We received permission from JS Kim to republish this very detailed latest article of his which looks at last weeks price plunge in the precious metals markets. He has very strong opinions as to the culprits. He also has some strong opinions on whether futures markets should even exist if their existence in fact leads to greater volatility in price which is what the producers of commodities (the original users of futures markets afterall!) are hedging against in the first place!
by JS Kim, Managing Director of SmartKnowledgeU
Currently it seems as if the disinformation about the reasons why gold and silver paper prices have fallen so quickly seem to outnumber the real reasons at least 10 to 1 in the mass media and though there have been some solid commentaries already regarding the real reasons why gold and silver paper prices have fallen (that have zero to do with the rubbish the mass media is selling the public), I feel that one can never have enough articles that try to disseminate the truth, especially when the truth is being bullied into submission by those with captive platforms from which to sell their fake agendas. Thus, in this article, I will discuss the truth about the current banker executed gold/silver raid and why it will ultimately FAIL.
I wish to summarize the facts regarding why this paper gold and silver slam happened, the usual suspects that were behind it, and why this slam will eventually result in massive failure and massive consequent devaluation of fiat currencies anyway. The reason I have opened up this first paragraph by constantly referring to a PAPER gold and silver price slam instead of a PHYSICAL gold and silver price slam is because massive premiums exist on physical silver and significant premiums exist on physical gold over spot prices of gold and silver. For all intents and purposes, the spot price is equivalent to the fake banker engineered price that cavorts across the ticker on your television everyday. But go to a dealer and try to buy at that ticker price and you will discover that it is a delusional fake price that no dealer is willing to kindly grant you. Instead, when I checked prices on 1-troy ounce American Eagle coins on Apmex last week, there was a 5.8% premium on gold coins and when the spot silver price had fallen to $22.99 an ounce earlier in Asia last week, Apmex was still listing their 1-oz American Eagles at $29.01, a whopping 26.2% higher than the spot price. Only a complete buffoon of economics, like Paul Krugman and his zombie followers, would ever believe that the price of real silver was $22.99 at any point and time last week.
How It Was Done and the FACTS About the Banking Cartel-Engineered Gold and Silver Raid
In any event, I will only briefly summarize the facts surrounding the recent gold/silver smash before moving on to the main and more important thesis of this article, and that is the expeditious path of fiat currency destruction that will be the blowback of this false illusory takedown of gold/silver prices that only exists in some hallucinatory world of illusions called the futures markets.
FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.
FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a “binding” contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.
FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral. Just see this video to understand why no bank account is safe today.
Who Did It and Why?
So what was a banker to do? The easiest answer would be to slam the paper gold and silver price so that profitable long contracts would quickly transform into unprofitable ones as a mechanism to stop physical delivery requests that would expose that the emperor indeed had no clothes. In other words, because the Western banking cartel-controlled COMEX and LBMA vaults had insufficient physical gold and silver for delivery and other banks were struggling to make good on the contracts they had signed with clients to deliver physical gold, they needed to stop delivery requests immediately. These are all indisputable facts, not speculation.
So this crisis quickly morphed into the conundrum of “How does one slam gold and silver prices overnight in a rapid waterfall decline?” Bankers needed to solve this puzzle as quickly as possible, and the Obama administration called a meeting of the following 15 bankers just one day prior to the start of the now infamous banker gold and silver raid:
Lloyd Blankfein, Chairman and CEO Goldman Sachs
Jacques Brand, CEO Deutsche Bank
Michael Corbat, Chief Executive Officer Citigroup
Jamie Dimon, Chairman, CEO and President J.P. Morgan Chase
Sergio Ermotti, CEO UBS
James Gorman, Chairman and CEO Morgan Stanley
Gerald Hassell, Chairman and CEO Bank of New York Mellon Corporation
Jay Hooley, Chairman, President and CEO State Street Corporation
Abby Johnson, President, Fidelity Financial Services, Fidelity Investments
Steve Kandarian, Chairman of the Board, President and CEO Metlife
Brian Moynihan, President and CEO Bank of America/Merrill Lynch
John Strangfeld, CEO, Prudential
John Stumpf, Chairman, President and CEO Wells Fargo
Jim Weddle, Managing Partner, Edward Jones
Bob Benmosche, President and CEO American International Group
As you can see, every US banker that you would expect to find at that meeting was in attendance, there to do “God’s work” no doubt, as has been Lloyd Blankfein’s preferred method of describing Goldman Sachs’s work in the past. Was it mere coincidence that one day after this meeting, a gold/silver slam that required the cooperation and participation of all the major banks participating in gold/silver futures markets materialized? I will let you be the judge of the connection between these two events, as this is the first speculation I have introduced into my article. Yes this raid was likely engineered at the highest echelons of banking, meaning the BIS, the Feds, the ECB, but they also needed their commercial agents in the commercial banking world to carry out their agenda.
