Gold Bears... Be Afraid, Be Very Afraid

Bill Gross just put out a warning in the form of an investment in QE3.  The past QEs have been very good for gold.  So gold bears would do well to pay heed.

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This guy has placed a $133 billion bet QE3 is going to happen

Frik Els | April 20, 2012

After failing to scale the psychologically important $1,800 an ounce bar at the end of February, gold has taken a few hard knocks on the way to its current trading level of around $1,650.

The spikes downward have all been thanks to Ben Bernanke and the US Federal Reserve and the fortunes of the precious metal seem increasingly linked to monetary policy in the US.

At the start of April for instance gold dropped some $60 an ounce in a single session when Fed minutes appeared to indicate a third round of so-called quantitative easing was off the table and its policy of zero interest rates may be coming to an end sooner than previously thought.

If the Fed stops flooding markets with cheap money, gold’s allure as a storer of wealth and an inflation hedge is diminished. Tighter monetary policy also strengthens dollar, further hurting the yellow metal.

Quantitative easing has been a massive boon for gold. The Fed’s new near-zero interest rate policy and purchases under QE1 kicked off on 16 December 2008. On 15 December 2008 an ounce of gold cost $837.50. Late on Friday, June contracts in New York changed hands for $1,642.80.

That’s a 96% improvement for the precious metal on the back of QE1 and QE2 (first mooted in August 2010) and ‘Operation Twist‘ (started in September last year and set to expire at the end of June). Before QE1 the Fed’s total assets were below $1 trillion. It is now closer to $3 trillion.

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Manipulation makes Us a Gift of Gold and Silver

Manipulation of precious metal prices?  Yes?  No?  Regardless of what you 'believe' Harvey Organ's view must be taken into account when trying to read the planted (IMO) tea leaves that are left to the rest of us who don't 'own' this market.

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Harvey Organ has been analyzing the bullion markets closely for decades. The quality and accuracy of his work is respected enough to have earned him an invitation to testify before the CFTC on position limits for precious metals back in 2010.

And he minces no words: Gold and silver prices are suppressed. With extreme prejudice.

In this detailed interview, Harvey explains to Chris the mechanics of how he sees this manipulation occurring, why he predicts this fraudulent pricing scheme will collapse soon, and why it's critical to be holding physical (vs. paper) bullion when it does.

The real suppression of the metals started in 1988. That’s when the leasing game started and was invented by J.P. Morgan.

These guys would go around to the mining companies and say, “Listen, I’m going to pay you for your gold in the ground and I will sell it. You just pay me as you bring it out.” So that was cheap financing to the miners. Barrick, the biggest mining company of them all, went in on this and it financed a lot of Nevada projects.

Once the leasing game came, the actual selling, the extra selling, suppressed the price. In the first five years, it started at maybe three hundred to four hundred tons. It didn’t start to get really bad until probably ’97-’98 with the Long Term Capital affair. And that’s when the leasing started to become around maybe 1,000 tons of gold. And it hasn’t stopped.

And silver is the same.

And that’s why you've had a long-term, 20 years of suppression of the metals. The problem now is that the physical is now gone. Where is going? It’s gone from West to East.

A lot of people don’t know that China used to refine close to 80% of the world’s supplies of silver, because it’s very toxic. Up until probably ’85, the Chinese handled 80% of the world’s refining of silver. Now they're down to 40%, but that’s still a major part of China’s industry. They are keeping every single silver ounce they refine, and gold. They are keeping it for themselves; their reserves are rising (though they don’t tell exactly). Two years ago they went up to 1,054 tons and I can assure you it’s probably triple that now. These guys are not stopping. Just like they are not stopping in oil. They know what the game is and they are slowly taking all their U.S. dollars that are on their shelf and converting them to gold, oil, copper – anything that’s real.

Continue to read this article.