Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up we’ll hear from Chris Powell of the Gold Anti-Trust Action Committee, better known as GATA. Chris has plenty of things to say on just how blatant the manipulation in the gold market has gotten and what the result of all of is likely to be. Don’t miss our exclusive interview with Chris Powell, coming up after this week’s market update.
Well, what a week for the metals markets. Unfortunately for the bulls, this week’s price action was notably to the downside, with spot gold breaking to five-year lows. But in the retail market, gold is having one of its best months on record. More on that in a moment.
First, let’s take a closer look at the market technicals for precious metals. Gold lost nearly $40 on Monday as selling from China drove spot prices below $1,100 an ounce. The yellow metal recovered somewhat from the worst levels on Monday’s selling spree, but has not been able to hold above $1,100. Gold finished Thursday at $1,090 an ounce and is currently even lower at $1,083, down 4.6% on the week.
So now the question on nearly everyone’s mind is: will gold test the $1,000 level or even dip lower to register a 50% decline from its all-time 2011 high of just over $1,900? 50% corrections occur every few years in most commodities. We’ve seen 50% or greater pullbacks in crude oil, copper, platinum, palladium, and silver since 2008. But not yet in gold. Of course, gold by nature is less volatile than other precious metals and commodities, so 50% corrections are rarer for the yellow metal. When they do come, they are quite significant.
There’s no rule that says gold has to fall 50% before bottoming, but it’s a level many traders are watching. That level is $961 on the charts to be exact. If gold prices do get that low, buy orders will likely start coming in.
Of course, silver is already down well over 50% from its all-time high. In fact, it’s down 70%. Since silver is normally more volatile than gold, the white metal usually falls harder during gold pullbacks. But that hasn’t been the case this week. Silver prices as of this Friday morning recording are at $14.46 an ounce, for a 3.1% weekly decline, and, for now, continue to hold just above its spike low from last November. But stay tuned on that.
Silver was also joined by palladium this week in outperforming gold. Palladium was on track for a slight weekly gain through Thursday’s close, with the automotive metal now trading at $618 an ounce – now essentially flat for the week after giving back a few dollars so far today. Despite holding its own this week palladium prices are still down big for the month, as are silver prices. But if these two metals can continue to outperform gold that would be a positive sign for the precious metals complex… something that would be a welcome sight to many battered and beleaguered precious metals bulls.
Right now though, the momentum trade remains firmly in the grips of the bears. As I noted last week, gold and silver futures traders have piled in on the short side in an extremely lopsided way. Sentiment among those involved in the paper gold trade is as negative as it’s been in years. Assets in exchange-traded instruments tied to gold prices fell to their lowest levels since 2009. And gold futures this week registered their worst string of declines since 1996.
The paper market is telling one story. But the actual physical bullion market is telling quite another. The U.S. Mint has sold over 100,000 ounces of American Eagle gold coins so far in July. That’s the highest monthly demand volume registered since April 2013. And that’s just as of this week. There’s still another week left to go before the final sales tally for Gold Eagles comes in for the month of July. It could be one for the record books with 109,000 1-ounce Gold Eagles sold -- with bargain hunters purchasing 6% of the U.S. Mint’s production from Money Metals Exchange.
As for Silver Eagles, the U.S. Mint has given up on trying to keep up with demand. After brisk sales during the first week of July, Mint officials suspended deliveries of Silver Eagles to dealers. Sales of the popular coins are set to resume next week. But we expect the Mint will be unable to get its act together and keep up with demand.
Fortunately, there are plenty of other ways to take advantage of these low, low prices in silver and gold. You can save a little on premiums by avoiding government-issued coins and opting for lower priced privately minted rounds or bars. We offer rounds and bars in a variety of sizes, with some sporting designs exclusive to Money Metals Exchange.
These are truly extraordinary times in the precious metals markets. Rarely have metals markets been so bifurcated between the paper and the physical trade.
They are challenging times, to be sure. When trading ranges give out, it’s tempting to want to give up. But years from now, will it matter to you whether gold bottomed at $1,060, or $960, or some other number? Probably not.
