THE DIRTY SECRET BEHIND THE GOLD MARKETS
Gold
As I have stated before, the Rand is the best performing currency in the world and yet the press has hardly even mentioned this, I have been bullish on it since Nov 2002 when the rate was 14 Rand to a dollar. Now it's somewhere in the 7 dollar range. Yet gold is not appreciating much in terms of the Rand. Look at chart below. What is gold trying to tell us?
We have two possible scenarios
Either gold breaks out in terms of Rand or the Dollar gains strength, while the Rand depreciates and so Gold falls in terms of the US dollar while appreciating in terms of the Rand, which will benefit South African Gold stocks.
The second scenario is that Gold actually breaks out in terms of the Rand and then we have a ballistic breakout in terms of the dollar because even though it looks overbought in US dollars, the movement so far has simply been a currency adjustment move. The stronger currency, which is gold, is appreciating against the weaker currency, the Dollar. This move has not been universal.
We believe that the dollar will put in an important low very soon and actually start to rally short term. Long term it is in a pronounced bearish trend; and as a result, gold will consolidate as the dollar gains strength and rates drop, primarily Gold shares, I do not see bullion correcting significantly..
We also believe that bond market is close to putting in a short-term meaningful bottom and dropping rates are usually Gold's nemesis. These falling rates will only be a short-term aberration and I believe long term we are destined for hyperinflation.
The above chart is a 3-year chart of Gold priced in terms of the South African rand. What a different picture to the chart with gold priced in dollars. Here you can clearly see how the dollar has been getting hammered to death, how the Fed is simply hyper-inflating the currency to untold insane levels. One again, the definition of inflation is not an increase in prices but an increase in the monetary base. In other words increasing the supply of dollars, this way we have more money chasing fewer goods.
The powers to be have artificially kept the price of Gold and silver down by rigging these markets. The scam is simple. They lease the physical metal into the market and then Gold which is on lease is sold of . So in effect what they are doing is selling something they do not own at all. Approx 15-16 tones of gold are short the market. If they had to ever cover these shorts the price of Gold would literally go ballistic and many of the financial houses would be burned into the ground.
This is the insidious way the central bankers hide the destruction of the monetary system. If gold was left undisturbed, with the present level of inflation it should be well over 1000 dollars but instead it is at a paltry 388 dollars and this money that is spewing out of these crack driven printing presses is going straight into the real estate market. That is why everyone and his grandma is looking to invest in the real estate market, convinced this is the safest and best investment of the decade. Remember, when everyone starts saying it's a good deal, the time to run is very near at hand.
MY new friend, Gale, from www.pgtigercat.com writes a very good essay on this topic and it has also been published here http://www.financialsense.com/fsu/editorials/2003/0611.htm
You will find it very enlightening, and I suggest that you read it slowly and if you have time, read it twice.
The main vehicle of intervention is the Exchange Stabilization Fund; the name says it all. Why, why would you have to stabilize your currency if you had a sound currency? You only create such an entity when you know you have rotten currency and you need to keep deluding the world that your currency is as sound as it once was.
The ESF works in cahoots with the Federal Reserve Bank of New York and these rats work with the Big New York banks to provide an additional layer of camouflage in their desperate bid to hide their illicit activities. For example the House of Morgan, perhaps that's why the New York is known as the big apple to which they should add with a rotten core.
How do they carry out their attacks? We have two gold markets: the New Gold market which is a pure paper market and the London gold market, which a pure physical market (meaning you need to actually have Gold in order to sell it).
The London market closes at around 12.pm New York time. It is then that the roaches come out of their dark hiding spots and attack, because the New York market is a paper market and so all one needs to create is a slip of paper with the promise to deliver or pay for the Gold at some future date. This is something the Government can create out of thin air, the same way they do so with our currency. However, they cannot create the physical metal out of thin air and actually have to dip into their reserves when they want to sell in the London market so they do so sparingly. Their main attack is always in the New York Gold market.
Their objective is simple: Sell as much paper as possible, since it's only paper and force the price down to key points. All major long players have stops, which will be triggered when hit and the banks who are in bed with the ESF know exactly where these stops are, so they drive the prices down. The traders who are long are forced to sell to cover to protect their profits or minimize loses as these traders sell off their long positions, further driving the price of Gold down.
The Government starts to buy its worthless paper back, in the process netting several million dollars and having a net 0 position. Not only do they make money but also they are able to drive the price lower without really risking a penny. Once again the innocent are the victims. This is done over and over again. One can see this activity if one looks at the open interest reported by the Comex every Friday. By the way, the day of attack is also Fridays. What you will notice is usually a 15-20K drop in open interest when they attack.
