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Gold market sentiment matters no more than technical analysis does

Section: Daily Dispatches

2:05p ICT Friday, March 13, 2015

Dear Friend of GATA and Gold:

Some gold market analysts are noting that sentiment in the sector has probably never been worse. They construe this as an indicator of a bottom in the metal's price and the price of gold mining shares. But in a market as manipulated as the gold market, sentiment has no more meaning than technical analysis does.

Really, who cares about what is being thought by ordinary investors, who may be able to deploy a few billion dollars in the gold market, when central banks have infinite money to deploy and acknowledge that they are trading the gold market nearly every day? And central banks are not trading just the metal itself but also futures, options, and derivatives, by which they can leverage their trading to infinity.

... Dispatch continues below ...


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In the face of the infinite money deployed against them, the sentiment of gold market investors could be entirely positive or negative and it wouldn't mean anything. In the gold market right now the only sentiment that matters is that of the biggest traders, central banks.

These days no gold market analysis is worth anything unless it starts with questions like the following or is underlain by premises arising from these questions:

-- Are central banks active in the gold market or not?

-- If central banks are active in the gold market, is it just for fun -- say, to run contests among their foreign exchange desks to see which one can cheat the most ordinary investors -- or is it for policy objectives?

-- If central banks are active in the gold market for policy objectives, are these objectives those that have been documented in government archives for decades -- to limit the price of the monetary metal and to push it out of the international financial system so that central banks may accrue more power? Or are there other objectives as well, like the objective suggested by the economists and fund managers Paul Brodsky, Lee Quaintance, and James Rickards, who argue more or less that gold price suppression by central banks lately is meant to redistribute gold away from Western central banks and investors to Eastern central banks needing to hedge their grotesque U.S. dollar-based foreign exchange surpluses against devaluation of the dollar?

In these circumstances, if central banks are determined enough they could use their infinite leverage to drive the price of gold on the futures markets down to zero. Their intervention is limited only by the metal they are prepared to lose, just as their intervention during the operation of the London Gold Pool was limited only by the draining of central bank gold reserves to critical levels in March 1968.

Recent attempts by some central banks to repatriate their gold from the Federal Reserve Bank of New York support suspicion that the price-suppression scheme, engineered largely the U.S. government, has begun expropriating foreign custodial gold for suppression purposes, buying the scheme a lot more time than some gold market analysts thought it ever could have.

And if, as seems generally agreed, any default on the gold contract at the New York Commodities Exchange can be resolved with cash settlement at the price prevailing before no gold was offered for sale and the price skyrocketed, should the price-suppressing central banks care much about a default? For the risk of default in Comex gold would be not really the risk of losing metal but rather the risk of losing the primary mechanism of price suppression, the exchange itself, which might be replaced by confiscation or the outlawing of private possession of gold.

While it may be hard to imagine, the U.S. government claims to be fully authorized by law not just to rig the gold market and all markets in secret --

-- but also to strip anyone of any asset, not just assets in the monetary metals, upon a presidential proclamation of emergency:

That is, the outcome of the current round of gold price suppression may not be anything like the outcome of the collapse of the London Gold Pool, an advance toward freer markets, but rather more of what even some central bankers call "financial repression."

But at least then gold price suppression would be undertaken so openly that even mainstream financial news organizations would have to mention it -- that is, if news organizations were allowed to continue operating at all.

That's why the only gold market analysis that may be worth anything anymore is analysis of the struggle between totalitarianism and liberty. No Internet site of financial data offers a chart for that.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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