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Federal Reserve knobbles the gold price creating a major buying opportunity for precious metals

Posted on 04 April 2013 with 7 comments from readers

This week’s take down of the gold price has all the classic hallmarks of a major intervention by the Federal Reserve say gold traders who know exactly what they see on their screens. Only the Fed can manipulate and coordinate the bullion banks in this way.

The Federal Reserve is trying to stay one step ahead of the curve and keep its money printing show on the road for a bit longer by propping up the US dollar with an attack on gold. How can the greenback be losing it if the monetary metal is falling in value? It’s a sign of desperation to be doing this, a warning sign that things are going wrong under the hood.

Short-term impact

This is a known ruse but then traders know it will have an impact on prices so they still jump on cue. The pack follow and reinforce the price fall. However, if you look back over more than a decade of gradually rising gold prices and this never lasts for very long.

This is a temporary distortion in a market driven by ever expanding monetary aggregates and the relatively fixed supply of gold. It’s rare stuff, hard to find and hard to mine. Buy on the dips and it’s a surefire winner in the longer term.

Besides what are we to make of the longer term future for the Fed’s policy of quantitative easinng, the printing of $85 billion a month or $1 trillion a year? What does this hold for the price of gold or silver for that matter as the only other monetary metal?

If QE stopped tomorrow then the US bond market would crash. Interest rates would rocket and bond prices fall through the floor. As this is the world’s largest and most liquid financial market, way bigger than the US stock markets, then this would be a major event indeed.

Great Rotation?

Where would that money go? Back into stocks paying tiny dividends? No there would have to be a major correction in the stock market too to adjust for higher interest rates. It would all be an absolute disaster for the financial sector, like back in 1974. Money would, on the other hand, pour into gold and silver as a safe haven in this sort of crisis.

Say things went in the opposite direction and the Fed decided to raise the monetary base still higher, and that has been the recent trend, what would be the impact on bullion prices then? Well we have already discussed the link between the monetary base and the price of gold. More money in circulation and the price of gold will go up even higher.

If that looks a bit like a win-win situation for gold and silver then yes you have got it. That’s why the Fed’s intervention in the bullion markets this week creates a major buying opportunity. We just don’t know how low it will be able to push prices first. But the absence of Chinese buyers for a two-day holiday today and tomorrow should take us to the bottom.

Posted on 04 April 2013 Categories: Gold & Silver

7 Comments posted by readers:

Comment by reo - 04 April 2013

Temporary Correction…this cannot last…BLAH BLAH BLAH…it’s only been LASTING FOR # YEARS…with Gold and Silver and Mining stocks just drifting down down down…with a new bottom PREDICTED OVER AND OVER AND OVER

Comment by GoldBug - 05 April 2013

If the price of gold is crushed and institutional investors sell it to invest in stock and real estate market that means buying it will cause us to lose money. Not so good.

Comment by DCW-TEXAS - 05 April 2013

Investment Rule #1- Gold and Silver are true money, always has been, always will be. These 2 metals have been the monetary foundation of most nations and empires for over 6000 years. Even in biblical times gold and silver were money denominated by weight, rather than face value. Remember this- government money always start out on silver and/or gold basis, and then governments always start debasing the nation’s currency……why? Because governments become corrupt and spend the nation into bankruptcy. Would you rather own a wheelbarrow of paper currency (while the govt. is printing without limits), or would you rather own 5 ounces of gold coins or 20 ounces of silver coins? Why do nations that spend too much usually experience inflation or in some cases, hyperinflation? Is it because there is too much gold or silver circulating, or is it because of too much paper currency being printed? Right now the gold and silver markets are being manipulated by our government, but eventually market forces will end the manipulation. In the years to come, many people are about to find out what true money is, and it is NOT paper federal reserve notes!

Comment by Ronny - 05 April 2013

Better stop wasting your time in proving the ignorant wrong on why PMs are real money.

Better use the ignorance of idiots like reo above to stack up more on PMs and let him/her enjoy the paper confetti currency.

We’ll talk again in the long(er) term who stored the most wealth.

Off to buy some more now at the current cartel-induced bargain prices :)

Comment by obewon - 01 May 2013

Worthwhile remarks from both DCW and Ronny.

Reflecting Back:
Over the past two years, we’ve seen a sharp increase in precious metals volatility, as desperate Western governments and their corrupt banks (most notably the FED/JPM Cartel and the BOE) resorted to various stealth techniques including heavy manipulation of the futures markets, to keep their dying fiat currency systems afloat. These tactics are well known to many hedge funds and HFTs.

Another Smash Today . . . and Perhaps Tomorrow:
With the Cartel’s heavy manipulation of 12 April/ 15 April 2013, many of us have been anticipating another smash by the Cartel. After all, as my Canadian e-friend James said so eloquently a few weeks ago on this blog, “This very strong surge in physical demand for gold and silver can not go unpunished . . .”. So it should come as no surprise to inquiring minds, that the Cartel has chosen “1 May” once again, as their date to sell a few hundred tons of “paper gold” into the market. The Asian markets are closed on this date, and some will continue to be closed on 2 May, in celebration of May day . . . perfect time to strike!

Reflecting Back to 01 May 2011:
Remember the Cartel’s dirty work done on 1 May 2011? What a perfect time for the Cartel to strike! Though even they know in the long run, they are merely shoveling sand against the relentless oncoming tide.

Hedging Today’s Smash:
Astute investors may wish to hedge by buying some physical PMs today, with a plan to continue buying tomorrow.

Comment by Charles Savoie - 03 February 2014

A biographical and genealogical peek at Federal Reserve personalities, especially the New York Fed Bank. Heavily documented with unique information.

Comment by obewon - 04 February 2014

Thanks for the “Monet mural” that partially exposes some members of the infamous group.

It’s a start!

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