At this point, there's really no reason to discuss the "how" and the mechanics of the deliberate, manipulative Globex smash of Sunday, July 19. However, it might be worth considering the aftermath as we look for reasons "why".
As we consider "why", the first and foremost reason was price and chart manipulation. Gold had bottomed at $1130 on November 7, 2014 and had, over the next eight months, found stout support near that level. However, on Friday, July 17, gold closed just above that important level at $1132. See below:
The smash that occurred on Sunday evening, July 19, was designed to take out this important support level and trigger all of the sell-stops that were placed below there. This was accomplished through a massive contract dump of $2.7B in paper gold that not only wiped out the entire global bid stack, it actually cause the entire Globex gold market to seize up and halt for 20 seconds..twice.
Though further selling akin to the event of April 12-15, 2013 failed to materialize, the damage was done and price has yet to recover.
Now to the question of "why".
Since the CoT reports tell us that The Large Spec short position in gold was already near record levels before the raid, why was the raid allowed to happen? Keep in mind that on the other side of those short trades would be "commercial" or Cartel Bank longs. These entities rarely lose as it is nearly always that The Specs are the ones taken to the fleecing shed. In this case, though, The Specs won. Again, why was this allowed? Could the answer be found in the GLD "inventory" numbers?
On April 11, 2013...the day before the massive two-day and $200 price raid that was effectively designed to take out 19 months of price support at $1525...the total GLD "inventory" stood at 1,181.42 metric tonnes. Immediately after the raid began, GLD "inventory" began to fall and by the end of April it was already down over 100 mts at 1078.54. By the June 28 price lows of $1180, "inventory" was down to just 969.50 mts and though price then rallied over $200 through August, GLD was still drained and stood at 921.30 mts on 8/30/13. By the end of 2013, with price back down to near $1200, the total GLD "inventory" had sunk to just 798.22 mts, a drop of a massive 383 metric tonnes from the pre-raid levels. 383 metric tonnes!!
How much gold is 383 metric tonnes? That's about 12.3MM troy ounces or about 31,000 of these:
Or, stacked 192 to a pallet, about 162 of these:
While price stabilized in 2014 and finished nearly unchanged on the year, global physical demand remained high. The clear effective result: More gold needed to come out of the GLD "inventory" and over the course of 2014, the GLD "inventory" fell from 798.22 metric tonnes to 710.81. This was another drop of over 10% and, expressed as London Good Delivery Bars, amounts to another 7,000 of these:
OK, we're almost there. Again, WHY was the Sunday evening July 19 raid allowed to occur? Could the answer be found on the chart below?
Again, as of Friday July 17, price was still above support at $1130 and only down about 5% year-to-date. However, "inventory" had been stubborn to leave the GLD. As noted above, the "fund" began the year at 710.81 mts yet, on July 16, it still showed and "inventory" of 707.88 mts...down not even 3 mts year-to-date...while even the World Gold Council had to admit that global demand remains high: http://www.gold.org/news-and-events/press-releases/global-gold-market-remains-steady-q1-2015-demonstrating-unique
And, in the time since the raid, it appears that The Bullion Banks have once again miscalculated the effects of the raid on physical demand: http://srsroccoreport.com/fear-spreading-in-the-global-financial-system-pushes-gold-silver-eagle-sales-to-new-highs/fear-spreading-in-the-global-financial-system-pushes-gold-silver-eagle-sales-to-new-highs/
So, I believe we have found the answer as to "why". Why was the raid allowed even though The Banks and other "Commercials" were forced to book some paper losses as a result? Because the GLD tree needed to be shaken yet again. As a readily-accessible source of instantly-available gold, The Authorized Participant Bullion Banks are once again redeeming their 100,000 share lots for physical gold from the GLD "inventory". That this gold is then utilized to settle physical demand from around the globe is hardly arguable, given recent history.
To sum up, since the massive, illegal amd manipulative raid of Sunday evening July 19, the GLD has shed 32.18 metric tonnes of gold from its "inventory". This is about 1,131,000 troy ounces or 2,800 London Good Delivery Bars. To be more accurate, though, perhaps we should express the plundering in different terms. Since this gold is now gone for good and not returning (http://www.tfmetalsreport.com/blog/3924/gonefor-good), a better way to describe the size and scope of the withdrawals would be this...about 35,200 kilograms.
TF
