The primary reason the U.S. Government and Federal Reserve intervene actively in the gold market is to keep to keep the price from moving higher in order the protect the reserve status of the U.S. dollar. Given that we know Russia and China are actively disabusing their foreign reserve holdings of Treasuries – quietly and now apparently more quickly – the dollar was in danger of breaching key technical levels to the downside and drop like a rock into the mid-70′s (USDX basis). Janet Yellen saved the day with her non-transparent post-FOMC statement that suggested the possibility of higher rates in six months, which all know is total nonsense. However, mission accomplished as her words managed to spike the dollar index back over 80 and now the Fed via its agent bullion banks are trying smash the price of gold lower to “reinforce” the move in the dollar.
This is what Monday’s manipulated hit on the gold market looked like:
Submitted by PM Fund Manager Dave Kranzler, Investment Research Dynamics:
When a GATA delegation visited an editor for The Economist at his office in London in May 2009 to give him the gold price suppression story and the associated documentation, he could not get rid of us fast enough. Chris Powell, Treasurer of GATA
(click on graph to enlarge)
As you can see, there was a volume spike in the number of gold contracts that hit the Comex (both the globex computer system and the trading floor) right at 6:30. The volume at 8:30 EST was 7.5 times higher than it was for the previous 1-minute period.
A little-known, barely followed economic report was released at 8:30 and the Ross Normans and Doug Caseys of the world would attribute the gold smash to the release of that report. Of course, no other market responded to the release of this report except of course silver. I’m not sure how Norman and Casey would explain that.
Suffice it to say that it appears as if the lower gold prices have triggered an increase in demand for physical gold in India and China. Buy-premiums in India are up right now about 30% over last week and the premiums on the Shanghai Gold Exchange have moved back into positive territory after being negative for the past two weeks.
I think it’s a pretty good bet that this manipulated “pullback” in the price of gold/silver has just about run its course. Anyone who explains this sell-off action as a “healthy correction” is doing nothing more than issuing apologies for the corrupt market manipulations of the Fed and the U.S. Government.