Observers of Gold in the past few weeks may have learned some valuable “Object Lessons.” These Object Lessons arise from simultaneously observing Gold, Geopolitics and Cartel Interventions.
First, the effects of major geopolitical events on the markets (and in light of Interventions) are difficult and at times impossible to predict. Recall that about a month ago, in mid-March, tensions arising from the Iran Dispute were gradually increasing. And then with the capture of the British military personnel, the tension spiked up.
And Gold? In a truly free market, Gold, as the quintessential Safe Haven would have spiked up too upon the taking of hostages. But in fact, the Gold price moved very little upon news of the hostage taking. What conclusion can be drawn from this other than that The Cartel was capping the price? [Long-time Deepcaster readers know that there is substantial evidence for the ongoing manipulation of Gold prices - - see www.gata.org for example, the website of The Gold AntiTrust Action Committee. Also see Deepcaster’s October, 2006 Letter regarding market intervention and data manipulation entitled “The Mega Manipulations - - Juiced Numbers IV: How the Government Gets the Statistics It Wants, Markets Get Manipulated, Citizens Get Deluded, and Worse” at www.deepcaster.com.]
And Gold shares reflected a similar fate. That is, in spite of the heightened tension created by Iran’s taking of hostages in the Gulf, the price of Newmont shares, for example, actually declined somewhat.
[Consider, indeed, just a few weeks ago we asked why Oppenheimer & Co. and J.P. Morgan Chase (a primary dealer for the Federal Reserve) entered into a Precious Metals shares lending agreement if it were not for the purpose of allowing control of and “Takedown Capacity” for the Precious Metals shares. No credible explanation for that “lending agreement” has been advanced other than that one.]
In sum, under normal market conditions and upon the taking of hostages, the Price of Gold, The Safe Haven Asset, would have increased dramatically as would the shares of Gold Producers like Newmont.
But we live in an Interventional Universe. Thus it is not surprising that the evidence indicates that The Cartel was involved not only with preventing the price of bullion from increasing during increased Middle East tensions but also with suppressing the price of Gold Producer shares.
Second, consider also that only about two weeks after the hostages were taken, they were suddenly released. Geopolitical Tensions diminished. Yet Gold spiked up several dollars. How does one explain this?
Of course, if fundamentals and technicals for Gold were the only consideration, Gold would be hundreds of dollars an ounce higher than it is today. But the fact that it is not hundreds of dollars higher indicates that its price movements over the past weeks were likely determined by Cartel Intervention.
So what message could The Cartel Interventionists be sending us via the aforementioned “managed” Gold price moves? It appears that The Desired (desired by The Cartel that is) Inferences from the aforementioned behavior of the Gold price are pretty clear. The Cartel apparently wants Investors to infer:
- Gold is not a “safe haven” asset, to be turned to in times of heightened tension (because it did not rise when hostages were taken).
- In times of diminished tension Gold cannot be relied on to diminish in price (because it is not a barometer of geopolitical tension).
And what conclusion could The Cartel desire us to draw from these inferences? That is, since Gold is not reliably either a safe haven or a barometer of tension, what is?
Well, The Cartel likely wants investors to believe that their Treasury Securities fill these functions.
We are encouraged, that is, to favor Treasury Paper over Gold.
Yet, given the supply/demand fundamentals for Gold such an ostensible market “preference” for paper over Gold can not be forcibly maintained indefinitely.
But for now, in our International Universe, it can be, and is.
So how do investors, speculators, and especially Tangible Assets Partisans cope with the seemingly Omnipresent Specter of Cartel Intervention?
Deepcaster’s April, 2007 Letter, “Golden Tactics for Profiting from Cartel Intervention” is designed to provide an antidote. It contains “Guidelines Designed for Protection and Profit” as well as the names of several precious metals companies it believes should be relatively resistant to Cartel Precious Metals Price Takedowns.
April 12, 2007