Gold Price Conspiracy : What Uncle Sam Doesn't want you to know !

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Gold Price Conspiracy : What Uncle Sam Doesn't want you to know !

Post  Ash100456 on Wed Jan 04, 2012 1:15 pm

A very interesting article half way down the page, Could explain whats going on with the gold price. I am not spruiking for anyone just putting this out there.
Cheers
Ashley



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The Santa Rally Continues
Wednesday, 4 January 2012 – Melbourne, Australia
By Murray Dawes
The Santa Rally Continues
Gold Price Conspiracy: What Uncle Sam Doesn't Want You To Know
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In Money Morning today: Government shenanigans in the bond market…big debts and falling demand…plus, is the price of gold being manipulated?

The Santa Rally Continues

The S+P 500 leapt 19 points overnight to 1277. Commodities were also flying with gold up about 2.5% and silver having its biggest move in over three years, up over 6%.

Most market pundits are pointing to the fairly healthy Institute for Supply Management (ISM) manufacturing figures that came in a bit better than expected (up 1.2 percentage points at 53.9%). But the market was already up strongly before those figures were released.

I can't be sure... But I suspect the dramatic change in the composition of the US Federal Open Market Committee (FOMC) board could have something to do with the surge in equity and precious metals markets.

Three new doves on the board of the FOMC have replaced three hawks. So now the board is stacked 9-1 in favour of loose monetary policy going forward. What are the chances the Fed will print some time in the next six months now? Pretty high I'd imagine.




It would be difficult for them to pull the trigger now because equity markets are rallying strongly and economic figures are picking up, so I don't think they will print in the next couple of months. But with the huge amount of debt due to be rolled over in the next year I think money printing is the only way they will cope with it.

My eyes nearly popped out of my head when I read on Bloomberg last night that "Governments of the world's leading economies have more than $7.6 trillion of debt maturing this year." Yes you read that right. $7.6 trillion.

$3 trillion of that belongs to Japan and $2.8 trillion to the US.

G7 aggregate debt principal and interest



Click here to enlarge
source: zerohedge.com

On 29 December Italy auctioned 7 billion euros of debt, which was less than the 8.5 billion euros targeted by the Italian government. That's not a very good start. Italy alone has to refinance $428 billion of securities this year with another $70 billion in interest payments.

If Italy struggles to reach its target of 8.5 billion euros just a few weeks after the European Central Bank (ECB) lent an "unlimited" amount to banks for three years via the Long Term Refinancing Operation (LTRO), how on Earth are they going to refinance $428 billion with 10-year yields at 7% and an economy that is keeling over into recession?

Before we can make any judgments about any possible money printing from the US Fed, you need to know what effect the LTRO will have. (I.e. the three-year loans worth US$641 billion that ECB recently made to over 500 banks in Europe.) Will the unlimited lending by the ECB filter into the sovereign bonds and therefore help with the upcoming mammoth task of refinancing?

I don't know the answer... But banks have been dumping sovereign debt onto the ECB by the bucket load and I don't think they are about to reverse course for the few extra basis points that can be made from the carry trade. But there is pressure being applied by the ECB and governments to use some of the proceeds from the three-year loans to buy sovereign debt.

Of course it has had a big effect on the debt under three years duration because the banks can easily match out their three-year loans with this debt. We have seen a dramatic fall in the last few months in this part of the yield curve in Europe. For example in late December 2011, the Spanish Treasury sold 3.7 billion euros of 3-month paper for 1.735%, after an average yield of 5.11% in November, at a bid-to-cover ratio of 2.9, up from 2.8.

The 6-month bill sold for an average yield of 2.435%, down from 5.227%, with 1.92 billion euros sold and demand outstripping supply by a factor of 4.1, after 4.9 a month earlier.

But when you look at the 10-year yields in Italy you see the same high levels near 7% as we saw prior to the LTRO.

As always the constant interventions in the market have unintended consequences.

If the ECB have forced all of the demand into the front end of the yield curve due to these three-year loans, does that mean the long end of the yield curve will suffer more than it otherwise would have?

Does that mean we will see a very steep yield curve even though Europe is in recession?

Will this then force each government to refinance with very short-term debt rather than long-term debt? Meaning they will need to refinance larger and larger amounts each year until the whole thing blows sky high?

