Dear PGM Capital, Blog readers,
Last Friday Gold sank more than five per cent, entering bear-market territory as institutional investors fled Gold amids of other safe-haven assets amid concerns about central bank sales and souring sentiment.
In the table below we can see the damage done to Gold and other precious metals last Friday, April 12, 2013.
| Precious Metal |
Closing Price [USD] |
Change [USD] |
% Change |
| Gold |
1,477.00 |
–84.00 |
-5.54% |
| Silver |
25.85 |
-1.81 |
-6.54% |
| Platinum |
1484.00 |
-47.00 |
-3.07% |
| Palladium |
705.00 |
-25.00 |
-3.42% |
The extend of the sell-off will underline some expectations that gold’s meteoric rally may end after 12 years of gains.
The precious metal slid below $1,500 an ounce for the first time since July 2011. Gold posted its biggest weekly decline since December 2011.
At moments like this it is worthwhile to take a step back to find out if the fundamentals for Gold are still present.
In the past 18 months Gold has repeatedly tested the support at $1530, as can be seen from below chart, Thia resulted in considerable top-loss orders around these levels. Moreover there are quite some investors who automatically sell when such a support collapses.
And as a cherry on the cake, gold now sells at more than 20% less than the previous highs and all media hype that we really have landed now in a bear market.
There were more elements that made the market players nervous. Just think of the “sell” advice given by the big USA BANK some days ago, or the forced gold sales of approximately 10 tons of Gold by Cyprus Central Bank in order to comply with ECB bail-out plan.
Cyprus clings on to the gold reserves and fights like a lion for this. Nevertheless, 10 tons of gold has only a value of about 400 million of Euros. For a of 23 billion of Euros of financing need, this is just a drop in the ocean.
Regarding the “Sell” advise of the Big USA Bank as mentioned here above, this is the same bank that advised its clients in 2007 to “buy” “Subprime mortgages” while the bank was shorting these securities in its own portfolio, which led to a profit of approximately 4 billion USB during the financial crisis of 2008.
It would not surprise us, if they are doing the same at this moment. Advising everyone else to sell gold, whereas they themselves are taking advantage of the low prices to build up their positions.
In brief, the ideal circumstances were created last Friday for a coordinated attack on gold, silver and other precious metals.
At the opening it became clear that the purpose was the support at $1530 their target. If they could break that, the rest would almost be a matter of fact.
Stop-loss orders and technical analysts would make the sale wave win momentum.
What we witnessed on Friday is nothing less than a precision bombardment to put the gold price at a deliberately lower level.
This game is played in Future Markets. Here the gold price is determined and is susceptible of manipulations, as most buyers never request a physical delivery.
In the Future Market it is possible for a party that wants to drop the gold price to do so, in order to flood the market with paper sales while not having the gold at its disposal. On Friday April 12, 374,000 future contracts were sold for which each contract contained 100 ounces of gold, which in fact means that on Friday, 37.4 million ounces of gold were sold. That coincides with about half of the year’s production. So on a single day, just as much gold was sold as all goldmines together can produce in six months time!
That people placed a large order on the market while knowing that you will not get a good price is not ‘normal’. Thus this should not be seen as a normal action. Which ultimately means that last Friday someone deliberately wanted to depress the gold price!
These manipulations are not new. They have been taking place for quite some time now, relatively on crucial moments you cannot overlook them.
Paul Craig Roberts a former “Assistant Secretary of the US Treasury” has the answer: he is of the opinion that the “Federal Reserve” is behind this attack. According to Roberts the FED worries about the dollar. The central bank is printing quite some money to avoid the collapse of the system.
This will stop when large parties request delivery of the gold purchases. Do not only think of investors who then deposit it somewhere in a large safe. But especially of central banks, such as China and Russia, who profit from the relativly low prices to convert the dollar reserves into gold.
Last month only China bought more than 100 tons of gold. According to Andrew Maguire an independent bullion trader, last Friday non-western central bank used the drop in the price of Gold and bought for more than 100 tons of Gold, to be delivered physically of course.
These attacks show the despair and concern of the central banks and the savers all over the world, that what happened in Cyprus can also occur in their own countries.
A lot of that money will go in the direction of gold, so it is now of great importance to discourage this as much as possible.
The deliberate coordinated attack on the price of Gold last Friday by some big USA banks and western central banks can be seen as an desperate attack and that they have used one of their last bullets to discourage people and institutional investors to put their money in those precious metals instead of into an account at their banks. The moment people realize that the money in their pockets and the Deposit Insurance Companies have less that 2% assets to cover their insured deposit, people might run into Gold, Silver and precious metals and ask for physical delivery.
Due to that we believe that people should follow the example of China and Russia and other Fundamental Investors, to use the decline of the price of Gold and other precious metals of last Friday, solely to add more of these precious metals to their portfolios, which are in closed end ETF’s and stored in Safe Countries with a history of protecting investors and depositors.
Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Precious Metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.
Yours Sincerely,
Eric Panneflek