Gold Market : An Analysis of Recent Geopolitical, Economic and Banking Events
There are many events to be analysed for these last few weeks. As happens every year, this time of year is, once again, quite fertile.
These events, whether geopolitical, economic, financial or historical (end of the London Gold & Silver Fixing), all exert influence, more or less on the long term, on the precious metals markets.
Within a long-term investment perspective, it is best to analyse first the geo-strategic events, since they might give us a clue on the hard trends in regard to the international monetary system, albeit without short-term fluctuations.
All of those events can be tied together and provide hints that confirm, as I’ve been showing with the rest of Goldbroker.com’s editorial team for several years, that a financial paradigm change is occurring and that it will lead, as has always been the case historically, to a return of a form of gold standard. We are not inventing this: Owning gold has always constituted a means of protecting one’s wealth in times of transition between monetary systems.
By following our analyses, you will be able to keep an eye on the different stages of these changes, in the midst of media fog and financial disinformation.
Spot Prices Performance
Gold and silver did well these last few weeks, since the start of June, coming out of their long-term correction phase, before experimenting a significant correction, Monday 14 and Tuesday 15 (July), following two more attacks on the COMEX.
At a time when both London fixes in gold and silver are being questioned, we have to reckon that this last blatant manipulation attempt was a sign of despair from the manipulators. As Egon von Greyerz states in a new article, the manipulators (Western commercial banks and governments) have almost no physical gold left, and they are desperately trying to kill this bullish sentiment in the markets in order to keep investors from flocking to physical gold and silver, which would make demand explode, at a time when there’s no available physical gold at these artificially-low prices and, thus, no physical gold to insure the convertibility of millions of paper contracts owned by thousands of investors in physical gold.
These last two attacks, at the most illiquid times of the day, constitute new evidence of blatant manipulation. GATA (Gold Anti Trust Action Committee) will gladly add these two new episodes to its long list of proofs it has been gathering for over a decade. And, without a doubt, BAFIN (German financial regulation organism) must have closely watched the price action on Monday and Tuesday. BAFIN has turned out, these last few months, to be the sole regulation agency paying attention to the price manipulation (certainly due to the United States’ refusal to repatriate even a small portion of their gold reserves), since its director stated that the gold market manipulation was much more important than LIBOR’s.
As can be seen, judicial enquiries have progressively moved from LIBOR to Forex and, finally, the gold market. In fact, this is a natural progression, because (confirmed) manipulations of LIBOR and Forex cannot occur unless gold is, also, manipulated.
The main financial and economic media in the West do not cover this phenomenon, or ever so hardly, but we all know who their financial masters are. Trusting their analyses to make investment decisions seems suicidal when, for instance, we know that central banks are buying stock shares and are, thus, pushing stocks higher. But you won’t read about that in the traditional “financial” media.
This media silence contributes to exposing millions of investors to bubble-prone assets (stocks, bonds and real estate, in certain countries).
Whatever the case may be, the manipulators are trapped in all scenarios, because these organised crashes only increase the transfer of physical god and silver toward the East (Asia, Russia, China, India) and lessen their capability to provide physical metals at a time when no heavy buyer (Russia, China, BRICs) is trusting paper gold. So, whatever they do from now on, the end of their capability of manipulating the precious metals’ prices is nearing.
The Zerohedge website, in two articles (read here and here), details the colossal number of gold futures contracts sold in order to crush the prices, on Monday and Tuesday, July 14-15.
Paul Craig Roberts, former State Secretary to the Treasury, has also explained, in a recent article, the scope of this manipulation.
We have been observing this price manipulation phenomenon for several years now, and the length of its duration may drive one to exasperation, but the truth is that reality cannot be manipulated forever. As with any other phenomenon, imbalances end up being corrected in long-term cyclical movements.
COMEX: Disconnect between virtual and physical confirmed on official CME site
A few weeks ago, I published an article focusing on the disconnection between the physical and virtual markets with regard to silver. Another proof of this disconnection can be found just by reading the official definition of silver futures contracts on the official CME website. In the bottom of the page, in the F.A.Q. section, it is written that “price may be managed separately from physical supply”. This does confirm a disconnection in fixing the price of silver on futures contracts. Because we know that, for the moment, as Paul Craig Roberts explains, those futures contracts are what the silver price is based on. In this context, no one can know the real worth of physical silver, given the amount of paper silver contracts floating above a tiny available physical silver market.
