Strange Days in the Gold Market

The Dow and NASDAQ were both down some 7-8% respectively. Today, they’re up roughly 5%.

As I mentioned previously, volatility begets volatility.

One of the most curious developments lately has to be the market for gold and gold mining stocks. The demand for gold bullion’s gone through the roof in the past couple of months as the financial system has fallen apart — so much so, that bullion dealers are simply out of stock on most coins. German bullion dealers have stopped taking orders because they’re so swamped and have no product to offer. The US Mint itself has suspended production on the Gold Eagle and Buffalo coins; they simply can’t get the gold on the open market at a cheap enough price to profitably make the coins at the prices for which they’re currently offered.

Which just begs the question: why doesn’t the US Mint just raise the price on the coins?

I’ve discovered that this is a rabbit hole question — the more you study it, the more questions you come up with. When you finally do manage to piece together an answer that makes sense, you’ve arrived at the conclusion you’re looking at the result of some kind of conspiracy.

Now, I realize that conspiracy theories regarding gold are the stock of Libertarians everywhere — not to mention, the kind of thing that makes traditional people regard us as freaks. But — I’ve come to believe that that is exactly what’s going on.

Here are the facts that are difficult to explain without invoking some form of conspiracy:

  • WHY … has the US MInt suspended the sale of gold coins rather than just raise the prices on the coins they offer?
  • WHY … had the electronic market of gold futures come about with a “spot” price of gold (that’s fallen quite a bit lately — 5.1% today) at a time when gold bullion dealers haven’t been able to keep the stuff in stock?
  • WHY … is Barrick Gold (ticker symbol: ABX), one of the world’s largest gold miners with a solid balance sheet, a good pipeline of new mining projects, and more production coming online next year, trading at a Price-to-Earnings ratio of 11.5 today — down over 10% today alone?

What on Earth is going on here?

Well, the COMEX (Commodity Exchange) is the marketplace where futures contracts for gold and silver, and what is traded are paper claims to the metal. Very little actual metal is delivered in all of this paper trading of gold and silver on the COMEX exchange.

In days of old, a large portion of the paper claims to gold and silver were ultimately backed by “forward selling” based upon mining operations. In other words, there were paper claims floating around to gold and silver that were backed by nothing more than the promise of a mining operation to deliver it at some point in the future. That makes some sense, but given that some mining operations were selling up to 10 years in the future, it’s not hard to see how this could be used to create the illusion of an abundance of gold when the actual precious metals themselves are quite rare.

Consider the recently settled lawsuit brought against Morgan Stanley.

Morgan Stanley was charging clients a service to store physical silver in their vault for them. The problem was, there was no actual silver ever stored. Eventually, the clients caught on and sued them for fraud.

Their defense? That it was merely carrying out “industry standard” practice.

Since the paper claims to gold and silver are for precious metals that are supposed to be stored in bank vaults, Morgan Stanley has since let us know that it’s the banking industry’s “standard practice” to claim they have gold and silver that they actually don’t. Is it such a far fetched idea that the COMEX paper market has attempted to “create” gold out of paper by inflating more physical claims to paper than actually exist? If the COMEX spot prices for gold and silver are truly representative of the actual demands for the physical metal, then why can’t the US Mint buy the gold it needs to fill its orders? Instead, since bullion dealers have stopped taking orders, Ebay has become the main exchange for gold and silver coins — which are trading at far higher prices the COMEX says it should.

This situation represents a vast fraud perpetrated against global investors seeking to protect their wealth against inflation. The Morgan Stanley lawsuit in particular shows how callously “industry standard” practice treats its clients. The fiat money game is all about how the banking industry can pervert the free market system and siphon off wealth to themselves. Apparently, out and out fraud is not against their interpretation of the rules, and that just goes to show you, as far as they’re concerned, this is war — a war they certainly fight aggressively.

Dr. James Conrad wrote regarding this issue:

“At any rate, you initially issue a lot of claims to fake metal, and so many futures contracts are written, in a very short time period, that they flood the market on exchanges like COMEX and the London Metals Exchange, where almost all the transactions are on paper, and real metal rarely changes hands.  Meanwhile, if you are the big bullion bank, you know what you are doing.  You issue just enough subsidized precious metal paper to automatically trigger stop-loss orders.  The price starts going down as the sell orders are filled.  That triggers yet more stop-loss orders, and the process becomes one of dominos, falling one after another, until the price collapses.  If the operation is successful, and the collapse is big enough, market confidence is destroyed, on a wide scale.”

I believe that we are clearly witnessing yet another attempt to destroy confidence in gold and silver as a hedge against inflation.

Further evidence for this: as discussed in the video of the Gold Antitrust’s Gold Rush 21: A Historic Gold Conference Exposing the Manipulation of the Gold Market, the gold market has declined at many times of high political tension, such as when Iraq invaded Kuwait.

Why would the price of gold decline when you would expect people to increasingly demand it except that the banks of the world flood the market with false paper claims in order to drive the price down to discourage people from looking at precious metals as a safe haven at all? The financial market is falling apart and the price of gold fell 5% today. Yet, there’s not enough physical gold to go around?

Beware, dear reader. Something is very rotten in the state of Denmark.

2 thoughts on “Strange Days in the Gold Market”

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