Gold Is Historically Cheap To The Stock Market

“The monetary authorities running the paper-money schemes of the present are anxious to forestall significant rises in the paper price of gold, because such rises would diminish confidence in the lasting value of the paper money in use today.”Hugo Salinas Price

The price of gold was victimized by yet another raid on the Comex paper gold market on Friday. The pattern has been repetitive over the last 15-20 years:  hedge funds push the price of gold higher accumulating a massive net long position in gold futures while the Comex bullion banks feed their appetite, building up a mirror-image large net short position.

A raid is implemented typically on a Friday after the rest of the world has shut down for the weekend, the Comex banks begin bombing the Comex with paper, which in turn sets-off hedge fund stop-losses set while the market is moving higher. This triggers a “flush” of hedge fund long positions which the banks use to cover short positions, booking huge profits.

As evidence, the preliminary Comex open interest report based on Friday’s activity shows the gold contract o/i dropped 14,316 contracts. For the week, gold contract o/i is down over 26,000 contracts representing 2.9 million ozs of paper gold. This is 8x the amount of “registered” – available for delivery – gold in the Comex gold warehouse.  I call this “a Comex open interest liquidation raid” by the bullion banks.  When the CFTC finally releases a COT report to reflect Comex trading activity for this past week, it will likely show a large drop in the net short position of the banks and a concomitant large drop in the hedge fund net long position.

Trump was out flogging the Fed on Friday for holding the dollar up with interest rates – interest rates that the Emperor of DC has declared “too high.” This likely signals a political campaign to drive the dollar lower, which will be bullish for gold.

Trevor Hall and I discuss on our Mining Stock Daily podcast why we believe the current sell-off in the price of gold will lead to higher prices. I also present a couple junior mining stocks I believe will be acquired in the escalating wave of gold mining company M&A transactions (click on the image or HERE to listen to the podcast):

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You can learn more about the highly undervalued junior mining stocks mentioned in the podcast plus many more in the Mining Stock Journal:  Mining Stock Journal information

5 thoughts on “Gold Is Historically Cheap To The Stock Market

  1. As you describe it, the hedge funds must be stupid beyond all human comprehension to fall for the bullion bank manipulations time and time again year after year after year. Sorry I don’t buy it.

    1. Okay. But there’s where your lack of understanding as to why hedge funds hold any paper gold exposure at all. Go research portfolio management theory, sharp ratios and marketing to pension funds 101. You might figure it out.

      1. Dave,

        I “buy” that they [non-commercials, hedge funds] do it. But I don’t understand why either. One column/blog please explain it further to people like him and me. From my outside uninformed vantage point I don’t understand why the non-commercials would take positions where they have “lost the bet” over and over. They have to know the commercials e.g. bullion bank’s usual short position is supportive of the perceived value of fiat currency, and therefore is supported by the Treasury etc.

      2. In a partial defense of the other poster, weren’t there two whistleblowers who were ready to testify to the CFTC that JP Morgan was doing a massive amount of wash trades with off shore accounts that were trading with JP Morgan’s acknowledged account? I thought Craig Hemke talked about them.

  2. There’s no doubt the hedgies trade paper gold like a currency, crossing it with other fiats, but there is something to be said about the monotonous regularity of the banks, in general, winning all the time, and not just in paper gold manipulation. It makes Guildenstern’s coin tosses, turning up heads 100 times in a row, seem like bad luck.

    Like in Vegas, only the casinos are allowed to get away with cheating.

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