Could there be gold confiscation in Germany?
BAFIN confirmed to the German website Goldreporter.de it had asked banks for information about clients having invested in gold, which quickly gave rise to rumours of confiscation from the German authorities.
I do not agree. BAFIN has been, in the last few months, the only regulating agency speaking openly about price manipulation, and has certainly had something to do with Deutsche Bank letting go of its seat in the London Gold Fix.
In a context where Germany has also been told by the United States that it could not even get back quickly a mere tiny portion of their gold stored at the New York Fed, and where Germany is cooling off its relation with the U.S. in favour or Russia and China (Germany just expelled the CIA chief in Germany because of spying accusations).
My take is rather that BAFIN is trying to know the level of exposure of German investors to the paper gold fraud.
BAFIN knows the price of gold is being manipulated, it has stated as much, and this request rather shows it is worried about the consequences of the implosion of the paper gold market for the German investors.
This gold audit, by the way, and this is revealing, only deals with gold derivatives and contracts sold to German investors by banks and investment funds, and not with sales of physical gold. As far as I know, no information was requested from precious metals storage companies.
So BAFIN is most likely worried about a coming implosion in gold derivatives.
Now to the financial/banking sector: Several news items confirm the seriousness of the situation (which, in fact, has been serious since the 2008 crash) and shed light on the fragility of the international banking system. Savers should take note of the deteriorating situation.
Banks are underestimating their risks
As Philippe Herlin writes in his recent analysis for Goldbroker.com, according to some analysts, banks have been revising their risk models in order to lower their required outright funds by underestimating the risks and by grossly overestimating the value of their assets.
And this comes out of the 84th annual report from the BIS (Bank for International Settlements), the “central bank of central banks”, the institution in charge of implementing prudential norms for commercial banks across the globe (Basel III).
Their underestimation of risks puts them in jeopardy, should an un-foreseen event take place.
And, as we’ve seen these last few weeks, un-foreseen events are occurring:
The main banks from Austria (Erste Bank) and Portugal (Banco Espirito Santo) announced some serious problems. There has even been a bank run in Bulgaria.
This puts in perspective ECB chairman Mario Draghi’s announcement about a 1 Trillion euro bail-out plan for banks, even though he’s saying it is to jumpstart credit.
Meanwhile, the IMF is suggesting, again, seizing depositors’ accounts.
The German newspaper Die Welt reported that the International Monetary Fund (IMF), on June 22nd, published a new call to use depositors’ accounts to pay sovereign debt (of course, after having paid the banks’ derivatives).
“The IMF is preparing for another round of confiscating depositors’ accounts”
In the United States, the Securities and Exchange Commission (SEC) will make official a rule making it impossible (we don’t know yet if it will be only temporary) to redeem funds invested in certain money market funds, amounting to a sort of bail-in or capital control in case of a crisis.
In this case, only sums invested in those funds will be impossible to redeem.
Let’s end this report with geopolitical events. Colossal changes are happening; these things take time, but the trend will not be reversed: The move toward global rejection of the US dollar is now underway, it’s a reality. And the rejection of the dollar makes the creation of a new international monetary system mandatory, to which effect the BRIC countries are actively preparing, notwithstanding the refusal of Western countries to modify the current system.
BRICs : Creation of a new development bank to compete with the IMF
The BRICs Development Bank is now a reality. In my articles, since 2011, I have often written about events to come that would confirm this challenge to the current monetary system, and the creation of this BRICs bank is one of those important events.
The case of Germany
Germany, angry about a few situations, such as the ECB’s lax monetary policy, to which it has been strongly opposed for a long time, the refusal of the United States to repatriate even a meagre portion of its gold stored in New York with the Fed in short time, and the revelations of the United States spying in Germany, is starting to walk away from the destructive influence of English-speaking countries and of Europe and toward the East (integration in the Euro-Asia free-trade zone) and the BRICs.