The reason they are so afraid of Gold rising and I already mentioned this earlier, is one simple reason. Anyone who has a decent background in economics or subscribes to the Austrian school of economics line of thought knows that an increasing Gold price spells trouble for that specific currency. It lets the world know that the buffoons are printing money with total disregard for the welfare of its Citizens and the only way to hide this activity is to control the price of Gold.
If Gold was not a currency, which the central bankers are trying so hard to stamp out of all economic theory by calling it an ancient relic whose time has long since passed, and was instead seen as some mania type investment vehicle i.e. like the mania in the net stocks, the powers to be would let it rise hundred fold without any intervention. But unfortunately Gold is the Ultimate currency and by letting it rise to untold heights they are blatantly admitting that they were, have and will continue trying to swindle the public from their hard earned money, through the evil process of inflation, which is a silent killer tax. If you factor inflation into the equation it can be argued that everyone is working like a mule for almost no pay and if you really look at it with open eyes you are actually working for nothing because in reality the dollars you are getting paid with are worthless they have nothing to back them up other than promises which are nothing but lies that the government can and will make good on all its debt, how does it make good on it's debt, well they simply just clap their hands and print more money.
The world is silently valuing nation's currencies based somehow on their natural resources. That is why the South African rand has taken off like a rocket. It has the world's largest gold supplies, not to mention platinum and palladium. This is another phenomenon that has gone unnoticed by the press. It is another reason why the NZ dollar another currency I was bullish on earlier this year has also taken of like a rocket.
That is one of the reasons the Chinese don't want to float their currency. Because huge deposits of Gold and silver and other metals are being discovered and this is only in the small areas where prospecting has begun. China is a vast nation. Most of it still remains unexplored in term of mineral exploration, and so the chances of locating new large deposits of Gold, silver, copper, palladium etc are very real and the most important component, which is labor, is extremely cheap. Add in the fact that most Chinese have a natural affinity for gold and that the government is actively increasing its reserves, this all explains why right now they are scared to let the Renminbi float. It is entirely possible the Chinese Renminbi could become the reserve currency of the world one day (but that is a topic for another day)
Lets look at some interesting facts on gold
I did a key word search on Overture, the search engine, and when I typed in the word "gold."
I found out that 84176 people had searched that word last month. When I refined it to "gold price" the number went down to 44678; "gold coin" 21917, "gold rush" 8898, "gold spot price" 4359, "gold investments" 2158 and "gold shares" 118. Now this represents the whole world. What does this tell us? That Gold is still not on everyone's horizon. To give you an idea of how few people are looking at Gold. I compared it to the word "SEX." In the month of September there were 3961438 (that's almost 4 million searches). Here's one more comparison. Stock market yielded 1.3 million searches, while Gold market yielded only 2703 searches worldwide.
This info has two meanings:
One. The current rise in the Gold market is due to a small percentage of investors jumping in and so long term there is a lot more upside potential.
Two: In the short term it is possible that many of these investors could be momentum traders and at some point in time they will want to cash in and as result gold shares, not so much as gold bullion, will correct significantly.
Long term this tells us that we should not even think about liquidating our long Term portfolios.
There is a reason why I have decided to spend so much time on Gold. First, to let all our old subscribers know that I have not changed my mind on Gold and silver one bit at all. As I have said again and again, I am not a Gold bug. I like Gold and silver only because it makes sense and I can see the trend. The day it ceases to make sense or cents I will dump it without any remorse whatsoever.
In addition, for the new subscribers I want you to know just how incredible an opportunity you have here to lock in spectacular profits. However, huge profits are made when you buy into a sector when everyone hates it and it's extremely oversold, Gold is still pretty much hated. However, the sector is far from oversold and taking new long-term positions in Gold Shares right now just doesn't make sense or cents. Gold Bullion and Silver bullion are always good buys.
One other factor I would like to mention is that this is not only a gold and silver bull market but it's a commodity based bull market which means anything that is a commodity is going to rise in value. And first and foremost I like to get into sectors that are extremely oversold and represent great opportunities and many times my position is contrarian to even the most contrarian thinkers out there. In the end all that matters is one simple thing: Can you deliver the results? That is all that really counts in the end.
A very interesting Excerpt
NEW YORK - ...the Bank of China's bullion guru said local consumers could pour $36 billion into the metal, equivalent to around 2,950 tonnes, or more than one year of supply, at current prices.
Tim Wood, 2003/09/26 Fri 17:00 EDT, Mineweb
Posted on behalf of
Sol Palha
TACTICAL INVESTOR
www.tacticalinvestor.com
October 31, 2003
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