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Sellers Sabotage Gold’s Celebration

By Rick Ackerman Posted on June 8, 2009, 12:01 am EDT Last Updated June 8, 2009, 4:13 pm EDT

The guy in the picture spent the weekend shuffling around the pedestrian mall in Boulder, Colorado, but he should try hanging out in front of the COMEX in New York if he’s serious about buying gold and silver cheap.  It was there on Friday that bullion was not merely “unwanted,” but positively despised. Exchange traders couldn’t dump the stuff fast enough, judging from the way prices plummeted early in the session and barely bounced for the remainder of the day.  When the dust had settled, August Gold was sitting at 957.50, down 24.80. July Silver got hit nearly twice as hard in percentage terms, diving 64 cents, or 4 percent, to close at 15.25.

gold-buyer

Some attributed the selloff to disappointment over gold’s inability to push above $1000 last week after hovering briefly above $990.  In that regard, we must confess to have been somewhat disappointed ourselves, since we had predicted a surge to at least $1008, followed by a quick consolidation, then a follow-through to $1066. Now it looks like we’ll have to wait. But for how long? Our suspicion is that the sellers got some help from Friends on High. Although we’re not big on conspiracy theories, it seems doubtful that disappointment alone could have accounted for the drubbing bullion received on Friday as it revved up for a move past $1000 that had seemed a foregone conclusion. It felt more like a shot across the bow – a warning to any speculators who fancy themselves getting rich effortlessly as they dance on the dollar’s grave.

A Resurgent Dollar?

Not on Friday, though, they weren’t. The U.S. Dollar Index recorded its biggest one-day leap in months, rising 1.24 points to end the day at 80.67. We can’t say we were surprised by this, even if gold’s weakness caught us unawares. Rick’s Picks has been tracking the NYBOT Dollar Index dollar very closely since May 29, when it broke beneath a key Hidden Pivot support at 80.04. That appeared to contradict our deflationary scenario of a strengthening dollar, a globally unexpected event that would have the effect of putting many debtors deeper in the hole. Still, we didn’t give up on the dollar when it cracked the support and fell thereafter to a so-far low of 78.33. Now, with Friday’s rally, the dollar warrants even closer scrutiny, since an emerging, bullish trend could have grave implications for all who owe dollars. We’d need to see one more push, however, before we infer that a major trend reversal might be in the works. Specifically, the Dollar Index will need to hit 81.43 by Tuesday. We’ll be watching closely, so stay tuned.

***

Calling All Traders…

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  • Rajesh Thakkar June 9, 2009, 5:49 pm

    Rick,
    I want to know what will be the effect on Gold price( short term & Long term) if USA support IMF Gold Sale? Where we see the prices if IMF sells 403.3 metric tons of Gold?

  • Gerald Clifton June 9, 2009, 3:14 am

    Chris (and Rick), in 1982, I wrote a letter to the White House (then occupied by Ronald, “Teflon,” Reagan). Gold, at the time, was trading around $400-$500 per ounce. I suggested exactly what Edelson (apparently — I haven’t read his musings and am inferring second-hand) posits. Why not simply book gold at, say, $250 (I went low, for the sake of rhetorical credibility), and book the $200 overage as an asset increase at the Treasury? Free money.

    I received a polite letter two weeks later, thanking me for being a responsible citizen and trying to help. Letters to the White House seldom get to the White House (big surprise, there!), and if they did, they would contribute to the annual Christmas bonfire.

    About a dozen years later, political and monetary authorities were boasting of balanced budgets and disappearing deficits, WITHOUT re-valuing gold.

    The message? We don’t need no stinkin’ gold to help with the national debt obligations. We got paper. And we can control paper.

