May 9 - Gold $378.40 - Silver $5.56
Weekends are beneficial for someone like me
who follows the markets all day long and writes a daily column.
Two days without the markets churning all over the place allows
some time for reflection and contemplation. It is also a period
to think about what the heck is going on here. My equity is
down a bit over 50% off its highs at the moment with no end
in sight in this 5th month of the continuing gold share debacle.
It is painful and can be disturbing, at least it is when I
force myself to look at the statements. Knowing most Café
members feel like me, with many completely demoralized, I
thought it might be helpful to put all this in perspective.
"We have statutorily gone onto a fiat
money standard and as a consequence of that, it is inevitable
that the authority, which is the producer of the money supply,
will have inordinate power."
-- Alan Greenspan, House Financial Services Committee, February
Which is just what The Gold Cartel and Working
Group On Financial Markets (including The Fed) are doing.
They are exercising their power. While perpetuating the notion
we have free markets in the United States, they are trampling
the little people, or average investor, most of whom are clueless
about what is really going on behind the scenes. Years ago
I stated the shenanigans of these powerful folks who were
rigging the gold price would eventually lead the US into eventual
financial market chaos, even resulting in small riots. We
are not there yet, but signs are emerging that this scenario
could easily become a reality. It is frightening, as that
day appears closer at hand than ever before. The following
is my take on what is happening and why it is important to
stay the course with your gold and silver investments.
Ironically, it all revolves around a supposedly
rinky-dink gold market While it is an insignificant financial
market in gross number terms, it is far more important in
the overall financial market picture than is widely known
and as far as the BIG SHOTS are concerned. Allow me to explain
why I believe this is so:
The bond market began its deep descent in earnest
around March 21:
Oil began its relentless run from $33 to $40
per barrel around March 29:
Gold topped out about March 28:
Silver topped out about March 28 and began its
spectacular collapse days later:
There is something remarkably wrong with this
silver collapse. Silver went up methodically for many months
and then falls more than 35% in less than 4 weeks, without
being allowed to make an attempt at any kind of recovery,
leaving huge gap after huge gap on its way down. Both gold
and platinum have made sharp corrections, but they were only
down around 15%. The savaging of silver is off the charts.
I can’t recall a market EVER correcting like silver
did when the fundamentals barely changed, or actually improved,
making 17-year highs to boot. The silver takedown was nothing
less than a mugging, done with white-collar thug/Mafia style
Compare silver to another bull market, say soybeans
for example, one which has similar very tight fundamentals.
Soybeans endured a steep 12% correction along the way to making
new weekly highs, but notice how many rallies there were while
it corrected. Silver was not allowed to rally at all and function
like the free-trading soybean market, or most any other market
in history for that matter - except when the Comex changed
their rules on Bunker Hunt.
Soybeans closed in new high ground on the weeklies,
which offers little credence to the notion the giant commodity
move of the past two years is over:
So, we have two critical commodities, oil and
soybeans representing the energy and food sectors, closing
at decade-plus highs. Then we have the 30-year bond market
collapsing in obvious response to the growing inflation in
the US. Meanwhile, during the exact same period, gold tanks
and silver is horrifically bludgeoned. This doesn’t
sit right with the historical nature of the way markets have
worked in America, to say the least. Clearly, this tends to
support the findings of the Gold Anti-Trust Action Committee
that some powerful people (as in plural) are interfering in
conspiratorial fashion in the gold and silver markets to suit
their own agendas. In doing so they are egregiously violating
the anti-trust laws of the US.
Which takes us to other aspects and motives
behind this criminal operation::
The United States has depended upon foreign
buyers to take up a significant portion of our debt. Until
recently both the Japanese and Chinese were huge buyers of
this debt. Weeks ago the Japanese announced they would be
pulling back somewhat and have done so since their fiscal
year ended on March 31. The Chinese, although this has most
likely been understood at the highest financial market levels
for some time, have let it be known they are, and will, be
doing the same:
China to diversify foreign exchange reserves
(China Business Weekly)
Updated: 2004-05-08 09:12
China is looking to diversify its foreign exchange
reserves out of US dollars, according to its top foreign exchange
China's chief forex regulator, Guo Shuqing,
said in a recent Financial Times interview the make-up of
the country's US$440-billion forex cash pile was being altered
to include more European and Asian bonds, given concerns over
a weaker US dollar.
