How the gold market was crashed … There's been a recent huge draw down of physical gold at the New York COMEX and at the JPMorgan Chase depository … So what to do? And how can that happen? They have to hatch a plan and carefully orchestrate it in a series of events that takes the gold market completely by surprise and force players out of their long positions. Read on for today's lesson in market manipulation and allow me to relay my speculation about what transpired last week. – Resource Investor
Dominant Social Theme: Money metals are barbaric instruments and deserve what they get, even if we have to give it to them.
Free-Market Analysis: Market sentiment can shift, even in a day, and perhaps it was merely market sentiment that has been driving the price of gold and silver and has resulted in recent crashes.
But those who buy and hold gold in sizeable quantities often do so because their faith in the monetary institutions of the social order has degraded.
This gives the ownership of money metals a philosophical cast. Those who own money metals in quantity are making a statement about their society and their faith in current sociopolitical institutions.
Those who control or seek to control those institutions – in modern day parlance what we can call "globalists" – are very aware of the larger overtones of significant ownership of money metals.
From the standpoint of "gold bugs," moves made by the powers-that-be to discourage gold and silver ownership are implemented to preserve the current social order even if it may benefit the wealthy at the expense of the larger middle class.
In other words, a kind of economic war is being waged between those who have a great deal (and want more) and those that have accumulated some wealth and merely seek to preserve it to serve as a bulwark against life's inevitable calamities.
Those who subscribe to this world view are quick to see the Invisible Hand of Conspiratorial History at work in a variety of economic and sociopolitical events.
And thus it is no surprise that within the metals and mining community people are willing to speculate about how various forms of dramatic price action are the result of outside influences – of a kind of meddling.
This Resource Investor article (excerpted above) is a good example of this sort of thinking.
In presenting it, we are not endorsing it but merely providing an example of why people (especially in the metals and mining community) continue to be suspicious of modern market movements and why the belief that markets are manipulated continues to exist.
The article makes the point that the biggest markets players wanted to launch a costly blow against the perceived value of gold (and silver). They did this by orchestrating a downturn using a three-step method.
The FOMC minutes from the last meeting were due for release during last week. But a funny thing happened. They got released EARLIER than expected. It was all a big mistake and the FED let the SEC and the CFTC know right away that the error had occurred. And lo and behold, despite the FED's transparency and newly crafted reputation for delivering timely and accurate reports, there happened to be some language we didn't get updated on until the FOMC minutes were released. The notes say that several members have been discussing cutting back on the stimulus. That was strike one. It got the gold market thinking that stimulus cuts might be coming.
A bombshell was released from news sources [Ed Note: Strike two]. It was reported that Cyprus would have to sell 400 million Euro's of gold as part of the bailout package of raising money for their failed banking system. Gold prices came down to $1,550 on the news and the day passed by. Even though Cyprus bankers tell us the next day that they didn't discuss selling any gold, market jitters remained with Friday just around the corner.
Gold is a nervous market to begin with as a lot of people have already lost a lot of money in the last six months. With Gold at $1,550, all that is needed for the market to drop is to get one more push where all the stops are. This price level was just below the two-year low of $1,525.
With the setup in place the final pitch was ready to be delivered.
ALL OF A SUDDEN THE LONDON PHYSICAL PLATFORM THAT BUYS AND SELLS PHYSICAL GOLD GETS LOCKED UP. THE SYSTEM FREEZES.
The screens all freeze. What does that mean? What can the physical holders do? Meanwhile the futures market continues to drop.
So these are the three strikes, according to this article. Cast doubt over the market, explain that further selling was coming and then freeze the ability of people to buy and sell physical gold at a critical time.
So what happens? The physical market holders begin to panic. How can they protect themselves as they can't sell either? What would you do if you were in that situation? There is only one solution, especially during a panic. Short and ask questions later. The market finally closes in New York and returns to the $1,500 area.
According to this article, the short selling fed on itself, margin calls were made and generally the selling devolved into a route.
We have no idea whether this chain of events accurately describes what took place. What is true is that the trust between certain parts of the mining and metals community and the mainstream investing community is on fairly shaky ground currently.
And we are not surprised that various "conspiracy theories" are being published to explain what just occurred. Transparency would be the antidote to such speculations but when it comes to commodities and money metals in particular, transparency is in short supply.