The Manipulation of Gold Prices

Seeking Alpha ^ | Dec 4, 2008

[dennisw]

I wouldn't imagine that Canada, as a governmental entity has much gold stashed away.... I have a feeling that they have been pretty much playing the game pretty much the same way the USA has been. Their holdings of Actual, PHYSICAL gold are probably greatly exaggerated, as are the US's (If there are really 145 million ounces of real gold in Ft. Knox, as they say there are, I'll eat 'shinola'.)

Russia.... thats really the trick part of the question.... Because of their natural resources (LOTS of gold in Siberia) they could have many tons of it squirreled away.... But given the way Putin has been playing his own games for the last 9 years I wouldn't be surprised if he had less than ten pounds or more than ten thousand tons of it stashed in his central bank.

They are both prime gold producers so naturally they are good candidates to back their currency with gold or create a new gold backed currency. Even 40% gold backed will be in demand

But I suspect nether government hold's much. In Russia case everything valuable was stolen and sold to KGB and Communist bosses back in the 1990s. I would bet the Central Governments gold was stolen too

Plus I doubt there was much to steal but that most was spent during the crisis years (Yeltsin Gorbachov) before and after the fall of communism

So what we left with is possible coalition of governmanets and large corporations (such as Toyota and Walmart) who would start up a gold backed currency. I'm sure there would be demand for it. But then you get to the question of where would this gold be kept. What nation would this "Fort Knox" sit in? Would it be safe?

If our gold is really in Fort Know maybe the US will start a gold backed currency. There is no reason we couldn't have a green dollar and a gold dollar

[FreedomPoster]

I personally was part of a group that moved around 10% of that amount during an audit in 1977. There were plenty of sealed vaults we didn’t move, to make up the rest. You could peer into them and see the gold there. So it was there, then.

I need to find my picture of Michael Blumenthal, Carter’s Treasury Secretary, standing in a vault, gold stacked to the ceiling, holding an ingot, with my name scrawled in chalk on the masonite on the wall behind him, among the other chalk graffiti we put there.

[LegendHasIt]

Legend Has It ;-) that most of the Ft. Knox gold has been transferred to the Federal Reserve vaults during the last 30 years... And no telling where it has gone since then.

Even if it hasn’t been moved, even if there are 400+ tons of gold there at Ft. Knox, it doesn’t belong to the Government (the people) any more. The Federal Reserve has a 100% lien on that gold for all the paper they have put green ink on over the last 55 years.

[monkeyshine]

The practices can be curbed by electronic means. It’s not as if nobody knows what is going on it’s just that not everybody knows what is going on. That is why some “unnamed hedge fund” could short AIG stock with impunity — such that 125% of its entire issue was short (which obviously means that the market was forced to absorb 125% more shares than the company issued). The broker didn’t stop his client from shorting when it hit 100% and to this day nobody asked who pushed it over the brink. All that needs to occur is that all the brokerages report the short volume in real time into a central database. Make shares short transparent and in real time just like everyone can see volume and price and bid and ask, and force a pre-borrow before a short sale can be executed. Computers can control it to make sure that 1) shares are available to borrow and 2) that the same share isn’t borrowed twice.

In addition, the SEC should force reporting of short interest if it should exceed a small % of the issue, just like they force reporting of long shareholders who exceed 4%. What we have today are money pools (hedge funds) that control billions in capital and have leverage that exceeds 5:1. They can literally control the price movements of scores of mid-cap stocks simultaneously. If 2 or more Hedge Funds talk to each other about their actions it is a conspiracy. Technically if you and I talk about it it’s a conspiracy but the likelihood of you and I moving the market is absurd. But look on youtube for the video of Jim Cramer talking about how he would “foment” by taking a large put position then hitting the bid with shorts then calling journalists to “foment” the idea that the sell-off they are seeing is due to a “rumor” that product X is broken or delayed or whatever.

And in no circumstances should anyone be allowed to short more than they can borrow. If they fail to deliver their shorts they should be required to buy them back.

As to derivatives, again it is the lack of transparency. The Credit Default Swaps specifically is another matter altogether. CDS’s are basically an insurance bet. When you buy a mortgage backed security you are betting that the mortgage payments will flow in your direction. The CDS is insurance in case of default that causes the payments to stop. What was to stop anyone from rigging that game? I could buy properties with 10% down via one fund, and short those properties through CDS’s in another fund, then stop paying the mortgages. AIG would have to pay off my 2nd fund the full 100% face amount, while my first fund which only put up 10% would renegotiate with the bank or simply surrender the properties who cares it cost 10% to make 100%. IMHO that whole class of securitization was an easy scam waiting to happen.

There may be nothing wrong per-se with derivatives as hedging instruments - but certainly they shouldn’t be secrets. They need to be public information if they are traded in markets. Otherwise, if they are private agreements unregulated by the agencies then they should not get a bailout.

Chris Cox simply didn’t want to do his job. He is, imho, corrupted or lazy. He isn’t incompetent and he isn’t overworked. He has been bombarded with calls and letters about the naked short selling problem. Patrick Byrne has led a crusade against it, and all Cox has done is ask for 3 comment periods. He just delayed and delayed and delayed action and here we are today with the DOW down 6000 points, and the Treasury printing over $2 trillion in cash and still the economy is shrinking and unemployment is rising.

Sorry for the rant but the lack of action by this administration has been atrocious and these problems were forseeable by people a lot smarter than me. My only saving grace is that I didn’t have much money in the markets. I blame Bush for his inaction and for letting Paulson take the lead here. We needed a leader and Bush abdicated control to Goldman Sachs with Congressional support. Well I’m sure Goldman Sachs knew quite well where the problems were within the market itself but plugging the holes with cash isn’t enough to fix these problems for the future.

[Vince Ferrer]

For me everything comes down to the dollar, gold, and oil, and the daily and long term changes in relative value. Any changes in the relative values is where the dangers and opportunities lie in the economy.

For currencies, I have started to follow the Russian ruble. They will be devaluing it quickly against the dollar. But if the dollar crashes, oil will rise, and the Russian economy can recover quickly.

I have not bought anything yet, and don't recommend anything to anyone.

[CHICAGOFARMER]

Do you have an ycomment on the 75 to 1 ratio of gold to silver?

YOuwwrote your commenttstinDec 4.

What are now?

Buy gold?

Buy silver?

Buy both?

[LegendHasIt]

I really don’t have any advice to give in that respect at this time. Both are at prices that make me glad that I’m not buying either one right now.

If they dip below $850Au and $11Ag again I’d consider buying either or both.

And as far as ratios... I never even put any thought into that... To my way of thinking Au & Ag should analyzed mostly independently.

I’ve always preferred silver to gold, since more of silver’s value is based on utility rather than psychological which is the primary thing that makes gold so costly.

[CHICAGOFARMER]

Thanks for your comment.

I just finished reading again the manipulation of gold prices.

I’m been following currencies, money supply, and commodities for years. I’m not an expert in fact consider myself just a beginner in understanding the manipulation of commodity markets.

But I do know this, having in my lifetime invested hundred million dollars and $1 billion with a retail businesses:

many of the comments, listed in the manipulation article will come true. It’s not a question of if but when.

I also subscribe to the thinking of Chris Martinson philosophy that their three controlling factors on this third rock from the Sun. First population control, second petroleum, third finally, financial paper money. Chris, states several hundred paper economies have failed in the past two centuries, as politicians and financial managers inflate away their past that. This places the burden of inflation on the back of those who save paper money.

http://www.chrismartenson.com/crashcourse/chapter-1-three-beliefs

checked Chris out and see what you think.

Chicago farmer