The Lawless Manipulation of Bullion Markets by Public Authorities

Paul Craig Roberts and Dave Kranzler

Note: In this article the times given are Eastern Standard Time. The software that generated the graph uses Mountain Standard Time. Therefore, read the x-axis two hours later than the axis indicates.

The Federal Reserve and its bullion bank agents are actively using uncovered futures contracts to illegally manipulate the prices of precious metals in order to keep interest rates below the market rate. The purpose of manipulation is to support the U.S. dollar’s reserve status at a time when the dollar should be in decline from the over-supply created by QE and from trade and budget deficits.

Historically, the role of gold and silver has been to function as a means of exchange and a store of wealth during periods of economic and political turmoil. Since the bullion bull market began in late 2000, It rose almost non-stop until March 2008, ahead of the Great Financial Crisis, which started with the collapse of Bear Stearns. When Bear Stearns collapsed, gold was taken down over the course of the next 7 months from $1035 to $680, or 34%; silver from $21 to $8, or 62%. The most violent takedown occurred as Lehman collapsed and Goldman Sachs was about to collapse. This takedown occurred during a period of time when gold should have been going parabolic in price. The price of gold finally took off in late October 2008 from $680 to $1900 while the Government and the Fed were busy printing money to bail out the banks. While the price of gold rose nearly 300% from late 2008 to September 2011, the U.S. dollar lost over 17% of its value, falling from 89 on the dollar index to 73.50.

The current takedown of gold from $1900 to $1200 has occurred during a period of time when financial and political fraud and corruption becomes worse and more blatant by the day. Along with this, the intensity and openness with which the metals are systematically beat down seems to grow by the day.


Christmas in America

Stephen Lendman

Good tidings and cheer at Christmas and throughout the year are for America's privileged alone. No joy to the world for most others. Washington is the grinch that stole Christmas. Bah Humbug defines its agenda.

America's criminal class is bipartisan. Responsible for growing human misery. Unprecedented in modern times. Privileged Americans never had it better. Ordinary ones face lump of coal harshness. Hard times keep getting harder. Reflected in institutionalized inequality. Growing poverty.

High unemployment. Multiples higher than phony Labor Department numbers. An epidemic of underemployment persists. Jobs paying poverty or sub-poverty wages. With few or no benefits. Households need two or three to get by.

Growing millions face "one impossible choice after another," according to Poverty USA. "(B)etween food and medicine(s), getting to work or paying the heating bill." Census data show around half the population living in poverty or bordering it. In the world's richest country. Affecting nearly 60% of children. America has a higher percent of working poor than any other industrialized country.

Human suffering is real. Neo-liberal harshness is official policy. Force-fed austerity reflects it. Social injustice is rife. Bipartisan complicity supports it. Ordinary people are increasingly on their own out of luck. America's social contact is targeted for elimination. Disappearing when most needed. Monied interests alone are served. Inequality is appalling. A race to the bottom persists. Class warfare defines it.

Most working Americans get by from paycheck to paycheck. One missed one away from possible homelessness, hunger and despair. Inflation adjusted median household income keeps dropping. Americans have less to spend on increasingly more expensive goods and services. People [need to] eat. Drive cars. Pay rent. Service mortgages. Have medical expenses. Heat and/or air-condition residences. Have children in college. Pay transportation costs.


A Global House Of Cards

Paul Craig Roberts

As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy.

So why has Japan adopted the policy? Since the heavy duty money printing began in 2013, the Japanese yen has fallen 35% against the US dollar, a big cost for a country dependent on energy imports. Moreover, the Japanese economy has shown no growth in response to the QE stimulus to justify the rising price of imports.

Despite the economy’s lack of response to the stimulus, last month the Bank of Japan announced a 60% increase in quantitative easing–from 50 to 80 trillion yen annually. Albert Edwards, a strategist at Societe Generale, predicts that the Japanese printing press will drive the yen down from 115 yen to the dollar to 145.

This is a prediction, but why risk the reality? What does Japan have to gain from currency depreciation? What is the thinking behind the policy? An easy explanation is that Japan is being ordered to destroy its currency in order to protect the over-printed US dollar. As a vassal state, Japan suffers under US political and financial hegemony and is powerless to resist Washington’s pressure.


