The Assault on Gold

Paul Craig Roberts ^ | April 4, 2013 | Paul Craig Roberts

[Bon mots]

For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

The Federal Reserve realized that its massive purchase of bonds in order to keep their prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in US bond and stock prices.

Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from offshoring millions of US middle class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.

Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on US protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. It was individuals who began the exit from the US dollar.

When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.

The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.

The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.

For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of gold and silver, and thus the Federal Reserve has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.

However, for the Russians and Chinese, whose central banks have more dollars than they any longer want, and for the 1.3 billion Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They see the opportunity that the Federal Reserve has given them to purchase gold at $350-$400 an ounce less than two years ago as a gift.

The Federal Reserve’s attack on bullion is an act of desperation that, when widely recognized, will doom its policy.

As I have explained previously, the orchestrated move against gold and silver is to protect the exchange value of the US dollar. If bullion were not a threat, the government would not be attacking it.

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices, and a rising interest rate and collapsing bond, stock and real estate markets.

The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.

When the Federal Reserve can no longer print due to dollar decline which printing would make worse, US bank deposits and pensions could be grabbed in order to finance the federal budget deficit for couple of more years. Anything to stave off the final catastrophe.

The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced.

By its obvious and concerted attack on gold and silver, the US government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.

Those who believe in government and those who believe in deregulation will be proved equally wrong. The United States of America is past its zenith. As I predicted early in the 21st century, in 20 years the US will be a third world country. We are halfway there.

[Bon mots]

It's not just the Fed in the USA that is trying to corral the sheep into failing fiat currencies as the sovereigns steal the value of those currencies.

In January India raised the import tax on gold to 6 percent to curb purchases.

India vies with China as the top global consumer of gold, and with nearly all demand covered by imports, the country's purchases are a major factor in global prices.

There has been talk of India doing more to discourage its citizens from purchasing gold, but more tariffs only increase smuggling. So far, we have seen much official manipulation of gold prices from governments desperately trying to keep their citizens holding currencies and in the banking systems so that my be properly shorn of their value.

[Bon mots]

Reinhart and Rogoff had an interesting graph in their latest book, "This Time is Different". It is how governments have been forever stealing the value of money over centuries. It used to be that money was backed by either gold or silver.

Now, your dollar bills and banknotes are only the 'wrapper' that money used to come in. People have been fooled into thinking that the wrapper is money. It's not.

Silver content of money (grams) ⇧
Now, there is only some nickel in US coinage, as even copper has been stolen from your pennies.
The above chart would show ZERO for today.

In the USA, dimes, quarters, half dollars and 'silver dollars' were 90% silver up until 1964. Then they were reduced to 40% silver until 1969, when finally all the silver was taken out.

In 1982 they took the copper out of pennies and replaced it with zinc. Next will be the 'nickel' - which now has 7.5 cents worth of nickel with a face value of only 5 cents. They will steal this value from you next.

You see where this is going... you are going to be left with just the wrappers that your money used to come in. They don't want you buying gold or silver on your own, as then you can keep them from stealing it as they crash the old economy, currency and financial system.

[Travis McGee]

If the price of gold is being suppressed by the means discussed above, we should be seeing a divergence between the cost of ETFs and other “paper gold” and “stored in the vault (trust us) gold” versus the price for physical, delivered gold. Is this happening?

[Toddsterpatriot]

Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

Who? Anyone who saw the price of gold and silver in those other currencies.

Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering

Which wars were those pesky neocons engineering in August 2011?

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments

Moving away from the dollar to the Euro? LOL! The Yuan? LOL! The Yen? LOL!!!!

As I predicted early in the 21st century.....

You predicted Bush would set off nukes in the US in order to attack Iran, maybe I missed the cities that were hit?

Poor Paul, still crazy after all these years.

[Bon mots]

60 day gold price:

ETF
3-MONTH CHART:

[Bon mots]

10 Best Precious Metals & Gold ETFs for 2013

Top-Rated ETFs

Top Precious Metals ETFs as of 2/28/13

Fund Name	Get Info	Overall Rating	Risk Grade
UBS E-TRACS S&P 500 Gold Hedged	SPGH	C+	C
ETFS Physical Palladium Shares	PALL	C	C+
Direxion Daily Gold Miners Bear 3X	DUST	C	D+
ETFS Physical Swiss Gold Shares	SGOL	C-	B
SPDR Gold Shares	GLD	C-	B
PowerShares DB Gold Fund	DGL	C-	B
PowerShares DB Precious Metals Fund	DBP	C-	B-
ProShares Ultra Gold	UGL	D+	C+
iShares Silver Trust	SLV	D+	C
PowerShares DB Silver Fund	DBS	D	C

Source: TSC Ratings

[SunkenCiv]

[snip] The Federal Reserve realized that its massive purchase of bonds in order to keep their prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in US bond and stock prices. Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from offshoring millions of US middle class jobs for the sake of executive bonuses and shareholder capital gains. [/snip]

Ludicrous. But that’s not surprising:

Paul Craig Roberts: Archives
Past articles by Paul Craig Roberts on LewRockwell.com
http://www.lewrockwell.com/roberts/roberts-arch.html

[Mase]

PCR, still crazy after all these years.

