Threat to the Hegemony of the US Dollar? Rigged Gold Bullion Market

Over the past month there has been a statistically improbable concurrence of events that can only be explained as a conspiracy to protect the dollar from the Federal Reserve’s policy of Quantitative Easing (QE).

Quantitative Easing is the term given to the Federal Reserve’s policy of printing 1,000 billion new dollars annually in order to finance the US budget deficit by purchasing US Treasury bonds and to keep the prices high of debt-related derivatives on the “banks too big to fail” (BTBF) balance sheets by purchasing mortgage-backed derivatives. Without QE, interest rates would be much higher, and values on the banks’ balance sheets would be much lower.

Quantitative Easing has been underway since December 2008. During these 54 months, the Federal Reserve has created several trillion new dollars with which the Fed has monetized the same amount of debt.

One result of this policy is that most real US interest rates are negative. Another result is that the supply of dollars has outstripped the world’s demand for dollars.

These two results are the reason that the Federal Reserve’s policy of printing money with which to purchase Treasury bonds and mortgage backed derivatives threatens the dollar’s exchange value and, thus, the dollar’s role as world reserve currency.

To be the world reserve currency means that the dollar can be used to pay any and every country’s oil bills and trade deficit. The dollar is the medium of international payment.

This is very helpful to the US and is the main source of US power. Because the dollar is the reserve currency, the US can cover its import costs and pay for its cost of operation simply by creating its own paper money.

If the dollar were not the reserve currency, Washington would not be able to finance its wars or continue to run large trade and budget deficits. Therefore, protecting the exchange value of the dollar is Washington’s prime concern if it is to remain a superpower.

The threats to the dollar are alternative monies–currencies that are not being created in enormous quantities, gold and silver, and Bitcoins, a digital currency.

The Bitcoin threat was eliminated on May 17 when the Department of Homeland Security seized Bitcoin’s accounts. The excuse was that Bitcoin had failed to register in keeping with the US Treasury’s anti-money laundering requirements.

Washington has stifled the threat from other currencies by convincing other large currencies to out-print the dollar. Japan has complied, and the European Central Bank, though somewhat constrained by Germany, has entered the printing mode in order to bail out the private banks endangered by the “sovereign debt crisis.”

That leaves gold and silver. The enormous increase in the prices of gold and silver over the last decade convinced Washington that there are a number of miscreants who do not trust the dollar and whose numbers must not be permitted to increase.

The price of gold rose from $272 an ounce in December 2000 to $1,917.50 on August 23, 2011. The financial gangsters who own and run America panicked. With the price of the dollar collapsing in relation to historical real money, how could the dollar’s exchange rate to other currencies be valid? If the dollar’s exchange value came under attack, the Federal Reserve would have to stop printing and would lose control over interest rates.

The bond and stock market bubbles would pop, and the interest payments on the federal debt would explode, leaving Washington even more indebted and unable to finance its wars, police state, and bankster bailouts.

Something had to be done about the rising price of gold and silver.

There are two bullion markets. One is a paper market in New York, Comex, where paper claims to gold are traded. The other is the physical market where personal possession is taken of the metal–coin shops, bullion dealers, jewelry stores.

The way the banksters have it set up, the price of bullion is not set in the markets in which people actually take possession of the metals. The price is set in the paper market where speculators gamble.

This bifurcated market gave the Federal Reserve the ability to protect the dollar from its printing press.

On Friday, April 12, 2013, short sales of gold hit the New York market in an amount estimated to have been somewhere between 124 and 400 tons of gold. This enormous and unprecedented sale implies an illegal conspiracy of sellers intent on rigging the market or action by the Federal Reserve through its agents, the BTBF that are the bullion banks.

The enormous sales of naked shorts drove down the gold price, triggering stop-loss orders and margin calls. The attack continued on Monday, April 15, and has continued since.

Before going further, note that there are position limits imposed on the number of contracts that traders can sell at one time. The 124 tons figure would have required 14 traders with no open interest on the exchange to sell all together in the same few minutes 40,000 futures contracts. The likelihood of so many traders deciding to short at the same moment at the maximum permitted is not believable. This was an attack ordered by the Federal Reserve, which is why there is no investigation of the illegality.