The mere thought of China offloading some of
its vast US Treasury holdings is enough to send shivers down
investors' spines, risking a further deterioration in the
already-bloated US current account deficit and more dollar
This has to have The Fed and Working Group on
Financial Markets a bit shook up. For if the Japanese and
Chinese are going to pull back, who is going to take their
place buying up our debt in this increasingly inflationary
I have used the word desperate in the past to
describe The Gold Cartel. One might apply that term to the
Administration as well. Look at what we have had of late:
*Remember the cancellation of the PPI reports
earlier this year, just when it became apparent commodity
prices were soaring. The excuse given was they were going
to change the PPI makeup somehow and couldn’t figure
out how to do it, or ran out of time to do so. What! The United
States Government can’t get out a timely report with
all the resources they have to get any sort of job done? That
Sure it is ludicrous. Compare the cancellation
of the PPI report (a negative for the financial markets) with
what they have done with the employment reports and how they
have spun them. All of a sudden jobs are miraculously going
like gangbusters. It was the talk of the financial market
TV shows this weekend. The March number was even revised up
to 337,000 new jobs. What they soft-pedaled was that a good
number of them were part-time and low paying jobs. This month
the Labor Department shocked most of the economists by announcing
the April job growth to be 288,000. However, the highly regarded
Hoisington Investment Management Company in Austin, Texas,
presents a completely different picture after dissecting this
number: "Incidentally, 270,000 of the April job gains
came from the birth/death model, a statistical extrapolation
rather than a direct increase in the job head count. Previously
the model was called a plug."
So without this model adjustment, the job gain
would have been 18,000 and a disaster politically for President
Bush. No wonder the Fed is leaving its Fed Funds rate at 1%.
The economy is nowhere near as strong as proclaimed by Wall
Meanwhile the last CPI was way above expectations
at .5%, meaning short-term interest rates are going more negative
by the month which, by the way, is normally an extremely gold
The bottom line: we have soaring inflation in
the US, the jobs picture is not improving in the real world
as widely trumpeted, and our biggest debt buyers, the Chinese
and Japanese, are pulling back on their purchases. This is
all hitting the fan at once. It gets worse when we take into
account the geopolitical developments so far this year.
The Iraq War is a complete fiasco with April
bringing us the most deaths in a single month since the war
started. Then, there is the building prisoner abuse scandal,
one which has the Arab world inflamed, to put it mildly. Think
about this. Amnesty International reported on what was going
on 9 months ago in a formal report. The scandal was officially
reported to the Defense Department two months ago. The only
reason the outrageous disgrace has surfaced to any great degree
in our part of the world is because the pictures were published.
Clearly, the Bush Administration and the Pentagon did all
they could to hush the scandal up and were caught doing so.
Put all of that together and you have a recipe
for a soaring gold/silver market, which was the case at the
end of March when all of the above factors were known to The
Gold Cartel, Working Group on Financial Markets, and the Bush
Administration. AND, there was little, if anything, any of
them could do about these developments.
Now, it takes us to one of these entity's worst
fears from a financial/political market viewpoint. If the
gold market were to explode above $430, it could very likely
set off not only the gold derivatives neutron bomb, but one
in the interest rate derivatives markets as well. GATA has
long held that one of the main purposes of rigging the gold
price was to assist The Gold Cartel crowd to control their
interest rates derivatives markets, which is a reason JP Morgan
Chase has something like 25 trillion worth of these derivatives
on their books. Were gold to bolt for $500, there is no telling
what it might affect. Simplistically, a soaring gold price
would have an impact on the financial markets as the investing/pundit
public would cite the rising price as proof of growing US
inflation which, in turn, would negatively influence the bond
market even further. Every time gold shoots up, we hear talk
of inflation in the financial market press. Just the way it
This scenario has to have had The Gold Cartel
and mainstream banking world in a twit. Therefore, a clandestine
massive attack on gold and silver was orchestrated by the
financial powers in the world. It is the one arena which they
could affect, having had almost a decade worth of experience.
