The Market Oracle reports about Gold Price Manipulation.
(emphasis mine) [my comment]
Gold Price Manipulation Further Forensic Examination
Jan 27, 2009 - 02:10 PM
Borrowing from the axiom that, “a picture is worth a thousand words,” today we are going to view the incredulity of recent macro-economic events with the aid of charts and graphs. First up is a chart of the price of gold [POG] over the past year with a few “milestones” pasted in for good measure:
It saddens me to point out that — collectively - the milestones on the chart above are all indicative or symptomatic of systemic financial collapse. It saddens me even more knowing that the price of gold has acted counter-intuitively — getting hammered — each and every time these unfolding events should have propelled it higher.
How It's Done
The manipulation / capping of the gold price is largely accomplished by appointees of the U.S. Treasury / Federal Reserve selling staggering amounts of gold futures on exchanges, like N.Y.'s COMEX, to suppress the price:
The table above is excerpted from the Quarterly Derivative Fact Sheet compiled and published by the U.S. Office of the Comptroller of the Currency. It shows that J.P. Morgan Chase has/had roughly 100 billion worth of gold derivatives [predominantly “short” gold futures] on their books as of Sept. 30, 2008.
Gold price suppression is not simply a “paper game” where relentless amounts of price suppressive “futures” can be sold forever; the price suppression scheme also requires that the price riggers expend some physical gold too — to make the ponzi-esque selling of futures “believable.” The physical gold which is mobilized to accomplish this is typically sovereign gold that is “leased” from Central Banks.
Leasing is preferred to outright sales because you can only outright sell something “once” — and it is gone. By leasing, the physical gold leaves the vault to be sold in the open market but Central Banks replace the missing physical gold with an I.O.U - for accounting purposes — and claim that they still posses the same amount of physical bullion! So, by leasing gold instead of “outright sales,” Central Banks can and do double count [cheat] — a la Enron — their gold stocks! [Don't try this at home or you'll end up in jail.]
The Unintended Consequences
The problem with cheating, besides being not nice, is that gold leasing, as it is practiced, still depletes physical caches of gold bullion. Logically and intuitively, if you practiced this thievery long enough it would lead to a bifurcated market where the price of the physical commodity would “decouple” and trade at a premium to the suppressed paper price. This is EXACTLY what has happened in the gold [and silver] market today! The premium being paid has expanded and it is growing in the price to acquire physical ounces. This decoupling of physical from futures pricing is reflected in the increased cost to lease precious metal over time. Demonstrably, even the crooks at Central Banks are less willing to “lend” their bullion — because they KNOW it's unlikely they will be repaid:
Folks would do well to remember that once physical bullion is no longer available to “back up” the fraudulently derived futures price, the nominal cost of obtaining physical precious metal will skyrocket.
Got physical gold yet?
My reaction: This article offers a very simple and clear explanation of the government' s gold price manipulation. When Americans discover that the fed has leased out all its gold over the years and it has in its vaults is IOUs, there will be panic and fury. The unlucky government officials in charge of this scheme are likely to spend considerable time in jail.
For those who still doubt the government' s interference in precious metals, consider what happened last summer with silver prices. Over the span of a few weeks, two commercial banks sold silver futures in excess of all known supplies and caused the price of silver to fall by half. There is no rational profit or business motive to such a move. Either these two commercial banks were displaying monumental stupidity or they were acting on the behalf of the Federal Reserve.
For more about the decoupling between physical gold and its suppressed paper price, see the Enormous Significance Of Gold Backwardation.
For more on the history of gold price suppression, see Gold Wars-Governments VS Price of Gold.
gold price manipulation occuring as I type this entry
For those of you who are curious about what gold price manipulation looks like, check out what is happening with gold prices right now:
Notice the big plunge in gold at 4AM Eastern time? This fits a predictable pattern: someone regularly unloads a large supply of gold in the thinly-traded off-hours (around 4AM). I have seen it happen a dozen times in the last few months.
Considering all the layoffs announcements we have had in the last week, I guess they thought it was time to try and hammer gold again.