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Chaotic price swings will be engineered to shake off gold investors
12:03p ET Saturday, June 6, 2020
Dear Friend of GATA and Gold:
A European friend well known to us who prefers not to fall under even more surveillance in his own country sends the observations below, for which your secretary/treasurer will take the responsibility of sharing with you.
His main point -- that huge volatility will be injected into the gold market to facilitate government intervention elsewhere in the world financial system -- echoes the cable sent from the U.S. embassy in London to the State Department in Washington on the eve of the creation of the gold futures market in New York in 1974.
... Dispatch continues below ...
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The cable noted the London embassy's consultation with bullion banks about the futures market and provided this evaluation:
"The major impact of private U.S. ownership, according to the dealers' expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison.
"Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens."
The cable can be read here:
http://www.gata.org/node/17081
Our friend's observations follow.
* * *
I've no real idea of who is doing what in the gold market, but the shenanigans in the last two weeks have all the hallmarks of a managed retreat by the forces seeking to control the metal's price.
Clearly Friday's U.S. jobs report was an exercise in trying to paint a picture of the possibility of a fast economic recovery, but I'm not sure it had huge credibility after its initial impact on the markets. The U.S. Federal Reserve and Treasury Department have a really big problem of needing to keep interest rates low while procuring massive new funds. A few weeks ago they got a 20-year bond away at a yield around just 1.22 percent, and the gold price was under pressure as they were doing it. That's no coincidence, in my view.
I think we now can expect gold to be attacked whenever a major government fundraising is being arranged or some big economic news is being presented. President Trump will support all this as he appears to be heading for defeat for re-election in November. Given his record, I imagine that the positive official spin on economic news will become even more remarkable.
Attacks on gold will keep investor interest in the monetary metal and gold-mining companies relatively subdued. It's much harder to maintain a position when prices are so volatile.
Gold investors expect that suppressing interest rates can be successful only if vast amounts of dollars are created and that it is impossible to do this without gold going much higher, especially since official gold holdings have been depleted by years of price suppression. I would never rule out a gold revaluation or debt jubilee as some have suggested.
But to quote Clint Eastwood in "The Good, the Bad, and the Ugly," where he talks about the stash of buried gold just before the final shootout, "We are going to have to earn it."
Gold investors should expect chaotic swings in prices in the next few years unless or until gold returns to anchoring the monetary system. But the underlying trend should be up, up, and away.
These are very strange times.
* * *
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
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