What's keeping the gold shares down, and what can we do about it?

Section:

8:13p ET Tuesday, April 10, 2012

Dear Friend of GATA and Gold:

Our friend R.S. asks:

"How can we find out how many illegal naked shorts there are on a given gold or silver mining stock? I see that no matter what -- market up, market down, gold and silver up, gold and silver down -- the miners never go up anymore. I own mining stocks. Many people I know own them. No one I speak to who has mining stocks is selling. As a result, I suspect illegal activity by the Federal Reserve, Wall Street, and investment banks. Also, is anyone taking action against these criminals? If there is, I want to participate in such a lawsuit."

Dear R.S.: As far as GATA knows, at present there is only one lawsuit targeting corrupt activity in the gold and silver markets, a class-action lawsuit in U.S. District Court for the Southern District of New York for which GATA consulted to the plaintiffs:

http://www.gata.org/node/10448

Other than GATA itself, a small, non-profit organization with no full-time staff, gold and silver investors and mining companies have no organization pursuing their interests, the World Gold Council (http://www.gold.org/), which has never said a word about improprieties in the gold and silver markets and the mining share markets, seeming to exist only to insure that there never is a world gold council.

... Dispatch continues below ...



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Of course regulation of the commodity and equity markets in the United States has ceased completely and those markets now are largely rigged through high-frequency trading, index futures buying, and naked shorting. While a select few gold and silver mining companies support GATA, most are too scared or stupid to stand up for themselves against the assault. So increasingly gold and silver investors may choose simply to avoid most paper instruments traded in the United States and instead obtain real metal and vault it outside the banking system and even outside the country.

We put your question to gold advocate and mining entrepreneur Jim Sinclair of JSMineSet.com and he quickly and kindly replied:

"There are more factors insulting the gold share group than illegal short sales, which, I believe, now make up only a modest amount of the short sales.

"Our greatest problems are the gold share and gold share index funds, which, to gain income, are lending their shares to any borrower in any amount for any time period the borrowers wish. Right now these funds are the greatest enemy of gold share prices, allowing legal shorting by hedge funds that will maintain their positions short until the market punishes them.

"There is little chance of a bull market in gold shares as long as the supply of borrow-able shares remains as high as it is.

"In short the culprits now are those investors who are long on margin and whose shares thus can be borrowed, as well as gold share funds and gold share index funds. The people who take the gold community's money to invest in their funds are screwing us all blue."

We also asked for comment from GoldMoney founder and GATA consultant James Turk, who replied: "I don't think there is any way to measure the number of naked shorts. We're operating today pretty much like the bucket shops of the 1920s that Jesse Livermore wrote about. Any firm willing to go naked short can do so. They just call it 'financial derivatives.'"

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

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