Has everyone been watching the goings on in gold and other precious metals lately? Today the price of one ounce plummeted another 9.4%, making the price drop of that barbaric relic in the last few trading days to be the biggest in thirty years. Astute observers tell us that Big Money (central banks, institutions, ...) even margined retail investors have been selling to deleverage and clear their books. Cyprus is held up as a sovereign nation poster child in this mad rush to divest.
So you’d think that with everyone acting like the gold rush is over and economic normalcy is returning in the world, that you could waltz into your local gold dealer (hereabouts JH Mint) and walk out with a bag full of the yellow stuff on the cheap. Not a chance, the shelves are bare and the prices quoted for uncertain future delivery are marked up by 14% or more. In other words, the retail dealers have effectively not lowered their prices at all, just increased their margins. JH Mint, along with other dealers across the land, were literally cleaned out last Friday when their establishements looked like the land office in 1893 Oklahoma.
Then why can’t I buy gold on the cheap today? The simple reason is that Big Money is manipulating the price drop. Ben and his ilk need to depress prices so that after a little time has passed (days, weeks?), all the big players can buy back in on the cheap. In the meantime, none of the big guys want to let the physical stuff get into the retail buyers’ hands and boost the price prematurely. Retail buyers are the people who look at the world and where they live, and ask (as 321gold.com reports) –
“Did gold fall off the cliff because the dollar index ripped higher? NO! Did Uncle Ben Bernanke say they were stopping the $85 billion + QE immediately? NO! Has physical gold become more abundant than any time in the recent past? NO! Are the world's central banks stopping their counterfeiting operations by devaluing their currency by stopping the printing presses? NO! It's quite the opposite, Japan, U.S., and the EU are increasing the money supply.”
The big secret is that no one can allow interest rates to increase on sovereign debts across the globe. That interest rates will have to increase in any case at some future time makes no nevermind to today’s big players, they already have their portfolios appropriately stuffed with what the little guy cannot buy on the cheap today. And all of them are betting that they individually will be out of the public eye and ire before the crapola hits the fan when interest rates skyrocket after no one believes in the brand new funny money being used today to buy sovereign treasuries in the industrialized world. And when interest rates do rise, then the dominoes will start crashing as every country’s debt service to GDP ratio sky rockets. And gold will again be in short supply as its price goes to the moon.
In the interval, please fasten your seatbelts.