What will matter is whether you persevered through it all and whether you took advantage of the extraordinary paper selling to add more ounces to your physical stash.
Well now, for more on the tumultuous week that was in the metals markets, including the latest on what is becoming an obnoxious and blatant manipulation scheme, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Chris Powell, Secretary Treasurer at the Gold Anti-Trust Action Committee, also known as GATA. Chris is a long-time journalist and a hard-money advocate, and through his tireless efforts at GATA he is working to expose the manipulation of the gold and silver markets. Through GATA's works over the years, some important revelations have come to light, which should concern everyone. It's good to have you back with us Chris thanks for taking the time to talk with us today.
Chris Powell: Oh, delighted to be here Mike.
Mike Gleason: Well I know you've only got a little bit of time here so I'll keep it short and I'll jump right into it: Several days ago, we had another attack on the gold market – right as it was holding above a critical price support zone. Someone sold several billions of dollars in gold futures contracts during the wee hours of the night immediately before the Chinese trading day began. It happened during a time of low liquidity like it normally does, and it took the price down over $40 in the matter of a few seconds, halting trading twice for a brief period. What are we to make of all this Chris?
Chris Powell: Well it's pretty depressing for monetary metals investors. On the other hand, I suppose you could see it in a way as progress for the cause because it was the most brazen, obvious, clumsy attack yet, and it has prompted a few people to acknowledge that it was a manipulation.
The problem is the people who are acknowledging that cannot quite bring themselves to question whether the central banks were involved in it. But it was so obvious that even people who are not aligned with the manipulation school are acknowledging that somebody was very heavily trying to drive the price down.
Now I think we've advanced to the point where most market observers will acknowledge that somebody is tampering with the gold market, that it's not a free market, and the question now is really only who's doing it, and perhaps in another few hundred years financial journalism will try to put a critical question to central banks about their own surreptitious trades in the gold market.
Mike Gleason: It certainly seems manipulative, because obviously a legitimate seller would try to sell when there is actual liquidity in the market as to maximize the sale price, and we've seen this sort of thing a number of times going back years now. So it is quite obvious what's happening, and there don't seem to be major investigations into these price raids. It just keeps happening. Why don't we see government authorities or large investors crying foul?
Chris Powell: Well because these raids, I am sure, are essentially instigated or underwritten by, if not actually implemented by governments. What some people don't realize Mike is that it is explicitly authorized by federal law here in the United States for the U.S. government, acting through the Exchange Stabilization Fund and the Federal Reserve, to rig any market. Not only in the United States, but in the world.
GATA brought a lawsuit in U.S. district court in Boston back in 2001. I attended the only hearing on this lawsuit, and an assistant U.S. attorney representing the Fed and the Treasury Department told the court in support of a motion for summary judgement dismissal that the lawsuit had to be dismissed because the complaint of market rigging had no remedy at law. Because the assistant U.S. attorney said the United States government claimed the power to do all the market rigging that our lawsuit accused it of doing!
Our own subsequent research into the Gold Reserve Act of 1934 as amended in the 1970's tended to confirm that assertion. The nice thing about that hearing was that the U.S. government through this assistant U.S. attorney got up and claimed the power to rig every market in the world. That's what the statute says.
We’re just having a very hard time getting the mainstream financial press to look at the statute and to put questions about surreptitious trading by central banks to the central banks themselves. But this most recent attack was so brazen and really clumsy. I know people think it was so clever because of its timing and the timing of it, the lack of liquidity and everything like that, but they gave themselves away. And I think that is a sign of desperation that they no longer can attack gold and keep the price down in subtle ways. They have to do this really obvious ham-handed stuff that even gets some pretty dense market observers suspicious.
For 10 years, GATA Chairman Bill Murphy and I have been observing this market, and practically every day for 10 years we've been saying they couldn't get any more obvious. And the next day they DO get more obvious. This one really I think took the cake, there's a Reuters' story that quotes a couple of gold traders as acknowledging that this was a manipulation, and they're wondering out loud who's behind it.
Now if Reuters can acknowledge that this attack on the gold market was a market rigging attack…. Well, we're that much closer to pinning responsibility on the main parties involved, which are Western Central banks.