Will Russia and China Hold Their Fire Until War Is the Only Alternative?

Paul Craig Roberts

Obama’s September 24 speech at the UN is the most absurd thing I have heard in my entire life! It is absolutely amazing that the president of the United States would stand before the entire world and tell what everyone knows are blatant lies while simultaneously demonstrating Washington’s double standards and belief that Washington alone, because the US is exceptional and indispensable, has the right to violate all law.

It is even more amazing that every person present did not get up and walk out of the assembly. The diplomats of the world actually sat there and listened to blatant lies from the world’s worst terrorist. They even clapped their approval!

The rest of the speech was just utter bullshit: “We stand at a crossroads,” “signposts of progress,” “reduced chance of war between major powers,” “hundreds of millions lifted from poverty,” and while ebola ravages Africa “we’ve learned how to cure disease and harness the power of the wind and the sun.” We are now God. “We” is comprised of the “exceptional people” –Americans. No one else counts. “We” are it.


Insider Trading and Financial Terrorism on Comex

Paul Craig Roberts and Dave Kranzler

July 16, 2014. The first two days this week gold was subjected to a series of computer HFT-driven “flash crashes” that were aimed at cooling off the big move higher gold has made since the beginning of June. During this move higher, the hedge funds, who typically “chase” the momentum of gold up or down, built up hefty long positions in gold futures over the last 6 weeks. In order to disrupt the upward momentum in the price of gold, the bullion banks short gold in the futures market by dumping large contracts that drive down the price and make money for the banks in the process.

As we explained in previous articles on this subject, the price of gold is not determined in markets where physical gold is bought and sold but in the paper futures market where contracts trade and speculators place bets on the price of gold. Most of the contracts traded on the Comex futures market are settled in cash. The value of the contracts used to short gold and drive down the price is well in excess of the actual amount of physical gold that is kept on the Comex and available for delivery. One might think that regulators would pay attention to a market in which the value of contracts outstanding exceeds by several multiples the amount of physical gold available for delivery.


Market Manipulations Become More Extreme, More Desperate

Paul Craig Roberts and Dave Kranzler

In two recent articles we explained the hows and whys of gold price manipulation. The manipulations are becoming more and more blatant. On February 6 the prices of gold and stock market futures were simultaneously manipulated.

On several recent occasions gold has attempted to push through the $1,270 per ounce price. If the gold price rises beyond this level, it would trigger a flood of short-covering by the hedge funds who are “piggy-backing” on the bullion banks’ manipulation of gold. The purchases by the hedge funds in order to cover their short positions would drive the gold price higher.

With pressure being exerted by tight supplies of physical gold bars available for delivery to China, the Fed is growing more desperate to keep a lid on the price of gold. The recent large decline in the stock market threatened the Fed’s policy of taking pressure off the dollar by cutting back bond purchases and reducing the amount of debt monetization.


Why is the Fed tapering?

Paul Craig Roberts and Dave Kranzler

On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.” In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.

As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down today (January 30, 2014).

When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded.

But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened: 8:21AM: 1766 contracts sold, 8:22AM: 5172 contracts sold, 8:31AM: 3242 contracts sold, 8:47AM: 3515 contracts sold.

Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including yesterday’s Comex trading session.


The Hows and Whys of Gold Price Manipulation

Paul Craig Roberts and Dave Kranzler


United States Gold Depository, Fort Knox, Kentucky. - An
Impregnable Fortress?
(Image: University of Kentucky)

The deregulation of the financial system during the Clinton and George W. Bush regimes had the predictable result: financial concentration and reckless behavior. A handful of banks grew so large that financial authorities declared them “too big to fail.” Removed from market discipline, the banks became wards of the government requiring massive creation of new money by the Federal Reserve in order to support through the policy of Quantitative Easing the prices of financial instruments on the banks’ balance sheets and in order to finance at low interest rates trillion dollar federal budget deficits associated with the long recession caused by the financial crisis.