In any event, the bankers above had to solve the conundrum of “How does one slam gold and silver prices overnight in a rapid waterfall decline?” Because this would be nearly impossible to accomplish if bankers actually had to sell real physical gold and physical silver to accomplish this, they resorted to massive intervention in their fraudulent paper derivatives futures markets. Anything becomes possible when you can just sell millions and millions of paper ounces of gold and silver backed by nothing but air to trigger stop losses on long contracts. By this time, I’m sure all of you have seen the chart that alleges that Merrill Lynch brokers sold several million ounces of paper gold ounces backed by nothing but air in a few hours, but here is the chart below that demonstrates the massive sale of imaginary gold for the few of you that may not yet have seen it. I don’t know if it has since been confirmed that Merrill Lynch was the agent that executed this dirty takedown, but obviously an agent of the Federal Reserve was used to instigate panic selling in the paper gold markets (and it was no surprise that Brian Moynihan of Bank of America/ Merrill Lynch was at a banking cabal White House sponsored meeting 24 hours prior to the gold/silver slam).
The reason I say it is imaginary is because FACT #4, the 400 tonne sale of paper gold represented above, was not backed by a single ounce of physical gold. It was merely millions upon millions upon millions of paper gold backed by nothing but air that was sold into the market by an agent of the Federal Reserve. If you signed a contract to buy 6 million iMacs from Apple, and then Apple informed you that your only option was to settle in cash and take a multi-million dollar loss because they had just slashed prices of all iMacs because they never had any iMacs in their inventory at the time they singed that contract, would you not call that fraud? Of course the CFTC will tell you that futures contracts were never intended for physical delivery but only as a hedging mechanism, but when you short quantities of a commodity that does not even exist in real life, is that not as fraudulent a hedging mechanism as possible of which even the Devil himself would be proud?
I realize that the Apple example relates to long contracts and that the 6 million ounces of gold that Merrill Lynch brokers sold represented ounces of paper gold sold short into the market (backed by nothing but air), and that these two examples represent opposite sides of the contract, but the examples still very adequately illustrates the concept I wish for people to understand. Whether you are buying or selling something that does not exist is irrelevant. Both trades, one hypothetical (Apple), one real (gold) are still instances of fraud since ounces of air are being traded that present a make-believe picture of real physical supply and demand to the world. In fact, since 2008, people that used to be honest about these fraudulent and criminal banking raids in gold/silver have now backtracked in their honesty and integrity for reasons only known to them. For example, in 2008, after another banker raid on gold/silver initiated fraudulently in paper markets, Donalde Cox of Coxe Advisors LLP stated that the highest levels of the Federal Reserve and US Treasury deliberately and artificially engineered the collapse in paper markets. He stated verbatim back then, “My attitude is, ‘Goddamn it, they’re good — it was brilliant.’” This time around, however, thought the evidence is just as egregious and compelling, Coxe’s explanation of the gold/silver smash was “gold was ready for a pause”, implying, of course, that this smash was a natural event after a run up in gold price that was too high. Of course, just look at the facts, absent of all speculation in this article, and you can easily deduce that Coxe’s explanation is a bunch of rubbish whereas just five years ago, he was willing to relay the truth. This backtracking of integrity by media pundits has also created a lot of confusion regarding the true reasons for this current paper gold/silver price drop as well. So exactly who is buying the rubbish that the likes of Coxe, Krugman, and Blankfein are spouting? From the looks of the gold buying frenzy in Bangkok yesterday as well as reported buying frenzies in India, Hong Kong, China, Australia, the US, and countless other countries, almost no one. Below, is the gold buying frenzy that was occurring in Bangkok, Thailand last week due to the bankers’ artificially-engineered low prices in gold last week.