Note also that no seller that wanted out of a position would give himself a low price by dumping an enormous amount all at once unless the goal was not profit but to smash the bullion price.

Since the April 12-15 attack on the gold price, subsequent attacks have occurred at 2pm Hong Kong time and 2 am New York time. At this time activity is light, waiting on London to begin operating. As William S.Kaye has observed, no entity concerned about profits would choose this time to sell 20,000 to 30,000 futures contracts, but this is what has been happening.

Who can be unconcerned with losing money in this way? Only a central bank that can print it.

Now we come to the physical market where people take possession of bullion instead of betting on paper instruments. Look at this chart from ZeroHedge.  The demand for physical possession is high, despite the assault on gold that began in 2011, but as the price is set in the non-real paper market, orchestrated short sales, as in the current quarter of 2013, can drive down the price regardless of the fact that the actual demand for gold and silver cannot be met.

While the corrupt Western financial press urges people to abandon bullion, everyone is trying to purchase more, and the premiums above the spot price have risen. Around the world there is a shortage of gold and silver in the forms, such as one-ounce coins and ten-ounce bars, that individuals demand.

That the decline in gold and silver prices is an orchestration is apparent from the fact that the demand for bullion in the physical market has increased while naked short sales in the paper market imply a flight from bullion.

What does this illegal manipulation of markets by the Federal Reserve tell us? It tells us that the Federal Reserve sees no way out of printing money in order to support the federal deficit and the insolvent banks. If the dollar came under attack and the Federal Reserve had to stop printing dollars, interest rates would rise. The bond and stock markets would collapse. The dollar would be abandoned as reserve currency. Washington would no longer be able to pay its bills and would lose its hegemony. The world of hubristic Washington would collapse.

It remains to be seen whether Washington can prevail over the world demand for gold and silver. Can the dollar remain supreme when offshoring has deprived the US of the ability to cover its imports with exports? Can the dollar remain supreme when the Federal reserve is creating 1,000 billion new ones each year, while the BRICS, China and Japan, China and Australia, and China and Russia are making deals to settle their trade balances without the use of the dollar?

If the consumption-based US economy deprived of consumer income by jobs offshoring takes a further dip down in the third or fourth quarter–a downturn that cannot be masked by phony statistical releases–the federal deficit will rise. What will be the effect on the dollar if the Federal Reserve has to increase its Quantitative Easing?

A perfect storm has been prepared for America. Real interest rates are negative, but debt and money are being created hand over foot. The dollar’s demise awaits the world’s decision how to get out of it. The Federal Reserve can print dollars with which to keep the bond and stock markets high, but the Federal Reserve cannot print foreign currencies with which to keep the dollar afloat.

When the dollar goes, Washington’s power goes, which is why the bullion market is rigged. Protect the power. That is the agenda. Is it another Washington over-reach?


Gold And Silver Bullion Coin And Bar Shortages Continue

Today’s AM fix was USD 1,476.50, EUR 1,124.95 and GBP 949.34 per ounce.

Yesterday’s AM fix was USD 1,456.00, EUR 1,106.22 and GBP 935.07 per ounce.

Gold rose $8.10 or 0.56% yesterday to $1,466.80/oz and silver finished + 0.68%.

Physical demand for coins and bars internationally continues and is
the strongest since the immediate aftermath of the Lehman Brothers
collapse on September 15, 2008, and the consequent global financial

Government mints, refiners and bullion dealers internationally are
reporting demand as high as in the aftermath of the Lehman crisis.

Brokerages are seeing nearly all buyers and little or no sellers
which is making for a tight market with rising premiums. At GoldCore,
sellers have been people liquidating unallocated positions and opting
for taking physical possession or the increased safety of allocated

Higher prices will be needed by bullion owners in order to
incentivise them to sell – prices that will likely be significantly

Most physical owners are buying for the long term and will not sell
in the coming months even when prices recover. If prices rise to back
above $1,600/oz, some physical gold might come back into the market and
alleviate the supply issues.