    Let me tell you all a little story about Larry Edelson. I used to subscribe to his service, via Martin Weiss, back in the “dark abysm of time.” The time was mid-2001. He sent out one of his urgent market alerts. “SHORT SILVER,” was the message. As always, the peripatetic Mr. Edelson (world traveler, savant, and a candidate for the “most interesting man in the world” — did/does he enjoy Dos Equis??) was in exotic climes. This time, in China, Thailand, and Malaysia. “Silver is trash here in the East,” he wrote. Buy gold for the coming apocalypse. “Asians give silver away, literally, for whatever cash or trading value they can get for it, ” wrote Edelson. Next came the technical drivel. “Silver is making a temporary top” (according to my charts, he was referring to the right shoulder of a massive head-and-shoulders bottom), and “…should be shorted down to under $2.50.”

    The price, at that time? $4.20. Yeah. Four bucks and change. The technical and “fundamentals” expert says short silver at four bucks and change. I canceled my subscription, explaining why. You cannot be bullish on gold and bearish on silver. You can take a market stance on ANYTHING, in any direction (it is a free country), BUT IT HAS TO MAKE SENSE.

    The last time I read an Edelson recommendation was 2 years ago. He recommended buying silver. At $15+. That is right. Short it at four bucks, but buy it at fifteen.

    Be very, very careful about choosing your gurus.

    Good luck, everyone.

  • Gerald Clifton June 9, 2009, 2:46 am

    Gold, right now, is overbought and over-hyped. Gold is in a tremendous long-term bull market (a 2-year double bottom, in 1999 and 2001), and there is no sign of any let-up in the long term trending metrics. But (India or not — there are other reasons besides India that gold EVERY year, during this bull, takes a breather roughly June-August) this is a weak seasonal period, and I do NOT think a gold pause right here need be cause for alarm or cause for crying, “foul.” It is a normal occurrence for the bullish hysteria to peak in March-May, and for the weak holders who bought the hype to be shaken out.

    Instead of whining about manipulation, you all should be in enough cash to be able to comfortably buy the dips, as the gold markets (or any other markets) give them to you.

    You can win a coin flip anytime, but you cannot make money flipping coins all the time. Right now, gold is in a soft period, with the golden asses braying (’tis the season when bulls morph into asses…). Going long here is equivalent to flipping a coin, and hoping you are one-time right. I do not think that this current correction will go deep, but gold could simply meander around for a couple of months between 920 and 980, with (perhaps) occasional stabs beyond those points. Major support is at 930, and major resistance is now at 990.

    Rick, you, of all people, disappoint me here. You switched from your dispassionate reliance on technical metrics to join the narrative of the braying fools. Your “hidden pivots” are time-tested and have been amazingly accurate. But NO “magic numbers” can tame this animal ALL THE TIME. Sometimes there are just too many cattle in the pen, and somebody has to open the gate and thin out the herd. THEN we can continue this magnificent bull market in gold.

    I am a bull, concerning things gold, if you haven’t figured that out by now. But, as a trader, I get worried when I start waking up every morning to thundering hooves in my living room and bullshit on my carpet. Give it a rest. Let the market do its thing, and buy the dips. Mooooooo.

  • Rich June 8, 2009, 9:52 pm

    Aloha All

    Maybe the only guy here who thinks gold and silver going down further before they go up. Nothing like living on a island. Meanwhile, T bonds may bounce big after $65 B come to market auction this week.

    Collapse of Credit and M3 due to shadow bank and securitized defaults with rising interest rates may suck all liquidity out of the 1000% Fed increase in currency in circulation over the last year. Pushing on a string: Pull my finger;

    So-called rising bank loans a onetime artifact caused by financing takeovers of failing Bear, Merrill, Wachovia, WaMu et al. Nothing to do with two thirds of the economy: collapsed pensions, foreclosed, tapped out, underpaid, unemployed, uninsured, repo’d aging baby boomer consumers facing bills they cannot pay with rising cable, food, education, energy and healthcare costs of living.

    GDP down over -10% spells asset DEFLATION Depression friends, no matter what Goldman Government does. The invisible hand is bigger and stronger.

