Avery Goodman

Can a Market Crash Save Us from Hyperinflation?

Hopefully, by next year, having learned that this type of so-called "stimulus" costs much more than it is worth, the government may back off from the insanity and allow the economy to recover more naturally. Obviously, the mistakes that have been made are severe. However, with the much lower current account deficits that are prevailing, even now, a fundamentally great nation, like the USA, could still have hope of true economic recovery if only the foolishness stopped here. But, in all likelihood, you are right that it won't. The NY Fed may to supply endless "liquidity" to juice the markets.

On Jun 30 03:52 AM Egg wrote:

> Ok, what about next year's bonds? And the next year's after that?
> And so on and so on?

Did the ECB Save Comex from Gold Default? (Part 2)

Kohalakid, the article title starts with "Did the ECB...?", not "The ECB..." did this or that. We do not know, for sure, as I have made clear, that ECB gold was sold to Deutsche Bank, and that is part of the complaint. That being said, any rational person's suspicion level would be raised very high. So, I call for a full investigation. That is all. Not condemnation, nor a finding of "guilt". There is a big difference.

The piece is not intended to allege that Deutsche Bank or COMEX defaulted. If you got that from it, it was an unintended message. The delivery was made. However it was accomplished, I am happy, because, otherwise, the buyers might have had a lot of anguish. The sudden appearance of 883,300 ounces of gold, however, is circumstantial evidence that the conspiracy theorists, from GATA to Jim Sinclair, are correct, and that is the point of the piece. Nothing more.

Did the ECB Save Comex from Gold Default? (Part 2)

Tern, evil can only breed in darkness. If state authorities were empowered to regulate, subpoenas would be issued -- something that never happens now, offices possibly raided with computers seized, etc. which also never happens. All the dirty laundry that is alleged to exist, if it does exist, would be revealed.

If, indeed the Fed and Treasury Department are involved, then it will show on documents, or in selective document destruction, as it always does. That would be enough to collapse the alleged conspiracy, assuming that there is one.

Did the ECB Save Comex from Gold Default? (Part 2)

Kohalakid, I can't properly answer a specific legal question in this forum, because that is giving legal advice. You should direct the question about puts to your lawyer.

Did the ECB Save Comex from Gold Default? (Part 2)

Jake, you and Jim Sinclair are, perhaps, correct about the title, but I think, in retrospect, it would be better to say "default on the COMEX" rather than simply of Deutsche Bank, because one particular bank is irrelevant. It is the reasonable suspicion that COMEX is allowing major dealers to sell naked short positions that is in question.

Kohalakid, I don't "believe that DB was short". I cannot come to that conclusion, because to do so, in the absence of sufficient evidence is unfair to the accused. People are innocent until proven guilty, and they have not yet been proven guilty.

I believe, however, that from a legal standpoint, there is a reasonable suspicion that they were nakedly short, and that warrants investigation.

I withhold judgment on whether or not there is a conspiracy to suppress the price of gold, for the same reason, although the circumstantial evidence that they may be is mounting, day by day. But, if there is a conspiracy, delivery of 8500 contracts, all at one time, on the first day, can be seen a an episode of showmanship in preparation for other events intended to suppress gold prices, most notably the announcement of sales of IMF gold by the G20.

If the delivery from ECB to Deutsche Bank, and from Deutsche Bank to COMEX, occurred for reasons of showmanship, it wouldn't matter if they might have been able to source gold, elsewhere. Indeed, they can ALWAYS source gold from IAU, the COMEX gold trust. When they do that, the gold is already in the form of 100 ounce bars (the COMEX gold trust, unlike other ETFs stocks an unusual number of 100 ounce bars). So, it would be easier from a logistical standpoint, since they could avoid trading 400 ounce bars with IAU or other COMEX dealers. But, if they did that, they would have dramatically raised demand for the ETF, and raised prices for gold at a time when the gold price was "running up".

Theoretically, by sourcing gold from the ECB (if they did) the "conspirators" (if there are any) would have avoided a short squeeze that would occur to normal dealers who get themselves in such a position, and who don't have political influence. They also avoided upward pricing pressure that is inevitable if 8833 contracts (the current number they delivered this month by my estimate), sitting undelivered for a month. Such undelivered gold would inspire allegations of wholesale shortages of gold (which would place more upward pressure on the price).