However, we believe that this may be a long term structural supply

demand issue in what is a very small physical bullion market, that will

only be alleviated by much higher prices and indeed higher premiums.

It is difficult to generalise regarding premiums as there are so many
products and so many regions but in general terms, prices on nearly all
small coins and bars are rising and on average there have been 1% to 2%
rises in the premiums on popular one ounce gold coins and bars. This
means that one ounce coins and bars can cost some $14 to $28 more than
they did prior to the price falls.

The percentage increase in premiums in the silver market is even
higher and there are more delays and unavailability of silver coins and
bars with popular formats such as Eagles and Maples now almost difficult
to secure. We acquired a large number of Silver Eagle Monster Boxes
yesterday which we expect to have sold by the close today.

Today, return of capital is of far more importance than return on capital.

Gold and silver bullion coins and bars are important in this regard

as they are not about making a capital gain per se rather they are about
wealth preservation.

Given we are in an era of competitive currency devaluations, there is
also the real possibility of making significant capital gains.

Of fundamental importance is the fact that gold and silver coins are
not ‘investments’ rather they are a safe form of money and an important
form of financial insurance that everybody should own.

With the risk of a global depression remaining very real, people need
to own the financial insurance that bullion coins represent. Bullion
coins are like health insurance in that you should own them but hope you
never have to use them.

The biggest benefit of owning gold coins either in your personal
possession or allocated in secure vaults internationally is that they
will always retain a value unlike paper assets and currencies which have
considerable counter party risk today – as was seen in the deposit
confiscation in Cyprus.


Former US Treasury Official – Fed Desperate To Stop Collapse

Today King World News was given exclusive permission to publish an extraordinary piece by former US Treasury Official Dr. Paul Craig Roberts, which warns that the Fed is now acting out of desperation in an attempt to prevent a total collapse of the financial system.  Dr. Roberts also discussed the Fed’s continued intervention and shorting in the all-important gold and silver markets.


“The real concern about US bank deposits is that they are denominated in US dollars, and the supply of new dollars has been increasing by about $1,000 billion per year for the last several years.  The demand for dollars has not been increasing by the same amount.  Indeed, as more and more countries implement measures to settle their trade balances in their own currencies, the demand for dollars is falling.

When the supply increases and the demand falls, the price falls.  The exchange value of the dollar in terms of other currencies has escaped sharp declines because of the dollar’s traditional role as world reserve currency and safe haven and because the sovereign debt crisis in Europe has caused flight from the euro to the dollar.  The Japanese, the Saudis and the oil emirates have large dollar holdings and no interest in destabilizing the dollar.

The Chinese (who also have large holdings) attitude toward the dollar could be adversely affected by Washington’s aggressive “Pivot Asia” policy of surrounding China with military bases.

Nevertheless, the world is watching, and the world sees only feeble efforts by Congress and the White House to balance the $1,000 billion annual operating deficit, a deficit that will rise if the economy turns down.  The world sees the monetization of $1,000 billion in Treasury debt and the banks’ mortgage-backed derivatives per year.  The question is unavoidable:  Who wants to hold dollars and dollar-denominated financial assets when the dollar faces such obvious exchange-rate risk?

The Golden Question

The movement out of dollars has begun.  If the trickle becomes a torrent, a sharp drop in the dollar’s exchange value will push up import prices, raising domestic inflation and destroying the Federal Reserve’s control over interest rates.  This risk leads to the conclusion that the Federal Reserve has been shorting gold and silver in the paper bullion market in order to protect its policy of Quantitative Easing….

“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 $1,000 billion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger.  The dollar’s exchange rate in relation to other currencies becomes untenable when the dollar collapses in value in relation to gold and silver.  As sharply rising bullion prices are a threat to the Fed’s policy, the Fed has shorted the bullion market in order to suppress prices.

As the dollar loses its role as the currency of international payments, the Fed’s debt monetization will collapse the dollar’s exchange value in currency markets.  Continued printing would drive the dollar down further, which means domestic inflation would rise higher.  The Fed would have to stop printing.