Excerpt from the March/April 2010 Issue No. 3-10
Evidence of Gold price manipulation mounts
The largest financial scam in history?
I have never been a big fan of conspiracy theories or claims of market manipulation. I can’t help but wince when a friend of mine routinely says “they must have” manipulated the price of whatever it is he is in whenever it moves against him, which is quite often. First of all - ‘they” don’t know or care what my friend is long or short on. Secondly, when you consider the amount of collusion required, day after day, to maintain the big lie - it’s really hard to imagine that it could go on indefinitely without somebody blowing the whistle.
Well, as most people who have been following the gold market for any length of time knows, there are groups out there who are determined to prove that big banks and governments have been manipulating (suppressing) the gold price for decades in order to protect their short positions and their “fiat” currencies. The problem is, there has never been any hard evidence - no whistle blower has stepped up to the plate to expose the conspiracy. Until recently that is.
Enter whistle-blower: Andrew Maguire, independent gold trader
Since the last week of March, a flury of articles and interviews have come forth claiming otherwise, and the whistle-blower has stood up. Andrew Maguire is a London England based independent precious metals trader who claims to have proof - if not first hand - then anecdotal - indicating that manipulation is taking place on a regular basis. I first read about this in an article by John Rubino posted at DolarCollapse.com March 30th entitled The Coming Precious Metals Short Squeeze (http://dollarcollapse.com/articles/the-coming-precious-metals-short-squeeze/). That article links to a series of other articles and the actual interview of Andrew by King World News, where he explains the alleged price manipulation (see page 2 for links to articles and this interview).
Allegations
1. JPMorgan inherited a large gold short position when they took over Bear Stearns, and they are using it to force prices down by adding to the position and then covering as much as they can, once they’ve brought the price down to their target. Andrew sent email to the CFCT predicting exactly how the gold price would be “taken down” in advance and it happened just how he predicted. The belief is that it would be impossible to predict such unusual price movement unless he was on to something.
2. Physical gold not present: The other allegation is that a massive amount of physical gold is lent out or unaccounted for - that for every 100 ounces of gold on paper, there is only a mere one ounce of real bullion.
The implication is that the gold market is being set up for a gigantic short squeeze - once this gets out into the mainstream and big players catch wind of it - they will know how to exploit it - by goosing the market, buying and taking physical delivery of gold until the short sellers are forced to cover their huge positions at any price.
Point two above is still pure conjecture. The first point - that Andrew could tell in advance that gold could be “taken down” is still only what I would consider to be “circumstantial” as opposed to conclusively admissible in a court of law. But that doesn’t matter. If governments are indeed colluding with major banks to control and suppress the gold price - there will never be a trial. We should have no faith in regulators. They ignored not less than 30 red flags that Bernie Madoff was conducting a ponzi scheme. They will ignore this too.
Independent opportunist traders however, could take advantage of the situation by triggering a short squeeze. Which leaves us with a conundrum. We are at the seasonal high point of the year so we would normally be lightening up right now on our gold positions. However, in this case, it is not such a conundrum. Because, as I have already previously acknowledged - the seasonal cycle already seems messed up. The high appears to have taken place on December 3rd, instead of around February when it normally takes place.
But don’t rely on my conclusions. Scan the articles and listen to the actual interview with Andrew Maguire listed below for yourself and draw your own conclusions. But, it may already be having an impact on the price. Maybe it’s a coincidence, but the price seems to be firming up since this story broke.
