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Ed Bugos: When everything else is manipulated, why not gold too?
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Gold Market Summary for Friday, August 27, 2004
By Jim Sinclair
www.JSMineset.com
Just minutes before the close "Millennium" awakened
in the gold crowd on the Comex floor, and, reputed to
represent Goldman Sachs, offered thousands of gold
contracts from slightly over $405 down to slightly
over $404.
Morgan was quiet today, having some small sales
early on in the session. Funds came into Millennium's
offering as buyers starting at 1:14 p.m. and took gold
up to slightly above $405 at 1:28. A few long day
traders closed out by selling, making the final trades
at 1:30 as the bell rang and everyone went home for
the weekend.
You see how the Exchange Stabilization Fund (ESF)
via a COT international investment firm can work to
try to demoralize the gold longs. However, keep in
mind that the dollar runs gold, not the Comex.
The ESF, better known as the lackey of the U.S.
Treasury, is too undercapitalized to have any meaningful
effect on the U.S. dollar price except for the smallest
time on an intra-day basis.
The play is to come in late in the U.S. trading session
for gold on a dollar-up day (gold-down day) and attempt to
paint gold bearish.
Now that you know the ESF is the prime lackey of the
U.S. Treasury, you have nothing whatsoever to fear. If you
think they can kill us, take a walk, meditate, and then
let's talk.
The Exchange Stabilization Fund in Detail
Market fear of the ESF and COT is fear of the things in
your closet when the lights are out.
1. The U.S. dollar runs gold; the Comex doesn't.
2. The ESF is not a fund.
3. The ESF is capitalized outside of the U.S. Treasury.
4. The ESF can legally trade gold, U.S. securities, and
any U.S. indexes, be they stock, commodity, or, for that
matter securities.
5. According to the U.S. Treasury, the ESF consists of
three types of assets: U.S. dollars, foreign currencies,
and Special Drawing Rights (SDRs). Currently the ESF has
about $38 billion in these three assets.
The ESF can be used to purchase or sell foreign
currencies, to hold U.S. foreign exchange and Special
Drawing Rights assets, and to provide financing to foreign
governments. All operations of the ESF require the explicit
authorization of the secretary of the treasury.
The secretary is responsible for the formulation and
implementation of U.S. international monetary and
financial policy, including exchange market intervention
policy. The ESF helps the secretary to carry out these
responsibilities. By law, the secretary has considerable
discretion in the use of ESF resources.
The legal basis of the ESF is the Gold Reserve Act of
1934. As amended in the late 1970s, the act provides in
part that "the Department of the Treasury has a
stabilization fund. Consistent with the obligations of
the government in the International Monetary Fund (IMF)
on orderly exchange arrangements and an orderly
system of exchange rates, the secretary with the
approval of the president, may deal in gold, foreign
exchange, and other instruments of credit and
securities."
6. I have repeatedly requested under the freedom-of-information
law copies of the quarterly report of the ESF to the Senate
Committee on Banking and Finance, as it is not classified
material, but I have been refused and on occasion simply
ignored.
7. The "Anti-Meltdown Team" is a kind of a myth. It does
not exist in the form most conspiracy theories present it.
Rather it is the ESF that buys the U.S. index futures prior
to the U.S. market opening in order to prevent an equity
market that, for example, dropped the DOW by 152 points
on a Monday to do anything but open up $10 above cash
parity on, say, Tuesday. All the activity is done on the
peanut volume pre-New York opening in euro trading. Let's
call this the prepping of market psychology.
8. The nature of the ESF in dressing up or down activities
is to make their plays in illiquid indexes so as to get the
best window dressing bang for the buck. In the U.S. dollar
they mess with the USDX to influence the huge dollar
market, which they cannot screw with unless they are
willing to expend their cashto zero and then fail. This
explains the famous ESF footprint in the USDX.
The $38 billion the ESF has is not available for market
plays. Much of the capital is already committed. Even if
all was pure cash, $38 billion could not significantly
influence a trend reversal in the U.S. dollar market that
trades in the cash market on an active day $1.2 trillion
and on a regular day $900 billion, according to the
published statistics of the International Monetary Fund.
I estimate from a review of the ESF's published balance
sheet that no more than $2 billion can be used to play
markets.
I find nowhere that this fund has a legal right to borrow,
top margin, or hypothecate assets to raise cash. I see
nowhere that the ESF has the legal right for additional
funding without congressional OK.
So today you saw the ESF in action clearly near the
close of the Comex open outcry session. You also now
know their Achilles heel.
Here is how it works. A partner of one of the major
international investment firms that trades bonds with the
New York Fed has received instructions to keep a lid on
gold and has chosen a price of $410 as the present max.
But it is clear from the way the order was handled and
then canceled that this lid is undercapitalized for the job
and respects the action of the U.S. dollar.
Anyone offering thousands of contracts of gold on the
Comex for sale within minutes of the close is attempting
to depress price and not really attempting to sell thousands
of contracts. All of a sudden, funds step in as buyers and
the seller is nowhere to be found in all those thousands
of contract that were being offered just moments ago.
The international investment bank covering, I suspect,
represented Morgan's previous buying and is for the same
account, the ESF. By that covering a company like
Goldman Sachs can come in and make the boisterous
offering when it perceives a pocket of gold weakness.
The ESF is simply an account. They can legally do what
they want. It would be against the law only if the
companies handling their orders knew in advance and
therefore prepared the game and trades beforehand. Of
course we know they did not.
Remember your mantra: As goes the U.S. dollar, so goes
gold in the inverse.
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
Subscription site:
http://www.lemetropolecafe.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
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www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com
Colorado Gold
222 South 5th St.
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www.ColoradoGold.com
Don Stott, Proprietor
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Gold@gwe.net
El Dorado Discount Gold
Box 11296
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Harvey Gordin, President
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Mobile: 602-228-8203
harvey@eldoradogold.net
Investment Rarities Inc.
7850 Metro Parkway
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http://www.gloomdoom.com
Greg Westgaard, Sales Manager
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Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
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Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
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www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
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1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
----------------------------------------------------
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