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Jim Rickards says China is going to make the Singapore Gold Exchange the center for world gold trading.

24 Hour Spot Gold Bid 1-14-2014

The banks and hedge funds are in this to make money.  This is NOT how you make money.  It is highly unlikely that anyone interested in profit dumps this many contracts at one time, to cause a fall like this.  I suppose you could argue that a hedge fund or bullion bank could deliberately set off a flood of long liquidations by hitting all the stops on the way down and then swoop in and buy the contracts at the lower price, but anyway you analyze it, manipulation is manipulation and it is not legal.  But the regulators are asleep on the job.

Anyone looking at this kind of trading, which happens on a regular basis, who doesn’t acknowledge manipulation, (most likely not for profit but for a political purpose to support the dollar) is not thinking clearly!  That’s as kind as I can put it.

Andy Hoffman shot off an email to me on Tuesday and said, “Another flash-crash again, (see chart above) exactly at $1,250.”  This kind of event drives Andy nuts.  He gets very angry and upset.  Not me – I replied to his email as follows:

Hey, if you worked for JPM, or GS, or a large hedge fund that causes this, this is exactly what you would do too.  They are in business to make money and have no issues with breaking every rule they can get away with.  They do it very well.  They manipulate all the markets, but it is more obvious with gold and silver.     They are protecting their short positions and doing what you would do in their position if you knew you could get away with it.  Further, I wouldn’t be surprised if the Fed and/or Treasury guaranty’s their losses.

Blame the regulators for their refusal to do their job.  Blame the government for permitting it or even orchestrating the lack of regulation.  The Cartel bullion banks are just doing what they always do and are supposed to do.  You can hate them, and you do, but just like the scorpion that stung the horse that was carrying it across the river, and they both would drown – when asked by the horse why did you do that? replied, “Because it’s in my nature.”  These Wall Street bums have no conscience, no morals.  They are there to make as much money as they can by any means necessary.  In fact, that is probably true now with virtually all big business.  I keep thinking about a recent comment by Paul Craig Roberts, former Treasury Secretary – “That couldn’t have happened when I was in office (1970s).  People didn’t act that way and didn’t think that way.”  These days, laws and even the Constitution are there to be ignored.  Until the Justice Department starts prosecuting the bad guys, it will continue.  Don’t hold your breath.

I want to re-focus on the most important issues related to the gold market.  And for those of you who are into silver (and you should be), worst-case, silver will follow gold.  Jim Sinclair say’s, when it comes to gold, “it’s all about the dollar.”  That’s correct but there is another layer to this.  His point is that when the dollar is out of favor and a risky currency to hold by foreigners, they will move into other currencies and gold.  Gold will move up inversely to the fall in the dollar, and more because of the huge new demand.

But not to be left out of this discussion, the timing of the move will most likely be dictated, not by the collapse of the dollar but by the inability of the market to be able to SUPPLY enough physical gold to meet the demand.

Here is a typical chart demonstrating what I am talking about…

Comex Registered Gold Chart

The simple fact that anyone can understand is that the demand for physical gold far outstrips the annual mine supply.  China’s appetite for gold changed everything.  Not only the official gold purchased by the government, but the burgeoning demand by the Chinese public.  There are hundreds of millions of new and potential new buyers and they are entering into a market already oversold.

The “readily available” gold, to meet the demand, is shrinking rapidly.  Comex gold, GLD gold, gold held in London – all is being drained to the point that central bank participation in the sales is all that is balancing the scales.

Will the West run out of gold to sell to Asia?  No!  There are tens of thousands of tonnes laying around, but they are NOT FOR SALE.  The question becomes, at what price will the owners of that gold decide to sell some of it?  Not at these prices.

That’s why I believe that when gold makes it move up and frees itself from the paper manipulation (in the next few weeks or few months is my guess), the move up will be rather fast, not slow and drawn out.  It will be the move up by gold that will cause the drop in the dollar, and not the other way around.  Now that’s a novel thought, one I haven’t seen in print yet.

Once gold shoots past its previous high, around $1900, dollar holders around the globe will take notice – and ask themselves why is this happening?  It will cause doubt in the dollar’s worth as a store of value.  Once the dollar starts to fall, below the high 70s, the move will be self-reinforceing, like a snowball rolling down a mountain.

So, when it comes to gold (and silver), I have but two words to say:  All’s good!