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Bill Murphy: Is this the Gold Cartel's end game?
By Bill Murphy, Chairman
Gold Anti-Trust Action Committee Inc.
The Silver Summit and Resource Expo 2015
Park Central Hotel, San Francisco, California
Tuesday, November 24, 2015
First I would like to thank Haywood Securities for the gracious reception last evening.
Right around the turn of the century (sounds like a long time ago) I toured the South African countryside on behalf of GATA. It was in early 2001 ahead of GATA's conference in May that year. It was quite a journey as it took me to Cape Town, Johannesburg, Pretoria, and then Durban, where the conference was to be held.
I will never forget it as it was GATA's first trip abroad to expose the gold and silver price suppression scheme.
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During that trip GATA supporters in Cape Town raised the equivalent of $50,000 to put an ad in the newspaper that is the Wall Street Journal South Africa. It was published during the internationally attended Indaba gold conference there. In that ad we decried hedging practices used by Barrick Gold and AngloGold that were major factors suppressing the gold price at the time. The ad caused quite an uproar.
Years later Barrick and AngloGold took losses of around $17 billion on their hedges, which severely affected their share price.
During my trip I met with the CEO of South African Airways and the second and third top executives at the South African Reserve Bank in Pretoria.
The South African Broadcasting Co. covered GATA conference, right at a time when gold was making multi-year lows right around $252 an ounce. Representatives of five nations attended.
After hosting two other conferences -- in the Yukon Territory and Washington -- GATA held its most recent conference at the Savoy Hotel in London in August 2011. It sold out with attendees from 39 countries.
A month later the price of gold topped out at $1,900.
Now there is a reason for rehashing this.
From our first conference when gold was at its bottom, to one month after our last conference, the Gold Cartel -- the Fed, U.S. Treasury, Bank for International Settlements, bullion banks, and a few other central banks -- allowed a managed retreat in the price of gold. It went up gradually for 12 years in a row.
Then in September 2011 everything began to change.
The Gold Cartel went from managed retreat mode to maniacal attack mode, which included a $200 bombing over a long weekend period in April 2013, engineered when few traders were around.
This attack mode went on steroids close to six weeks ago following release of Federal Open Market Committee minutes, an attack in which gold and silver were slaughtered while the Dow rose 200 points on the same interest-rate news. The Gold Cartel did its thing while the Plunge Protection Team did its thing.
That day I was giving a presentation at the New Orleans Investment Conference when the gold price was $1,175. Until that day the open interest in gold on the Comex (an equal number of total long and short contracts) was soaring as the gold price had been getting pounded. It was clear the Gold Cartel was doing the selling. It was becoming clear that the situation for gold and silver was hopeless until the Gold Cartel blew up.
On the day of my presentation the cartel orchestrated a normally bullish outside day reversal to the upside. It was a sucker trap. The price of gold then fell $110, going straight down over the weeks ahead. During this period silver went down an unprecedented 15 days in a row.
The intensity of the daily selling had "Gold Cartel" written all over it. As a result of what the cartel has done over the last four years, the gold and silver mining industry is reeling with major producers suffering and many junior minors and exploration companies on life support. Those of us who have invested in these firms know that all too well.
So much for the bad news.
This presentation is about some potentially very good news, which has a high probability of kicking in over the not-too-distant future.
But first, let me step back a bit.
Following my presentation at the New Orleans conference, some word was spread that GATA was giving up. Nothing could be further from the truth. It was just that we were being realistic about what was going on:
1. What was so blatant about the price action, which looked so hopeless.
2. For 17 years most of the mainstream financial news media have refused to give GATA the time of day no matter what evidence of market manipulation my colleague Chris Powell sends them. For example, the veteran gold reporter for Bloomberg News told us to our face that she is forbidden to mention GATA.
3. The gold and silver mining industry refuses to deal with the farce that is destroying it. The supposed spokesman for the industry, the World Gold Council, won't have anything to do with GATA.