    Meanwhile, here’s some more entertaining evidence:

    Zorro CEO of the third largest life insurance company waited 8 years after gold quadrupled to buy $400 Million in gold, saying it did very well in Depression, may quintuple again from here and is not going down 95% like some of the stocks in their portfolio…

    Eye kid you not. Maybe it’s time to cash those policies in:
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aByZIkH6PwkI

    Just for the record, gold stocks went down with the market during the depression as they always have, because of margin calls. They did well just before gold was made illegal. We were on a gold standard with less government and more savings then. The 75% FDR devaluation of the dollar came AFTER the deflation, not before. We have not hit bottom yet, folks.

    We are having a margin call on the entire world economy, and people think gold will go up?

    Banker Rothschilds and Rockefellers know all financed assets eventually fall the amount they are financed. Why else would agents B, O and G do what they’re doing, saddling US into more debt and spending that got US into trouble in the first place?

    Giant fire sale takeover of America coming soon to a neighborhood near you. Read Biblical Joseph and the Pharaoh, Sabbatical or Jubilee if not clear. The borrower submits to the lender.

    For the guy who paid Larry Williams $5000 and wrote repeat comments why GoldilocksBears and the four largest traders are wrong: for $100,000 may show you another way of looking at things;

    Profits the best revenge. Up 547% on Baltic Dry Index closely-held stocks so far since December. Meanwhile enjoying hidden pivot points.

    Happy Regards,
    JubileeProsperity.com
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

  • Chris T. June 8, 2009, 9:02 pm

    [forgot this with prev. post]
    Rick, you are spot on about the Edelson article.

    >They cease all gold sales and instead, raise the current official central bank price of
    >gold from its booked value of $42.22 an ounce — to a price that monetizes a large
    >enough portion of the world’s outstanding debts.

    Let’s put some numbers to it just for fun. Forget total world debt, lets use just the total US federal liability, as per Richard Fisher of the Dallas Fed = +/- $100 Trillion (why focus just on current debt, lets use the discounted total liability to get a clean slate 🙂 while we’re at it ).

    Total world gold is about 150,000t (ever mined) or about $4.6 Trillion at $950/oz.
    If half of just the US debt is Edelson’s “large enough portion”, then (if we could get our hands on the total world gold) current official bank price would have to be increased by about 25,000% to monetize this $50T, or about $10,300.

    Now add to that total all private, and state and municipal US debt, plus total Japanese, German, Uk, French, Italian, and the rest of G20 etc debt, and reduce the effectively available Gold from 150,000t to a more realistic 35,000t, what price / oz is that?

    Mental methane, and just smelly enough for the central bankers to ponder, as Rick points out…

  • Chris T. June 8, 2009, 8:20 pm

    Keith:>

    >I was always taught that a manipulated market can only be manipulated in the direction
    >of the primary trend. No?

    You seem to be impliying that because “alleged” manipulation is counter to the primary trend, it really can’t exist / or be effective. However, assuming there is such a thing, where could the market be without that manipulation? That difference would be the measure of its effectivity.
    And, because the primary trend is still counter, perhaps this does show the truth in what you have been taught?

    >If it’s true that the bulls can call the bluff of the bears and take delivery of physical and >win the game then shame on the bulls.

    This takes time and its hard to “call the bluff”. Just look at the limit on monthly contract delivery to any one person. In Silver it is 1500 per month. Enities that would pool resources to severally take delivery would be accused of collusion/manipulation themselves. (as Nelson and Bunker were hunted by the crimex). And even if one entity had the wherewithal to keep doing this until COMEX is empty, they would also pull a Hunt on him. This is not new. They could call it a non-essential need (to protect the industrial user) and force cash settlement, they could increase the margins to more than 100% (been done), or they could pull an LME Nickel.

    Thus only very slow and steady withdrawals are possible.

    >What’s all this talk about naked shorting? What about the naked longs that speculate on
    >contracts with a small margin but do not the have the cash to deliver? Who’s to say one
    >is worse than the other?

