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Bankers, Precious Metals, And MF Global
Gold Nugget
Did bankers use the MF Global (MFGLQ.PK) bankruptcy to suppress gold and silver prices and create the panicked appearance of collapsing precious metals to give themselves additional precious time to delay the crash of the euro and the U.S. dollar? As crazy as this sounds, a closer investigation of some key data seems to imply this possibility. Though bankers claim that they created futures markets to provide a mechanism for commodity producers to hedge against volatile market prices, I have never bought the Kool-Aid the bankers were selling in this explanation for the rationale behind their creation of futures markets.
Given that today, futures and spot prices for gold and silver in the short-term are entirely set by banker manipulation of the supply and demand for paper derivatives that often have no backing of any physical metal, I believe that bankers created futures markets for the explicit intent of allowing themselves to manipulate the prices of commodities and to enrich themselves, and themselves only, through the process of alternately and artificially inflating and deflating prices as would not be allowed in any type of free market. In other words, bankers invented futures markets to allow themselves to siphon off and steal money from other parties that wanted to invest in commodities with a mechanism, risk-free to them, that required deception and zero honest work and zero integrity.
The futures markets in commodities is such a deceptive market that it is hard to know even where to begin to unravel its many mechanisms of deceit in all their glory. Futures contracts traded on the world’s largest commodity markets such as the COMEX in New York and the LBM in London allow bankers to commit reverse alchemy, turning real physical gold and real physical silver into nothing but false paper contracts and air.
Secondly, through futures contracts traded in New York and London, bankers routinely defy the economic principles of supply and demand, and set short-term prices for gold and silver that have zero to do with the supply and demand dynamics of the physical gold and physical silver market. In the world of physics, such an illogical, comparable feat of deception would be the indefinite suspension of the law of gravity. Bankers invented paper-derivative gold and silver markets to allow themselves to defy and suspend every sound economic principle that exists.
This is important to understand because not only does understanding this concept make the bulk of what you learn in business school a lie and entirely useless, but also because bullion banks, such as Deutsche Bank (DB), Citigroup (C), JPMorgan Chase (JPM), Goldman Sachs (GS), et al, that serve as the puppet conduits for more powerful families that control Central Banks, routinely used to lease physical gold into the open market as their primary mechanism to suppress the price of gold and silver.
However, as their mechanism of fractional reserve banking began to threaten the viability and utility of the most widely used fiat currencies in the world, the USD and the Euro, bankers understood that they needed to utilize and/or create another mechanism to suppress gold and silver prices that could replace selling physical PMs into the open market as they no longer wished to give up a solid asset with no third party counter-risk for what they knew they were turning into essentially worthless pieces of paper.
Thus bankers increasingly turned to the paper futures markets to manipulate and control the price of gold and silver and also served up additional bogus derivative products to the public like the GLD and SLV ETFs. Bankers knew that there was no way they could possibly control the price of gold and silver if the supply and demand determinants of physical gold and physical silver had anything to do with the price, so they conspired to fool the world into believing that the fake paper price they set was set by the supply and demand of the physical markets.
Collapsing of Gold/Silver Futures Markets Directly Related to MF Global Collapse?
And here’s where MF Global enters the banking cartel gold and silver price suppression scheme. Today, short-term futures and spot prices of gold and silver have almost nothing to do with the physical supply and demand dynamics of gold and silver, as odd as that may sound. Bankers created the futures markets and paper derivatives in gold and silver to kill free markets and for the express purpose of suppressing gold and silver prices.
Today we have no idea what the free market price of gold and silver should be or could be, besides the fact that both would be multiples higher than their current price, because of the fake paper market in gold and silver that the bankers created.
As well, bankers ensured that they armed a legion of worker bees in commercial investment firms all over the world that would represent these paper derivatives backed by very little physical gold and silver to their clients as the equivalent of investing in 99.999% pure physical gold and silver. In doing so, the worker bees thereby lured people all over the world into what will turn out to be the fatal mistake of not buying millions of troy ounces of physical gold and silver and instead buying their offering of fool’s gold and fool’s silver.
When we receive a massive default of gold and silver futures contracts that stand for delivery on the COMEX or LBM, or if the SLV and GLD default, then, and only then, will the public start to see true price discovery of physical gold and physical silver in action. However, for clients of MF Global, unfortunately, they have already experienced the mistake of buying fool’s gold and fool’s silver from the bankers and have received air in exchange for gold and silver futures contracts they purchased that stood for delivery.
Bankers invented fake paper gold and silver contracts, because they knew that if they could not fulfill contractual obligations to deliver physical gold and physical silver because the contracts were a binding lie to begin with), that they could always renege on these contractual obligations and give the people the nothingness they truly owned in return. And thus, we have the story of MF Global.
