Gold and Silver Manipulation

1
Gold and Silver Manipulation

• Possible manipulation and outcomes
• Jeff Glenn

2
Gold and Silver Manipulation

• Down the Rabbit Hole
• The Players
• History
• Gold Manipulation
• Silver Manipulation
• Physical Shortages
• A Rigged Game
• Possible Outcomes
• Deeper Implications

3
The Players

• Treasury - Paulson
• Fed Reserve - Benanke
• Central Banks Trichet, et al
• Bullion Banks
• JP Morgan
• Goldman Sachs
• Citibank
• Barrick
• Deutche Bank
• UBS
• Comex

4
History

• US Revolutionary war Continental 1st failed
  currency
• Constitution a response to ensure non-fiat
  currency
• Gold/Silver based Money prosperity for hundreds
  of years
• 1791-1811 - 1st National bank of the US
  Inflationary failure
• 1816-1836 - 2nd National bank of the US
• 1834 Gold price set at 20.67
• 1907 Bank failures used as rationale for
• 1913 Federal Reserve and IRS
• Still backed by Gold convertibility
• 1929 Stock Market collapse Gold falls a bit
  during deflation

5
History

• 1933 - FDR responds to depression
• Requires Gold be turned in at 20.67 oz
• Devalues dollar by setting the price of gold to
  35 oz to end depression
• 1944 Bretton Woods Strong US dollar becomes
  reserve currency backed by Gold
• 1971 Nixon stops Gold convertibility US
  insolvent
• 1972 38 oz
• 1973 42.2222 oz
• 1974 Gold Legalized
• 2009 Reserve Status? (75 Trillion in
  obligations)
• Dollar has been devalued by 98 since 1913 (96
  just since 1974)

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Gold Manipulation

• Gold Leasing
• Initial paper on the usefulness of Gold
  manipulation to prevent Golds early warnings
• Stop auditing of government reserves
• Paul Volckers comment
• In 1980 we neglected to control the price of
  gold. That was a mistake.
• Alan Greenspans comment
• "Central banks stand ready to lease gold in
  increasing quantities should the price
  rise.testimony to Congress on July 24, 1998

7
Gold Manipulation

• Direct Selling
• Central Banks Washington Agreement
• US
• TITLE 31 gt SUBTITLE IV gt CHAPTER 51 gt SUBCHAPTER
  II gt 5116 (as of Jan. 2, 2006) Treasury may
  buy sell gold/silver with approval of president
• IMF may sell gold
• Comex futures exhibit manipulated patterns
• Price rises overseas and during the 1st hour in
  NY it is crushed.

8
Gold Manipulation - Missing Gold

• US gold has not been audited since 1955
• 8,133 tons of Gold on US books
• 1,700 tons at West Point gold reclassified as
  "Custodial Gold"
• U.S. gold reserved reclassified as "Deep
  Storage
• Much may have been leased out which may mean
  there is little or no gold left
• Accounting changes could imply many things
• Government is actively preventing auditing of our
  Gold reserves.
• IMFs gold looks to really be a claim on
  sovereign gold which means proposed IMF sales
  will probably never happen.

9
Gold Manipulation GATA lawsuits

• GATA Lawsuits
• 1st dismissed no standing
• Blanchard coin then sued
• Barrick gold tried to have it dismissed claiming
  that they are an agent of the government
• Settled out of court
• GATA Freedom of Information suits being fought
  tooth and nail
• Fed redacting key portions and entire documents
• Word games at all levels

10
Gold Manipulation

• Possible Explanations
• Deleveraging and flight to safety
• Mining companies hedging of production
• My evaluation they manipulate as needed because
  in the end this is a confidence game

11
Gold Supply

• Supply
• 4-5 Billion oz (125,000-156,000 tons) of above
  ground gold
• 2,500 tons (2) is mined every year but this
  has been going down for years
• 800 tons of scrap gold is recycled
• Demand
• 4,000 tons
• Deficit of 700 tons
• The deficit is currently supplied by Central
  Governments
• All Gold would cost only 3.4 Trillion (730/oz)
• 700 Billion for all Central Bank Gold.
• 12/2-4 Gold in backwardation (spot price gt future
  price)
• Antal Fekete _at_ http//www.24hgold.com/contributor
  .aspx?contributor_nameAntalE.FeketeFilterall
  langueen

12
Gold - Holders

• 19 held by Central Banks and Official
  Organizations
• US 8,133 tons
• Germany 3,413 tons
• IMF 3,217 tons claims against others?
• France 2,540 tons
• Italy 2,451 tons
• Switzerland 1,064 tons
• Japan 765 tons
• GLD 745 tons
• Netherlands 621 tons
• China 600 tons
• ECB 563 tons
• Russia 457 tons

13
Silver Manipulation

• Case for Silver Manipulation
• Similar story different verse
• Manipulation directly by bullion banks
• Bullion banks take big short positions and kill
  leveraged longs
• Derivative contracts exert leveraged movement
• Silver market is tiny and thus easy to manipulate
• In 1997, Warren Buffett purchased 130 million
  ounces (4,000 metric tons) of silver at 4.41 per
  ounce (total value 572 million).
• All available silver could be bought for only
  7.5 billion (10/oz).

