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We found out last Friday who “A” (not “the”) culprit was that has been selling concentrated blocks of gold futures to depress the price.  The Financial Times wrote that a mid-level trader from Barclays was nabbed and censured by FCA (British equivalent of the SEC), Zero Hedge wrote about this last Friday here.  Barclays was fined 26 million pounds for not supervising properly and injuring clients.  I don’t even know which humorous direction to go from here because there are so many.

First off, this “lone perpetrator” only worked for Barclays for the last 8 years while FCA says that the scheme was ongoing for 10 years.  Did someone “teach” him how to sell big and very naked blocks and then just retire and pass the baton on to him?  Also, are we to believe that this “rogue” trader got away with selling $10’s of billions worth of gold (and in a bull market) while the compliance department at Barclays never saw or said anything?  No, not possible.  Remember, this particular instance has a 10 year track record behind it, FCA never saw anything at all until just recently?  Or…the CFTC?  How could they have not seen this?  What about before 2004, does anyone still remember the old “$6 rule?”  (Yes I know that was the “2% rule” at the time just as it is now).

We are also supposed to be led to believe that all of the waterfall and concentrated smashes were done by just one trader again, not possible.  If it was just this one guy, how is last April’s 36 hour waterfall period explained?  50% of total global gold production was sold in concentrated bursts in less than 2 trading days.  Are we to believe that this $50 billion or so that was sold came from just one company and by just one trader within this company?  $50 billion?

I usually don’t like to rant but I really can’t help myself on this one.  For more than 15 years I have said that the gold and silver markets were manipulated or rigged to keep the price down, I have said on umpteen occasions that all that is needed is to pull a “time and sales” to see how much was sold and who sold it.  Period. End of story.  Time and sales is not a big undertaking like a “DNA” test; it’s even easier than “fingerprints.”  Time and sales is a PAPER TRAIL that tells you who bought, who sold, how much and exactly at what time.  It is not rocket science, it is not in any fashion a judgment call and doesn’t even need any reasoning whatsoever.  Time and sales are black and white hard data that tell you who did what and when.

We have been led to believe by the numerous CFTC investigations that all is copacetic.  Please remember the “wording” that they’ve used to cover their sorry bottoms, they “found nothing actionable.”  They did not say they found “nothing illegal” although they probably could have because a lower gold price (which I will explain shortly) is in the “interest of national security.”  So, anyone acting in this interest would not be doing anything illegal OR where the CFTC could take action.

No matter what we “conspiracy nuts” at least have a smidgeon of vindication because we now have hard evidence that effort has been made to lower the price of gold… by at least one trader.  Technically, it cannot be called a “conspiracy” yet because there is only one perpetrator but… we also know that there is no way that this one single trader could have possibly sold $50 billion (40 million ounces) in just two trading days.  If this were the case and the market was “honest,” any single trader that went that short would have been sniffed (squeezed) out in an epic “come to Jesus” moment by market participants.  Any single trader that sold or shorted 1/2 of global gold production would have the task of eventually covering that position while a bunch of sharks circled to make this impossibility without losing an equal amount of flesh.  It also stands to reason that if these bursts of selling were not “officially” sanctioned, they would have been uncovered by the week’s end.  Can you imagine if this were done in the Treasury or S+P pits?  No, this would never fly; the perp would end up in solitary confinement between water boardings!

OK, I mentioned above that a lower gold price is “desired” and in the interest of national security.  Why is this and how can I say it?  Think about it, what would a $5,000 or $10,000 price of gold mean?  Did you notice the little “dollar sign” in front of the numbers?  It would mean that “dollars” would be worth far far less than they are currently at $1,300.  It would mean that their purchasing power is far less.  It would mean that the “power” to print these pieces of paper (or electronic digital chits) is less “powerful.”  The power would be less because logically they would have to print many more just to equate to current purchasing power.

From another angle, a higher gold price means a lesser level of “confidence” that would require more dollars for the same ounce of gold.  Please understand that “confidence” is the only thing left that is holding up your standard of living.  Confidence is the only thing left that lends “value” to your dollar bills.  It is the only thing left that lends value to Treasury bonds which by the way are what your bank uses as “reserves” to claim that they are solvent in any fashion.  Confidence is the only thing that is keeping the global (U.S. sponsored) Ponzi scheme from collapsing.  What I have just described is “motive,” motive for a lower gold price.

In reality, I cannot believe that a British (Western) regulator would dare expose even one trader for price manipulation of gold.  This is a “thread” that is now exposed and can be pulled on.  Do these regulators really believe that one sacrificial lamb will be enough?  Do they really believe that the public will be satisfied… or gullible enough to accept just one mid-level head to roll?  This is a very dangerous precedent or gambit if you will.  In my opinion, they should have just kept lying 100% because this is the way that lies come unraveled.  This is like the little kid explaining to his mother that all the cookies are gone because he saw his brother eating one when he got home from school.  He’s not admitting his own guilt but he is pointing a finger.  “Someone” did it, he is admitting that the cookies are gone …and the lie unravels from there because he still has cookie crumbs on his face (how to explain the continuing 8AM massacres etc. after this bad bad lone trader has been shut down?).