I wouldn’t be surprised to see Germany leave the European Union to join the BRICs which, as we’ve seen, are starting to build a base toward a new monetary system via the creation of their development bank, totally opposed to the IMF.
It’s difficult to find fault with the BRICs trying to walk away from a destructive and predator institution like the IMF. Case in point: the IMF loaned 17 billion to Ukraine under the condition that it doesn’t lose control of its eastern territories.
The IMF’s proposed evolution only consists of implementing their Special Drawing Rights (SDRs), another paper currency experiment without any change in the voting rights, with many countries being under-represented.
Germany’s position is not to be confused with Angela Merkel’s position. German industry leaders, notably, are accusing her of not taking Germany’s commercial interests with Russia at heart. Her position does not reflect the thinking of Germany’s commercial and industrial base, which will certainly push her toward the exit or even an anticipated one, since she is openly talking about leaving office before the end of her mandate in 2017.
Should this anticipated resignation be confirmed, it will reveal the end of the influence of political, banking and financial circles in Germany, and the seizure of control by the industrial leaders. As is always the case, commercial interests do end up dictating a country’s strategic orientations.
Germany’s behaviour, in the months to come, is to be monitored closely. Once its tilting toward the East is really officialised, probably in reaction to the next financial crisis that should come, end of 2014- start of 2015, it will have quick and severe consequences on the European Union and the survival of the euro.
Movements of de-dollarization and defiance against U.S. leadership
Sanctions against Russia are starting to turn against the United States, with nine European countries ready to ignore them, because Russia is a more important commercial partner than the U.S. for certain European countries.
Furthermore, these same countries consider that the Transatlantic Trade and Investment Partnership (TTIP), proposed by the Obama administration, is an attempt to annex Europe in a sort of economic NATO benefiting only American large corporations. Let’s recall that this treaty will place the interests of large corporations above national interests.
Russia’s influence in Europe, due to energy and commercial links that cannot be broken, is leading European countries to ignore the sanctions and to question their use of the dollar.
This questioning of the use of the dollar has even been announced publicly, recently, by two Frenchmen. Let’s hope France will follow Germany in this trend toward closer ties to the East.
TOTAL: Christophe de Margerie, its CEO, announced he was seeing no reason to keep buying oil with dollars, adding that it made perfect sense to use other international currencies for the settlement of oil transactions.
This questioning of the petrodollar by the CEO of one of the largest oil companies in the world is not just candid, when we take into account that the dollar’s stability is based on oil being traded in dollars, which automatically sustains the currency.
Since 2013-14, the direct questioning of the dollar use isn’t coming from small countries prone to conflicts, such as Lybia, Iraq or Iran, but directly from top leaders of important countries that can’t be worried about economic, or even military, pressures (Russia, China).
Banque de France: The president of Banque de France, Christian Noyer, who is also a member of the board of governance of the European central bank, announced that sanctions against BNP would bring companies to massively reject the dollar.
He is clearly stating that “commercial transactions between China and Europe must be done in euros and renminbis. Let’s stop using the dollar... this case (sanctions against BNP-Paribas) will have consequences”.
The sanctions that are being imposed directly by the United States to its European partners or the ones it asks them to impose against Russia, at a time when the TTP is being negotiated, are not appreciated at all or even simply ignored, with direct consequences for the dollar.
Toward a new monetary system
All of the events mentioned above are part of the fundamental trend, i.e. a migration toward a new monetary system.
Physical gold is migrating to the East (Russia, China) and, with it, power and influence. We see it with China and Russia progressively imposing their will, building consensus with a great many countries that wish to end American domination made possible by their capacity (privilege) of issuing the world reserve currency.
The saying, “He who holds the (physical) gold makes the rules”, is truer than ever. The announcement of the creation of the BRICs development bank is just the first cornerstone in the new international monetary edifice. All we have to wait for is the first official announcement from the East of a new means of settlement of commercial trade based on one or more tangible assets, with gold. Afterwards, logically, an announcement of the convertibility of certain currencies into gold, or even the creation of a new currency that would be convertible to gold, should be made.