The Gold Manipulators Will Be Punished by Egon von Greyerz GoldSwitzerland |
October 15, 2016
The selling of gold we saw
last week was another desperate attack by the BIS and some
central banks, together with the bullion banks, to manipulate
the gold market lower. We saw over 40% of annual production
of gold being sold last week which is 1,000 tons. The physical
market continues to be strong which I will discuss further
on.
Western Central Banks hold less
than 50% of official quantities
Obviously, the sellers had no physical gold
to sell so they conveniently dumped all this gold in the
paper market. It would have been totally impossible for
them to do this trade in the real gold market which is only
physical of course. Western Central banks have no physical
gold of any quantity to sell. This is why they must fabricate
paper gold out of thin air in order to dump it in the market.
In total, these banks officially have around 23,000 tons
of gold. I doubt they even hold half that figure. The rest
is likely to have been sold covertly.
No major central bank has had an official
audit of their physical gold in modern times. Last time
the US gold was audited was in the 1950s. A proper audit
would not just reveal that these banks have a lot less gold
than they officially declare, but it would also expose the
true position of their gold lending or leasing. Most of
the gold they have left has been leased to the market in
order to depress the price. But this gold no longer stays
within the LBMA bullion banks like in the past. No, instead
of the intelligent buyers of gold today like China, India
and Russia take delivery. This means that the leased gold
now becomes a paper claim with no chance of getting physical
gold back. So what has happened in the physical market in
recent years is that central banks have continuously depleted
their physical stock by selling and leasing their gold with
most of the buying having taken place in the East.
This transfer from West to East is the reason
why Western governments and central banks are desperate
to keep the gold price down. Official gold is no longer
held in “safe” Western hands that are easy to control. Instead,
the gold has been acquired by nations and people who understand
the value of gold. These new gold buyers also know that
it is the best protection against the total destruction
of paper money that is taking place in our debt infested
world. And the countries that are now buying gold are not
sellers.
Russia accumulates gold in spite
of economic difficulties
The Russian government, for example, has
been expected by the West to sell their gold every time
they are under economic pressure. But if we look at the
chart below, the picture looks very different. Since 2006,
Russia’s gold reserves have gone up almost 4X.
And it is the same in China. Official
Chinese holding have increased more than fourfold since
2006 to 1,800 tons.
China has accumulated more gold
than any nation in this century
But since China has produced and imported
over 11,000 tons of gold since 2009, it is assumed that
the official gold holdings are substantially higher than
the 1,800 tons reported, maybe as high as 8-12,000 tons
which would be higher than the official 8,000 tons that
the US holds.
As paper gold is dumped physical
gold buying continues
So whilst the West is dumping paper gold,
the East is buying physical. And this is exactly what happened
last week. Gold fell almost $100 on selling of massive amounts
of paper gold. But something very different happened in
the physical market. Mutual Funds and ETFs bought over 30
tons of physical gold last week. In total these funds have
increased their holdings this year by over 46% or 900 tons
to 2,840 tons. As we can see in the chart below, the buying
by these funds has been strong all year. When gold corrected
by $100 in May, their gold holdings continued to increase.
As some speculative gold buyers are becoming
nervous due to another manipulative attack in the paper
gold market, the wealth preservationists see this as a real
opportunity to add to positions in physical gold.
We are seeing the same thing in our company
with continued strong buying from investors who understand
that what we have just seen is another desperate attack
by the BIS and some central banks together with the bullion
banks. When this group dump half a year’s physical gold
production in a very short time, they know they temporarily
can drive the price down. Banks can of course manufacture
unlimited amounts of worthless paper gold and sell it to
buyers who don’t understand the massive risk they are taking.
But at some point, holders of paper gold will realise that
they can’t get rid of it at any price. At that time, the
price of physical gold will go up by hundreds of dollars
or more in a day.
Thus, last week’s takedown is absolutely
nothing to worry about even if we see a bit more pressure.
We have seen these manipulations time and time again in
this bull market which so far has lasted 16 years and is
likely to last at least another 5 years and maybe a lot
longer.