tinfoil hat causing me to see conspiracies everywhere?

The latter.

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#41) On March 04, 2012 at 12:04 PM, TMFAleph1 (95.98) wrote:

George Soros during the time he was "experimenting" with international currencies and caused the crash of the British Pound as a currency?

I'm not sure what you mean by "experimenting with international currencies" but, based on the rest of your post, it appears you misunderstand Soros' intentions. This was a speculation, pure and simple -- nothing more.

Furthermore, although Soros was the biggest winner from the devaluation of sterling, he did not cause it. Instead, the UK government was forced to devalue and leave the ERM, after trying to defy the law of economic gravity.

Finally, although the sterling trade is commonly attributed to Soros, it was actually Stanley Druckenmiller's trade.

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#42) On March 04, 2012 at 12:18 PM, TMFAleph1 (95.98) wrote:

This morning, in an exclusive interview, London whistleblower Andrew Maguire told King World News that the launch of a physical gold and silver exchange in China was interfered with and subsequently killed by a New York based entity with very powerful Chinese connections.

This sounds like a good premise for a novel. Does our old friend Andrew Maguire offer any evidence to support his allgegations regarding the actions -- or even simply the existence -- of this shadowy "New York-based entity with very powerful Chinese connections."? I find it very hard to believe that Chinese authorities take their orders from an entity based in New York.

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#43) On March 04, 2012 at 8:10 PM, TMFAleph1 (95.98) wrote:

"This persistent pattern of high correlation makes Mr Goldman sceptical that last week’s gold flash crash is anything more than a couple of clumsy hedge funds unloading excessively large positions."

Gold Flash Crash Rouses Suspicion of Witchcraft, FT 

 

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#44) On March 05, 2012 at 12:34 PM, TMFAleph1 (95.98) wrote:

"As they say, a paranoid is someone who suspects nine of the five conspiracies against him. Last week was a feverish one for the more sensitive gold specu ... investors, with a “flash crash” on Wednesday interrupting what had been a stately procession since December to ever-higher highs. Since gold people believe their positions represent not just an investment, but virtue itself, the losers smell witchcraft, and particularly evil Fed witchcraft at that."

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#45) On March 06, 2012 at 9:39 AM, johnybottom (< 20) wrote:

Yesterday CDY fell 12%, today they announce: http://www.cardero.com/s/news_releases.asp?ReportID=510925

Cardero Withdraws From Trefi Deposit Purchase LOI

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#46) On March 12, 2012 at 7:00 AM, XMFSinchiruna (27.97) wrote:

TMFAleph,
Thanks for posting a laughable perspective on the event for a touch of comical relief.

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