Collectively, it is obvious as evidenced by:
*The unauthored outrageously negative FT article
*The German Bundesbank gold sale flap
*Stories about the French selling gold
*Greenspan talking down the metals
*Former Fed Governor and gold hater Wayne Angell stating publicly
gold was under control
* The mysterious downgrade of Goldcorp
This all happened around the same time and was
well coordinated. This latest assault on gold is so much larger
than a simple "conspiracy," we need a more comprehensive
description of what has occurred.
Gold investors, gold companies, poor gold producing
nations have all been taken to the cleaners. It has been a
bloodbath. Except in our world, few care. That is about to
change in the months and years to come. Why? Because what
the "Orwellians" have done to us is going to spread
over into the other financial markets.
The Gold Cartel has corrupted the gold market
beyond belief at this point. In doing so the Goldman Sachs,
Morgan Stanleys and JP Morgan Chases have collectively and
methodically ripped off your average Joe and Jane in America
and around the world. These big New York banks/financial institutions,
because of their collusion and inside information, have conducted
a kind of class warfare against the average investor. They
have stolen from us, hiding behind the sanctions of The Fed
and Exchange Stabilization Fund. Their motive, besides greed,
is to defuse potential disasters in the stock and bond markets
and they will stop at nothing to accomplish their mission.
Well, they have lied and falsified information
so much it is ALL beginning to fall apart anyway. They are
being found out and it is commencing to blow up. Inevitably,
the dam is going to break, the volcano going to blow, and
it will affect all the financial markets. The little guy average
investor won’t know what hit him or her.
Remember Enron. It was blowing up for a year.
Those who said so were ignored, or fired. This corporation
was voted the number one in America year after year by the
likes of Fortune and Forbes magazines. Yet, their employees
and shareholders were blindsided and left with nothing. That
is a fact.
Keep in mind the pornographic scandal in Iraq.
The only reason for the scandal really surfacing and the subsequent
outrage is the pictures were released. The disaster is more
than a year old for gosh sakes.
Americans are now rightfully outraged on both
counts. Too late. The horse is out of the barn. The damage
is irrevocable. The lies or denials in each scandal carries
the day, which is just what is going on in the gold market.
It is time the public be told the truth about the gold price
rigging so they can manage their own financial affairs before
it is too late there also. You think lies is too strong a
term to describe what is going on? Allow me to refer you to
some proof captured by GATA’s Andrew Hepburn and Mike
Bolser, which is summarized by Australia’s Sid Reynolds.
Sid's entire GATA recap can be read at:
GOLD PRICE MANIPULATION - VERSION 9, 22nd OCTOBER,
#11. IMF has directed CB’s not to disclose
how gold is leased/swapped, only total reserves (proof below).
IMF have denied this, "This is not correct:
the IMF in fact recommends that swapped gold be excluded from
reserve assets." Refer http://www.gata.org/bofi.html,
and search for "correct"
However, numerous member countries/entities
have proven the IMF has lied ie
• Philippines: "Beginning January 2000, in compliance
with the requirements of the IMF's reserves …, gold
under the swap arrangement remains to be part of reserves
and a liability is deemed incurred corresponding to the proceeds
of the swap." Refer www.bsp.gov.ph/statistics/sefi/fx-int.htm,
and search for "swaps"
• The Central Banks of Portugal, Finland
& Italy confirmed in writing that swapped gold remains
a reserve asset under pertinent IMF regulations. The staffs
of the central banks of Canada, Ecuador, Finland, Holland,
and Portugal have also confirmed this. Refer www.goldisfreedom.com/IMFgold.htm,
and search for "Finland"
• European Central Bank: "Following
the recommendations set out in the IMF operational guidelines
of … developed in 1999, all reversible gold transactions,
including gold swaps, are recorded as collateralised loans
in balance of payments and international investment position
statistics. This treatment implies that the gold account would
remain unchanged on the balance sheet." http://solutions.synearth.net/2003/02/21
This IMF recommendation should not be underestimated.
For example, on its balance sheet the German Bundesbank lists
"Gold and Gold Receivables" as a one line item.
This approach is in direct conflict with Generally Accepted
Accounting Principles (GAAP), which the central bank is obligated
to follow as per German banking law.
Thus, from their published financial statements
there is no possible way to determine how much gold Germany
holds in its vaults. The refusal of the Bundesbank to provide
a breakdown between physical gold and gold receivables belies
any notion of market transparency.