14
Silver Manipulation

• Most Central banks do not have silver reserves
• China had massive reserves but there do not seem
  to be any records of what has happened to them
• Not viewed as strongly as money mostly a
  commodity
• Manipulation is likely as 1-3 banks have massive
  short positions and drive the market
• Bear sterns position was not liquidated as would
  be the normal practice in a default but was
  simply transferred to JP Morgan.

15
Silver Manipulation - Supply

• Silver is much closer to an acute shortage only
  0.5-1 Billion oz (15,000-31,000 tons) because
  silver is consumed
• In ground Silver to gold ratio 8-20 to 1
• Physical Paper premiums approaching 50
• Current pricing is reducing supply
• 60-80 of silver comes as a byproduct of other
  metals (Nickel, Copper, ) and many of those
  mines have already been shut down
• Some estimates of as much as 60 of all silver
  mines are unprofitable now and will likely be
  shut down.
• New exploration is falling off a cliff because
  juniors cannot obtain funding. Existing
  discoveries unlikely to move forward.
• It takes a long time to reopen mines (Financing,
  Hire workers, etc.)

16
Silver Manipulation - Demand

• Industrial demand is inelastic (i.e. 2 silver in
  a 500 item)
• TV
• Mirrors
• Electronics
• Industrial demand has exceeded supply for 15
  years
• Current above ground stockpile is probably lt500
  million oz.
• Compare this with the current Gold stockpile of 1
  billion oz.
• This is one of the most under reported stories
  out there

17
Silver Manipulation Mispriced Market

• In the ground the ratio of silver to gold is
  estimated at somewhere between 8 to 16 ounces of
  silver to 1 ounce of gold.
• The market is currently pricing 88 ounces
• of silver to 1 ounce of gold. From 1792-2002
• mean ratio is 31.32.
• Given the above ground stock imbalance (a new
  situation) we will probably see a massive
  correction when the world wakes up to this
  reality.
• The monetization (viewing silver as money) of
  silver is a key driver in this ratio and is why
  silver has far more volatility than gold.

18
Physical Shortages

• Physical gold and silver have traditionally sold
  for a nominal price over spot
• Current demand for Gold is so high that these
  prices have jumped from 5 to 40 per ounce over
  Comex futures price
• The demand is causing delivery delay or outright
  suspension of orders at dealers and mints
• US Mint
• Suspension of sales of Golden Eagles and Golden
  Buffalos
• Very limited allocation of Golden Eagles
• Interestingly the US mint was able to handle 10x
  the current demand in the past
• Perth Mint
• Working 24x7 with three shifts the Perth mint on
  11/22 suspended new orders to resume 1/12/2009
  possibly with allocation.

19
Physical Shortages

• Price differences result in physical shortages
  and is often the hallmark of a manipulated market

20
A Rigged Game

• Government action against alternativegold money
  systems
• Liberty dollar shut down and Gold coins
  confiscated
• E-Gold executives charged for not complying with
  money laundering laws
• Have been unable to shut down goldmoney.com since
  it is domiciled outside of the US

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Possible Outcomes - Comex failure

• Investors are taking delivery in increasing
  volumes.
• Bullion banks taking delivery Do they know
  something?
• JP Morgan
• Goldman
• Citibank
• Current demand increasingly driven by the spread
  between Comex prices and physical prices.

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Possible Outcomes - Comex failure
http//meltdown2011.wordpress.com
23
Possible Outcomes Comex failure
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Possible Outcomes Comex failure

• Recent Changes in Central Banks Views
• Many nations have sold gold to support the
  illusion that it is not of value.
• UK
• Washington Agreement to limit sales
• Many signatories have stopped sales (only 34 tons
  so far)
• A number of rumors of countries buying Gold
• Iran
• Oil countries (Dubai, Saudis, Russia)
• India
• China
• Russia
• Qualitative Easing Inflation (beyond the
  already high 10)

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Possible Outcomes

• Possible outcomes
• Deflation/Disinflation followed by Recovery
• Result You probably make a profit since
  historically precious metals do well during
  recoveries.
• Deflation/Disinflation followed by Inflation
• Result You could double your money.
• Deflation/Disinflation followed by
  Hyper-Inflation
• Result Jackpot
• Government Responses
• Currency Devaluation
• Result - Jackpot
• Replacement currency
• Result - Jackpot
• Unless the house changes the rules

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Deeper Implications

• Because the government manipulates
• Statistics (CPI/PPI/GDP/Employment/)
• Stock markets via the plunge protection team
• Bankruptcy via government takeover
• Treasuries via Fed actions most clearly by buying
  them
• Gold/Silver only makes sense
• Are we really free when government can choose
  winners and losers and manipulates what should be
  free markets?
• Transparency must be demanded of our government
  and the federal reserve so we can enjoy real Free
  Markets
• Contact your congressmen
• Tell everyone
• If true how will Americans react upon learning
  the truth?

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References

• http//www.gata.org
• Outstanding and detailed information on gold
  manipulation. Daily links to global news related
  to gold manipulation. Many other links on
  website.
• http//www.dailyreckoning.com
• Overall view of failing fiat dollar and
  government manipulation of gold and silver
  markets.
• http//www.SilverSeek.com
• In depth silver market analysis.
• http//www.CampaignForLiberty.com
• Movement created by Ron Paul to campaign for
  government and monetary reform.