What investor in their right mind would try to move two million ounces of gold in one fell swoop? Certainly not one who was trying to maximize profit. And who would be smart enough to have that much gold then be so naive as to move it all at once?
That is exactly what happened this past Friday, according to a Sprott Group newsletter written by David Franklin who reported that shortly after the opening of trade on the Comex in New York that morning, when gold plunged more than $30 an ounce to an almost three-month low of $1,259.60, Chicago's CME Group reported that at 8:42 am Eastern Time a 10-second stoppage occurred after a volatility safety mechanism was triggered as a 2 million gold ounce order was executed.
Franklin went on to say that Sprott's inside sources noted this large sale was in direct contrast to a "very docile PM gold fixing in London" where 68,000 ounces of physical gold were offered against 88,000 ounces of physical gold requested - a "prime example of the paper market in gold pushing around the price of the physical metal."
So why would a savvy trader dump almost a billion dollars in gold value on the paper market within seconds unless he, she or they were trying to send the paper gold price lower?
For the record, the move was classified as:
"..a Stop Logic event which detects potential market movements caused by the triggering and trading of stop orders where the resulting price move would extend beyond an exchange specified threshold."
Was it perhaps a speed bump in a high-frequency-trading algorithm? I'll let you ponder that, dear reader. But to me, ever the cynic, as stated in a most recent article, the last thing big government and western central banks need is for the monetary metals to "outperform their paper," as in "dollar."
Speaking of the all mighty dollar, something very disturbing was also brought to light in the Sprott report that also supports my observations in that recent article on the behavior of our political elite wrestling their differences on the blue carpet and in the halls of the capitol for two weeks:
"[in] continuing to play with fire, they're not only making investors nervous, they're making the rest of the world nervous, especially those nations with high exposure to U.S. debt."
Sprott Group also cites a commentary published in a Chinese state-run newspaper that went so far as to suggest the need for a "de-Americanized" world and went on to further suggest:
"What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar."
Which again strongly supports the case for physical silver and gold, because more so, now than ever, only silver and gold are a secure measure of value. But why with all the government discord and QE-infinity would silver and gold not be outperforming everything priced in dollars?
Why does everyone except holders of the physical appear to be in "dump mode".
"The sentiment around gold has been diminishing since April when billionaire investor George Soros indicated that gold was no longer a safe haven and the smart money was getting out. The shadow over gold has continued through this month when Goldman Sachs' head of commodities research said, gold was a 'slam dunk' sell and headed for $1,050 an ounce."
Yes, and diminished since April after an apparent smack down, we should note.
So from what we've read so far begs the question: should we now sell our gold?
Goldman Sachs is not the only large investment firm telling people to rid their portfolios of the barbarous relic. As Bloomberg reports, Morgan Stanley (NYSE:MS) (whose shares are moving up this week) expects gold spots to average $1,313 an ounce in 2014 - that's down from the $1,420 it had previously forecast this year.
With all this (orchestrated) talk it is hard for the Main Street investor/saver to get the real low-down on what's really up. When I want to make sense of the landscape I listen to, among few others, Rick Rule, Chairman of Sprott Global Resource Investments Ltd. and Sprott Asset Management USA.
Mr. Rule will tell you it's the critics who will be proven wrong, not gold owners.
"I suspect the call on the part of Goldman Sachs and Morgan Stanley will resemble their disastrous calls about collateralized mortgage bonds and real-estate heading into the 2007 and 2008 collapse. I think this call on gold is just as ill-timed and ill-advised."
Henry Bonner then asks Mr. Rule about QE and the recovery, asking what everyone is obviously wondering: shouldn't it all be good for stocks and bad for gold?
"I have a difficult time seeing a recovery in anything besides asset and equity prices. [says Rule] It mostly looks like the direct result of short-term liquidity injections into the market. […] What do you think about a recovery that has no jobs? Or the only new jobs are flipping hamburgers, that don't pay much better than welfare?
Folks who buy gold as protection against a possible dollar crash should, in this opinion, continue unabated. Prices are at bargain levels for both silver and gold and should be taken advantage of right now. None of us knows what will happen in the future, near or far. Will we have a repeat of the debt ceiling debacle, all tied to Obamacare again, with another ugly default possibility looming in three short months from now? If so, what will that do for the reputation of the nation as perceived by the rest of the world? Will they still be willing to accept U.S. dollars? Or will they want gold instead like the nations dealing with Iran do to get around sanctions, so as not to raise the ire of the United States?
I say again, buy and hold physical silver and gold. There will come a time when the price you paid for it does not matter. And one day the only thing that will matter is that you own it rather than do not.
Allow me to share with you again an important message that was written in the book "The Silver Bomb" by Michael MacDonald and Christopher Whitestone where the authors make an extremely strong case for silver, specifically. They suggest we buy despite price fluctuations, stating:
"If you buy silver today and the next [day] it drops 20% don't let this shake you because that 20% is measured off of the current illusion of wealth; the US dollar, which again, with all other currencies and assets denominated in dollars, is going to crash. It is at that point that those with physical metal, especially silver in hand are going to be the new RICH of the new era. Buy with both fists now, and don't look back."
This has been my silver mantra. It applies to gold as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.