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Understanding gold begins with realizing that its market isn't normal
4:06p ET Tuesday, October 11, 2016
Dear Friend of GATA and Gold:
When he's not touting mining stocks in which he has invested, 321Gold's Bob Moriarty is assuring his readers that everything in the monetary metals markets is perfectly normal and that anyone who expresses contrary suspicion is not merely mistaken but stupid, a charlatan, and a scam artist.
So it is again with Moriarty's commentary published today at The Gold Report, "The Wolves Get the Golden Fleece as the Sheep Get Shorn One More Time":
http://www.theaureport.com/pub/na/the-wolves-get-the-golden-fleece-as-th...
"The gold and silver markets," Moriarty writes, "are filled with wolves that want nothing more than to get your money in exchange for feeding your fantasies. At every market low they are whining about how the bullion banks are manipulating the gold price and keeping it suppressed. At every high they are suggesting a Comex default is about to happen and prices are going to skyrocket. Or the market is about to have a 'commercial signal failure.' Of course they just made it up.
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"Comex can't default; there are provisions in every commodity market for cash settlement."
Yet legal as it may be, "cash settlement" is exactly what many people mean by a default -- the failure of a counterparty to deliver what was promised and expected. Moriarty knows very well that this is how his adversaries define default and indeed how the readers of his adversaries understand it.
If there were no provisions for cash settlement, Moriarty adds, "anyone with pockets deep enough could force every commodity market into failure."
Indeed, and anyone with pockets deep enough can control any commodity futures market. But Moriarty has not the slightest curiosity about the surreptitious intervention by governments and central banks -- which have the deepest pockets -- in the commodity futures markets, intervention documented by filings with the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission:
http://www.gata.org/node/14385
http://www.gata.org/node/14411
Moriarty continues: "We hear about how the shorts are into 'naked short selling' one more time even though there is no such thing."
Yet even the lowliest trader working out of his parents' basement can open a commodity futures trading account and, having posted a certain amount of earnest money, sell a contract for a commodity he doesn't and may never own.
"Some of these fools," Moriarty writes, "want to convince their readers that the central banks are behind a 'gold takedown,' but if you go to Google and put in 'central banks buying gold' you can find dozens of articles showing that, contrary to the con men, actually the central banks are buying gold."
Yes, a few central banks outside North America and Europe lately have reported buying gold. Most central banks lately have not reported buying gold, even as the Bank for International Settlements, the central bank of the central banks, recently reported reviving its gold swap operations and the director of market operations for the Banque de France, another central bank that has not reported adding to its gold reserves, told the London Bullion Market Association meeting in Rome three years ago that his bank is secretly trading gold for itself and other central banks "nearly on a daily basis":
http://www.gata.org/node/16704
http://www.gata.org/node/13373
That is, there is a lot more activity by central banks in the gold market than the occasional purchase announcements cited by Moriarty.
Moriarty goes on: "Yet another writer on one of those single-string banjo-playing web sites said he doubted the central banks had half the gold they claim, but through Google we now know that not only have the central banks been buying gold, they have been buying gold stocks with both hands."
But even the International Monetary Fund has admitted that central banks have done a lot of gold "leasing," which means that certain gold reserves are, to put it politely, impaired, and that doubts about those reserves are well-founded:
http://www.gata.org/node/12016
As for central banks "buying gold stocks with both hands," the most we can find on this point is Zero Hedge's report a month ago that two central banks, Norway's and Switzerland's, lately have bought gold stocks:
http://www.zerohedge.com/news/2016-09-08/switzerland-and-norway-begin-ma...
Maybe other central banks have bought gold stocks too, but if such purchases have been reported, GATA has missed them and maybe Google has missed them too. At least GATA is a little less credulous than Moriarty, as we concede that Google is not the final word, that Google doesn't know everything, in part because central banks don't tell Google everything.
Back to Moriarty: "One word the experts, the gurus, and all the other fools never use is 'correction.' All markets go up and down. It's the way of the world. A market enters a bull phase but it will correct. A market enters a bear phase but it corrects. If you are reading anyone taking about naked short sales or Comex defaults or gold takedowns and you never hear the word 'correction,' either the writer is a fool or you are. And in the greatest bull market in history, you are going to lose all your money because at the very top they are going to be telling you to buy."
But Moriarty is the one always telling people to buy -- to buy the stocks he already has bought.
Fools and charlatans as we may be, GATA is telling people that 1) central banks have been surreptitiously manipulating the gold market for longstanding policy reasons involving the defense of their currencies and bonds, manipulating markets so much lately that it's barely surreptitious anymore; 2) that this manipulation is destroying market economies and doing great injustice around the world; 3) that justice, if and when it comes, will be a cosmic correction made endurable only by a form of money without counterparty risk, the ultimate money, the money whose market central banking has always sought to control -- gold; and 4) there is no understanding the gold market and the world financial system generally without discerning what central banks are doing with the gold market -- that the gold market is not the normal market Moriarty likes to imagine.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
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