Clearly deceptive accounting, countenanced by
the IMF has allowed official sector gold to hit the market
without a corresponding drawdown on the balance sheets of
central banks. This has made it impossible for analysts to
ascertain the exact size of official sector gold loans, swaps
and deposits. The unwillingness of central banks to provide
even a minimum level of transparency suggests that total gold
receivables are substantially larger than the accepted industry
figure of approximately 5,000 tonnes.
For several unanswered questions to IMF, refer http://groups.yahoo.com/group/gata/message/903
Just in, more support for GATA's arguments:
Dear friend: 16624.488 ounces of gold from the Central Bank
of Spain are missing from its vaults after 1998. According
with the Spanish Tribunal de Cuentas they are distributed
as follows: 5.955.430 Fort Knox. 6.077.211 Bank of England.
4.591.847 BIS. In my opinion they are leased. This information
was published in Diario el Mundo, Monday 1 of May 2001 page
Francisco Ruiz de Alda
Assuming this email is correct, nowhere is this
missing Spanish gold accounted for in the official central
bank gold statistics.
The establishment, via the IMF, is lying to the world about
how much gold the central banks have left. The Gold Cartel
is surreptitiously bombing the market with leased/swapped
gold to maintain an illusion, to continue their fraud, even
as the physical gold market is on fire. They are doing so
for many of the reasons oft-discussed here. One is to take
away the financial market barometer from the average investor.
"See," they say, "there is no real inflation,
look at the falling gold price. Joe and Jane investor, you
don’t need fear inflation will hurt your stock market
investments." There is another reason just surfacing,
as expressed by two Café members in these emails I
ironically received this morning:
My guess is that as inflation accelerates the Gold Cartel
has gone on the offensive to try and decisively break the
belief that gold and silver are inflation hedges. If there
is to be inflation, the government wants everyone to buy TIPS
and keep all that money in the system. Look, they say, even
if there is inflation, gold is a crummy place to try and protect
your money. Give it to us and we will protect you from those
greedy petrol pirates, blah, blah, blah.
Of course, one day (soon, I hope) the Cartel
will run out of the metal they need to enforce their agenda
and we will get honest markets back. The thing to remember
is that the Bullyon Boys can only get their way for a limited
time and I don't think it is in their power to permanently
sever gold's link to economic reality.
It also seems to me that what we are seeing
now in precious metals is the kind of panic selling that arrives
on waves of margin calls and short sales. If nothing else,
this is how markets that don't have some hidden supporting
force act from time to time. Market action like this is never
allowed to happen in the major averages. The plunge protection
team is ever ready to step in when panic, or even serious
I want to bring something to your attention, and to Mike Bolser's
(whose e-mail I don't know), about the "Campaign"
against gold and silver by the Fed and the banks. Perhaps
you have already thought of it, but as I have not heard it
mentioned in the precious metals circuit, I can only conclude
it has not yet been considered.
While the organized, systematic trashing of
gold and silver is obviously designed to hide inflation, and
to discourage them as potential investments, one might ask,
"Why are they doing this just now?".
With all the hints of future rate increases
so obviously still out on the horizon, why are they trashing
My answer is that more than knocking gold down
to discourage the bond vigilantes from moving out of bonds
into tangibles is involved.
They are preparing the ground for the vigilantes
to move into the vastly increased number of TIPS now being
issued, instead of into gold, silver and the commodities.
That is why I think they are trashing the metals now –
to steer the vigilantes into the TIPS when the inflation signaling
rate increases occur.
Of course, the indexing of the inflation correction
factor will remain under the control of, as your quote from
Orwell implied, the "Ministry of Plenty's" control,
where it can be sufficiently understated to permit the government
to continue to pilfer the wealth of the bond-holders (only
to a somewhat lesser degree).
If you and Mike think there is anything to this,
then it would seem to me that an all-out effort to discredit
TIPS by highlighting the fraud of the inflation factor to
all who will listen is a necessary pre-emption to defend the
gold market, and to steer the bond vigilantes back into tangibles,
and away from the paper the Fed so obviously wishes to keep
them in. A pre-emptive attack on them in retaliation for the
pre-emptive attack on gold and silver.
