Jeffrey Lewis: “Gold and silver price manipulation from the top down” – Resource Investor

Posted on :Nov 12, 2013

The manipulation of gold prices, along with practically every other asset class, has perfectly transparent legal precedent. The precious metals political hot potato taboo has been strong enough to make it almost impossible for the mainstream to understand. And while it is perfectly plausible and even celebrated by the practitioners, the greatest threats to economic stability (LIBOR, bonds and interest rates, equities, electricity) are openly discussed facts. Obviously, history has demonstrated that these great unnatural “tinkerings” always end badly.

To summarize, the key points of a recent interview with GATA’s Chris Powell’s demonstrated how silver analyst Ted Bulter and GATA dovetail — and how it ends.

The Exchange Stabilization Fund

The ESF is basically the funding arm of the Treasury — as spelled out on their website.

By definition it means (and is confirmed by open admission) that they intervene across a broad range of asset classes.

The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that “the Department of the Treasury has a stabilization fund consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates. The Secretary, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.”

They use swaps and huge concentrated positions held by Fed member banks to intervene in the gold market.

The Fed’s member banks include the bullion banks, who obviously wield control of COMEX via concentrated positions or ‘constant’ market corners.

Gold Anti-Trust Action Committee

GATA has documented (modern) evidence, by the use of their FOMC Freedom of Information Request, that the fund has very broad legal authority to intervene anywhere.

The fund also works in conjunction with the Fed — again, as stated at the Treasury site — which more than implies market coordination and collusion.

With gold, they still have the ability to maintain that illusion.

Silver Achilles

Silver is a bigger ‘problem’ because CB’s don’t have any physical metal to “inject” into the market in order to maintain the confidence game.

But probably not for long. And one might assume the end is very near, given how fragile/vulnerable the system is (especially the credit/REPO market) to “unforeseen” shocks, Black Swans, etc.

This is where I find it too easy to get carried away. One quick look around the macro world reveals a host of potential shocks. This would fuel the need and opportunity to build short-term predictions about current events (rationalized with evermore sophisticated technical or trading indicators).

Interpreting the Whistleblower

The work of GATA and Ted Butler dovetail somewhat. GATA has exposed the reality and legal mechanism for intervention. Ted focuses mainly on the details of how that intervention manifests in the trading data.

Backing up further, it’s generally accepted by the “street” that the Fed, the Treasury or the ESF intervene all over the place — and that’s perfectly okay. But mention of precious metals intervention remains a very successful (though ultimately destructive) taboo.

The ESF, with its broad authority and coordination with the Fed (and by proxy, the Fed’s member banks) have the ability to control prices in both gold and silver. This also happens to be very profitable for the banks.

The giant banks are given carte blanche by the mainstream because they are so “successful,” and “surely the man in the fancy suit is someone you can trust.” They are also too big to fail and/or prosecute.

Price suppression, controls, and manipulation are common occurrences. They have been observed and documented for practically all modern markets. And they always end eventually.

Just because it is legal does not make it right.

In the ultimate public relations triumph, the most economically destructive are actually perfectly acceptable by the majority of observers. However, the most dangerous to the financial system and the governments who serve them is the manipulation of the monetary metals.

Gold Goliath is not your typical gold dealer.

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