None of this really matters because it is becoming more obvious that “all is not right” in the gold market.  Austria now wants to audit their gold in London.  First it was Germany who asked for an audit (and were denied) at the New York Fed and then asked to repatriate gold, now it is Austria.  Will London give them the same excuses that “logistically” it will take 7 or 8 years?  Remember, Germany only received 5 tons total of gold last year out of 300 (out of 1,500 “held”) that was promised.  The FCA truly boo booed on this one because they are admitting that one trader sold nonexistent gold, do they expect people to believe that this guy was the smartest (and only) person in the world to have figured out how to sell gold…that isn’t really gold?  And without his firm knowing about it?  Really?

I do want to make mention of a piece written on the Barclays topic by Trader Dan Norcini recently.  Dan is a really good guy and I have learned much from him over the years.  We had a back and forth a couple of weeks ago regarding my piece on negative GOFO rates and what they mean.  We finally agreed to disagree.  We apparently also disagree on a few points regarding Barclays and I am apparently part of the “GIAMATT” (gold is always manipulated all of the time).  Yes, I do believe this.  I do not believe that there are any days where gold truly trades freely.  Do I believe that ALL price drops are cartel driven?  No, markets should and do go both up and down.  Can the exact percentage numbers of 1% or 2% where gold is constantly capped to the upside be explained by anything other than pre planned programs?  Can there be a $250-$500 million seller of gold every single morning at 8AM (like 5 O’clock Charlie)?  In my opinion no there cannot.

Dan says that the dollar index no longer dropping is why gold stopped going up and that gold will not go higher until the index resumes its downtrend.  He may be correct but the dollar index is “versus” other fiat currencies, primarily the euro.  If all currencies debase at the same rate, there will be little movement in the index yet all of the currencies have debased.  If the price of gold can be “managed” to lower levels then the façade of paper currency purchasing power can be maintained.  There has been enough anecdotal and hard evidence dug up over the years that points to manipulation to depress the price of gold.  There is certainly motive and without a doubt the “ability” through futures markets where huge leverage can be employed.  There is also the “cover” of agencies like the CFTC’s monkeys who see, hear and speak no evil.  I am of the opinion that TPTB cannot afford to let gold trade freely for even a single day for fear that it could ignite the derivatives time bomb but that’s just my opinion.

Dan also mentions that the central banks actually “want” higher gold prices because they are afraid of deflation; this is one part that I particularly disagree with.  With the way “money” is thrown around today, a pittance $20 billion order for delivered gold in my opinion would be enough to tip the scales toward an upside panic if the Fed desired it.  I cannot believe that higher gold prices could not be easily orchestrated overnight as mined supply does not meet the current demand and market prices are below the costs of mining, in other words the supply just isn’t there.  The danger to the central banks as I see it is not prices going down because all they’d have to do is print up some fiat and buy gold, no, it is losing control of upside pricing.  A loss of control to the upside would crack the confidence in and the credibility of the central banks themselves.  Were (when, in my opinion) this to happen, they will lose their currencies and thus their ability to push and pull the levers of finance.  I guess the flaw in logic that I see here is that the Fed can ALWAYS buy gold if they want to and pay for it with newly minted money.  Can the Fed “always” sell gold to keep the price down?  Well, yes they can as long as they have it to sell …but they can only sell what they have because gold cannot be printed.  Actually upon thinking about this for just a short moment longer, what would stop the Fed from making the statement “we will buy any and all gold for $2,500 per ounce?”  Would gold not immediately shoot up to $2,500?  Sorry, I don’t buy the argument that the Fed wants higher gold prices and are afraid of lower prices.

I do want to say that I respect Trader Dan’s opinions but I do not agree with all of them.  I know him as a top notch guy and he is obviously a top notch trader as evidenced by the fact that he is “still here” and trading.  Trading is a hazardous occupation and one where just one big mistake could be enough to knock you out of the game if you are not disciplined.  I would never dismiss what Dan has to say out of hand but after reading his piece, I do disagree with much of it so I guess we’ll just have to agree to disagree.

That said, I have written many times that trying to time gold is a mugs game in my opinion.  If you understand the end game then you also understand that you have to be there “when” it happens.  If you purchase physical metal without margin and sit tight until the end game arrives, you will “win” so to speak.  Buying dips is a great idea but if you own no metal at all currently, “you shouldn’t wait to buy gold…you should buy gold and wait.”

As I have said in my opinion for several years now, this entire scheme will come down on the day that China is told, “Sorry, we cannot deliver any more gold.”  This will happen on its own or the Chinese can force it with an outsized order.  It doesn’t matter which occurs first because the outcome will be the same.  We will live with a much much higher price of gold and a financial system that implodes because confidence evaporated.