-->The Dirty Secret Behind the Gold Markets
by Sol
Tactical Investor
October 29, 2003
Gold

As I have stated before, the Rand is the best performing currency in the world and yet the press has hardly even mentioned this, I have been bullish on it since Nov 2002 when the rate was 14 Rand to a dollar. Now it's somewhere in the 7 dollar range. Yet gold is not appreciating much in terms of the Rand. Look at the chart below. What is gold trying to tell us?

We have two possible scenarios.

Either gold breaks out in terms of Rand or the Dollar gains strength, while the Rand depreciates and so Gold falls in terms of the US dollar while appreciating in terms of the Rand, which will benefit South African Gold stocks.

The second scenario is that Gold actually breaks out in terms of the Rand and then we have a ballistic breakout in terms of the dollar because even though it looks overbought in US dollars, the movement so far has simply been a currency adjustment move. The stronger currency, which is gold, is appreciating against the weaker currency, the Dollar. This move has not been universal.

We believe that the dollar will put in an important low very soon and actually start to rally short term. Long term it is in a pronounced bearish trend; and as a result, gold will consolidate as the dollar gains strength and rates drop, primarily Gold shares, I do not see bullion correcting significantly.

We also believe that bond market is close to putting in a short-term meaningful bottom and dropping rates are usually Gold's nemesis. These falling rates will only be a short-term aberration and I believe long term we are destined for hyperinflation.

The above chart is a 3-year chart of Gold priced in terms of the South African rand. What a different picture to the chart with gold priced in dollars. Here you can clearly see how the dollar has been getting hammered to death, how the Fed is simply hyper-inflating the currency to untold insane levels. One again, the definition of inflation is not an increase in prices but an increase in the monetary base. In other words increasing the supply of dollars, this way we have more money chasing fewer goods.

The powers to be have artificially kept the price of Gold and silver down by rigging these markets. The scam is simple. They lease the physical metal into the market and then Gold which is on lease is sold of. So in effect what they are doing is selling something they do not own at all. Approx 15-16 tones of gold are short the market. If they had to ever cover these shorts the price of Gold would literally go ballistic and many of the financial houses would be burned into the ground.

This is the insidious way the central bankers hide the destruction of the monetary system. If gold was left undisturbed, with the present level of inflation it should be well over 1000 dollars but instead it is at a paltry 388 dollars and this money that is spewing out of these crack driven printing presses is going straight into the real estate market. That is why everyone and his grandma is looking to invest in the real estate market, convinced this is the safest and best investment of the decade. Remember, when everyone starts saying it's a good deal, the time to run is very near at hand.

My new friend, Gale, from www.pgtigercat.com writes a very good essay on this topic and it has also been published here http://www.financialsense.com/fsu/editorials/2003/0611.htm

You will find it very enlightening and I suggest that you read it slowly and if you have time, read it twice.

The main vehicle of intervention is the Exchange Stabilization Fund; the name says it all. Why, why would you have to stabilize your currency if you had a sound currency? You only create such an entity when you know you have rotten currency and you need to keep deluding the world that your currency is as sound as it once was.

The ESF works in cahoots with the Federal Reserve Bank of New York and these rats work with the Big New York banks to provide an additional layer of camouflage in their desperate bid to hide their illicit activities. For example the House of Morgan, perhaps that's why the New York is known as the big apple to which they should add with a rotten core.

How do they carry out their attacks? We have two gold markets: the New Gold market which is a pure paper market and the London gold market, which a pure physical market (meaning you need to actually have Gold in order to sell it).

The London market closes at around 12.pm New York time. It is then that the roaches come out of their dark hiding spots and attack, because the New York market is a paper market and so all one needs to create is a slip of paper with the promise to deliver or pay for the Gold at some future date. This is something the Government can create out of thin air, the same way they do so with our currency. However, they cannot create the physical metal out of thin air and actually have to dip into their reserves when they want to sell in the London market so they do so sparingly. Their main attack is always in the New York Gold market.

Their objective is simple: Sell as much paper as possible, since it's only paper and force the price down to key points. All major long players have stops, which will be triggered when hit and the banks who are in bed with the ESF know exactly where these stops are, so they drive the prices down. The traders who are long are forced to sell to cover to protect their profits or minimize loses as these traders sell off their long positions, further driving the price of Gold down.

The Government starts to buy its worthless paper back, in the process netting several million dollars and having a net 0 position. Not only do they make money, but also they are able to drive the price lower without really risking a penny. Once again the innocent are the victims. This is done over and over again. One can see this activity if one looks at the open interest reported by the COMEX every Friday. By the way, the day of attack is also Fridays. What you will notice is usually a 15-20K drop in open interest when they attack.

Interesting Quotes (from that article)

Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes

"The fate of the world economy is now totally dependent on the U.S. stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings."
Paul Volcker Ex-Chairman of the Federal Reserve September, 1999

"Higher interest rates are an indicator of a strengthening economy. I'd be frustrated and concerned if there were not some upward movement in rates." John Snow, U.S. Treasury Secretary.