The Fed’s policy of monetizing one trillion dollars of bonds annually put pressure on the US dollar, the value of which declined in terms of gold. When gold hit $1,900 per ounce in 2011, the Federal Reserve realized that $2,000 per ounce could have a psychological impact that would spread into the dollar’s exchange rate with other currencies, resulting in a run on the dollar as both foreign and domestic holders sold dollars to avoid the fall in value. Once this realization hit, the manipulation of the gold price moved beyond central bank leasing of gold to bullion dealers in order to create an artificial market supply to absorb demand that otherwise would have pushed gold prices higher. The manipulation consists of the Fed using bullion banks as its agents to sell naked gold shorts in the New York Comex futures market. Short selling drives down the gold price, triggers stop-loss orders and margin calls, and scares participants out of the gold trusts. The bullion banks purchase the deserted shares and present them to the trusts for redemption in bullion. The bullion can then be sold in the London physical gold market, where the sales both ratify the lower price that short-selling achieved on the Comex floor and provide a supply of bullion to meet Asian demands for physical gold as opposed to paper claims on gold.

The evidence of gold price manipulation is clear. In this article we present evidence and describe the process. We conclude that ability to manipulate the gold price is disappearing as physical gold moves from New York and London to Asia, leaving the West with paper claims to gold that greatly exceed the available supply.


Manipulations Rule The Markets

Paul Craig Roberts

What American “democratic capitalism” has brought to the world is manipulated financial markets and the absence of democracy. How long this game can play depends on the outside world.

The Federal Reserve’s announcement on December 18 that beginning in January its monthly purchases of mortgage-backed financial instruments and US Treasury bonds would each be cut by $5 billion is puzzling, as is the financial press’s account of the market’s response.

The Federal Reserve conveys a contradictory message. The Fed says that improvements in employment and the economy justify cutting back on bond purchases. Yet the Fed emphasizes that it is maintaining its commitment to record low interest rates well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the [Open Market] Committee’s 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The last sentence in the quote states that the Fed does not regard its announced reduction in bond purchases as less accommodation or as a move toward tightening. In other words, the Fed is saying that tapering does not mean less accommodation.

To put it another way, the Fed is saying that the economy is doing well enough not to require the same amount of monthly bond purchases, but is not doing well enough to stand any change in the near zero nominal federal funds rate. The implication is that the Fed either does not think that a reduction in purchases will result in a rise in long-term interest rates or that such a rise will not derail the economy as long as the Fed keeps short-term rates at or near zero. If the $10 billion decrease in monthly bond demand results in higher long-term interest rates, what good does it do to keep the federal funds rate at zero? If the $10 billion monthly bond purchases were not needed as part of the accommodation policy, why was the Fed purchasing them?


Gold Wars

Kelly Mitchell / Paul Craig Roberts

Introduction by Paul Craig Roberts: I do not know what role facts, evidence, or a desire to know the truth any longer play in American lives. This article confirms my experience as a scholar, journalist, public policy maker, and corporate director. The vast majority of people believe what they want to believe. Facts and evidence have little to do with it. People believe what serves their hopes and self-interests as they perceive their interests (often incorrectly) and what validates their emotional commitments. A select few can think independently, but their voices are usually drowned out.

To help those who are capable of independent thought, I am posting with permission the Introduction to a new book, GOLD WARS by Kelly Mitchell, from Clarity Press. I encourage you to order this book and to study it. American institutions are so corrupted that no leadership can rise from the political parties, media, corporations, or universities. We are on a many-faceted course of destruction. Leadership will have to come from non-traditional sources. Perhaps those who can think independently can produce the needed leadership.

The economics profession, Wall Street, and the financial media are committed to maintaining the status quo. There is no independent thought there. The voices maintaining the Matrix in which we live are far more numerous and loud than my voice and the voices of Michael Hudson, Herman Daly, John Williams (shadowstats.com), Mike Whitney, Nomi Prins, Pam Martens, Matt Taibbi, Gerald Celente, Dave Kranzler and the few others who endeavor to break people free of the false consciousness that blinds them to reality. “Free market” economists pretend that financial markets are efficient and do not need to be regulated. Kelly Mitchell shows us that financial markets are manipulated and serve narrow private interests at the expense of society.


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