Where I am going with all of this is four-fold:
*We have to be very careful in the short-term.
The Gold Cartel could perpetrate anything when it comes to
the gold and silver markets. In addition, the financial markets
are so fragile they could implode at any time. One must be
very careful about margined accounts.
*Never in history have there been more reasons
to own gold and silver. Regardless of what happens in the
very short-term, now is the time to be adding to gold/silver
investments on this powerful break. The big picture for gold
and silver prices has never been better. Once this orchestrated
technical break is over with, which could come at any time,
gold and silver will soar again, this time taking out $430
and running quickly for $500. The share prices will go ballistic.
*While winning this gold/silver battle at the
moment, The Gold Cartel is reeling behind the scenes and LOSING
the war. The physical gold market is just too strong, demand
too powerful. This orchestrated propaganda reveals their real
hysteria on the matter.
*It is time to aggressively do what we can to
get the GATA story out there so more and more investors can
prepare for what is coming. We may have a way to accomplish
this objective. For the first time in over five years, GATA
has been mentioned in a major US financial market publication,
the Wall Street Journal’s "Smart Money Magazine."
I have not seen it yet as it is just hitting the newsstands,
however, I know it includes a feature article on gold, mentioning
GATA and what we are all about. The reason this came to be,
according to the author of the story, is he was looking for
gold’s staunchest advocate in the US. Gold fund managers
unanimously told him: "GATA," not The World Gold
Council, "GATA." GATA’s Chris Powell will
be following up on this when he obtains a copy.
This is a big breakthrough for us. We need to
send copies, with accompanying letters, to the financial press
around the world and ask why they are not covering what GATA
has learned over the years. Why do they refuse to even mention
us, or deal with the inordinate amount of evidence we have
amassed concerning the manipulation of the gold price? By
suppressing a known scandal, they are just making it worse
in the end. Just ask the Enron executives, or Defense Secretary
Rumsfeld. Now that "Smart Money Magazine" has brought
this subject out of the financial market closet, others might
not be so shy about dealing with this very important issue.
More to come on this development.
Meanwhile, Keep the Faith and remember:
GATA BE IN IT TO WIN IT!
GOLD ANTI-TRUST ACTION COMMITTEE
To further understand what is going on regarding
the financial market storm which is coming, I strongly recommend
everyone read what the savvy Jim Puplava has to say in his
by Jim Puplava
Storm Watch Update from Jim Puplava
May 7, 2004
Adrian Van Eck’s commentary will be very
Adrian Van Eck's Hotline on Money and the Economy
(1 800 219 1333).
For: Thursday, May 6, 2004
In order to push its program, China had cut
the value of its money in half against the U.S. dollar and
then locked it in tightly to the dollar. They did this ten
years ago. A few years after they carried out this plan, much
of Asia collapsed financially. They had tried to compete with
Chinese prices and had lost so much money doing so that they
went broke. Indonesia in particular saw 30 years of patient
construction of a middle-class wiped out in a few years, and
once affluent people fell into the ranks of the poor. The
Philippines also suffered mightily. Japan fell into a recession
from which it has yet to fully emerge. South Korea also fell
victim. For some reason, America praised China because they
alone did not then cut the value of their money. It was not
recognized that they had done so before everyone else and
had triggered all the other nations’ problems and that
their plague brought on the Russian and Latin America defaults.
American big business, in its greed and ignorance
of the fundamental principles of capitalism, fell in love
with China’s planned economy and assumed that its workers
would put up with slave labor wages and working conditions
for two more generations. So dozens and then hundreds of American
manufacturing plants moved there. The American Purchasing
Managers Association changed its name to the Institute of
Supply Management. They began putting out glowing reports
on American productivity, production, new orders and employment.
Their numbers have grown further and further away not only
from the harsh realties of life in America (nine million unemployed,
worst since the Great Depression of the Thirties) but even
from the Federal Government’s own numbers - which all
too often (as in the case of the alleged GDP growth, the CPI
and recently the number of new jobs created) have begun to
resemble only the vivid imagination of bureaucrats being pressured
to come up with the "correct" numbers.