In short, with the G20 about to release propaganda about "saving the world" and the proposed IMF gold sales, the alleged conspiracy would do these things in the hope of reducing prices, instead of seeing them rise. And, indeed, we have seen prices reduced in recent days from their highs in late March.

Did the ECB Save Comex from Gold Default? (Part 2)

I think the consensus view is that, even if the conspiracy theorists are correct, there is really nothing the alleged manipulators can really do, in the long term, to stop a massive price rise in precious metals. They can only harvest money from over leveraged long buyers, but, when conservative buyers purchase for cash on the futures market, they can get gold cheaper than anywhere else, especially during a major downward manipulation. So, the conservative cash rich buyers will step in on deep dips, and buy all the gold bars in sight. Then, they will stand for delivery, take the bars away from COMEX for a time, and wait.

All things change with time. However, even now, you could, potentially, sell large bars of gold on consignment to major gold dealers for a premium over the alleged "spot" price. You could also sell a 100 ounce bar, easily, to one of the many Swiss banks who are eager to buy them. Or, most likely, you could just hold onto it for, let's say, 5 -10 years, keeping it off of the COMEX/NYSE-Liffe exchanges, and then, sell it back, when the prevailing order changes, as it inevitably will.

We are entering a major depression/hyperinflation episode. It is going to be one or the other, or both. But, whatever the upcoming events are, huge changes will result, and existing "heads" are going to roll.

In 5 years time, for example, if Congress removes the exclusivity of jurisdiction from CFTC's enabling act, state law enforcement will move in. Such "irregularities" as may now exist will be cleaned up, the playing field more level, and the futures exchanges will be better places for smaller traders to do business,

Did the ECB Save Comex from Gold Default? (Part 2)

The prior comment should read:

"...I think further that the derivatives dealers would have a terribly difficult experience in continuing with the alleged gold & silver pricing fraud, if people, especially any of the larger hedge funds were serious about making money in trading bullion. If two of them bought 50,000 contracts each, and then stood for delivery, that would end any possibility of continuing the alleged conspiracy..."

Did the ECB Save Comex from Gold Default? (Part 2)

Generally speaking, I agree with you. I think further that the derivatives dealers would have a terribly difficult experience in continuing with the alleged gold & silver pricing fraud, if people, especially any of the larger hedge funds. If two of them could bought 50,000 contracts each, and then stood for delivery, that would end any possibility of continuing the alleged conspiracy.

Since most of the shorts are probably naked, gold would not be available to satisfy the deliveries. The ECB and/or the Federal Reserve would be forced to make a huge and dangerous policy decision, to bail them out.

If the same thing were done in the silver market, since the sovereigns have no silver, and the shorts are even more certainly naked, the result would be complete implosion.


On Apr 07 08:58 AM SW Richmond wrote:

> Mr Goodman,
>
> The government and the Federal Reserve now have a direct hand in every aspect of our economy...

Did the ECB Save Comex from Gold Default? (Part 2)

Large scale delivery demand would stop all potential conspiracies in their tracks. The alleged scheme is based upon the premise of not needing to stockpile real supplies of metal. Stockpiling supplies in line with the amounts of metal contracted for, either with vaulted metal or real mining forward contracts, would be extraordinarily expensive, and would make the scheme unprofitable. Since the players are profit motivated, the scheme, if it exists, would surely end.

Did the ECB Save Comex from Gold Default? (Part 2)

Sovereign gold holders, like ECB and the Federal Reserve, may be passive participants happy to see gold prices suppressed, but not the driving force. Silver short manipulation, and, previously, oil price long manipulation may simply be good ways of making money. Silver is only a "quasi-monetary" metal. Oil has no monetary component at all, in spite of the hopes of some who would like to use it to back currencies. Yet, both have suffered apparent manipulation pressures at least as great, and perhaps much greater than gold.

In high finance, the motivation is almost always making money. The gold conspiracy theory revolves around the idea that sovereigns have concocted a scheme to bolster paper currencies by suppressing gold. If the conspiracy does exist, its primary motive is probably not to support the dollar or the Euro. That may be a secondary result, welcomed by central bankers. However, the goal is probably to make money for short sighted individuals at derivatives dealer houses, who want big money now, and don't particularly care if they bankrupt the institutions they work for, in the longer run.