    No one is saying that, manipulation is manipulation, and it is illegal apriori. As to the longs, again, see Nelson and Bunker. When they had sewn up only about 10% of the market, they were accused of manipulation. And they were hardly naked, they had Billions at their disposal, and actually WANTED to take delivery.

    When only 1, or at best 2, entities control a (net) short position equal to more than 50% of one year’s production of that commodity, that is manipulation.

    >The shorts may not have the gold but so what?

    Extend that line of reasoning to ETFs for a moment. It has been alleged by many, looking at the actual legal structure of the custodial agreements of GLD and SLV, that these ETFs, are, at least partly, naked. The amount of those naked shares represents an unmet demand for the physical stuff, either by the ETF having to buy, but not doing so, or the shares’ purchaser buying physical himself instead of paper. Had that demand for the PM actually been manifest in the physical domain, where would the price be today? It is hardly possible to think that ALL demand for paper PMs would have poofed away, if the paper form were not available. Some yes, but not all.

    > The longs aren’t willing to cough up the cash.

    Where are the long defaults that prove they are unwilling to cough up the cash?

  • Harleydog June 8, 2009, 6:31 pm

    Rick,

    Just wanted to drop you a note agreeing wholeheartedly with your thoughts on deflation v inflation etc. It got me to thinking about an article (re: the monetization of debt via gold), here is the link below,

    http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996

    I came across a few months back by Larry Edelson over at Martin Weiss’s Money and Markets site. Any thoughts would be appreciated.

    HD

    &&&&&

    Nowhere in Edelson’s “plan” to I see even a word about what would happen to creditors. (In fact, they would be wiped out — along with savers as a class, global bond markets, and all other institutional conduits of saving.) Edelson apparently doesn’t understand what he is talking about. But C.V. Myers did, when he wrote the following: Ultimately, every penny of every debt must be paid — if not by the borrower, then by the lender.

    Get it? If debt is “wiped off the books,” it simply means that creditors have taken the hit. Personally, I don’t think creditors will go along with such a scheme. That doesn’t necessarily mean the geniuses at the central banks aren’t talking about it — only that one of them with an IQ over 70 is bound to raise an objection if he is able to follow Myers’ implied money trail.

    RA

    (((((((((((((((()))))))))))))))))

    Edelson’s “solution”:

    The G-20’s Secret Debt Solution”

    It would be a strategy designed to ease the burden of ALL debts — by simultaneously devaluing ALL currencies … and re-inflating ALL asset prices.

    That’s what central banks and governments around the world are going to start talking about this weekend — a new financial order that includes new monetary units that helps to wipe clean the world’s debt ledgers.

    Only this time, it won’t be just the U.S. that devalues its currency. The world is too interconnected. Instead, the world’s leading countries will propose a simultaneous and universal currency devaluation.

    This time, they will NOT confiscate gold. There would be riots all over the globe if they even mentioned the “C” word.

    But they don’t have to confiscate gold. Here’s one scenario …

    They cease all gold sales and instead, raise the current official central bank price of gold from its booked value of $42.22 an ounce — to a price that monetizes a large enough portion of the world’s outstanding debts.

  • Chemical June 8, 2009, 5:23 pm

    Maybe they do it to keep the retail jewelry market from going under. It’s gone from what, 250 to 1000 this decade? What manipulation? Point being that they can knock the wind out of its sails, but they can’t keep the ship from sailing. Just don’t expect moonshots overnight and you’ll be all right. Unless you’ve already bought all the gold you’re going to own in your life, please stop rooting for meteoric leaps so us little guys get a chance to build our positions. Enjoy these good ol’ days when gold is under 1000 for the last time in our lives.

