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How Goldman Sachs Ignites an Assault on Gold – and Loses
One of the best pieces of evidence in the argument that gold is manipulated by an unofficial and informal collusion among the Fed, the U.S. Treasury Department, the biggest US banks, and the CFTC is the sheer perfection with which they enlist the support of media. AMSCAM, (American Syndicate for Collusion and Manipulation) as it is known, always precedes coordinated attacks on the gold price with an apparently spontaneous media onslaught the uniformly warns the reader about the perils of investing in gold.
In the lead-up to the unprecedented assault that started on April 12 and concluded by end of day April 15, the media campaign kicked off with a Wall Street Journal Headline that read “Goldman Sachs: Short Gold!”
Exclamation marks in the headlines of mainstream media are usually reserved only for the most profoundly earth-shattering events, like “War Declared!” or “Man Walks on Moon!”
Recently the assistant Global Markets Editor for MarketWatch asked me to comment on the significance of media-distributed forecasts like the one above distributed by the Wall Street Journal.
Here’s our dialogue:
Hi James!
I was just hoping to get some of your thoughts on the recent gold-price forecasts.
When Goldman Sachs came out with its forecast in the second week of this month, that seemed like it was almost the lone catalyst for gold’s price decline. But how important are these guesses on the prices and how often have they actually moved the market? Are there any forecasters that more highly regarded than others (and why)?
I can’t imagine that , especially in a market like this, they will be very accurate. Besides that, forecasts right now are all over the board, with my own survey of about 9 forecast showing averages this year as high as $1,700 this year and as low as $1,480. What exactly is an average gold price anyway – Comex futures, London fix?
I’m hoping to get a story done on gold forecasters by Thursday afternoon.
Thanks for any thoughts!
My response:
Forecasters of gold prices are almost invariably ‘talking their book’. In other words, when Goldman Sachs manages to get a headline that reads “Goldman Sachs: Short Gold!”, they obviously have an interest in driving the price downward, usually so they can cover their own prior short bets. Conversely, when the CEO of a major mining company predicts that gold prices will rise, the self-interest served in such a statement is obvious.
When you ask mow effective these are in “moving the market”, Goldman Sachs is extremely influential. If they say sell, traders, investors and funds all sell. But when the CEO of a mining company says ‘buy’, its not at all effective, because mining companies are unable to influence the price of gold. In the case of the Goldman Sachs call, prominently featured in the Wall Street Journal, and bombastically captioned with an exclamation mark, the sentiment is interpreted as a very strong sell signal, and that becomes amplified through secondary and tertiary re-broadcast through social media and other publications.
The other problem with forecasts is timing. As evidenced by your own confusion, an ‘average’ gold price is usually asserted without giving the time horizon for the average measurement. So the average price over the last week is very different for the average over the last month and the last year. Mostly in the press, the average gold price is determined by taking the average closing price a one year time-frame from the London spot market.
There is a homily among gold forecasters of long experience that advises “pick the direction, just don’t pick the time”. In other words, if I say “gold is going higher” I am definitely going to be right at some point, just as if I say “gold is going lower” I will also be right. If I say, “gold will be $1,800 an ounce by September 2013″, my chances of being right are drastically reduced.
People like Rob McEwen, president of McEwen Mining and former Goldcorp CEO, always makes outlandish statements about the gold price, because it gets him quoted in the press extensively, and attracts interest to his company.
People like George Soros comment frequently and apparently contradictorily on the price of gold, because it gets him press, and also because he can influence the market.
Hope thats useful!
Cheers,
James
Then her redirect:
Thanks James.
So when big banks are all cutting their forecasts on gold prices, what do you suggest that traders do? It’s like a herd mentality at this point.. Goldman Sachs didn’t necessarily cause the declines in gold but it exacerbated them and since Goldman Sachs’ forecast cut, many more have done the same.
