I’d like to write about something that is so basic that you may scratch your head and wonder why I would even bother. I have written many times about this and others have shown that the “price” of gold is manipulated. This is no longer a “conspiracy theory,” it is a fact. I titled this piece “The Reason” and will discuss it from 2 standpoints, from the manipulators and from yours.
First, “why” is there any reason to rig the price of gold? This is easy. Governments have every reason TO rig the price and in a fiat world where the money that they create competes directly with gold. They would be crazy not to suppress the price of their competitor. Gold is the canary in the goldmine. If the canary dies then you will soon be dead also just as it follows that if the price of gold is “rising” in dollars or euros or yen, “something” must be wrong with them. The thought process of central banks is that if you can disconnect the alarm then there will be no fire…or at least no one will know that there’s a fire. It is truly this simple, the central banks believed (for too long) that if they could keep the lid on the price of gold then they could do whatever they pleased and no one would know. This was true 10 or 20 years ago, they had the supply that they could feed into the market…this excess supply is very close to being used up. We know this because demand has exceeded known supply by at least 1,500 tons per year for going on close to 20 years, so far more than half of what centrals banks had…is already gone.
Then from YOUR standpoint, if you know that the price of gold is “rigged”…you can go one of 2 ways in your train of thought. Some people think, “Oh I wouldn’t touch it BECAUSE the price is rigged.” Or, as I believe, this IS the very reason to own gold, because you are able to purchase it cheaper than if it were in a freely traded market. If central banks want to “subsidize” gold buyers then so be it; don’t look a gift horse in the mouth. Just buy it and put it away because you know that it is cheaper than a freely traded true market price.
Until last Wednesday or maybe Thursday there was a litany of “bashers” jumping up and down and screaming that the “permabulls” are wrong and that the likes of Martin Armstrong are correct. If you agree that the evidence clearly points to the prices of gold and silver being manipulated then it follows that you should look for “bottoms.” If you cannot see that gold is clearly manipulated (there is clear motive, clear ability in the paper markets and clear evidence of action), then I cannot help you (Armstrong).
If you understand that the price is manipulated and has been for years now then how can you “risk” trying to call a top? How can you trade and “hope” that you guess correctly? What if you guess wrong and the rigging either stops or fails? How do you get back in? Gold has corrected and silver has crashed by more than 50% on the paper markets but the upside is many times the current prices. Do you risk getting in maybe 10% or even 20% lower than current prices while sitting on the sidelines? The “sidelines” being “cash dollars,” euros or yen etc.) and out of something that when all is said and done will trade at multiples of current prices in fiat?
Trying to call “top” in a long term bull market is a mugs game as you can only truly be correct 1 time. This “1 time” is when the bull market is over for good or at least for many years. For example, would you have done the right thing in 1976 by selling your gold at close to $200 if you were not back in as it traded down close to $100? As Richard Russell is fond of saying, “Very very few people ever ride a bull market from start to finish.” I am going to say that there is FAR more risk in NOT owning gold than owning it. I am not even talking about the possibility of a finite percentage loss versus the possibility infinite gains; I am talking about the potential (probability in my view) of the entire financial system coming down. It was only last Monday that we heard of Chinese banks going offline and their whole system having liquidity problems…was this to spread and go global? Would you rather have dollars in a bank or gold out of the system? Do you believe this scenario to be possible (I hope you do)? If so do you have any idea when? Where? Are you willing to bet that you or someone else that you listen to is smart enough to know “when?”
Here is the point, if you bought gold at $1,900 nearly 2 years ago you still bought it at a “subsidized” price. When push comes to shove shortly will you lament about “what a bad buy” it was to have paid $1,900? Or will you just be happy that this capital was not part of the “bail in” where depositors lose money to save their bank? Will you think “Gee, if I only listened to the top callers I would have more ounces?”
Those who know me personally know that I became bullish on gold some 15 years ago. My thought process has evolved over time but my basic premises have never changed. If you bought at $1,900 or $1,600 I will tell you that you got your purchase “cheap,” if you bought last Friday at $1,200 then you got it cheaper but at least you own it. I would not have any interest at all in gold if I thought it was going to $2,500 per ounce and then fall off. I have an interest in owning gold because it is wealth. “Wealth” that will carry you to the next system whatever it may be. Maybe the mainstream pricing will be in SDR’s, in Yuan or some new currency called “wombats” or something like that. The point is this, you will be afforded a place at the table, a ticket to entry, gold will allow you in. Dollars on the other hand will not be accepted and when the new “rules” are made, those with dollars will have no say. Choosing to “trade” gold for dollars means that you stand a chance to be holding those dollars when the inevitable “shunning” of the dollar takes place. “Trading” is a risk not worth taking in my opinion even if you are trying to trade for more ounces rather than dollars.
P.S. I will give it one more day to see if JP Morgan delivers from both their dealer inventory and from the customer side. They are contracted to deliver roughly 100,000 ounces more gold IN JUNE than they had in their inventories as of Friday afternoon. As I see it, they need to completely empty their inventory AND deliver another 100,000 ounces to honor contracts. It is still not even clear that delivery was made on the 1,000 call options from May. This is a very big deal if you believe in contract law, if not…oh well, there’s always Dancing with the Stars or the America’s Got Talent to watch.