Over the years, various US government officials have admitted to extensive interventions in almost all markets other than precious metals. This has led more than one analyst to observe that “there are no markets, only interventions.”
On May 4, the price of gold surpassed $1,190 just after 9:00 AM Eastern. There was a significant prospect that the spot price might shoot up past $1,200 before the COMEX close. If gold were to reach this significant threshold, along with the support of a silver price that had risen more than 6% in the past half month, that could have presented huge problems for the US government. A rising gold price indicates falling confidence in the US dollar, which would mean that buyers of US Treasury debt would likely demand a higher interest rate to protect against this risk.
It is pretty much an open secret that the US government is funneling resources to its trading partners to allow them to buy stocks (and their derivatives) of the companies that make up the Dow Jones Industrial Average, so as to push up this key financial indicator.
On May 4, the US government faced a difficult choice. Its array of tactics used to suppress gold and silver prices had largely failed in recent weeks. Precious metals prices were even rising in recent days when the US dollar itself was rising against other currencies! The one event that did still seem effective at pushing down gold and silver was a broad decline in the US stock markets.
To me, it is plausible that the president’s Working Group on Financial Markets (also nicknamed the "Plunge Protection Team") decided that it faced two hard choices on May 4—either allow the price of gold to risk rising to all-time record levels or to sacrifice US stock market prices in order to suppress the prices of gold and silver.
By 11:00 AM Eastern, the Dow Jones Industrial Average had suddenly dropped 2%, the NASDAQ was down 3%, and other US indices were similarly down. European markets, which slightly overlap US market trading hours, were also down significantly. Asian stock markets did not suffer as they were long closed by the time US markets opened.
The supposed reason for the decline in the US and European stock markets May 4 was the concern over the potential failure of the bailout of the Greek government. However, there was no particular reason why this months-old financial story should have particularly affected markets that specific day.
So, I think there is a significant possibility that the US government allowed the stock markets to decline on May 4 (or maybe even helped push it down) primarily to hold down precious metals prices.
Beyond thinking that this turn of events could happen, I actually expected it to occur. When the gold price declined earlier this year, my company established a substantial long position in the “paper gold” market at an average cost of about $1,115 per ounce. I had instructed my traders to exit this position when they could liquidate for at least $1,190. My reasoning was that, at least for the first attempt, the US government would not allow gold to reach $1,200. We closed this position at $1,190.80 before prices fell by $20 in a matter of minutes. My company realized a sizeable profit by counting on the US government to manipulate the price of gold before it reached $1,200.
Now that gold has dropped $20, we are again actively adding to our gold and silver long positions. I don’t expect the current bargain prices to last long.
I doubt that there will ever be clear cut evidence to prove that the US government was or was not behind the sudden drop in precious metals prices on May 4. However, it will almost certainly continue to be true, as it has for nearly the past decade, that more profits can be realized trading on the basis that gold and silver prices are manipulated—instead of believing that they are trading in free markets.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes "Liberty's Outlook," a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles". His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com.
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There is actually the evidence. Consider how they do it and you will understand – so they accumulate long position – huge positions – thousands of contracts and then suddenly in a minute on a planned day they dump all those thousands of long contracts and multiply it by naked short selling. But because there are still smart people who buy the dips, they are forced still to spend some of physical gold too.
Like 100 paper gold (naked futures) versus 1 physical gold.
consider that the Cartel is not US only,l but rather international – where do they get that physical? Hedges form companies and dumping (so called leasing) form Western Central Banks. You can go back and check – all the plunges in any given year (especially 2008-2010). exactly in the day of the plunge – there was a sale of gold from some european central bank (check the reports in BIS) .
These days they dump whatever left in IMF.
So, not surprisingly on May 4 they dumped close to 20 tonnes of physical gold from IMF.
You even can guess these planned days – the day before the plunge they decrease lease rate (GOFO) on LBMA. So if in any given day you see sudden drop in LBMA GOFO, you can expect next day either big plunge of gold price or
maybe they expect a rise in gold price and they will try to hold the price by dumping.
Why does pushing the stock market down push gold down?
A really big problem with your premise about the stock market and gold is that the European markets — FTSE, DAX and CAC — all began their slides at 9:15AM CEST, 6 hours before the NYSE opened.
Why did investors the world over flee to the dollar and the yen instead of gold? They could easily have overpowered DC’s attmept to push gold down.
Why does DC want the dollar high? It is currently trying to get China to increase the value of the yuan relative to the dollar, and this suggested manipulation does nothing to that effect. Many also claim that the Japanese are artificially deflating the yen relative to the dollar. Why would we not want the US dollar lower to boost our exports as the Chinese and Japanese are doing?
If this gold and stock market slide was intended to push interest rates down on govt. debt, it was a failure because 3 mo T-Bills reached their highest point in a month on the 4th.
Your success in buying and selling paper gold indicates only that in a spooked market that one can, not unexpectedly, make money when we see high volatility.
Thanks for a little comic relief.
I’ve got bad news for you – Oswald acted alone.