Now, I don't know how much longer this is going to take us, but I think it's progress insofar as even the densest observers of the market are acknowledging it's manipulation.
Unfortunately, mining industry executives themselves are quiet about this, and the World Gold Council as usual has nothing to say. But at least the scales are starting to fall from the eyes of a few people, precisely because these attacks are becoming more and more brazen and clumsy.
Mike Gleason: That leads me right into my next question here, I know you've been encouraging mining companies to band together and hold back some of their production from markets at these suppressed prices. I know First Majestic has been sitting on some of their silver production in the past year, but I know it's tough. If miners don't sell metal, they may not have the cash flow needed to keep the lights on. What is your sense of what the mining industry is thinking?
Chris Powell: The mining industry, Mike, is thinking that it should just die quietly and obediently! I think its value is likely to fall to zero, and its executives will have nothing to say for themselves or their companies all the way to zero. The industry is worthless, and it's worthless not so much because of the attack on the monetary metals by central banks. It's worthless because its own shareholders and executives are content to die quietly. If the industry will not stand up for itself, I have no idea why anyone would want to invest in it.
Mike Gleason: What about the institutions in the metals markets such as the World Gold Council and Silver Users Association? I guess you commented on that a moment ago but to expand on that where are they coming from on all of this?
Chris Powell: Well, I can only speculate about their motives, Mike. I think I can clearly say that they are useless to investors in the monetary metals. I find it laughable that something like the Sunday night/Monday morning attack on gold could happen, and here we are, many days later, and the World Gold Council had nothing to say about it!
Particularly when even some gold traders are quoted by Reuters and The Financial Times, and other people are saying “gee, this is an attack, this is a manipulation.”
I think it exists mainly to make sure that there is no worldwide voice for gold investors and gold mining companies, because it's absolutely useless in the context of the attack on the industry. It will have to answer for itself if anybody wants to try to get answers out of them. I wish the financial press would call up the World Gold Council today and ask it, "Hey what do you think about what happened Sunday night and Monday morning? Are you in the least suspicious about it?" I think they'll just get stony silence out of them and I think they’re really the worst of the industry.
Mike Gleason: Will definitely be interesting to see how much longer people are going to put up with it. I definitely sympathize with everything you're saying, it is quite frustrating.
Well, excellent stuff Chris even though it can be a little bit of a bleak picture here, thanks for being so willing to speak the truth about what's going on. I know it must be a frustrating venture at times but there's a lot of people out there in the precious metals community, ourselves included, who do appreciate the work that you're doing at GATA there. Now before we let you go, can you give our listeners more info on how they can learn more about this and then follow GATA's work?
Chris Powell: Oh sure Mike, again thanks for letting me harangue you about this. GATA is the Goal Anti-Trust Action Committee, our internet site is gata.org. We're a non-profit educational and civil rights organization. We've got tax exempt status from the U.S. Internal Revenue Service. We are very grateful for any donations that can be made to us, you can donate by credit card over our internet site or get our address off the internet site and send us an ordinary check, although I'm very reluctant to touch for donations these days now that our industry has been just so devastated. I'm not sure that anybody's got any money to give us anymore but we will try to keep flying the flag and pleading the case for free and transparent markets and limited and accountable government, particularly for free trading gold and silver. As defenders of economic liberty through the world, we do put out some dispatches to our email list every day and if people would like to get on our list they can just go to gata.org and sign up for our dispatches in the right hand column of our internet site.
Mike Gleason: Well it's definitely a noble endeavor Chris and we appreciate it very much. Thanks again to Chris Powell of the Gold Anti-Trust Action Committee, again the website is gata.org. We urge everyone to check out the great content available there that Chris and the guys put out on a regular basis.
And before we close, we should reiterate and note that despite what seems like an awfully bleak picture for precious metals investors recently, eventually, market forces will win out. If low prices continue to devastate the mining industry, production will fall and shortages will crop up. This forces prices to rise. So if you believe gold and silver have a bright future in the long-term, today’s suppressed prices are really a gift. It gives you more time to accumulate more ounces at what appear to be bargain prices.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.