Ratings agencies downgraded MF Global on Oct 25 and MF Global declared bankruptcy on Oct 31. If one scours the data that the Chicago Mercantile Exchange (CME) releases via its aggregated Commitment of Trader reports during this time period, one may not notice any data that immediately stands. However, investigation of the disaggregated reports reveals far more interesting patterns that almost undoubtedly can be traced back to the collapse of MF Global.
In a period just preceding the MF Global collapse, from late August to mid October, the open interest (OI) in longs in gold and silver futures within the Managed Money category collapsed by 33.75% in gold (202,430 to 136,103) and 44.74% in silver (29,849 to 16,494). During this exact same time period, shorts in the gold and silver futures in the Managed Money category increased by 19.3% and 83.82% respectively (see the chart below).
Within the Managed Money category, between Sept 13th and 27th, in just a two-week period, the drop in OI in the longs in gold and silver futures was even more pronounced, with a 25.41% plunge and 34.3% plunge in silver. I imagine if someone could trace the connection of this plunge in OI in the Managed Money category in the gold and silver futures markets, one would discover that a good deal of the plunge was somehow directly tied to the impending MF Global bankruptcy and its freezing and/or liquidation of gold and silver futures accounts in its possession.
After Phase I of the collapse in OI in the gold and silver futures markets, Phase II followed. When the story about MF Global’s legalized client theft hit the presses, an enormous public distrust of the entire futures markets started to build. If clients lost millions of dollars in gold and silver futures accounts due to forced liquidation or freezing of contracts that they were holding for delivery, anyone that had considered using the futures markets to take delivery of real gold and real silver following the MF Global debacle obviously reconsidered their options.
Thus, due to the massive fraud of the futures markets that was revealed by the MF Global collapse, another huge drop in the OI of gold and silver longs in the Managed Money category occurred during Phase II (as labeled in the above chart) that respectively amounted to an additional respective 11.79% and 7.48% plunge. In essence, it appears that the MF Global collapse served up the exact same price suppression effect as a CME issued initial or maintenance margin hike in gold and silver futures, which forces a tidal wave of unwanted and involuntary liquidation of gold and silver longs that consequently violate technical support lines and trigger technical sells.
Of course, we also have to factor in the temporary OI-increasing effect of the risk-on CME event when they lowered initial margins to a 1:1 ratio with maintenance margins at the onset of November. Still, given the figures presented in the chart above, it seems that bankers used the MF Global collapse to force liquidation of gold and silver longs in the futures market quite rapidly and drastically. Why is this important? This is important because typically strong hands ride out any temporary banker manipulations of gold and silver prices downward.
In this case, strong hands, if they existed at MF Global, were not given this opportunity and were forced to liquidate or had their accounts frozen whether or not they desired such an outcome. Furthermore, if primarily strong hands were forced out of the futures market, this would leave the majority of volume in the gold and silver futures markets primarily in the hands of the criminal banking cartel.
We’ve seen repeatedly, this past year in the US SP 500 index, when low trading volume primarily controlled by the banking cartel has translated into curious and inexplicable market bounces of 2% in a single day. In other words, low trading volume allows bankers excessive and easy manipulation over markets. If this was indeed the scenario bankers deliberately created with the MF Global collapse, then the MF Global collapse and simultaneous collapse of open interest in gold and silvers futures certainly would have paved the way for the banking cartel to easily manipulate gold and silver prices.
There was also further circumstantial evidence that bankers used the MF Global collapse to collapse gold and silver futures markets at the end of 2011. For example, in an article posted on the SilverDoctors blog by Jim Willie in which he gathered data regarding the amount of physical gold and silver ounces represented by the longs at MF Global that were standing for delivery in the futures markets before these contracts imploded, he stated: “JP Morgan increased the amount of registered silver and gold by precisely the amount that was suppose to be delivered [by MF Global]…JP Morgan effectively averted both a Comex default and a European Sovereign Debt implosion.”
Silver Lining in the MF Global Debacle?
Can there be a silver lining in the MF Global debacle? I believe that in the long-term, this extremely unethical, negative event could transform into a positive game-changer in the way people buy large amounts of gold and silver. Obviously, the futures market is not a safe market for anyone seeking to take delivery of millions of dollars of physical gold and silver as many MF Global clients learned. The GLD and SLV ETFs, of course, are no safer than any gold or silver futures contract for the same reasons.
So in the future, and I mean the immediate future starting now, I believe that large buyers of physical gold and silver will now opt to bypass the bullion bank’s middle men in the futures market and go directly to the gold and silver mining companies to buy large quantities of bullion. This should eventually help usher in the death of futures markets as a mechanism for buying physical gold and physical silver and be a step towards establishing a free market for gold and silver prices for the first time in our lives.
Mark Cutifani, CEO of AngloGold Ashanti, recently echoed the same:
“Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding it’s hard to get physical gold.”