A recent article on zerohedge.com outlined the shell games involved with the three-year loans.

Italian banks have been issuing bonds to themselves and then having those bonds guaranteed by the Italian government, so that they can use those bonds as collateral at the ECB for three-year loans. The mind boggles.

Most of the money that was lent out has been redeposited at the ECB. So as the new year gets underway the most important thing for us to keep an eye on is movements in this money deposited at the ECB. Will it sit there as a capital buffer for banks like we have seen in the States or will it be put to work?

If the banks prove gun shy in loading up on sovereign debt with this new money then we may see the US Fed step into the breach in a few months with printed dollars.

Either way, the market seems to be feeling confident that the mountain of debt will be refinanced somehow, so why not start buying ahead of the party?

I can't say that I feel like such a Pollyanna.

Recent manufacturing figures out of Europe have been terrible.

Marketwatch reported that...

"Euro-zone manufacturing is clearly undergoing another recession," said Chris Williamson, chief economist at Markit. "Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single-currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011."

For the second month in a row, all nations covered by the survey reported a decline in output.

Williamson said it was particularly worrying to see new orders falling at a far faster rate than output. That indicates firms have relied on orders placed earlier in the year to sustain current production levels, he said.

The PMI is a diffusion index with reading below 50 in contraction, above 50 in expansion. The current readings for the PMI manufacturing index across Europe are:
Germany 48.4
France 48.9
Netherlands 46.2
Austria 49
Italy 44.3
Spain 43.7
Greece 42.0
The US may appear to be decoupling at the moment. But rest assured Europe and America will begin to converge in the next few months with the US following Europe into recession.

The austerity measures in Europe will have to bite hard during 2012. Spain has already said they are going to miss their deficit target of 6% by a full 2 percentage points! So expect even more austerity in Spain.

Portuguese car sales are down over 30% in the last year. Spanish car sales are down 18% to 1993 levels. Germany must start to feel the pain of European austerity at some point this year.

When I look at the above I find it very hard to get very bullish about this latest rally in the stock market.

Many market players are still on holidays and the volume trading is very thin. I think the current excitement will be short lived and we will see another swan dive in the market before long.

Keeping an eagle eye on each bond auction in Europe will be important in the first few months of the year. Any signs of distress could lead to a sharp sell off but that is when you will see Bernanke fly in on his helicopter to save the day.

What a world we live in.

Murray Dawes
Editor, Slipstream Trader

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Gold Price Conspiracy: What Uncle Sam Doesn't Want You To Know
by Peter Krauth

Is it really so preposterous to believe the United States and Europe would conspire to keep pole position in the global financial system?

I don't think so - and neither does China.

That much was revealed in a diplomatic cable recently uncovered by Wikileaks.
According to the 2009 cable from the U.S. embassy, China believes the United States and Europe have, as a matter of policy, suppressed the price of gold to discourage its use as a reserve currency.

And there's a pretty compelling case to be made for a gold price conspiracy.

The Gold Price Conspiracy

The cable summarised several commentaries in Chinese news media sources on April 28, 2009.

"The U.S. and Europe have always suppressed the rising price of gold," it reads. "They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency."

According to the cable, China believes that by building its gold reserves, it can not only safeguard itself against the declining value of the dollar, but encourage central banks around the world to expand their gold purchases, as well.

"China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold," the cable said. "Large gold reserves are also beneficial in promoting the internationalization of the RMB."
Now, if all we had were the Chinese claiming the U.S. and Europe were suppressing gold prices, it would be easy to disregard as superficial propaganda.

But in fact, there's evidence that supports this claim.

In the decade between 1999 and 2009, central banks - dominated by the West - were net sellers of gold in every single year. And that's despite the fact that gold in that time soared from $250 an ounce to $1,200 per ounce - a nearly 400% gain.

Then there's the infamous "Brown Bottom."

Between 1999 and 2002, Gordon Brown, then UK Chancellor of the Exchequer (and later Prime Minister), decided to sell nearly half of his nation's gold reserves. At the time, just the advance notice of these substantial sales drove gold's price down from $282.40 an ounce to $252.80.