Should Futures Markets Even Exist if its Main Purpose is to Aid and Abet Banking Fraud?
The CFTC states that “futures markets allow commodities producers and consumers to engage in ‘hedging’ in order to limit the risk of losing money as commodity prices change.” Again this is pure rubbish as bankers invented futures markets to manipulate prices of commodities to fleece and rape investors, period. Maybe a hundred years ago, the futures markets actually served this purpose, but today, this clearly is not the purpose of the futures markets. And considering what we know about the mechanisms of how the bankers took down paper prices of gold and silver so easily recently and the starring role that the fraud of futures markets played in this takedown, the larger more vital question is, “Should bankers be able to participate in futures markets and if so, should futures markets even exist?” Outside of precious metals, consider the wild volatility in the price of light crude oil from 2007 to 20ll when the oil price volatility was off the charts and oil went ballistic from roughly $50 a barrel to $150, then crashed to $35 then went ballistic to $120 again, and often with price movements occurring in rapid and stunning fashion. Does any fool actually believe that supply and demand determinants for physical oil were responsible for this massive volatility in crude oil prices within very condensed periods of time?
Furthermore, when bankers already have the price mechanism locked down for a commodity, is it just not a little curious and suspicious that NO futures market exists for such a commodity? Diamonds are the perfect example of such a commodity. Bankers and diamond dealers already have the price mechanism locked up for this commodity and have destroyed any real secondary market for this commodity with clever marketing schemes like “diamonds are forever” and“diamonds are a girl’s best friend”, so they are unwilling to subject its price to any outside influences with a diamond futures market. Just read this article, “Have You Ever Tried to Sell a Diamond?” to learn why there are no futures markets for such a widely traded commodity such as diamonds.
Thus if prices of commodities are allowed to be manipulated by bankers for personal gain only and if the prices bankers constantly set for commodities have no semblance to the price that a free market would set for them through physical supply/demand determinants (as we can already see with the every widening divergences between physical and paper prices that I also predicted would happen years ago in this 2008 article “JS Kim Uncovers Four Parallel Markets for Gold: Asia Futures, NY Futures, Physical Bullion, Physical Coins“), then I say shut all of the futures markets down in both London and New York!
For people that claim permanently shuttering futures markets would hurt the producers that need to “engage in ‘hedging’ in order to limit the risk of losing money as commodity prices change,” I don’t believe producers of commodities would be hurt at all, and here’s why. If allowing producers to engage in hedging were the true purpose of the futures markets, then I say keep them open. But to say that is the true purpose of the futures markets is comparable to believing the rubbish that the US Federal Reserve prints on their website of their mission being to establish“price stability” of the US dollar even though they have deliberately engineered a 98% plunge in USD valuation over the last 80 years! If you were to shut down the London, New York and Shanghai futures markets for gold and silver for just three months, and radically higher prices for gold and silver would result as a consequence of their closure (of which I’m positive would happen since the bullion banks are perpetually short millions of paper gold and silver ounces that don’t exist in the real world in the futures markets), then what you are forcing producers to do is to use futures markets not to hedge against changes in the prices of their commodities but instead to hedge against the fraud committed by bankers. Should hedging against the fraudulent price moves engineered by bankers really be a good reason to justify the existence of futures markets?
If you were to shut down the futures markets and let free market and only supply/demand determinants of the physical commodity set prices instead of supply/demand determinants for paper oil, paper gold, paper platinum, etc. etc. backed by nothing but air, I guarantee that the world would receive not only a radical restructuring of all commodity prices but also commodity prices that would be far more stable and far less volatile, two conditions that would provide great benefits to producers. Thus the best way the CFTC could serve commodity producers at this point would be to completely shut down the COMEX (but of course we all know the probability of this event is less than the revival prospects of a flatlining ER victim).
