Gold is down on Tuesday as currency wars and fears over what Greece will do next should be pushing the yellow metal higher. Gold last reported a.m. is $1259.70 down $17.40 and silver is $17.33 up 5 cents.
February is generally a positive month for precious metals and gold should begin moving up towards the $1300 mark again. CME Group announced on Tuesday a 21 percent increase in daily contracts in January with precious metals contracts increasing by one quarter. Metals volume averaged 410,000 contracts per day up 24 percent compared to January 2014.
HSBC is reporting that President Obama plans to implement a one-time tax on U.S. corporate profits held overseas and the bank believes this may bring negative consequences for gold. The new tax would equate to a 14 percent transition tax on estimated USD2tn in earnings by U.S. companies held overseas. HSBC strategists believe the new tax would generate a sizable wave of U.S. dollar buying as corporations repatriate funds held abroad in the U.S. A stronger dollar typically brings gold prices down.
The almost 100 year old London gold fix will be turning over the reigns of fixing gold prices to new members beginning March. After opening the Shanghai Gold Exchange last year, the Chinese will be joining these ranks as well. This will be China’s first attempt to stake a claim in fixing global precious metals prices.
The London gold fix has been caught repeatedly suppressing gold prices by selling gold it doesn’t have. Scandals and lawsuits are widely reported especially over the past few years. Very similar to our own Federal Reserve it doesn’t allow investors to audit their gold holdings to make sure they are actually there. More lawsuits are coming and we will see fines levied but no one will go to prison for global theft that stands in the billions.
Last May, Barclay’s was fined 26 million for its failure to reign in an options trader who supposedly drove the price of gold lower in 2012 to avoid paying 2.3 million to one of the lenders clients. Fortunately for the client, he maintained a close watch on pricing fluctuation and spotted movements that were clearly fraudulent.
In December the FCA said it would oversee seven UK based financial benchmarks including the gold fix, following the attempted manipulation of key rates for bank lending and foreign exchange. The bullion bankers overseeing COMEX and the London gold fix may be stepping away publicly but it’s foolish to believe they are getting out of the business for good. They will simply bribe China and other “new” members into doing business as usual. Knowing that one will not face prison creates a certain boldness as is evidenced by the actions of overlords governing all global markets. Needless to say, a citizens arrest will not work in these type cases.
It’s no secret that China has been purchasing more gold than any other country until recently when Indian demand exceeded China’s in 2014. The new position for Chinese banks will give them a greater voice in the global gold price but that doesn’t mean an end to price suppression. China just like every other nation enjoys buying gold at great discounts. Central banks conduct business as central banks no matter where the are located.
Western bankers realize China is becoming a major player whether they like it or not and it’s better to have a “useful” enemy than just an enemy.
Be watchful as China leads the BRICS countries into purchasing gold at record levels in the coming months and years. Gold will eventually dethrone the U.S. dollar paving way for possibly a gold backed Yuan.
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