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China is likely capping Comex gold to facilitate metal's eastward flow

Section: Daily Dispatches

8:43p ET Tuesday, February 16, 2016

Dear Friend of GATA and Gold:

In analysis posted tonight at GATA Chairman Bill Murphy's, Toronto securities broker Mike Ballanger elaborates on a point made by a number of GATA's friends since the big gold smash of April 2013 -- friends like Koos Jansen, Jim Rickards, and Andrew Maguire, among others. That is, China almost certainly is very active keeping gold futures prices down so that it might acquire more real metal as it reduces the U.S. dollar component of its foreign-exchange reserves.

Your secretary/treasurer put it this way in November 2013:

"China is the gold market as well as the U.S. government bond market and any market China wants to be -- China's foreign exchange surplus is that huge. If China had not been at least complicit in the April smashdown of gold, it would not have occurred -- China would have bought the dip at a much higher level. So much for the 'Chinese put' many gold investors thought they enjoyed.

... Dispatch continues below ...


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"China and the United States have great leverage over the other. Each knows what the other wants.

"The United States wants to devalue the dollar gradually and gracefully to reduce its debt burden and improve its trade balance.

"Understanding the U.S. objective of gradual dollar devaluation, China wants to hedge its insane dollar exposure and is doing so by acquiring gold and other hard assets around the world.

"Each side could blow up the other at any time -- China by dumping U.S. debt instruments and buying gold abruptly, the United States by devaluing abruptly.

"So the two governments probably are talking to each other in detail every day and acting cooperatively in the markets in pursuit of their objectives, which really are not so contradictory.

"The advice often given by market analysts, some of whom just shrug off the unfairness of gold price suppression and market rigging -- advice to purchase gold steadily at the market rigging's 'discount' and just wait for the great international currency reset (and pray that you have time to wait) -- is probably being followed most of all by China itself, which is as well situated as any other nation to push gold futures prices down to facilitate its acquisition of real metal."

Last October the Austrian central banker Peter Mooslechner more or less confirmed all this, if inadvertently, in an interview with Kitco News on the sidelines of the LBMA conference in Vienna, volunteering that Asian central banks were surreptitiously intervening in the gold market as the price declined:

Pressed by the German financial journalist Lars Schall about his remarks to Kitco News, Mooslechner disappeared and the Austrian central bank clammed up, confident that no mainstream financial news organization would make anything of Mooslechner's admission.

An excerpt from Ballanger's elaboration tonight is appended.

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

* * *

Gold and Gold Miners Analysis for February 16, 2016

By Michael Ballanger
Tuesday, February 16, 2016

Last night I was sitting in my reading room (which substitutes as a "libation room" most evenings) and I was trying to go over the "coincidence" of a strong gold market during the Chinese Lunar New Year holiday and sudden and dramatic weakness Sunday evening with the Chinese traders back at work.

I have alluded to that famous quote by Mark Twain mentioned here a few weeks back that goes like this: "It ain't what you don't know that gets you into trouble; it's what you know for sure that just ain't so. ..."

I mention this because one of the most classic cases of recency bias is the natural assumption that the Chinese are constant, perpetual buyers of gold day in, day out, week after week, and never sell. We all know "for sure" that it could not have been Chinese selling that has been suppressing the gold market -- but what if that "just ain't so"? What if the Chinese are using the phony, synthetic paper market called the Crimex to set the price for physical purchases that never get seen until months later?

In other words, the Chinese central planning traders are capping the Crimex price to secure physical gold and silver prices advantageous to their long-term national objective.

Dumping trillions of ever-depreciating U.S. dollars for price-capped physical gold sounds like a brilliant idea and it really is nothing more than disguised arbitrage, masterfully executed and wonderfully discreet. They have even perfected the "false flag" concept seen in military campaigns throughout history by making it appear that it is other central bank entities that are perpetrating this heinous financial folly.

Dreaming, am I?

Well, when you drill down into it, there are a great many nuances that point to the Red Menace as the master manipulator, such as the 3 a.m. ET smashes that have always occurred in the thin trading sessions of the European opening, but it was last Sunday evening (morning in China) when the gold market was immediately marked down by as much as $28 an ounce on the Asian opening, the first day back at work after a week of fun and frivolity.

Don't forget that the average Chinese citizen has loved these low prices, as has the People's Bank of China for most of last six months. Since the yuan has been declining against the U.S. dollar lately, the double whammy of weak yuan and strong dollar exchange rate for gold has created some nice profits for the Chinese gold buyer.

In the final analysis, it really doesn't matter that much who the buyers are and who the sellers are, but if my speculative thinking is on the money, it is even more bullish for gold because the level of foreign exchange reserves held by the People's Bank of China has been drastically reduced by massive stock market and currency interventions of late, and since this is the funding source for People's Bank of China gold accumulation, once the central bank's vault is empty of U.S. dollars and full of gold, the need for suppression vaporizes and that phony, synthetic paper market is allowed to levitate. ...

* * *

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