The Gold & Silver Bull Have Been Sighted In Physical Markets and is Still Strong & Robust
So yes, contrary to the kool-aid the media is selling the public, the gold and silver bull is still fiercely alive and well. Yes, this correction in gold is greater than past 20% corrections, but when collapse of the global fiat Ponzi scheme and loss of control of all financial markets was at hand for the global bankers, desperate times call for desperate measures and thus, using the mechanisms I described above the bankers executed a 5-day price slam equivalent to 7 standard deviations of the 5-day price move in gold over the last 20 years. For those that still incredulously believe all the media rubbish and the big commercial banking lies about gold and silver, just check out this article called “Has the Commodities Bubble Burst? No, no, no!”, that I wrote all the way back in 2006 in which I called out Morgan Stanley Steven Roach’s pure propaganda announcement that a “commodities bubble” had burst. In fact, these rubbish calls of gold and silver collapsing back then were being made by big global commercial banking firms because of a 20% pullback in gold price from $728 to $583 in a few months. My response? I stated, “I’ve dug deep enough down into the rabbit hole to know that gold will rise much much higher in the future.” So yes, I believe a $817, or 140% increase in the price of gold from $583 to its current price of $1400 is a “much much higher” price and all the people that called me a fool for stating this 7 years ago are the EXACT same people calling me a fool for stating that the gold and silver bull are still alive and well.
The Blowback: The Days of Re-hypothecation Coming to an End
But how will the banker price manipulation of commodity prices that have zero basis on the reality of free market dynamics of the real physical commodity in the real world finally backfire in their criminal faces? Here’s how its likely to go down in the gold/silver world. As I wrote more than 4 years ago, the divergences between real physical PM prices and fake banker manipulated spot paper prices will continue to grow. Secondly, if we were to assume that the reason COMEX inventories plunged prior to the gold/silver slam down were attributable to peoples’ deteriorating trust in bankers to hold their physical gold and silver (a very healthy distrust by the way), then we can safely assume that the same entities that withdrew their physical gold and silver from the banking system will not return and store any of their physical gold and silver within the global banking system in the future. This will prevent bankers from re-hypothecating physical gold and physical silver and selling the same gold ounce and the same silver ounce over and over to multiple persons and accounts as they have been doing for decades. Or if instead, the banks up their re-hypothecation schemes and sell the same ounce of gold 10 times instead of 5 times due to their physical gold and physical silver reserves diminishing, then smaller withdrawals of physical PMs from their vaults will result in greater stresses on their abilities to suppress the price of gold and silver in the months ahead.
Thirdly, I really don’t believe the central purpose of this gold/silver takedown was simply so the COMEX and LBMA could replenish their raided physical gold and silver inventories at much lower prices. This could not possibly have been the central purpose of the price raid in my opinion as the bullion banks have unconditional support from the Central Banks to continue their fraud in every capacity. Thus, if they simply needed to buy more inventory, Central Banks would have merely continued their counterfeiting scheme and extended an open credit line to these bullion banks (if they were needed) and thus the raided COMEX and LBMA warehouse could have been easily replenished at even higher gold and silver prices. A more reasonable explanation, in my opinion, is one of the following two explanations:
ONE, the physical gold and silver inventory that the COMEX and LBMA needed to replenish their inventories was not available for sale, i.e. no one was selling physical gold and silver in the large quantities they needed, and since so many entities were asking for physical delivery of PMs that had been re-hypothecated over and over, the COMEX and LBMA could no longer shift physical gold and silver in and out of various vaults to cover all deliveries. Thus, the bankers needed to slam prices to convince holders of physical to panic sell their metals to replenish their inventories. However, since as I’ve explained above, this price slam was executed in paper markets and the only selling bankers accomplished was to force liquidation of long contracts of paper ounces of gold, these actions still would not have released more physical ounces to the market. In fact, all initial reports from regional physical bullion dealers and out of the LBMA pointed to just the OPPOSITE EFFECT of massive decreases in physical supplies of gold and silver due to extremely strong buying from sovereign institutions and retail individuals alike. Even with anecdotal reports of bullion dealers being depleted of their physical silver and gold inventory that can be confirmed by visiting these dealers’ online websites that list nearly all bullion silver and bullion gold as “SOLD OUT”, some bullion dealers may perhaps be listing inventory as “SOLD OUT” when they may just be unwilling to sell at such artificially set low prices.
