George Rebane
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.
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.
Golly, west texas intermediate crude also took a tumble but prices are not falling fast at local gas stations, nor do the clerks seem to know why... 'Do you want your receipt?' is all they seem to be able to state.
I'm shocked (shocked!) at the notion of an orchestrated margin squeeze, but am not convinced one should expect the local goldbuggers to be on the forefront.
Posted by: Gregory | 15 April 2013 at 03:42 PM
Sorta quoting George:
One of the great things about capitalism is you can game the system and one of the problems of capitalism is you can game the system. Which is it? The bubble of the week.
Posted by: Paul Emery | 15 April 2013 at 04:45 PM
Paul, just remember the old saw that under Capitalism, man exploits man, but under Socialism it really is the other way around.
Every system ever imagined has been gamed, and every system that will ever be will be gamed. I don't know about you, but I think free and open markets are the hardest to game.
Posted by: Gregory | 15 April 2013 at 05:08 PM
Gregory
Is the price of gold a free market item? If I have an ounce of gold in my hand can't I sell it to anyone at any price?
Posted by: Paul Emery | 15 April 2013 at 05:33 PM
PaulE 533pm - Not at "any price", but only at the price that someone is willing to pay for it in a free market. Only the government (a la FDR 1933) with a gun to your head will make you sell your gold at a price that it decides to pay.
Posted by: George Rebane | 15 April 2013 at 05:41 PM
"I've never seen Ben smile this wide for so long" -Mrs. Bernanke #gold
Posted by: TheMikeyMcD | 15 April 2013 at 07:00 PM
Maguire: “Gold and silver only have this type of selling when there are extreme shortages of the physical metal. I am totally aware that before this takedown occurred there was an imminent LBMA default.
I know, I know! More conspiracy theorizing....right wing crackpottery!
But then again...
“In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999: George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K." (GATA, 2003)
Oh I suppose that this could be dismissed out of hand if there really was a free market but one has to wonder with the codification of "systemically important financial institutions" (http://www.investopedia.com/terms/s/systemically-important-financial-institution-sifi.asp) why todays (and Fridays) gold price smash isn't simply a case of perception management?
Can't have the rabble doubting the system now can we?
Posted by: fish | 15 April 2013 at 07:00 PM
A: China's slowing economy (according to an article that graced a bit of fish wrap floating around at the local coffee shop). Apparently, the Chinese are big believers in gold (as well as powdered rhino horn).
Posted by: Brad Croul | 16 April 2013 at 03:50 PM
Paul 5:33, you do understand that a market can both be free and gamed at the same time, don't you?
Game theory is an active and interesting branch of mathematics. If you know something about the market that others don't, you can game it.
Posted by: Gregory | 17 April 2013 at 02:05 PM
As I have said... I could not say it any better myself... there are 2 precious metals markets, paper and tangible.
https://www.texmetals.com/us-mint-silver-eagles-allocation
"As of today, we are completely sold out of silver."
"Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion"
Posted by: TheMikeyMcD | 22 April 2013 at 09:29 AM
MikeyMcD 929am - to which I might repeat my call that the recent plunge and current bounce of precious metals prices was entirely manipulated by the big guys now re-establishing their positions at lower entry points.
http://online.wsj.com/article/SB10001424127887324235304578438790716251064.html?mod=WSJ_Markets_LEFTTopStories
Posted by: George Rebane | 22 April 2013 at 10:06 AM
You can fleece a sheeple more than once...
Posted by: TheMikeyMcD | 22 April 2013 at 10:35 AM