In terms of monetary policy, the Federal Reserve and Treasury became concerned about the inflationary potential of excess reserves in the banking system and large gold inflows, and therefore decided to double reserve requirements and sterilize gold inflows. – Douglass Irwin, Dartmouth College 2011, in reference to the decision in January 1937 byTreasury Secretary Henry Morgenthau to block the use of gold in the monetary system.
As you can see from the quote above, the U.S. Government has been manipulating gold for much longer than anyone understands. In fact, FDR temporarily disconnected the dollar completely from the gold standard in 1933.
Yesterday Bloomberg News published a report which alleges that hedge funds have assumed their most bearish position in gold in history. That article is 100% inaccurate. Moreover, historically, whenever the hedge fund net long position (longs minus shorts) becomes as low as it is now, gold has staged big rallies.
While Bloomberg specializes in misleading and fraudulent news reports, thankfully we still have access to data which enables truthseekers to ferret out the truth. Currently, if you go by the Commitment of Traders report published by the CFTC, which Bloomberg references, the “Managed Money” account category – aka the hedge funds – are net long 29,844 gold futures contracts. (Note: Bloomberg uses futures + options combined, but serious analysts do not include options in the analysis. that said, aggregating the hedge fund options position makes Bloomberg’s point of view even less compelling – i.e. including the options position increases the hedge fund net long, making the hedge fund bear growl softer).
I downloaded the historical disaggregated data (it goes back to 2006) from the CFTC website and looked at the net hedge fund long position in gold. Not only is the hedge fund net long position not at a record low – i.e. at its most “bearish,” it’s not even close. Using just the futures positions, the net short as of last Friday was 11,435.
HOWEVER, from November 25, 2013 to January 14, 2014, the hedge fund net long position ranged from 9,941 (12/3/2013) to 28,270 (1/14/14). There have thus been at least one recent periods of time when the hedge funds were significantly more “bearish” on gold than they are now.
WHEN THE HEDGE FUND BEAR GROWLS, GOLD RALLIES
EVEN MORE INTERESTING, the three previous times when the hedge funds have assumed an extreme “bearish” Comex paper gold futures position, gold staged a big rally (click to enlarge):
Of course it remains to be seen whether or not history will repeat a fourth time. The Treasury Department, in conjunction with the Fed and its agent bullion banks, has never attempted to push the price of gold lower with as force as is being exerted currently. This is because the degree of gold manipulation is directly correlated with the degree that our system faces collapse.
One thing is clear, however, the financial media is doing its part to promote anti-gold terrorism with highly misleading and fraudulent news reports.