Through it all I have watched the way China
was absorbing $120 billion in trade surplus and another $50
billion in direct corporate and Wall Street investment per
year. For an economy that totals only one and a quarter trillion
dollars a year (about one-tenth the size of ours) that was
a way-out-of-line sum of money. That money largely went into
China’s four big government-owned banks and then was
distributed via a constant series of make-believe "loans"
(really subsidies) to Chinese corporations, especially the
state’s BIG 35. The result was that the banks were increasingly
holding worthless loans equal to two-thirds of their deposits,
a number no civilized nation can tolerate. Once, twice, three
times China announced "reforms" that consisted of
gigantic government cash infusions into their banks, to help
them get solvent. But bad loans have been building faster
than the bailouts. They were getting cash transfusions while
bleeding out 1000 holes.
Then came the climax. China has few raw materials.
To build new factories for Americans and themselves, they
purchased iron ore, copper, aluminum cake and a host of other
commodities - plus advanced machinery and more recently food
to feed the millions of farmers who had flocked to cities
and had given up growing foods. The volume of imports grew
so high that Japan, Asia, Europe and Latin America were living
off China, taking from China the money flowing in from America.
I knew it could not last and in a recent Forecast I said so.
I predicted that one day soon the bankers would call their
biggest borrowers into their office and say: "The party
cannot afford these huge subsidies we call loans. You will
have to raise your prices to cover at least most of your costs."
That is exactly what happened a week ago. Wall Street is desperate
to hide the fact that its investments are at risk and that
it peddled worthless junk to pension funds and mutual funds.
They are using a pile of lies and are claiming all is well
I say they are lying. And the proof I have waited
for appeared in Barron’s this past weekend. China has
been buying U.S. Treasuries to fund a portion of our debt.
That alone kept the Treasury from blowing the whistle on them
and their big American CEO friends, who have shipped three
million jobs to China and falsely called it productivity increases.
(The ISM does not ask members where new orders are being produced.)
But guess what: American banks have stripped their loan portfolio
dry, cutting back every category except purchase of Government
securities, which rose a shocking $15.7 billion. Over at the
Fed, foreign holdings of U.S. Treasuries (which had been rising
by $6 billion a week for a year actually fell by $1.86 billion).
And Fed credit, which had only increased by $23 billion in
the previous 51 weeks, jumped an astounding $5.7 billion in
one week. In addition, the Fed bought outright $753 million
worth of Treasury securities.
We had been warned over a year ago they could
and would do this when it was necessary. Greenspan had flown
to Asia and told them he had a bottomless checkbook and a
bushel basket and would buy any T-debt they wanted to sell.
And Governor Ben Bernanke - a genuine scholar of both the
Depression and the decade-long period ending in 1951 when
the Fed had printed money and brought as much Treasury Debt
as needed to keep both long and short Treasury rates very
low, had pledged to send helicopters aloft all over America
and dump cash out to the public, the way ranchers drop bales
of hay to cattle caught in the fields after a snow storm.
SO BRACE YOURSELF. If this is the beginning
of the move that I think it is, America will experience a
new round of inflation. It will be denied on all sides, as
it is being denied now. (I know of no one who believes the
government’s inflation numbers. If the real inflation
data were subtracted from nominal GDP, it would be seen that
both growth and productivity are well below what they claim
Nevertheless, while denying there is inflation,
the government and the ISM are boasting that prices paid and
received by businesses are climbing at the steepest rate in
years, and they say this new pricing power has come just in
time to save many businesses that were starved for funds before.
So forget whether the Fed dropped the word "patient"
from its new announcement. And don’t worry about a quarter-point
"tightening" at the end of June or the middle of
August. You are seeing the first bales of money dropping from
Bernanke’s helicopters. Before they are done, true inflation
will be up to 8%, although the government will claim it is
either 5% or 6%. And everyone in the financial media, especially
the Wall Street Journal and Investor’s Business Daily,
will brag about how modest and benign inflation is.
During this new period of DENIAL, Gold
is acting as if there is no inflation and will be no inflation.
Well, along with my son Jonathan Van Eck I believe they will
be proven wrong about inflation and the value of Gold again
today, as they were in late 1979. But this time the surprise
will be to the upside.
Copyright (c) Le Metropole
Le Metropole Cafe is a Membership site. Visit and experience
a 2-week Free Trial!