Still, GATA is continuing to pound away to get the truth out, but with changed expectations, which I will mention shortly. Quitting is the furthest thing from our minds.
But first, here is what we know about the gold market over the past four plus years
-- No amount of quantitative easing anywhere in the world has done the price of gold any good.
-- Neither have near-zero interest rates.
-- Nor has enormous physical demand from India and China.
-- Nor the staggering debt in the United States.
-- Nor a race to the bottom in many currencies.
The Gold Cartel has been able to mobilize enough physical gold, via the central banks and other sources, to meet demand. Yes, the shenanigans in the paper/derivatives market set the market tone, but at the end of the day the PM Fix in London is how 90 percent of physical market transactions are priced. If the paper market was totally phony, the physical market would force a phony lower paper market to be rejected.
As for the silver market, the smartest people in our camp can't figure out where the Gold Cartel and JPMorgan are coming up with enough supply to meet demand. Silver has been the heaviest-acting market that I have seen in 40 years. It trades as if it has an anchor around its neck.
The paper-market selling of gold and silver of late has been the most intense we have seen on a day-to-day basis over the last 17 years. So much so that the Gold Cartel is turning the normally bullish speculators into shorts because of the one-way easy trade so far while the cartel's members themselves are covering their own short positions. Gold recently broke $1,073, a multi-year low, which has the spec shorts and other market bears encouraging more rallies to be constantly sold.
So where is the good news in that?
The GATA camp has long wondered what the Gold Cartel's end game would be for the gold and silver price suppression scheme -- how they would be able to come up with enough physical supply to keep that scheme going. Because of this scheme, both gold and silver have been taken to artificially low prices. If the price of gold had just kept pace with inflation in the United States, it would be over $2,500 an ounce.
These artificially low prices of late will not stand. The Gold Cartel is going to hit a tipping point some time when they will be unable to carry on.
There is a strong possibility that this tipping point is near and they know it, which is why their day-to-day selling has gone into overdrive. Perhaps recognizing that their day of reckoning is not far off, the Gold Cartel could be concluding their four-year-plus orchestrated takedown. If that is so, the best way to accomplish their goal would be to make the short side trade so obvious, so easy to make money on, that it would turn the specs very short, maybe the most in history, while cartel covers more of its own short positions.
Some in our camp have been calling for the end game to happen with a reset in the West in which the prices of gold and silver go sharply higher overnight. That sort of reset would cause catastrophic losses for many shorts and put the Comex in jeopardy, which would have repercussions for other financial markets dealing in futures. But if a reset is ever to occur, the Gold Cartel would want its camp to be the least short possible, preferably even long. As the latest commitment-of-traders report shows, the commercial traders, many of them in the cartel, have already gone from extremely short to virtually flat, which is extremely unusual.
A reset could cause huge problems. Yet what we are seeing of late could also be setting up something else, which could do a lot to solve any developing physical supply issues, at least over the short term. That is to continue to get the specs as short as they have ever been and then drive the prices of gold and silver up sharply over a brief period for some highlighted reason -- similar to driving the price of gold down $200 over that long weekend in April 2013. That move wiped out many spec longs but the Comex survived. It was manageable.
What is critical to appreciate is that if the Gold Cartel is going to solve some looming physical market issues, any sort of action would have to be swift and violent. For a gradual move up would just cause the specs to cover their shorts and go long again, just as before that release of the Fed minutes. That is the way the precious metals markets have always worked. There is no reason for that to change now.
Yes, suddenly sharper higher precious metals prices would encourage retail buying in the West, but it ought to crush Chinese and Indian buying, as the Chinese and Indians like to buy dips and are loath to chase the markets. And after what has happened to the precious metals in recent years, suddenly higher prices probably would also attract a fair amount of normal hedging.
Now the Gold Cartel could make such a raid just a short-term trade and go tight back to what they have been doing. Or it could lead to that end game, with gold and silver soaring, if only to where they should have been in the first place.
