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Mainstream Precious Metals Analysis: Out of Touch, Out of Context and Off the Mark


 -- Published: Friday, 11 April 2014 | Print  | Disqus 

By Dr. Jeffrey Lewis

On average, every quarter we are exposed to yet another price guidance by a mainstream analyst. Such analysts usually reside within a large investment bank. These calls become focal points for a sector and often seem to carry with them some form of self fulfilling prophecy.

What makes them qualified?

Many come directly from the big financial firms and investment houses. They are respected because of their size and brand, which gives them credibility based solely on relative visibility.

Goldman-Sachs was too big too fail; it was rescued and given banking status.

"When the world's most intelligent FDIC-backed hedge fund, pardon, bank says the current market structure is no longer necessary to Goldman, people notice, and promptly imitate".

They play their own book against their clients’ book.

They are a liquidity conduit. They are wrong in their precious metals price predictions both ways - up or down in prediction and, therefore, directional influence.

Goldman Sachs’ recent bearish view of gold is a case in point among a series of predictions.

The most recent prediction lower was made on the grounds that Treasury Inflation Protected Securities (TIPS) would put pressure on gold as an alternative. Watching the TIPS would create insight on future price direction.

TIPS Yield Rates will Weigh Heavily on Gold Prices

A Treasury Inflation Protected Security is a bond which increases its principal upwards by the same amount as the rate of inflation (as reported by the Consumer Price Index). The average annual return on TIPS since its inception 10 years ago has been about 5.4%.

The point is this: The calculation method for the CPI is flawed and will always understate the true rate of inflation. Adding such a CPI figure to the anemic nominal TIPS yield will never allow investors to get ahead in real terms. Unlike TIPS, gold offers no guaranteed rate of return, but a rational investor would rather have the millennia of history validating gold as an excellent hedge against inflation rather than a return benchmarked versus the Consumer Price Index.

We all know markets are rigged - LIBOR, energy, FOREX, aluminum warehousing, plunge protection and open market operations by the Fed.

We know that mega bankers are corrupt and far above the law. We know the ratio of metals traded to physical production is way off the scale and even the COMEX reports have disclaimers.

Many of you have read the Central bank memos from GATA regarding the legally sanctioned gold price suppression scheme. And you are by now familiar with Ted Butler's work at uncovering the trading mechanisms and positioning employed.

It is common knowledge that shorting at the London open and going long on metals at the close of the Western market is a profitable trade. Yet, you still refuse to entertain the notion of market rigging in the metals whether up or down by the powers that be or their agents.

Unfortunately, many remain willfully blind to intervention in the metals with the intention of controlling price. It is as if, literally, their job tomorrow depends on not seeing this today. That may not be a stretch.

The fact is that the financial elite and economists closest to the center of that apocalypse cannot address price management.

Essentially, the credibility of these calls all comes down to a simple precedent.

They are discussing derivative prices which may influence physical value - but it's an abstraction that can disintegrate at any moment.

It is quite astounding when one realizes the depths of madness in which we live by taking a quick look at how the most respected economist and monetary leaders characterize financial conditions. It is a testimony to both the youth and quasi scientific nature of economics. It should also be a warning that things for the masses are not much like anything close to what they appear.



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 -- Published: Friday, 11 April 2014 | E-Mail  | Print  | Source: GoldSeek.com

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