By L. Reichard White
©April 20, 2013
On Friday April 12 and Monday April 15, 2013, the titular price of gold dropped a total of over $200, a performance not seen in over 30 years. Monday saw the biggest one day dollar drop in gold ever. The Friday move was about 4.88 standard deviations meaning it should only happen about once every 4,700 years, and the two day price movement in the GLD ETF was in the eight standard deviation range — meaning the sun should burn out before it happens. Everyone’s looking for explanations.
Yet, at the same time, ABN AMRO, one of the largest banks in Europe, didn’t have the physical gold it had contracted to deliver and defaulted. Venezuela, Germany, Mexico and the Netherlands are repatriating their gold from the United States — and the U.S. Mint has periodically suspended sales of gold and silver coins because of a lack of the precious metals. Maybe that’s because as a CNBC survey discovered, more Americans prefer gold over all other investment classes.
Maybe it’s just a normal trashing of the gold price by the government-banking axis, but an extreme one.
But why now?
Hopefully the answer is, “Because we’ve been trying to protect our Keynesian zero-real-interest-rates against gold ever since it hit $1923.70/oz and threatened them — and just NOW all the factors were finally right.” Former U.S. Assistant Secretary of the Treasury Paul Craig Roberts thinks that’s the case.
But if the answer is, “We see a serious ripple in the fiat money force, and we’re trying to head the disaster off at the pass,” they may be right. Worse, their blatantly obvious action against gold may precipitate the very disaster history suggests they should fear. Maybe Japan’s early April program to inflate the yen as far as the eye can see was the ripple that broke the camel’s back.
In that case, Paul Craig Roberts explains what the bankster-government axis is worried about.
Here’s an example of how nervous central banksters get about a rising gold price – – –
We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K. –Edward A. J. George, Governor of the Bank of England and a director of the BIS, to Nicholas J. Morrell, Chief Executive of Lonmin Plc: Civil Action No. 00-CV-12485-RCL, Filed Dec. 7, 2000
Why are governments involved? Guess which organizations are, hands down, the biggest debtors in the world and so must have low interest rates? Guess which particular one is the biggest debtor in the history of the world? Hint: THE Debt Clock
So you shouldn’t be surprised when veteran metals trader Andrew McGuire reports that the western banking-government amalgam — spearheaded as usual by Bankster Goldman Sachs with its bearish call on gold last week — dumped more than an unheard of 500 tons of PAPER gold on the market late last week (April 12, 2013). And, it seems, pimped, cajoled, and forced other weak hands to play along.
CNBC’s Rick Santelli, April 15, 2013, reports a sell order of 125 tons from a single source on Friday’s open alone. There’s a similar report from Ross Norman but of 400 tonnes, and another from Mark O’Byrne at GoldCore that, “ Massive $20 Billion Paper Gold Sell Orders Trigger Stop Loss Selling And Unfounded Panic“.
There was a similar if even more virulent move in the silver pits.
What’s paper have to do with it? “Paper gold” means the move was done with promises to deliver gold, not with actual physical gold itself. Which is what makes the failure of ABN AMRO to deliver promised gold — and the U.S. Mint suspending precious coin sales — very interesting indeed.
It’s directly analagous to the beginning of an old fashioned run on a bank where the bank was unable to redeem its “Redeemable in Gold on Demand” dollars — the only Constitutional kind — because they’d printed those redeemable I.O.U.s for more gold than they actually had. If anyone else had done that, it would be called “counterfeiting.”
And because the banks are so interconnected, this isn’t just a run on ABN AMRO.
AND maybe the repatriation movement, besides being interesting, is the straw that lit the fuse as Venezuela, Gremany, probably Holland, and perhaps some other countries are repatriating their gold which has been theoretically stored in the valuts beneath the Federal Reserve Bank of New York — made famous in Die Hard With a Vengeance, the third movie in the series. Mexico, with about 95% of it’s gold reserves in New York and The Bank of England, is also beginning to repatriate “its” gold.
The real tell for anyone who doesn’t believe in this sort of thing is that even the experts all remark on how unusual it is. For example, according to CNBC’s Sharon Epperson, “The volatility that [the NYMEX futures traders] are seeing right now in the gold market, they say, is unprecedented in the last twenty, thirty, forty years they’ve been trading.” Likewise renown analyst and long-time market observer Dennis Gartman remarked on CNBC, April 15, 2013, ~”In 40 years observing the gold market, I’ve never seen anything like this.”
That’s what it now takes to get folks’ attention, and clearly this hasn’t been lost on those engineering such events these days. And remember, when the government does it, it’s not a conspiracy, it’s a plan.
History? That was when France, a few other countries, and most importantly, the markets, called Uncle Scam’s Bretton-Woods “London Gold Pool” paper-gold bluff by taking delivery of actual physical gold from the U.S. and its other eight dragooned central banks. In stupidly trying to again raise the market bet and cap the price of gold, Uncle airlifted a bunch of gold to London, ultimately collapsing the floor of one storage vault. But that was all to no avail. Being caught with its counterfeit shorts down, finally, on August 15, 1971, with Executive Order 11615, Nixon “closed the gold window,” thus abrogating the international convertibility of the U.S. dollar to gold and finalizing the biggest default in history. So far.
So, trashing gold – – – as long as possible – – – is business as usual.
But there are consequences – – –
…after 1971, the era of stable growth simply came to an end for the United States. Eighteen months after the gold window was shut, American wages, adjusted for inflation, reached their all-time peak. …since then the average American worker has been losing ground. Family income has gone up, which is the statistic most politicians point to but it now takes two workers in each family to make that income, whereas in 1971 it took just one. -Joel Kurtzman, THE DEATH OF MONEY, (New York, NY: SIMON & SCHUSTER 1993), p. 70
L. Reichard White [send him mail] taught physics, designed and built a house, ran for Nevada State Senate, served two terms on the Libertarian National Committee, managed a theater company, etc. but his hobby is explaining things he wishes someone had explained to him. You can find a few of his other explanations here.