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Tuesday, September 30, 2014

Why Gold Prices Are Dramatically Lower than 24 Months Ago..

Today we're going to talk about Gold..

As of Monday afternoon's close, the commodity was trading at $1,216.98/oz.

On Dec 20, 2013, it closed at $1,203.70 which means in a little over 9 months, even with all the little ups and downs, the value of one ounce of gold ultimately has risen a mere $13

Now if you wanted to compare with a year ago, specifically Sept. 27, 2013 when gold closed at $1,339.20, its value has dropped by $130 or thereabouts..

So why is this?
How is a commodity that at one time was trading at $1,794.10 just two years ago (specifically Oct. 4, 2012) dropped about $580 per ounce

One word..   Manipulation

More broadly explained:

The Federal Reserve (with the Government's blessing) rigs the gold market and devalues its price so not to cause a dramatic devaluation of the trillions upon trillions of paper money via QE its created out of thin air to buttress and bolster the stock market

What exactly do we mean?
OK, this is a super-complex subject and we'll try our damnedest to simplify but we make no promises all our readers will grasp what we're explaining..   All we can do is get the info out there..

The Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011.

Naked short selling in stock market language is is the practice of short-selling a tradeable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale.
The Fed and its agents rig the gold price in the New York Comex futures (paper gold) market.

The bullion banks have the ability to print an unlimited supply of gold contracts which are sold in large volumes at times when Comex activity is light.

Generally, on the other side of the trade the buyers of contracts are large hedge funds and other speculators, who use the contracts to speculate on the direction of the gold price.

With us so far?  Just do your best..
Now, the hedge funds and speculators have no interest in acquiring physical gold and prefer to settle their bets in cash, which makes it possible for the bullion banks to sell claims to gold that they cannot back with physical metal.

Contracts sold without underlying gold to back them are called “uncovered contracts” or “naked shorts.”

It is illegal to engage in naked shorting in the stock and bond markets, but it is permitted in the gold futures market.
The fact that the price of gold is determined in a futures market in which paper claims to gold are traded merely to speculate on price means that the Fed and its bank agents can suppress the price of gold even though demand for physical gold is rising. 

Still with us?  Good..  This is important stuff..

If there were strict requirements that gold shorts could not be naked and had to be backed by the seller’s possession of physical gold represented by the futures contract, the Federal Reserve and its agents would be unable to control the price of gold, and the gold price would be much higher than it is now.
The bullion banks do not have nearly enough gold in their possession to make deliveries to the buyers if the buyers decided to stand for delivery per the terms of the paper gold contract.

The reason this scheme works is because the majority of the buyers of the contracts are speculators, not gold purchasers, and never demand delivery of the gold. Instead, they settle the contracts in cash. 

They are looking for short-term trading profits, not for a gold hedge against currency inflation.

What is occurring is nothing short of insider trading.
We're almost done.. You're doing a great job following..

The bullion banks that short the gold market are clearing members of the Comex/NYMEX/CME.

In that role, the bullion banks have access to the computer system used to clear and settle trades, which means that the bullion banks have access to all the trading positions, including those of the hedge funds.
When the hedge funds are in the deepest, the bullion banks dump naked shorts on the Comex, driving down the futures price, which triggers selling from stop-loss orders and margin calls that drive the price down further. 

Then the bullion banks buy the contracts at a lower price than they sold and pocket the difference, simultaneously serving the Fed by protecting the dollar from the Fed’s loose monetary policy by lowering the gold price and preventing the concern that a rising gold price would bring to the dollar.

Insidious isn't it?
Gold isn't just a tangible asset that governments can not create out of thin air to keep their decayed economies going..

It serves as a warning; a 'canary in a coal-mine' of sorts for aware people that financial and economic trouble are brewing.

For example, between the tech bubble collapse (January 2000) until just before the collapse of Bear Stearns triggered the Great Financial Crisis (March 2008), gold rose in value from $250 to $1020 per ounce, or just over 400%.

Moreover, in the period since the Great Financial Collapse, gold has risen 61% despite claims that the financial system was repaired.
It was up as much as 225% (September 2011) before the Fed began the systematic take-down and containment of gold in order to protect the dollar from the massive creation of new dollars required by Quantitative Easing.

The US economy and financial system are in worse condition than the Fed and Treasury claim and the corrupt corporatist financial media reports.

Both public and private debt burdens are high, and corporations are borrowing from banks in order to buy back their own stocks.

This leaves corporations with new debt but without income streams from new investments with which to service the debt.
In addition, the recent release of the 2013 Income and Poverty report shows that real median household income has declined to the level in 1994 two decades ago and is actually lower than in the late 1960s and early 1970s.

So in summary, the combination of high debt and decline in real income means that there is no engine to drive the economy, and you have a continued meaningless tag-line called 'Recovery' doused in the putrid stench of 'Hope'

And with home re-sale prices under $1million as stagnant as salaries and now a manipulated gold market, its harder and harder for tens upon tens of millions of Americans to make it..

Just the way the 1% want it..
~ Yeah right Mr Bullshit.. um.. Buffett..