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?


Mystery investor puts $1bn into new Russian gold mine

In an effort to double gold production by 2018, Russia’s largest gold producer, Polyus, has attracted $1bn in investment for the 3rd largest undeveloped gold deposit in the world.

Russian Federation Deputy Minister for the Development of the Far East Dmitry Shelekhov confirmed the 32 million rouble investment, but would not disclose the source, ITAR-TASS reported.

The Natalka mine is the newest development from Polyus, and is located 400 km from the seaport of Magadan, in the remote and barren northeast corner of Russia.

The mining of precious metals is a lifeline for the local economy, Magadan Oblast Governor Vladimir Petcheny told ITAR-TASS.

Polyus, which accounts for nearly a quarter of Russia’s gold mining, forecast the mine, which is slated to become Russia’s largest, will have the capacity of 15 tons (1.3 million ounces) by next year.

In total, the company has 1,836 tons (40.8 million ounces) in gold reserves, and is the world’s third largest by this criterion.

Since 2009 gold production in the Far East and Russia has increased sharply, aided by a state-sponsored effort to boost gold production after a steep decline from 2000-2009. Gold production in the first quarter of 2013 increased 6% year-on-year to 320,000 ounces. Sales were estimated at $524 million, according to a company trading update from April 2013.

Also according to the report, gold production in 2013 has been reconfirmed between 1.59 and 1.68 million ounces, excluding assets in Kazakhstan.

Billionaire oligarch Mikhail Prokhorov is the Chairman of the Board, and approved the $31.3 million Natalka capital expenditure in 2008. The company said it would spend $14 million throughout May to install a ‘pilot plant’ and another $8.7 million to complete a feasibility study.

Refined Gold Production


Refined gold production, 000 oz Q1 2013 Q1 2012 Change
Olimpiada 156.6 156.6 -
Blagodatnoye 86.5 83.6 3%
Titimukhta 34.0 21.8 56%
Verninskoye 11.0 6.4 71%
Alluvials 0.7 1.0 -30%
Kuranakh 31.8 33.1 -4%
Total refined gold production from continuing operations 320.5 302.4 6%

Chief Executive Yevgeny Ivanov told Reuters in January he expected the Natalka plant to be fully operational by 2012-2013, a launched which has been repeatedly postponed. In the second quarter of 2013, Polyus will review the option to start production at Natalka in winter 2013-2014.

Presently the pilot plant is equipped with mining equipment, drilling rigs, trucks, loaders, and cranes.

Two dormitories that sleep 275 were commissioned last year and were completed in the first quarter of 2013, and currently 1,400 personnel are employed, according to the company’s website. By 2014, the plant will staff 2,000, and by 2023 upwards to 3,500.

On the New York Mercantile Exchange, June gold futures lost $13.3, down to $1,412 per troy ounce. Prices fell on the news of unemployment in Britain.


Gold falls below $1,400 as slump continues

On Wednesday, gold pices retreated below $1,400 for the first time since April 19

REUTERSOn Wednesday, gold pices retreated below $1,400 for the first time since April 19

Gold futures tumbled below $1,400 an ounce, extending the longest slump in almost three months, as the dollar’s rally eroded demand for the metal as an alternative investment. Silver fell to a three-week low.

The greenback climbed to a nine-month high against a basket of major currencies. The euro fell to the lowest in almost six weeks against the dollar as the euro-area’s recession extended to a record sixth straight quarter. Gold has declined 17 percent this year as some investors lost faith in the metal as a store of value.

Prices retreated below $1,400 for the first time since April 19 as stimulus measures by central banks and record-high equity markets fail to accelerate the pace of inflation. While consumer demand for coins and jewelry helped rally the precious metal by 5.7 percent from a two-year low on April 16, gold is headed for its first annual decline since 2000, halting 12 straight years of gains.

“Physical demand can provide some support, but gold cannot do well in a deflationary environment,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “The dollar has emerged as the preferred flight-to-quality instrument, and lots of money has also moved to equities.”

Gold futures for June delivery fell 2 percent to settle at $1,396.20 at 1:38 p.m. on the Comex in New York, after touching $1,389, the lowest for a most-active contract since April 19. Prices dropped for a fifth straight session, the longest slump since Feb. 20.

The metal touched a 26-month low of $1,321.50 on April 16, entering a bear market with prices down 26 percent from a closing high in August 2011. Gold reached an all-time peak of $1,923.70 on Sept. 6, 2011.

Yesterday, holdings in exchange-traded products backed by gold dropped 6.2 metric tons to 2,219.7 tons, the lowest since July 2011, according to Bloomberg data.

ETP holdings have slumped 16 percent in 2013 after gaining every year since the first product was started in 2003. While the selloff has been faster than expected, a further drop will probably mean more price declines, Goldman Sachs Group Inc. analysts including Jeffrey Currie said in a report dated yesterday.

Last month’s plunge in prices fueled retail demand. The U.S. Mint said April 23 it ran out of its smallest gold coins, while Australia’s Perth Mint said volumes jumped to a five-year high. India’s bullion imports may surge 47 percent to 225 tons in the second quarter to meet consumer buying, according to the All India Gems & Jewellery Trade Federation. Imports by China from Hong Kong more than doubled to an all-time high in March.

Silver futures for July delivery fell 3.1 percent to $22.658 an ounce on the Comex, the biggest decline since May 1. Earlier, the price touched $22.445, the lowest since April 18.

On the New York Mercantile Exchange, palladium futures for June delivery advanced 0.3 percent to $729.05 an ounce, the highest settlement since April 11. Platinum futures for July delivery fell 0.7 percent to $1,490.70 an ounce.