Maybe nothing will come of this. Maybe this will blow over and the status quo will be maintained. But I would keep an eye on this story. It gives us a reason not to lighten up on our gold holdings. Not only is the seasonal cycle weakening - buy the chart looks positive (threatening to break the neckline of a nearly completed inverse head-and-shoulders formation). And now we have the outside chance of a massive short squeeze that could cause panic buying and a major price appreciation. I’m not necessarily betting on this - but I certainly wouldn’t bet against it either. Recent Articles and Interview about the Manipulation of Gold Prices
1. March 28 - Tyler Durden Zerohedge.com Former Goldman Commodities Research Analyst Confirms Gold Market Is “Paper Gold” Ponzi http://www.zerohedge.com/article/former-goldman-commodities-research-analyst-confirms-lmba-otc-gold-market-paper-gold-ponzi
2. March 30 - John Rubino DollarCollapse.com The Coming Precious Metals Short Squeeze
http://dollarcollapse.com/articles/the-coming-precious-metals-short-squeeze/
3. March 30 - King World News -Broadcast Andrew MaGuire & Adrian Douglas Discuss What Could Be the Largest Fraud in History http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
4. March 31 - Nathan Lewis Huffingtonpost It’s Ponzimonium in the Gold Market
http://www.huffingtonpost.com/nathan-lewis/its-ponzimonium-in-the-go_b_519893.html
5. April 2 - Global Institute of Visionary Wealth Huffington Post Exposes Gold Ponzi Scheme
http://globalinstituteofvisionarywealth.com/?p=299
6. April 3 - Geena Paul Commodity Online Will fraud lift gold prices to $10,000/ounce?
http://www.commodityonline.com/news/Will-fraud-lift-gold-prices-to-$10000ounce-27107-3-1.html
7. April 7 Peter Degraaf Stockhouse Beating JPMorgan at its gold trading ‘game’ - Take away the physical supply
http://www.stockhouse.com/Columnists/2010/Apr/7/Beating-JPMorgan-at-its-gold-trading--game-
Excerpt From The September/October, 2009 Issue No. 8-09
Gold pauses at $1,000
Higher inflation looming, could drive the next leg up
Gold has spent the last month teasing the bulls -
moving back and forth over and back under $1,000 as if trying to decide
what to do - make a decisive break out or pull back. Not a big problem
for long term investors, but a pain for traders who don’t know whether
to hang on or step aside. Fully convinced that I have no idea what
the price of anything will do day to day or week to week for that
matter, I place myself into the former group saving myself the agony
of trying to decide what to do.
Looking at recent history shows the October seasonal correction can’t
even be counted on. Last season - it not only gave back some of its
September gains as it tends to do in October - it collapsed into November
along with everything else. Look at the year before and it’s an entirely
different story. In 2007, Gold soared in September, October and November.
Trying to be too cute would have had you leaving major profits on
the table. So I can’t follow the October dip too much. I figure I
am real lucky to get in and out anywhere near the major seasonal highs
and lows. A few core positions such as Newmont, I’ve held from the
very beginning (previously Franco-Nevada).
I hope to sell these closer to the end of the secular bull market.
In theory this could be around 2020. Why then? Because gold tends
to run up and down in 20 year secular bull and bear markets. This
secular bull market began in 2001, so I simply add two decades which
takes it to somewhere close to 2020. In the meantime we should stop
adding to positions when the bull market reaches the manic stages
(see page 4). Meanwhile, what’s it going to take for the Gold price
to make new highs and begin the next big leg up? How about inflation
finally setting in.
The Deflation/Inflation debate has been ongoing for some time now
with Deflation winning so far. Many are predicting higher inflation,
but when? I figure it all has to do with credit creation. Yes, Central
Banks are issuing gazillions of dollars to stimulate economies around
the world. However the commercial banks that get the money are not
turning around and lending it out. They are using it to bolster their
own capital reserves.
Sooner or later, this bolstering of capital
reserves will end, banks will loosen up and start lending again, and
I figure that is when the inflation people have been expecting will
be unleashed. And that will push up interest rates, hit the economy
and the US Dollar and Gold will start running up once again. I think
it is only a matter of when this happens.
