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Avi Gilburt’s Response To GATA

 -- Published: Thursday, 17 December 2015 | Print  | Disqus 

By Avi Gilburt

This past week, Chris Powell, from GATA, took issue with my presenting Bill Murphy’s admission that none of the “fundamentals” in the gold market have meant anything to the price of gold.  But, it is quite clear that he did not understand my point.  So, please allow me to clarify my point.

Let’s start with Mr. Powell’s presentation of GATA’s perspective:

“GATA's work explains why fundamentals of supply and demand have not been manifesting themselves in the gold market -- indeed, why neither fundamental nor technical analysis of the gold market is much use.”

Mr. Powell does not even realize that the premise upon which GATA “works” is completely erroneous upon its face, and ultimately useless to investors.  You see, Mr. Powell clearly states that the premise upon which GATA works is that “fundamentals of supply and demand” are what is supposed to control the metals market. 

But, even Mr. Murphy noted this to be an erroneous premise quite clearly:  “[n]o amount of quantitative easing anywhere in the world has done the price of gold any good. Neither have near-zero interest rates. Nor has enormous physical demand from India and China. Nor the staggering debt in the United States. Nor a race to the bottom in many currencies.” 

In other words, by their own admission, the fundamentals of supply and demand are not operative in this market. Moreover, the underlying premise that fundamentals control the gold market is wrong, ab initio. Thus, searching for a reason as to why fundamentals do not control the market – such as manipulation – will serve no one in being able to identify how the gold market is supposed to work.  Let’s take this perspective apart step by step.

It is quite clear that fundamentals have not controlled the gold market, and GATA has clearly ceded this point.  But, they claim that the market is being manipulated, and that is why the fundamentals are unable to control.  Moreover, if the market was free of manipulation, then such fundamentals would control the market, and the market would rise.  Therefore, based upon GATA’s logic, there is no manipulation when the market is rising – since that is the direction in which their supposed fundamentals point – and manipulation is only an issue when the price of gold is declining. 

To maintain such a perspective, one has to assume that the metals market is the only market in the world that is only supposed to move in one direction (up), and when it is not moving in that direction, then it is because of manipulation.  Is there anyone with any real experience in any financial market that can accept such a premise as realistic?  I think not.

In summary, their perspective is that fundamentals suggest gold should rise, and when gold is not rising, then the reason must be “manipulation.”  Again, this premise simply lacks any real perspective of how financial markets work.  Otherwise, they would have to take the position that gold is being manipulated both to the upside and downside, as there is no market in the world that does not see periods of progression and regression.  Yet, that does not seem to be a position they support, as this perspective was not being presented when gold was moving within its parabolic phase through the $1,900 level.  Should we not maintain some amount of intellectual honesty and consistency about a market premise, which should be applicable at all times, or is it just when the market moves against you that such premise is operative?

You see, what Mr. Powell fails to understand is that, ultimately, fundamentals do not control this market, whether there is manipulation or not.  Rather, investor sentiment is the main controlling factor which moves metals both up and down at all times, and not just some of the time.  And, unless one understands how to track investor sentiment, then one would have no way of being able to determine how gold and silver really move. 

In fact, if Mr. Powell understood how to track investor sentiment, then he would likely have expected the decline within which we now find ourselves, and would not have to search out “proof of manipulation” to support a standard market correction.  Again, this means that the premise of GATA’s “work” is erroneous, on its face, and any research in furtherance of its “work” is useless.  They are simply looking in the wrong place, assuming their perspective is to help investors, rather than seek out excuses as to why the market moved in a direction in which they did not expect.

Next, Mr. Powell claims that “neither fundamental nor technical analysis of the gold market is much use.” While I have addressed why fundamental analysis is of no use, we seem to agree on that point. 

But, I am not sure why he thinks that technical analysis is of no use?  Our technical analysis - which is based upon a mathematical model used to track investor sentiment - called the top in the gold price within $6 of the actual high struck in 2011, and did so in August of 2011, a month before the top was struck. 

And, even while gold was going parabolic (clearly before it even topped) I noted that “the target for such a pullback will probably be a minimum low of $1,400, it could fall as low as $1000, or even as low as $700. It will depend upon how the decline takes form. But those are very viable targets for gold on the downside.” 

So, it sounds to me like our technical analysis was quite spot on.  Not only did we call the top within $6 of the top actually struck, but we even provided the downside targets BEFORE we topped. 

And, remember, during the parabolic phase in the summer of 2011, you could not find anyone who thought gold was going to top, as everyone maintained the expectation that we were surely heading over $2,000. And, for those that remember that summer, anyone calling for a decline to $1,000 gold was akin to someone claiming that the Martians were going to land on the earth.  It was just not within the realm of possibilities of almost all investor perspectives.  So, again, I would say our technical analysis has fared quite well in the metals market.  It just seems that Mr. Powell does not understand our analysis methodology.

Next, GATA proudly points to all their “proof” of manipulation, and claims this is why the gold market has fallen by almost 50% and why the silver market has fallen 75%.  Now, while I may concede that there may be times where certain participants in this market may exert pressure upon the market, both to the upside and downside, none of this “proof” can support silver’s 75% correction.  While they may be able to justify individual price moves of 1% (or even dare I say as much as 2%), their claim of a 75% downside price “manipulation” is akin to claiming that a paper cut caused a person to bleed to death.

Furthermore, as noted above, we were able to identify the top and downside targets in the metals based upon our analysis methodology.  But, is there any methodology which would be able to know where the market will go based upon manipulation?  In fact, those that claim the market is manipulated neither prepared you for the market top in 2011, nor have they been able to tell you where the market was going.  So, due to our accurate topping and correction forecasts, one would have to either accept the fact that we are part of the manipulation cartel, or there is something else that is really controlling the market, which is forecastable, if one knows where to look.  Which do you think is the more plausible conclusion? 

Lastly, Mr. Powell claims that “[n]o analysis of the gold market is worth anything if it fails to address the following questions, which GATA encourages Gilburt and all gold market analysts to address.” 

Well, I clearly beg to differ.  Isn’t the goal of market analysis to accurately discern market direction and price targets?  Is Mr. Powell claiming that any analysis that can discern market direction and accurate price targets is still worthless simply because it does not address his questions regarding the involvement of central banks in manipulating the gold market?   ?   What is more important – answering his questions or accurately discerning direction and targets for the metals?  Is GATA so myopic that they feel their questions are more important than price?  While you ponder those important questions, please allow me to continue.

I would say that our analysis, which does not consider any of Mr. Powell’s questions as important, or even relevant, has been worth millions to our members, who have profited quite handsomely during this market correction.  Moreover, our analysis has assisted our members in generating significant price improvement within their metals investment portfolios, which should be the ultimate goal of all investors.

In fact, I suggested to my members to exit their long positions as we moved through the $1,900 region in gold, I have identified many short trade set ups on the way down, and have only recently suggested entering the long side again for long term investors.  You see, when one really understands how the gold market works, one does not have to waste time on irrelevant “questions,“  and can navigate the metals market quite well without “addressing the questions” posed by Mr. Powell. 

I guess the real question to you, Mr. Powell, as one who clearly understands all the answers to your own questions, is how much have your answers (and manipulation claims) helped you in determining the direction and accurate targets for this market over the last 4 years?  While I think we all know the answer to this question, one has to now ask which perspective is more helpful to investors?  That is the truly relevant question investors should be asking.  Any other questions or proofs are what are truly “worthless” to investor’s goals, as you put it.


Avi Gilburt is a widely followed Elliott Wave technical analyst and author of (, a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

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