There is much more profit in failing to comply with legitimate cover requirements. If you are a profit-oriented person, you want to minimize expense and maximize profits. Why spend money on stockpiles, if you can get away without doing so? In 1974, having purchased the vesting of exclusive jurisdiction of CFTC, big derivatives dealers made sure that they would not be held to the standards embodied in the law.

Follow the money, and you will find the answer. The alleged gold and silver manipulation would be extraordinarily profitable. For those on the inside, who may cooperate to insure that they know tomorrow's news, today, it would be a money machine. The concept may simply be to regularly "harvest" the deposits (margin) of leveraged long players. Doing this, periodically, even while allowing the price to rise, over time, is extraordinarily profitable. Sovereign gold holders may be participating as opportunists, rather than as a driving force.

Did the ECB Save COMEX from Gold Default?

Indeed, the only way that the proposed trade could be defeated is if people at the public exchanges continue to demand delivery in huge quantities. Counter parties at the OTC forwards markets could not actually deliver. Based on the number of gold OTC contracts reported at the Bank of International Settlements, it is impossible for many of the counter parties to really have gold to deliver. And, if they did, they probably wouldn't be willing to part with it, so they wouldn't become a counter party in the first place. So, you might end up being forced to deliver gold to your COMEX buyer, whereas your OTC counter party would only be able to deliver dollars to you. If you have political power, however, you go to the Federal Reserve or the ECB, and they graciously lease or sell you the gold you need to avoid a default.

Did the ECB Save COMEX from Gold Default?

Not if you are a clever manipulator, who cooperates closely with other manipulators, and buys huge positions on the OTC market, right after selling enough smaller quantities of short positions to bring down the price on the smaller public exchange. You'd pick up your gold at very close to the public price, on the larger OTC markets, and then ride the price upwards, with many more positions, after you've already finished your downward manipulation on the open market exchange. So, it wouldn't be a arb trade, but it would be a paper trade, because it is doubtful that huge quantities of deliverable gold exist anywhere in the world today, except, perhaps, in sovereign vaults like the ECB. The maneuver would be a fraudulent manipulation. You could even use the receipts from the OTC exchange to satisfy the CFTC inspectors! Assuming that they continue their policy of not bothering with actual vault inspections.


On Apr 02 04:09 PM kohalakid wrote:

> Avery,
>
> Yes, what you say is certainly possible in theory, but to what gain??
>
> That OTC forward long position you talked about will likely get hedged
> off the same way the short COMEX position will probably get hedged
> too. The market will find the most available liquidity and COMEX,
> with its 10 to 30 cent spreads, is going to get a lot of business
> from the hedgers of those OTC forwards. The liquidity in the forwards
> and spot and futures make arb very difficult. Try to push one up
> or down and the others will follow..and FAST!!

Did the ECB Save COMEX from Gold Default?

Spectator, because other longs and shorts will tend to get in the way of the trade, it is very difficult to do what you have proposed.

However, theoretically, clearing members of COMEX could, potentially, take large long positions in the OTC forwards market, at times when they are selling short positions on the smaller COMEX market.

The COMEX price deeply affects the spot price, because the fiction of "delivery" gives it "moral authority" (at least in the past) as to price discovery. It was previously assumed to be legitimate and still is considered legitimate by many traders, including, I suspect, kohalakid, for example.

Potentially, one could accept losses by manipulating the smaller publicly reported market (COMEX), while seeking much larger gains on the unreported non-public OTC markets.

Did the ECB Save COMEX from Gold Default?

I believe what Spectator is suggesting is if two banks can trade between themselves, creating fake prices for the public to see, and either settling the matter in a "dark pool" exchange, or having a prior agreement not to take or provide delivery. Is that correct, Spectator?

Did the ECB Save COMEX from Gold Default?

No, because there are unlimited numbers of vaulted dollars ready for delivery, and more being printed everyday!


On Apr 02 02:30 PM kohalakid wrote:

> Avery,
>
> But the flip side to that is, as you pointed out, 99% of the longs
> never take delivery of their metal. Are their representations to
> buy metal for delivery at a future date also fraudulent, because
> they don't take it and pay for it in full??