Thanks again,
And my response:
Well its important to consider the source first and foremost. Goldman Sachs says “Go Short!” and subsequently, analysts from a dozen banks will come out the next day and say “sell gold” based on Goldman’s call.
As to whether or not Goldman’s call was or was not the SOLE cause of the rout is definitely up for debate. As a long term investor in gold based on my belief in the fundamentals, I could care less what Goldman said yesterday or says today or will say tomorrow. I am buying physical gold on the dips, and holding onto it over the long term. Traders, on the other hand, who are opportunistic gamblers, should sell when somebody like Goldman says sell, and buy when someone like Goldman says buy, because that is going to be the short term trading action based on the overwhelming market influence that Goldman can have through the accommodative headlines of financial media outlets like the Wall Street Journal.
Headlines Cause Sales
When publications such as the Dow Jones Group, which includes the Wall Street Journal and MarketWatch, distribute the self-interested ‘forecasts’ of employees of major name plate institutions like Goldman Sachs, they (perhaps inadvertently) amplify and perpetuate the sentiment contained in the forecast. When they color that information and apply bias through the use of bombastic headlines and punctuation, the effect is compounded.
It is broadly satisfying to the community of participants in the physical gold market that despite Goldman Sachs et al’s ability to orchestrate massive attacks in the paper futures market in gold, and that the knock-on effect is a drop in the price of physical gold, the attacks repeatedly backfire by causing buying opportunities. Every time the futures price takes down the spot price, the buyers and hoarders of physical come out of the woodwork to take advantage of the opportunity.
Endgame Approacheth
The ability of the AMSCAM collusive group to continuously undermine the demand for physical gold is dependent on two key pillars of the strategy: 1) The ability to create and endless supply of paper gold in the futures market, and 2) The covert delivery of gold from (what can only be) world central bank holdings to satisfy delivery to buyers of physical gold in the spot market.
At this time, the community of gold market observers and participants who believe that there is vast pent-up demand for gold, and that the price will break out to above $2,000 in the near term and well beyond shortly after, believe that the time where the central banks run out of gold to supply physical sales is at hand.
In fact, many buyers of coins and bullion around the world are reporting delays in having their orders fulfilled, and in some cases, the delays are months long.
According to Liberty Gold and Silver News Blog:
“Two of the largest silver bullion fabricators in North America, A-Mark Precious Metals of Santa Monica, California, and the NTR Bullion Group of Dallas, Texas, have just notified their retail dealers that they have suspended sales of most of their silver products. A-Mark has announced that it is ceasing taking orders for all its one ounce, ten ounce, and one hundred ounce rounds and bars. There is no projected date for resumption of sales!”
Stories of this type abound right now. This is the kind of situation that unfolds our of the public eye because the mainstream financial press lacks the experience and vested interest to recognize the significance. As journalists, they can only report what they are told to report by their editorial assignment editors.
Goldman Short Covered – Time to Buy Gold
Lets assume, for the sake of argument, the Goldman Sachs and its band of thieves have now covered their short bets to the tune of 400 paper tons of gold. What might that be telling us?
It is conceivable that Goldman et al realized that the inability of the central banks to continue supplying physical gold to mints and jewellery purveyors means that the jig is up, and the heretofore futures market domination of the spot price is about the end. All the paper supply in the world will mean nothing if there is no physical gold to fulfill the purchases of spot gold buyers who want delivery.
What Goldman Sachs realizes, and maybe we should too, is that the long-awaited explosion to the upside in gold and silver may be very close, and this is the last time we will see gold at these levels.
But – caution – it could also mean that Goldman has another, even larger assault planned on precious metals through the futures market, as the mentality moving the switches behind the scenes concludes that maybe a bigger hammer is all that is necessary.
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The post How Goldman Sachs Ignites an Assault on Gold – and Loses appeared first on Midas Letter.
2013-04-25 10:03:34
Source: http://www.midasletter.com/2013/04/how-goldman-sachs-assault-gold-1304251/
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