You even can guess these planned days – the day before the plunge they decrease lease rate (GOFO) on LBMA. So if in any given day you see sudden drop in LBMA GOFO, you can expect next day either big plunge of gold price or
May 1st to the 3rd have been removed on the Gofo, explain that one
Look, we know markets are manipulated by individuals and/or companies that want to work it to their advantage. Read or listen to Whistle Blower Andrew Maguire’s rant on the manipulation of gold and silver on the commodities market. So, we know that to cover their criminal naked short positions they will work in cahoots with agents to get it done. Other markets are no different. Why else is there a “plunge protection team”? If you think it is just a little security measure to protect national security than you are living in la la land. The reason why governments manipulate markets is because it is in their best interests to do so. If they can get away with it, they will do it. And so far they have been doing a damn good job of committing this crime over and over again.
One conspiracy (JFK assassination) does not mean everything is a conspiracy. Some “conspiracies” are not really conspiracies at all (Nixon’s inaction on oil prices in 1974 and his desire to let OPEC drive up the price of oil so the Shah could buy more US arms) but a misguided inaction to let others achieve a result.
The gold bugs have been predicting everything from Armegedon to depression pretty much on a monthly basis. Almost every time they have been monstrously wrong because they have been using their own pet theories devoid of any reality based evidence to support their doomsday scenarios.
The reality is bad enough. You don’t have to wallow around in Friedmanesque hogwash (it was at the recommendation of Uncle Milty that Nixon abandoned the Bretton Woods Agreements on currencies and turned currencies into a financial casino) to realize that the economy is in trouble. The issues are far greater than the price of gold this month. In fact, while I own a fair amount of gold and quite a lot of silver, these prices are at best a realy, really small tip of the iceberg.
I’ll give you a question to consider, why is there such a thing as “paper” gold totally devoid of the ability to deliver physical gold? Why is the same true for wheat, corn, oil or any other commodity? The purpose behind “futures” was to protect, say farmers, from low prices at harvest time and, say bakers, from high prices at the same harvest. These contracts are supposed to be for real wheat, not pretend wheat. Futures have become a pure financial play, like currencies, like stocks. They remove assets from the real economy instead of providing assets to the real economy for generating widespread growth.
The financialization of our economy is a recipe for disaster. Throughout history when an economy moves away from making stuff to pushing make believe paper nothings, economies crash and burn.
Here’s another issue to ponder. Despite the theory and assertions propounded in the halls of business and economics schools, why has almost 40 years of productivity gains not shown up in the wages of the folks generating those gains? Productivity and wages used to track each other (roughly 80% of gains showed up in wages, the rest went to owners) but stopped in 1973. Real wages have flatlined ever since.
These are only a few of the major forces destroying our economy. Serious stuff is going on under our noses, and complaining about gold prices and manipulation, while it may be satisfying and a nice way to avoid considering the depth and breadth of the problems while pretending to know what they are, isn’t going anywhere near the problems or coming remotely close to solutions.
With respect to gold and silver (or any other manipulation including the Hunt brothers’ silver play in the late 70s or the Goldman Sachs oil play of 2007-8), is the appropriate response to a particular manipulation to become, in effect, a co-conspirator or accessory after the fact by playing the game with them instead of doing something about it?
I give Pat credit for his involvement with the CFTC hearing and the Justic Dept complaint.
Another question with respect to a manipulation attempt is how significant is it in the marketplace? Can the Treasury Dept or the IMF or some other entity carry out a major manipulation such that it tightly controls the price or can it only nudge the market for a short time, after which things return to staus quo? Is the pressure building up under their lid enough to blow the cooker to pieces?
Do you not think others thik the same as you and it could be your selves who are manipulating the price
What else happened around 1973…aside from wages no longer tracking production?
Oh yeah, we went off the gold standard!
What conspiracy…!!!???
Oh yeah, and if Ozwald acted alone, then I guess Bin Laden told NORAD to stand down from his Bat-Phone in his Cave Fortress in Tora Bora!
Why is gold approaching $1200 today? Gold hits $1190 Tues AM, drops under $1160 on Wed and roars back thru $1195 Thurs AM. Yeah, that’s really solid market manipulation!
We weren’t on the “gold standard” prior to the abandonment of Bretton Woods in 1973. Bretton Woods was convened in 1944 by FDR, the guy who called in all circulating, non-collectable gold in 1933. The thing that Bretton Woods did relative to currency was to create a mechanism to eliminate wild fluctuations in currencies. It created a process among a group of central bankers to peg currencies. In the US gold was only loosely backing the dollar without any direct relationship to it, without any obligation to redeem the dollar in gold.
When Nixon abandoned Bretton Woods, he did eliminate the loose connection with gold and “floated” the dollar by withdrawing from any pegs. Uncle Milty prophesied that this would restabilize the dollar. How has that worked out? The dollar has done more twisting and turning than a whirling dirvish at key moments of financial instability, exactly the opposite of Friedman’s predictions, exactly opposite of what the global economy requires, exactly opposite of what stressed national economies require, exactly opposite of what the real economy that actually makes stuff needs.
As for Lee Harvey Oswald, at no time did I say he acted alone. I strongly suspect, although I cannot prove it anymore than you can, that he was merely the fall guy and there were more shooters, in all likelihood in one spot in addition to the grassy knoll. So what? it has no bearing on the price of gold.
On September 11th Bin Laden was not in Tora Bora.
I don’t know why NORAD fighters were on stand down over the east coast. Considering the arrogance, rigity and incompetence of Donald Rumsfeld, anything is possible and probable.