The Goverment’s (Fed’s) War On Gold

Michael Kosares of USA Gold – a Denver-based precious metals coin and bullion dealer – has written a must-read essay about the Fed’s war on the price of gold.  Without question, the war has intensified amid rising doubts globally about the use of the dollar as the reserve currency.  Not only has this war on gold intensified, it has become blatantly obvious to anyone with more than one brain cell in their head.

Please take the time read this in its entirety – it’s not long but it’s full of insight:

I can’t remember the exact quote but when I used to trade and Mr. Volcker was Fed chairman, he said something like ‘gold is my enemy, I’m always watching what gold is doing’, we need to think why he made a statement like that. If you’re a central banker or one of the congressmen or senators, watch what gold is doing because this is a no-confidence vote in fiscal and dollar policy. 
– Rick Santelli, CNBC

Here’s the rest:   So How Goes The War On Gold?

There’s just no telling how much longer the Fed and its agent bullion banks can keep using paper to manipulate the price of gold and silver, but I believe the end is getting close.  When the demand for deliverable physical gold/silver overruns the enormous paper short interest, the move up will redefine shock and awe.

6 thoughts on “The Goverment’s (Fed’s) War On Gold

  1. This week at the SALT Conference, I’ve had the opportunity this week to speak with some of the smartest, most well-connected investors in the country – credit guys, long-short equities people, analysts, traders and on and on. I won’t name drop, but suffice it to say there’s probably a trillion dollars under management represented here and I’ve learned quite a bit about how the institutional consensus is shaping up this year.

    Lots of people are talking about the Things You Don’t Want To See if you’re very long risk assets like stocks and corporate bonds right now. They are all happening at once:

    1. Collapsing home builder stocks and fading real estate data.

    2. A US dollar on the verge of ripping to the upside.

    3. Treasury bonds refusing to back down, nudging their way higher daily.

    4. A deteriorating number of new highs for individual stocks as the indices flirt with record levels.

    5. Influential managers who’ve been bullish for most of the rally starting to turn cautious (Einhorn, Cooperman, Tepper, etc)

    6. Stalling earnings growth.

    7. Defensive stock leadership

    8. Huge divergence between small caps and large caps.

    All of these things are blatantly occurring now. None of them are positives.

    1. All these smart guys at the SALT conference point fingers at the central bankers and act as if without them they would still be in business today but with out them this conference would be renamed DUST—–D is for detritus, the rest you can figure out.

  2. I wonder if the powers-that-be are even more terrified of an upward price explosion on silver than they are on gold (no disrespect to gold intended). My thinking that this is so is because the pressure on silver seems much more blatant and heavy handed than on gold. Could the heavier pressure on silver be because there is a lot less of it to go around than there is gold?

    A GSR (gold to silver ratio) of 65 to 1, by the way, seems crazy to me.

    1. Yes! The paper derivative short vs. the available supply of physical silver that can be delivered to buyers is astronomical. They are afraid of short-sqeeze in silver more than in gold for sure. But also, they use silver as a means to manipulate gold. A lot of big hedge funds have black box algos that arbitrage the gold/silver ratio. If the cartel can take the price of silver lower, it automatically triggers selling in gold futures.

      Just like everything else the Government does, when a bad decision creates an unsolvable problem for the Govt, instead of trying to fix the problem they just do more of whatever the bad decision is.

      1. “In China they swap $160,000 in debt for $80,000 of silver .. So, either debt’s worth half or silver’s worth double.”

        In Ordos, one of the 12 subdivisions of Inner Mongolia, people in the ghost city are bartering to settle their debts.

        Ordos real estate entrepreneur He Jun has gathered many debts since the private loan sector in the city collapsed two years ago. He is just one of the army of debtors in Ordos, once the richest city in China in terms of per capita GDP on the back of its coal reserves but now called the “city of debt,” according to the China Securities Journal.

        Since most of the debtors are also creditors, they started paying debts with objects such as wine and houses that their own debtors had provided to settle their debts, the journal said.

        At first, the most common debt settler was Chinese liquor or baijiu, a favorite of native Inner Mongolian residents. However, the lack of price transparency with the liquor prompted local law enforcement departments to ban settlement with the product.

        He Jun turned to precious metals because of the ban. “I believe gold and silver, which have high market liquidity, are suitable for settling debts,” he noted, adding that “gold can be exchanged for cars and silver for houses.”

        “After the real estate bubble burst, many houses remain uninhabited in Ordos. As a result, no one is willing to exchange houses for gold. Houses can only be exchanged for silver,” He added.

        For example, He use silver objects worth 500,000 yuan (US$80,000) to pay off at least 1 million yuan (US$160,000) in debt.

        According to He’s estimate, the value of private debts in Ordos stands at over 200 billion yuan (US$32 billion). “They can only be settled gradually over time,” he added.

        a little dated but this is interesting….didn’t hear or read in MSM.

        1. You got it Dante.
          Can it get more ironic than that, settling paper and leveraged contracts in real metal despite themselves? Even iron could be structured into the trade, pun intended.
          Outside of Taiwan, you’ve proven you can take the culture out of communist China, but you can’t take the china out of that culture.

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