Those gold sales yielded an average price of $275 an ounce, raising a total of $3.5 billion. Today, those 395 tons of gold would be valued more than $19 billion.
You have to admit, it doesn't make a whole lot of sense to sell a solid asset whose price is moving steadily higher each year - especially when the United Kingdom's debt problem then wasn't nearly as bad as it is today.

The answer: Because there's a conspiracy afoot.

Gold Dust on The Fed's Hands

Here's more damning evidence.

A U.S. District Court this year ordered the U.S. Federal Reserve to disclose to the Gold Anti-Trust Action Committee (GATA) the minutes of an April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, as compiled by an official Federal Reserve Bank of New York.

And it's a bombshell. The minutes suggest that officials from the G-10 governments and their central banks were, in fact, conspired to synchronise their policies to affect the gold market.
It turns out that U.S. policymakers aren't just worried about preserving the dollar's role as the world's main currency reserve. They're also worried about the effects higher gold prices could have on the nation's debt burden.
The minutes include comments by a U.S. delegate identified only as "Fisher," which is likely Peter. R. Fisher, head of open market operations and foreign exchange trading for the New York Fed.

Fisher, the minutes say, made the case that rising gold prices would increase U.S. debt. Fisher "explained that U.S. gold belongs to the Treasury. However, the Treasury had issued gold certificates to the Reserve Banks, and so gold also appears on the Federal Reserve balance sheet," the minutes say. "If there were to be a revaluation of gold, the certificates would also be revalued upwards; however [to prevent the Fed's balance sheet from expanding] this would lead to sales of government securities. So the net benefit to Treasury would need to be carefully calculated, since sales of government securities would expand the public portfolio of government securities and hence also expand the Treasury's debt-servicing burden."

Indeed, Fisher's remarks are an open acknowledgement that the United States has an interest in suppressing the price of gold.

So, clearly, there is a growing body of evidence that Western governments, central banks, and even some of the largest investment banks have a vested interest in subduing the price of gold. Furthermore, they've already acted on behalf of that interest.

But now the tide is turning. The dollar and the euro are on the ropes and emerging markets have been steadily increasing their gold purchases.
While authorities in developed countries are making it more difficult for investors to build gold holdings, China and other developing markets are doing just the opposite. They're actually encouraging their populations to adopt physical gold and gold investments like futures and exchange-traded funds (ETFs).

So I think it's high time the average Westerner looked to the East for cues on wealth preservation and their attitude towards gold.

Editor’s Note: Peter Krauth is a highly regarded US market analyst and expert in metals and mining stocks, with a special expertise in energy and resource-related investments.
This article first appeared in the Money Morning US edition (www.moneymorning.com)



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Ash100456
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Gold Price Conspiracy :What Uncle Sam Doen't want you to know!

Post  TWO BOB on Thu Jan 05, 2012 9:15 am

Hi Ashley,
Have been getting Money Morning for years & their articles have been close to the mark.Also Harry Dent is very interesting he now is saying gold & silver are in a bubble & telling readers to get out of gold at $2,000.00oz. cheers
But who has a cristal ball to know what will happen in these INTERESTING TIMES. confused
Cheers
"TWO BOB"

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Re: Gold Price Conspiracy : What Uncle Sam Doesn't want you to know !

Post  philski on Sat Sep 29, 2012 6:19 pm

not a scrap of the above includes China selling its gold reserve onto the market during the last year. And, the Price is still going up. Not down as a genuine market works.

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Goldmann and Saccs manipulated the Gold price drop

Post  goldmatt on Wed Jul 03, 2013 9:02 am

I read an article written by a Goldmann and Saccs advisor about 2 months ago saying that if people woke up tomorrow and decided that gold was just a worthless yellow metal with no real importance than its price would reflect that and it would be cheap and of no significance. The rookies who follow this kind of advice then went selling mad on the bullion and exchange markets and plummeted the price of gold. This has lead to record lows in the price and a HUGE gold grab by Goldmann and Saccs at the low price. Basic price manipulation before a big purchase. Gold investors need not to worry as the price will bounce back huge and overcorrect itself. The fed is still printing money for the next 18 months before they claim to be shutting down the press. The amount of gold ETFs on the market are actually much higher than the amount of physical gold in possession, if a few too many investors want to exit the trade and claim their physical bullion they will soon find that there isn't any. This will then send the gold price to new record highs.

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