People that want to own physical gold and physical silver never should have been buying the GLD, SLV, or gold and silver futures. Now, in light of the MF Global debacle, scores of people will stay away from these fraudulent vehicles for good.
About the author: JS Kim is the Chief Investment Strategist and founder of SmartKnowledgeU, a fiercely independent investment research and consulting firm with a mission to help re-establish the monetary freedom that bankers have stolen from us. Despite believing that gold and silver will remain highly volatile in 2012, JS believes that long-term holders of physical gold and silver will be richly rewarded as bogus paper gold and silver derivatives start collapsing and reach their intrinsic value in coming years. Follow JS on Twitter and Facebook.
Republishing rights: The above article may be reprinted as long as all text, links and the author acknowledgment remain intact and exactly as printed above.
Article source: http://seekingalpha.com/article/316197-bankers-precious-metals-and-mf-global
Why isn’t the Gold price going through $2,000 now?
- Precious Metal Gold
The gold price went over $1,900 and looked as though it was going to mount $2,000, but since then has fallen back to $1,600 and is in the process of consolidating around the lower $1,600 area. It was expected that it would have moved a lot higher faster, but that hasn’t happened, yet.
In the face of Italy’s downgrade to A2 by the ratings Agency, Moody’s summary that, “There has been a profound loss of confidence in certain European sovereign debt markets, and Moody’s considers that this extremely weak market sentiment will likely persist. It is no longer a temporary problem that might be addressed through liquidity support, and several euro-area governments are increasingly affected by the loss of confidence.” The downgrading was expected, as are further downgrades for the different Eurozone members, shouldn’t the gold price be on its way through $2,000 to much higher levels?
The ‘downturn’
The news over the last few weeks has sent global financial markets down very heavily as a slow recovery morphed into a downturn and at best a flat economic future in the developed world. These falls have been accompanied by tremendous worries that there could be a major banking crisis that will cripple the Eurozone economy as a whole, not just the debt-distressed nations. In France growth is now at zero, in Greece it is somewhere south of a 5% dip in growth well into recession. Greater austerity simply adds to the fall in government revenues defeating their purpose of reducing their deficit. All of this implies an ongoing shrinkage of the Eurozone economy. This hurts investor capacities in all financial markets and wealth throughout the Eurozone. Cash becomes ‘king’ as investors flees markets to a holding position waiting for much cheaper prices before re-entering markets at lower levels.
The path to deflation is then made. Deflation in its early stages causes tremendous de-leveraging. That is the selling of positions to pay off loans taken to increase positions. It may come about because of investor prudence, banks calling in loans, stop-loss triggers and margin calls [where the level of debt against positions becomes too high and forces sales]. This often and particularly in the case of precious metals has nothing to do with the fundamentals of the market. It is simply the position of investors. This happened in the precious metal markets as well. This is why gold and silver prices fell.
De-leveraging
As was the case in 2008 and often through history, the process of de-leveraging is a short-lived one, even when it is savage. Once and investor has sold the positions he feels he needs to that downward pressure on prices disappears. Leveraged positions are the most vulnerable of investor held positions and can make up the froth or ‘surf’ in the markets, which cause the volatility levels to increase when dramas strike. In 2008 these positions were huge because there had been two and a half decades of burgeoning markets that encouraged greater risk taking. Since then, while leveraging has taken place it has been less and rapidly removed when dramas hit.
In 2008 we saw a similar drop in prices from $1,200 to $1,000 [20%], which equates to the fall from $1,910 to $1,590 [16.9%]. In 2008 the precious metal prices then slowly rose as buyers started to come in from all over the world. It took over a year for prices to recover back to $1,200.
Change in market structure
Today the shape of the precious metal markets is quite different, particularly that of gold. In 2008 central banks were sellers, today they are buyers. In 2008 the Chinese gold markets were small. Since then they have grown to such an extent that they are soon to overtake India. These are two dynamic features that give demand a totally different shape to 2008. More than that, the impact of the developed world long-term has diminished quite considerably. It now represents less than 21% of jewelry, bar and coin demand. The emerging world as a whole represents over 70% of such demand now.
The bulk of the world’s physical gold that comes to the market is dealt at the London twice daily Fixings. The balance that is traded outside the Fixings is the most short-term price influential amounts, producing the swings that resemble the waves on the seashore. It is these traders and speculators that often persuade long-term buyers to stand back and wait for the prices to swing to the point that persuades them to enter the market. The drop from $1,900 had this effect on investors. Now that the fall has happened we see a surge in demand from the emerging world to pick up the slack in the market. We have no doubt that central banks are buying the dips as well.
So once the selling from the developed world has stopped [emerging market demand waits for this before buying, allowing the fall to extend further] in come the buyers happy that they are entering the market at a good time. Because of this change in market shape we fully expect the market to take far less time to find its balance and allow demand to dominate.
