A Textbook Example Of Gold Manipulation
By Patrick A. Heller, Market Update
December 02, 2008
Those who really understand what happens in the gold market have long observed the following pattern:
If there is some significantly poor economic or financial news that will be released during the day, invariably there is an unexpected decline in the price of gold either before or at the same time that the news is released to the public.
Many times the assault to drive down the price of gold begins in the London market at 3:00 AM Eastern Time zone, when the traders acting on behalf of the US government begin their day. If the news isn’t quite so bad, the manipulation may hold off until after the US Comex opens.
That this pattern occurs so consistently is no longer a surprise. When the US government is preparing to release an economic report such as unemployment rates, inflation levels, trade statistics, and the like, this information is available to several top government officials well before the information is made public. There is ample time to prepare countermeasures for damage control.
Events on Monday, Dec. 1 were a perfect example. When Federal Reserve Chair Bernanke and Treasury Secretary Paulson had to publicly admit that the United States had already slipped into a recession, they knew that the news would spook stock market investors. It doesn’t matter that pretty much everyone already knew the US was in a recession, but a lot of denial was possible as long as the government pretended otherwise.
When stock investors want to leave the stock market, they look for safe havens to park their assets. If the price of gold is falling, investors will be less inclined to pull money out of the stock market and buy gold. Knowing this, it is not hard to envision that the US government would put forth the effort to make sure that the price of gold dropped on December 1.
Since there was so much horrible economic and financial news released on Dec. 1, the price of gold needed to be severely clobbered, if you think like the US government. Gold only dropped a few dollars in Asian markets. Then, right on schedule at 3:00 AM Eastern Time, the price of gold was ambushed in the London market. The attack continued when the US markets started trading. The price of gold dropped over 5% by the close of US markets.
Of course, the news on Dec. 1 that the Dow Jones Industrial Average did even worse, down almost 8% for the day. The scariest news was the increase in the risk that the US government might default on some of its 5- and 10-year Treasury debt.
The problem for the US government in trying to hold down the price of gold is that there are many people around the globe who jump in to buy gold when it is perceived to be a bargain price. People in India, for instance, have shown extreme eagerness to purchase gold when the price of gold has dipped below $800 in the past few months. Physical gold demand in the Far East, Middle East, Europe, Australia, and many other parts of the globe is much stronger than it is in the US.
About the only way the US government can counter this rising demand is by supplying untraced physical gold to the market. That presents a new set of problems - such sales must be kept secret and can only continue as long as there is any gold to unload. If the general public ever learns of this behind-the-scenes gold activity, the price of gold will explode.
There are those who think that the time for sharply higher prices is drawing closer. In the past week, analysts at both JP Morgan Chase and Citigroup issued reports stating that gold could reach $2,000 in the not-too-distant future.
Last week the U.S. Mint released horrible news about the initial release of 2009 Eagle products. In past years, the Mint has been able to produce the new year’s coins for two to four months before the first January sale and been able to cover almost all orders. For the beginning of 2009, the U.S. Mint will only be selling 1 ounce gold American Eagles and Silver Eagles dollars, and only in the quantity that they can strike in two weeks in December. There will not be any sales of Platinum Eagles, fractional size Gold Eagles, or Gold Buffaloes. Since this news was released, premiums on US bullion coins have started to rise. At the Michigan State Numismatic Society convention in Dearborn last weekend, the few dealers who had Gold Eagles in stock were able to sell all they have for more than $100 above the gold spot price.
