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Monday, April 7, 2014

GASP! Precious Metals Manipulated?

Most of us who buy precious metals have long believed that the "spot market" prices are being manipulated by various entities.  We're called paranoid, and anti-government, and all other sorts of names.

For me at least, it is like water on a duck's back.  The comments of the naysayers just rolls off my back.  I make all of my various investment decisions based upon logic and data.

For instance, when the government and Wall Street types say that increasing the amount of money in the economy (via Quantitative Easing) will have no effect on inflation, I know that to be untrue.  When you create more of something, those "things" currently in the market become less valuable.  This is true whether you're talking about bushels of wheat or dollars.

Yet, somehow, we've created nearly 4 trillion new dollars, and inflation stays flat.  How could that be?

Basic economics also tells us that when something is in high demand and low supply, prices increase.  It's basic market forces at play.  Yet, we see massive purchases of gold and silver - year after year after year - and prices for both metals drop.  Again, how could that be?

Not surprisingly, these are both tied together.  A weak dollar and strong precious metals put the US government at direct risk.  If the dollar were to ever lose so much of its value when compared to other world currencies, it would risk losing its one and only valuable role:  That of being the instrument of world trade.

The dollar - long since removed from the tangible backing of precious metals - is only valued because it is the currency used when countries buy goods from each other.  When Country X buys oil from Country Y, it's traded in dollars.  Or Country A buys wheat from Country B.  Foreign exchange (FX) as the global reserve currency is the only value possessed by the dollar.

If confidence in the dollar erodes and moves to another medium - say gold or silver - the dollar is no longer needed.  If dollars are worthless, our government would be unable to exert financial and political power throughout the world - we'd just be another France or Brazil or Japan.

So how can a government exert pressure on a commodity with worldwide demand?  Former US Treasury Assistant Secretary Paul Craig Roberts tells us what's going on -
In brief, Roberts, and his associate Dave Kranzler, assert that The Fed has had to resort to this practice in order to protect the value of the US dollar from its effective reduction in value through its Quantitative Easing policy. In order for the Fed to effectively support the reserve status of the U.S. dollar by pushing it higher when it starts to drop, it has also to prevent the price of gold from rising as this is seen globally as something of a bellwether for the dollar. If the gold price rises the dollar is seen as getting weaker and vice versa.
So what's the big deal?  Former Fed Head Bernanke told us gold isn't even money.  Well, the world disagrees -
Roberts and Kranzler avow that intervention in the gold market has been occurring for a long time, but that in the past several years this intervention has become more and more blatant and desperate through the fear that rising concerns about the dollar are causing countries like China and Russia, and others, to accumulate fewer dollars and more gold. The natural progression of this would see the dollar eventually lose its place as the global reserve currency and thus forfeit the huge trade advantages which come with this position.
What is so disgusting about all of this is that the Fed has had to enlist their Big Boy Banker Buddies on Wall Street to affect these engineered crashes on the precious metals markets.  Timing is everything...
So how did the Fed achieve this?  Roberts and Kranzler say that the Fed accomplishes it through its banking allies – said to be JPMorgan and Goldman Sachs and others – implementing a series of gold price flash crashes by short selling huge amounts of gold futures into the COMEX market usually at times when trading is thin. These gold futures short sales trigger not only a sharp gold price decline directly, but also leads to stop-loss orders and margin calls coming in which hammer the price down further. The authors  illustrate the timings of these flash crashes in graphical format showing just how this was achieved during the month of March, and which brought the gold price down by around $80 an ounce.
Uhm, any questions now as to why the Fed bailed out the Too Big To Fail banks?  The Fed needs them to be their bag men.

Read the whole linked article, as well as the original article that goes into much more detail.

Then go buy precious metals.

Well, go buy precious metals if you:

  • Have an emergency cash reserve
  • No significant planned purchases (i.e., real estate)
  • A steady job
  • Other, liquid retirement resources

I tell the customers in my PM store that they should look at precious metals as the very bottom of their retirement resource bucket.  It is the stuff you want to touch last.

Why?  It IS volatile.  Manipulation does that sort of thing.  But, market fundamentals ALWAYS prevail.  The Ponzi Scheme our government is operating will eventually fail.  Maybe next year, maybe next decade.  They have a vested interest in keeping the lie alive, and they're a very creative bunch.

I personally started acquiring metals in 2005, because I believed it would all crash within 5 years.  Well, enter the "creative" Quantitative Easing series, and they've kept the corpse from stinking too badly.

There will be more moves along these lines, but it will eventually tip over.  All logic and math and history tell us this.

Precious metals also won't be paying you interest or a dividend.  BUT it will be preserving your capital.  And when this big ol' financial mess goes, "BOOM!", you'll be sitting pretty.

Buy what you can afford, and buy it over the counter for cash - it's no one's business what assets you own.  Buy a little bit each month, bury it in the backyard or put it in a fire safe for safekeeping,   Just keep it out of the banks.

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Copyright 2014 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.

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