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
-- Alan Greenspan, House Financial Services Committee,
February 11, 2004
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
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 precision.
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
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
(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 manager.
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 weakness.
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 environment?
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 is ludicrous.
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 Street.
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 friendly development.
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 is.
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
*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
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
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
GOLD PRICE MANIPULATION - VERSION 9,
22nd OCTOBER, 2003
#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
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
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
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 49.
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
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 gold now?
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
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
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
*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
*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 latest:
by Jim Puplava
Storm Watch Update from Jim Puplava
May 7, 2004
Adrian Van Eck’s commentary will
be very helpful also:
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 in China.
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
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 today.)
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
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.
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