Most important to appreciate is that it wouldn't happen because the cartel wanted it to but because the cartel was forced to let it happen given the worsening limits of the physical market. Obviously the gold and silver scene would change overnight should anything like that scenario happen. And yes, we would like to watch it happen. But this just could be an explanation why the Gold Cartel has gone into such intense selling mode every day lately. Something very strange is going on.
Predicting this sort of dramatic move and jumping up and down about it would be the kiss of death. So let's just leave this as a reasonable possibility, an exciting one. If it does occur, there will be a lot more smiles on our faces the next time we see each other.
And that leads us back to where GATA is likely to make its most impact in the years ahead, beyond what we have accomplished so far, as when a federal judge ordered the Federal Reserve Board to pay GATA $2,800 for refusing to let GATA see one of the Fed's gold records when we sued the Fed. A copy of that check is posted at GATA's Internet site here:
http://www.gata.org/files/FedCheckLegalCosts.jpg
Regarding the gold and silver price suppression scheme, We have come to realize that you either "get it" or you don't. Of course there is a middle ground occupied by those who simply do not want to hear about it, a "cognitive dissonance" because GATA has taken on the richest and most powerful interests in the world, and who wants to confront them?
And then there are those who disparage us because they are apologists for those doing the dirty deeds.
But there is something coming because of what the Gold Cartel has done that will have to be dealt with and will be very hard for our naysayers to ignore.
Like it or not, the gold price is widely viewed as a measure of U.S. financial market health. The gold price is a thermometer that has turned dysfunctional thanks to the Gold Cartel. It does not work. When feeling very ill, would you want your doctor to take your temperature with a broken thermometer?
The gold price has been suppressed for planned reasons. Those reasons have to do with interest rates, the dollar, confidence in U.S. fiscal policy, etc.
That subject is an entire treatise itself, but suffice it to say gold price suppression went into high gear under U.S. Treasury Secretary Robert Rubin as the key to his "strong dollar" Policy. To achieve their goals the Gold Cartel has secretly rid central banks of much of their claimed gold reserves and has fleeced ordinary investors of their gold, gold that ordinary investors didn't take possession of, leaving their gold hypothecated and pledged over and over again, gold that investors think they have access to but will not when they try to retrieve it.
The rigging of the price of gold and silver is the lynchpin rigging operation that has set up all kinds of imbalances in the U.S. economy and led to other market manipulations to prop up our economy and financial markets. Everyone knows that our interest rate market has been manipulated and there is the Plunge Protection Team constantly propping up our stock market by buying serious dips. Then you have the bullion banks in the Gold Cartel getting fined for rigging interest rates, the currency markets, the energy markets, the mortgage markets, etc. In recent years JP Morgan alone has paid $30 billion in fines for rigging markets.
This rigging have led to a mirage that "everything is fine," as in that great line in the movie "The Stepford Wives." But the odds are that all is not fine behind the scenes. All this market manipulation is leading to serious chaos in our financial markets and economy when all this market management blows up.
When that chaos materializes, it is going to raise the question: How could this have happened?
About the same time, when gold and silver price suppression blow up, a new fear factor will have investors panicking to secure the gold and silver they think they own. Some of them will be turned away due to defaults and failures to deliver, and the ensuing scandal will be epic.
The public will not care much about gold and silver but they will be in an uproar as to how their financial well-being has been so suddenly compromised. They will demand answers from the press and elected officials.
The search for answers will lead to the rigging of the gold and silver markets. The mainstream financial news media will no longer be able to ignore the evil that GATA has been exposing all these years. The media will have no choice then but to air what we have had to say because the public will demand answers.
Then we will be heard then -- unfortunately too late for many. But our efforts will not be in vain since, once they are known, they may prevent a repeat occurrence for another generation.
In the meantime, for our generation, let us hope this really is the Gold Cartel's end game.
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