-- Posted Thursday, 14 August 2008 | Digg This Article
| Source: GoldSeek.com
If poor financial performance stemming from ownership of junior resource companies is getting you down – read on for some valuable insight as to remedial, insulating actions you can take now to help protect and preserve your net worth.
Understanding How and Why Metals Markets are Manipulated
The basics are these:
· A rapidly rising price of gold has historically served as the “proverbial canary in the coal mine” – alerting investors that money is being created in excess.
· This, in a nutshell, explains why gold is viewed and so widely spoken of as the “ainti-dollar”. A rapidly rising price of gold explicitly means that the purchasing power of fiat money [aka the dollar] is shrinking. As people witness, first hand, the erosion of their purchasing power – they lose confidence in the currency being debased and, they naturally seek alternatives to preserve their wealth.
· Because fiat money – backed by nothing – is, in effect, a huge exercise in blind faith - monetary authorities do go to extreme lengths to prevent the erosion or collapse of the collective faith in their brand of fraudulent currency.
· Key to their efforts – are making the historical sound alternatives look bad or worse.
· This is accomplished by capping or even pummeling the price [primarily through the use of futures (COMEX and LBMA) through surrogate conduits utilizing their puppets in the banking community (read, Goldman Sachs and J.P. Morgan)] when metals prices start to rise in earnest. This is evidenced by the staggering amounts of gold derivatives [approx. 100 billion in notional at J.P. Morgan alone] on the books of players such as J.P. Morgan [from the Office of the Comptroller of the Currency Quarterly Derivatives Report]:
The Achilles Heel
What is vitally important for everyone to realize is that the price riggers DO HAVE AN ACHILLES HEEL. While it is not readily or implicitly apparent in the table of gold derivatives above – what folks need to understand is this: For futures markets to remain viable as price discovery mechanisms, there must be the belief [or threat if you prefer] that a maturing futures contract can, in fact, be settled with the underlying physical commodity.
This implies the following: If derivatives are, in fact, being used to suppress the price of gold then ‘some amount’ or percentage of the notional being traded - of the underlying physical commodity necessarily is changing hands.
Now, consider that we factually know that physical supply of gold [mine supply + scrap] has been in an annual deficit position, relative to physical demand [jewelry and investment] of 1,000 to 1,500 tonnes per year for as minimum of the past 10 – 15 years.
There is only one source where this undisputable deficit can be [or has been] satisfied: VAULTED SOVEREIGN STOCKS OF PHYSICAL GOLD – period!
Now, folks need to understand and appreciate that Central Banks around the world have for decades claimed to posses around 30,000 tonnes of vaulted sovereign stocks of gold bullion [including 8,000 or so tonnes allegedly held by the U.S. at Fort Knox and West Point]. Despite the facts regarding annual supply/demand deficits presented above, there has been NO ADMISSIONS to changes in the amounts of physical bullion controlled by Central Banks? They still claim to have, more or less, 30,000 or so tonnes of vaulted sovereign gold.
What we do irrefutably know about Central Banks and their accounting treatment of gold stocks would, no doubt, bring a tear to Enron’s jailed former chief financial officer – Andy Fastow’s eyes. You see, we know that Central Banks “swap” and “lease” gold. When gold bullion is swapped or leased – it physically leaves the vault and is sold into the open market. The now missing physical gold is replaced with a “paper I.O.U.” and the Central Bank continues to report [can you say double-counting?] on its books that the physical bullion is STILL THERE.
Anywhere else in the world, this would be called FRAUD.
What we can take away from all of this is the following:
· Using back of the envelope math: 1,500 tonnes x 15 years = 22,500 tonnes. Then: 30,000 [alleged vaulted] – 22,500 [accumulated deficits] = 7,500 remaining vaulted tonnes.
· The 7,500 remaining vaulted tonnes may in fact be conservative.
When this relative pittance of physical gold bullion is either gone or withdrawn from possible sale – the only possible means for price manipulation will be naked selling of COMEX futures. This leg of the ongoing price manipulation would logically and likely be savage in nature – perhaps trying to inject such extreme volatility to the metals complex that folks are literally too scared to participate.
This continued fraud WILL CAGEGORICALLY HAVE A VERY SHORT SHELF LIFE – because there will be no viable physical settlement capability/mechanism to validate the futures exchange as reliable or honest price discovery. When it ends, the price of gold and precious metals will advance geometrically.
If this assessment is correct, then one would logically be led to the conclusion that shortages of physical metal should be appearing. Low and behold, this is EXACTLY WHAT IS HAPPENING:
Silver & Gold Shortage Announcement
Due to the recent price fluctuations, APMEX is experiencing a temporary shortage on certain popular products.
We are actively scouring our sources to locate additional inventory to satisfy the needs of our valued customers