  • tiburon June 8, 2009, 2:06 pm

    JP – you have a point – the momentum implicit in a revisit to $1050 will require a move so egregious that even the most sanguine commentators will must take note.
    I tend to believe they hope for a steady upward ‘creep’ in nominal price, averaging say 13%/annum at most, as AU has done consistently against most world currencies over the last decade. This will placate sovereign funds and allow steady security accumulation by the monied interests medium term, against the inevitable Grand Fall and K-Winter. Barring Black Swans, of course. And if wrong, well, “back up the truck” still holds in my estimation, regards physical. Gold, is Money.

  • Tahoe Billy June 8, 2009, 1:53 pm

    I guess what I am asking is this, if the Fed claims “unlimited liquidity” (which they have) to fight recessions, what do they have in the arsenal of weapons against a rising price of gold, “unlimited manipulation”? I mean aren’t they really same issue? Make fiat currency number one at all costs against gold? The never really bother explaining to the public just how much money they print and maybe they don’t bother at all explaining how much gold they control?

    Bill

  • jp June 8, 2009, 11:47 am

    perhaps the “cabal” understands that if the train pulls out at $1050, it will have enough steam that they CAN’T stop it…

  • Steve Jaray June 8, 2009, 11:13 am

    just a little pullback…we should see $1000 gold very soon. (by mid week?) It was too easy last week. Now that everyone is dumping the metal it will surprise ppl this week and rally “in anticipation” of more QE/dollar weakness and higher long end rates…

  • Terry S June 8, 2009, 6:22 am

    “Who can explain it, who can tell you why…fools give you reasons, wise men never try! ” (Some Enchanted Evening, South Pacific)

  • Chris T. June 8, 2009, 5:51 am

    You write:
    “that the sellers got some help from Friends on High. Although we’re not big on conspiracy theories”

    And the previous comment adds to that.

    Within the rise of AU over the last some years, there have definitely been constellations/patterns/etc which the vario,us technical analyses would identify as important. One did get to see interesting down-moves there. That is where any manipulation would be used, for max. effect. A psych. important mark, such as 1000 fits there as well, if only to keep Newsweek, Time, CNN, general MSM from headlining this (again).

    More power to them, lets clean more weak hands out, and allow stronger ones to load up at great prices.

    As to conspiracy: A conspiracy is secrect, hidden, and not in the open, and its existence can at best be inferred from certain results, and factual incongruencies with proffered mainstream analysis of those events/results/

    With the PM, it is not secret, it has been in the open for years, Greenspan admitting to a willingness to manipulate, and Volcker bemoaning the fact he didn’t do it back when.
    The work of GATA provides enough evidence from public sources to prove the manipulation, thus it is not consparicist to believe in such official actions.

  • Keith June 8, 2009, 5:19 am

    I’ve thought of the same question myself. I think the gold manipulation theory is very believable but it isn’t without it’s shortcomings. I was always taught that a manipulated market can only be manipulated in the direction of the primary trend. No?

    If it’s true that the bulls can call the bluff of the bears and take delivery of physical and win the game then shame on the bulls. They are way too timid to ever win the game. What’s all this talk about naked shorting? What about the naked longs that speculate on contracts with a small margin but do not the have the cash to deliver? Who’s to say one is worse than the other? The shorts may not have the gold but so what. The longs aren’t willing to cough up the cash.

  • Tahoe Billy June 8, 2009, 1:58 am

    Rick,

    I have been following your site for quite some time. Here’s the deal-if there is a cabal against rising gold prices then I suggest that they would be at least wise enough to cause something truly demoralizing. Wouldn’t that be to allow gold to final bust it’s double top, above $1050 or wherever, and then cause it to drop like a rock back below $950? If they have the power to really make a lasting presence felt, then wouldn’t that be the blow they would want to delivery? And if what I say is logical, then wouldn’t you want to consider the unconsiderably of that exactly happening.

    It is logical that gold is highly manipulated. if they wanted to clean everyone’s clock and keep the dollar the reserve store of value, they would let it dramatically rise above the double top before killing the party. No?

    Bill


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