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While Banks Persist With Their Criminal Activities, Make Sure You Own Physical Gold & Silver

Precious Metal Investment Expert
November 11, 2014

Gold prices began this week on a softer note after surging on Friday. The price of the yellow metal snapped a seven-day loss to end sharply higher on Friday, as the price of spot gold rallied by 2.6% or $37 an ounce to close out the week at $1178.50 an ounce. The yellow metal scored its biggest one-day gain in nearly five months, as a retreat in the U.S. dollar and heavy short-covering lifted prices from a 4-1/2-year low. However, at the time of writing, gold prices have given back about half of Friday’s gains.

Last Friday, a report from the Labour Department showed weaker than expected U.S. job growth in October, although unemployment rate dropped to a new six-year low. The non-farm payroll employment rose by 214,000 jobs in October and the unemployment rate was 5.9%.

The dollar slipped after the jobs report was released as investors took profits on the greenback's months-long rally, which has seen it reach multi-year highs in anticipation of tighter U.S. monetary policy next year. The report also boosted speculation that the Federal Reserve may hold interest rates low amid sluggish global economic growth. Before the report, gold fell to the lowest since 2010 and the dollar touched a five-year high amid expectations for improvements in the labour market.

On Thursday, gold prices ended lower for a seventh straight session, on growing speculation about U.S. interest rate hikes on the back of some upbeat economic data, including a report showing a more than expected drop in initial jobless claims. Then, on Friday, prices surged!

On Thursday, gold prices ended lower for a seventh straight session, on growing speculation about U.S. interest rate hikes on the back of some upbeat economic data, including a report showing a more than expected drop in initial jobless claims. Then, on Friday, prices surged!

This on-going volatility in prices shows the impact traders have on the gold market. By using the paper contracts on COMEX, traders can buy and sell huge volumes of gold without ever having to deliver or take delivery. The volumes that they trade do not represent the true quantity in the physical market place.  It is simply a speculative play on price, and thus it is important for investors to ignore this volatility or “noise” because it has nothing to do with the real driving factors behind price.

Gold came under some selling pressure on Thursday as the dollar extended its gains after the European Central Bank (ECB) President Mario Draghi said the ECB policymakers might use outright quantitative easing if deemed necessary. The ECB Chief offered a downbeat assessment of the Eurozone economy, with risks to the outlook skewed to the downside. He also highlighted geopolitical risks that could dampen confidence.

The euro plunged to its lowest in more than two years against the dollar on Thursday after Draghi affirmed his pledge to use unconventional measures to stimulate a sluggish Euro zone economy.

He added that the impact of the ECB's asset-buying program on its balance sheet would be sizable. His remarks, which came after the ECB kept interest rates at a record low of 0.05%, were a green light for investors to sell the euro.

When asked if the ECB had an official balance sheet target Draghi replied. “Together with a series of targeted longer-term refinancing operations to be conducted until June 2016, these asset purchases will have a sizeable impact on our balance sheet, which is expected to move toward the dimensions it had at the beginning of 2012.”

In the press briefing, Draghi said ECB members are all prepared to take more policy action if necessary and the bank's staff will prepare the groundwork. He reiterated that the risks to the Eurozone's recovery remained tilted to the downside.

JP Morgan Chase & Co made the headlines once again. The bank said it faces a U.S. criminal probe into foreign-exchange dealings and boosted its maximum estimate for “reasonably possible” losses on legal cases to the highest in more than a year.

The largest U.S bank reported that it might need as much as $5.9 billion to cover losses beyond reserves for legal matters, up $1.3 billion from the end of June, and the most since since mid-2013.

Last year, the bank spent some $23 billion in settlements yet not one banker was prosecuted!

Both Citigroup Inc., and Zurich-based UBS AG disclosed last week they also face criminal inquiries by the Justice Department into their foreign-exchange dealings. Citigroup cut third-quarter results to include a $600 million legal charge.

Meanwhile, Swiss bank giant UBS (NYSE:UBS), the world’s largest private lender, is about to reach a settlement in the year-long global probe into allegations of misconduct at its precious metals trading business, as well as supposed collusion and manipulation in the foreign exchange market.

A report by revealed that the UBS, is just one of the six financial institutions expected to announce an agreement of at least $2.37 billion (£1.5bn) in fines on Wednesday to settle accusations of foreign exchange market rigging with the U.K.’s Financial Conduct Authority (FCA).

The other five banks working on the settlement are U.S. banks JP Morgan, Citigroup, Britain's HSBC, Barclays and Royal Bank of Scotland.

So far, close to 35 traders have been suspended or fired by their banks. No individual or institution has so far been accused of any wrongdoing. The precious metals market has come under heavy regulatory scrutiny and allegations of price rigging. BaFin, Germany's financial regulator  has launched a formal investigation into the gold market and is probing Deutsche Bank, one of the former members of a tarnished gold-fix panel that will soon be replaced by an electronic fixing. hat I find astonishing is that while banks are fined for their criminal activities, no one in top management has been prosecuted. And, if an individual wants to deposit cash, he/she is regarded as a criminal. But even worse, these banks are still obliged to conduct Know Your Customer (KYC) when it should be the other way around. It should be customers demanding to know more about the banks activities.

But, these banks are not alone. Central bank manipulation of prices and risk taking has become the norm over the last six years. And at the same time, these polices have allowed governments to provide false financial stability and false economic growth. 

Much of the economic and jobs growth in the United States is artificial growth, with little chance of being sustainable. It is based on the excess money printing of the US Fed which is used to buy assets at fake prices. It will be interesting to see what happens when interest rates are normalized and QE stops. The financial system is fragile, heavily leveraged and reliant upon a continuation of low interest rates. Thus, the appearance of stability and low volatility is also illusory. And, the liars and deceit will continue until a politician or banker is prosecuted. Thus while these banks continue with their criminal activities, make sure you own physical gold and silver stored out of the financial system.

While it is impossible to function without a bank account, it is imperative for individuals to do whatever it takes to preserve their wealth. If there is a financial collapse coming, your bank and your government are not going to do a darn thing to save you. And, instead they will destroy your wealth and leave you destitute. This is why it is important to hold both physical gold and silver.

gold spot price 10-nov-2014

The strong rebound in prices on high volume on Friday has been negated by a move to the downside. Recent lows may be re-tested again, but it is impossible to forecast.     

David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.

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