The last time I saw an article from him he was singing hosannas to Julian Assange. We'll never know what caused him to jump the shark, but do we even care? He's nuts.

[Rich21IE]

I believe so, if I understand your question. And its quite annoying. Its reflected in the “premium” one must pay for the physical item. So for example, if a Silver Eagle is selling for $32.00 you can usually buy for delivery at about $34.00. A $2.00 spread. But last week the spread widened to more than $3.00. You can see this crap at bulliondirect.com; check the Nucelo Exchange, their trading market.

Then, there’s another odd spread; Silver is quoted at 27.30 an oz., but see sticker symbol SLV, (I-Shares Silver Trust ETF) and its priced at $26.39.

[M Kehoe]

Good afternoon.

Then, there’s another odd spread; Silver is quoted at 27.30 an oz., but see sticker symbol SLV, (I-Shares Silver Trust ETF) and its priced at $26.39.

If I understand what you are looking at correctly, the "Bid" and "Asked" price always shows a spread.

5.56mm

[Toddsterpatriot]

I'm sure the neocons found some way to give him Alzheimer's.

[dennisw]

Not yet but Jim Sinclair and Gata say it will. Plus Silver bugs want to bust the silver bank. Silver bank meaning those who trade in fictitious silver and those who drive down the price of silver. JPMorgan being the biggest villain. JpMorgan is one of the foremost banks (shareholder) in the NY Fed. JPM does the FReserves’s bidding, driving down gold and silver which compete with the Fed’s fiat currency.

[Toddsterpatriot]

JpMorgan is one of the foremost banks (shareholder) in the NY Fed.

They get 6% on their "shares" and 0.25% on their excess reserves, just like everyone else.

[dennisw]

Name the other NY Fed member banks in order by the number of shares owned and order of influence. I read last week (true?) that JPM’s gold vault is right by the NY Fed’s, connected by a tunnel.

[expat_panama]

PCR, still crazy after all these years.

Actually, this piece seems to show an accelerating split from reality. After first glancing at the list of PCR gaffes in Todd's post I'd thought to focus on the piece's main theme. There isn't one; just a ramble of disjointed nonsense. PCR seems to have hit a new low.

[dennisw]

They get 6% on their "shares"

And is very nice risk free income....not to mention JPM and other Fed Resereve primary dealers who get a free gift in the billions each year by the Federal Reserve not buying Treasury debt directly. NY Fed buys (and have been a tremendous net buyer for a few years) Treasury debt from intermediaries such as Goldman and JPM. Amazing how JPM is a NYFed member bank and gets this free gift each year in the hundreds of millions from the NYFed. Maybe a billion? You tell me 

NY Fed's current list of primary dealers. Some are new but the older ones must be senior and get more action and free Fed money

Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies LLC
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.

[dennisw]

Then, there’s another odd spread; Silver is quoted at 27.30 an oz., but see sticker symbol SLV, (I-Shares Silver Trust ETF) and its priced at $26.39.

Silver has been down. But when it is rising I think you will usually have to pay a premium to buy SLV. I don't follow SLV so cannot say for sure. Eric Sprott has a physical gold fund and a silver one in Canada. The premium to get in (buy) is higher when the precious metals are hot. If you buy an ounce gold Maple Leaf coin you will pay a higher premium over the gold price when gold is hot. If you bought now the premium is probably lower than usual.

[yefragetuwrabrumuy]

Like Texas, other states should start building their own gold repositories. However, they should do some things that would be gigantic confidence builders.

The first of these would be that the repository has a public section, for the gold owned by the state; and a private section for privately held gold kept there under contract guarantee.

In the first instance, the state would re-assay and purify all its gold to 24 karat. Specifically, .9999 millesimal fineness, like the Canadian Maple Leaf. The reason for this is that each 1-oz and 1-pound or more ingot would be laser engraved with a hologram, that would identify it as a unique thing, with a complex matrix code. Then it would be sealed in a transparent container, to further insure purity and prevent contact damage.

This would mean that all the state’s gold would be both verifiable and easy to inventory.

On the private side, the state could do the same with private gold, assigning it its 24k value after purification, and minting it as either sealed ingots or coins, which would then be kept for depositors, guaranteeing them *their* gold back, not just any gold.

Likewise, for a small fee, the state could insure their gold against federal confiscation, with a fixed, annual insurance fee in which they agree to pay ‘x’ amount for your gold, in which it becomes property of the state, not the federal government.

And if gold is again legalized, for that same amount, you can buy your gold back from the repository, instead of on the market.

[Toddsterpatriot]

Name the other NY Fed member banks in order by the number of shares owned and order of influence.

Every member gets one vote, no matter how many "shares" they're required to buy.

[Toddsterpatriot]

And is very nice risk free income....

Yeah, a couple of million, so what?