Thus I’m not buying the story that the banks didn’t want to buy more gold/silver at higher prices because more physical buying would have sent the price higher and that is the reason they slammed prices. If significant physical buying of gold and silver was a catalyst to send spot prices of gold/silver higher, then spot prices of gold/silver would have been steadily and significantly increasing for a steady 12 consecutive months at least. Physical gold and silver buying will eventually stabilize and send even paper gold/silver prices steadily higher but likely only when the disparity between physical and fake paper prices becomes large enough.
Thus, explanation number TWO may be more reasonable, and that is the bankers executed a gold/silver slam to prevent large scale defaults of physical gold/silver delivery on the COMEX and LBMA that would have caused a consequent catastrophic devaluation of all major fiat currencies simultaneously and major global bank failures; and to convince people that gold and silver are no longer safe havens and to keep them pumping their fiat into global stock markets that are likely to catastrophically crash sometime within the next 18 months. However, while the accomplishment of the above two objectives have kept the majority of people compliant within the global financial Ponzi scheme, the subsequent structural damage inflicted upon the global financial system was enormous.
Because the enormity of this most recent price raid in gold and silver will undoubtedly
(1) very significantly contract physical gold and silver supply; and
(2) contract the physical reserves under control of the Western banking cartel to re-hypothecate gold and silver
these two consequences will eventually erupt into a full blown default of the LBMA and COMEX and a realization from all global citizens that the banking emperors of this world indeed have no clothes. In other words, the current executed banker raid in gold and silver will have the same long-term success rate as a doctor that tries to save his patient from the venom of a Malaysian Blue Krait snake bite by applying tourniquets that redirect the venom from the patient’s heart to the patient’s liver and kidneys. The patient would die within two hours if the venom reached the patient’s heart but may live an additional 4-6 hours before dying if the venom is redirected to his other organs. Not a solution but just a delayed inevitability. This is what the bankers have just done with their recent price slam. They have no anti-venom for the misery they have deliberately created, and the death of their fiat currency system is now inevitable and unavoidable, a consequence of the fact that the bankers have just STRENGTHENED the gold and silver bull by strengthening the bullish dynamics of the REAL PHYSICAL gold and silver markets with their executed raid in THEIR FAKE PAPER gold and silver markets.
In conclusion, the bankers may have delayed the default of the LBMA and COMEX with their ingenious 100% paper executed slam of gold and silver, but the mechanism they used to achieve their success is likely to ensure and expedite the circumstances necessary for the absolute failure of the LBMA and COMEX and the consequent failure of all global fiat currencies. Thus, please never be misled by all the white noise of mass media propaganda or from major commercial banks like Goldman Sachs when the topics of gold, silver and paper money are concerned. It is just a matter of time before the bankers themselves suffer the dire blowback consequences of the recent fraud regarding their slamdown of paper gold and silver prices. However, because one of the blowback effects of the Western banking cartel’s gold and silver price slam will be the purchasing power destruction of all major global fiat currencies, best to convert the majority of your fiat currencies into physical gold and silver now, including any holdings in the GLD and SLV, before it is too late. (Copyright: 2013 SmartKnowledgeU. This article may not be re-published on other sites and is subject to the terms of the re-publishing rights published below.)
About the Author: JS Kim is the Managing Director and Founder of SmartKnowledgeU, a fiercely independent research & consulting firm whose mission it is to help Main Street protect their wealth by exposing the lies of Wall Street.
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