This Issue:
- Gold pauses at $1,000 Page 1
- Two emerging industrial stock picks that are building shareholder
value by saving customers money Pages 2 & 3
Updates: CPDV, OOO & CSC Page 4
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From The June, 2009 Issue No. 6-09
Mid-Year Review
Many conference speakers sceptical of recovery
I was interested in observing the demeanor
of everyone attending the World Resource Investment Conference in
Vancouver earlier this month, since this was the first conference
I attended since the market put in it’s double bottom in March. Fortunes
have been lost and many people are still understandably traumatized
by the devastation to their net worth.
Mind you, conditions have improved dramatically since the second sharp decline
in global stock markets took place in March. North American stocks have rallied
40%. The CRB Index, a key sign of economic health has rallied sharply. The pace
of decline, of home prices, of layoffs, and fear levels have all subsided. Nobody
is claiming a robust recovery is underway. But if one waits for full recovery
before investing, it is already priced into the stock markets. The true bargains
are found during periods of uncertainty. The question on everyone’s mind, and
the topic of discussion by many speakers was whether the recovery is for real,
or was there a second shoe to drop.
Of the veteran speakers I heard, both at the conference and outside of it, most
were negative and sceptical of the recovery. Most felt that the credit bubble
which took decades to form would not be resolved in a matter of a few weeks or
months, but years. This isn’t some kind of inventory recession that could be
solved with a few interest rate cuts, but a far more serious balance sheet recession
that consumers would take years, maybe a generation, to recover from.
S&P 500 Since 1970
Like other previous secular bear markets,
I suspect stocks could be range bound for
at least two decades
Doug Casey (The
International Speculator) compared
the demise of America to fall of the Roman Empire, and we all know
how long the subsequent Dark Ages lasted (I suspect he exaggerates
to make the point that he believes the situation is quite serious
and lasting). Other speakers I’ve heard elsewhere are also sceptical.
Market historian Bob Hoye suggests a potential parallel between the
current economic and stock market rebound and the dead cat bounce
that took place in 1932, still early on in the Great Depression. Another
analyst, Martin Weiss, believes we are merely in “the eye of the hurricane”
that will rise up again once interest rates go up and sites the $14
Trillion in liabilities as proof trouble lies ahead (read: New
hard evidence of Continuing Debt Collapse! June 15, www.moneyandmarkets.com).
If there was a divide of opinion,I found it along
the lines of age. More youthful speakers, such as John
Lee (Mau Capital)
David Skarica (Addicted to Profits) and Jim
Letourneau (Big Picture
Speculator) were more optimistic. Siting stock market recoveries in
Asia of up to 70%, and anecdotal such as full stores and restaurants,
either these guys are naive and too optimistic, or the older ones
are being too negative. Only time will tell who is right. The other
thing I noticed, what how uncertain everyone has become.
My Outlook
I would describe what we are experiencing now as a cyclical bull market that
within the context of longer term secular bear market that began in 2000. I
believe it’s a bull market for 1 - 3 years because;
1. The charts are saying it is
2. Because of all the government stimulus, and,
3. Because the demographics are still positive.
That is because the number of people aged 45 to 54 is still rising. Until the
year 2012 that is.
Then in 2013, the secular bear market should resume as the demographic trend
turns negative, and stays that way until 2025. That is, the number of high spenders
begins to contract and keeps falling until the year 2025. I realize that is a
grim long term outlook. But I am here to tell you the truth based on the facts,
not what you or I want to happen. And like Mark Stein says, demographics may
not explain everything, just about 90% of everything.
I suspect the recovery and cyclical bull market will be muted at best. A 1 to
3 year reprieve before the big bad bear returns for certain in 2013.
Nor would I rule out some shorter term sluggishness, given the huge 43% run up
that the TSX has had since March, the time of the year, and the fact
that gold and now oil, at least temporarily, seems to have reversed their upward
trend.
Long term subscribers who want a refresher of the demographically
driven bust lying ahead, or new subscribers who aren’t aware of Dan
Arnold’s book
which explains
this very well should visit www.TheGreatBustAhead.com,
read the article and listen to
the interview he provides
free of charge,
spelling out
what lies ahead and why
nothing is going to stop it.
This Issue: (#6-09)