2012 recession and the battle against it
The I.M.F. has just warned that the developed world will enter a recession in 2012. Will that be a negative for the gold market? We do not believe that it will. The world has seen the recovery peter out, has seen the sovereign debt crisis arrive and now sees the I.M.F. recommend that the Eurozone banks be recapitalized. What does this mean for precious metals?
Cast you minds back to the recapitalization of U.S. banks under the TARP measures whereby the Fed bought the ‘toxic’ debt investments of the banks against fresh money. When we say fresh we mean just that, newly created money in the trillions. This did lower the perceived value of the dollar inside and outside the U.S. The effect on gold was palpable as it rose back through $1,200 and onto new highs.
Already we are hearing rumors of an E.U. government minister’s plan to walk the same or similar road. With the recent past in mind, we are certain that that will lower the perceived value of the euro and see euro investors seek places to cling onto the value the euro still has. This time round we fully expect markets to discount these actions in the same way. The downturn will therefore be fought with new money creation in the same way the U.S. did it from 2008 on.
Second time round
There is a significant difference between 2008 and now. In 2008 the credit crunch was new to investors and shocked the markets into overreactions. In 2011 we are not shock but expectant of what lies ahead. In 2008 the developed world economy had considerably more resilience than it does now, so the situation is more serious and less likely to be believed as the panacea for the developed world’s economic crisis. Because the gold and silver prices rose so strongly after that time and in the face of those ‘solutions’ the same will be expected now. In 2008 confidence in the financial system as well as in the monetary system appeared unassailable, not this time. While the developed world, outside of the gold ETF’s in the U.S., has not been the main driver of rising gold prices, this time we would not be surprised to see their resilient confidence in their world snap and a frantic search for safe-havens follow.
Yes, if we see a repeat of the 2008 breakdowns in the near future they will slaughter remaining confidence in the monetary system and the ability of its governments to set matters straight. What then for gold and silver?
By Julian Phillips
Source: www.ibtimes.com
Euro Slides As Egypt Worries Spark Safe-Haven Bids
As Egypt Worries Spark Safe-Haven Bids
NEW YORK (Dow Jones)–The euro weakened broadly and sharply Friday as concerns about political unrest in Egypt sparked demand for safe-haven currencies such as the dollar, Swiss franc and euro.
After having spent most of the week ignoring the crisis in Egypt, traders became transfixed by images of pro-democracy demonstrators embroiled in street protests with government forces. This led investors to abandon risk-related investments in favor of safe-harbor assets amid worries about the potential for spillover effects worldwide.
With the euro already under pressure from constructive U.S. economic data, the figures coalesced with the market’s jitters about Egypt. Despite concerns about the U.S.’s fiscal imbalance, both Treasurys and the dollar rallied as they momentarily reverted to their traditional role as safe harbors during times of global instability.
“We’re going to watch over the weekend to see how aflame [Egypt] becomes,” said Andrew B. Busch, global currency strategist at BMO Capital Markets in Chicago, who said markets were modestly heartened by the data. However: “risk-off is happening because once you destabilize Egypt, you destabilize the Israel peace process and embolden Iran,” he added.
“Risk off” trades typically bolster the dollar, U.S. Treasurys, the Swiss franc and other assets perceived as safe havens.
The euro fell to session lows around $1.3594, more than a full cent below an earlier session high. The euro fell by more than 2% against the yen to trade at 111.63. Against the yen, the dollar was also sharply weaker on the day, trading near 82. Against the Swiss franc, the euro traded near 1.2820.
Speaking from Davos, German Chancellor Angela Merkel launched a strong defense of the euro, saying it was “more than a currency” and its failure would doom Europe. However, jittery markets largely ignored her remarks. Dealers said the market was becoming increasingly impatient with the lack of progress in Europe’s debt crisis.
“There has been very little resolution on the debt front, and in fact there has been more tension,” said John McCarthy, manager of currency trading at ING Capital Markets in New York.
“We’re getting to a level in euro/dollar where, based on concerns about European peripheral debt issue that have not gone away,” traders are becoming increasingly reluctant to take the single currency much higher, he added.
Dealers say the yen has been buoyed by both exporter demand for the currency and modest safe-haven flows. At least for the moment, analysts say concerns about Thursday’s Japanese sovereign debt downgrade by Standard & Poor’s have abated.
“Japan and their huge exporting companies have clearly become accustomed to the strong yen and are clearly taking every chance they get to buy in when there is a selloff,” said Western Union Business Solutions in a research note. “Even with the credit downgrade, investors don’t seem too worried about piling their cash into the Land of the Rising Sun and still see it as a bastion of safety.”
-By Javier E. David, Dow Jones Newswires; 212-416-4564; javier.david@dowjones.com
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