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Brien Lundin: Only market manipulation by government explains gold's fall Tuesday

Section: Daily Dispatches

By Brien Lundin
Gold Newsletter, Metarie, Louisiana
Tuesday, March 10, 2020

... Gold's decline today doesn't seem to fit any reasonable interpretation.

If investors are flocking into equities in anticipation of significant Fed easing and government stimulus programs, they should also be piling into gold alongside stocks. If the rising stock market today is stealing the thunder, and money, from gold, then why did gold maintain its losses when the stock market dipped into the red mid-session?

... Dispatch continues below ...


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And yes, the U.S. dollar rebounded today after yesterday's shellacking, but the greenback and gold have been trading with a very close, positive correlation in recent weeks. So a stronger dollar doesn't seem like a valid reason for gold's steep selloff today.

Maybe it's just a normal correction after the yellow metal hit an intra-day high above $1,700 yesterday. Perhaps.

Of course, another explanation would be covert manipulation in the paper gold markets to keep the gold price -- and investor worries -- corralled.

As long-time readers know, I'm not a big advocate of the idea that government forces are manipulating the gold price on a daily basis. But I think it's obvious, especially if one considers the history of previous gold-price manipulations, that someone, somewhere steps into the market at key moments.

And this is undoubtedly a key moment.

It's also important to stress that there is only a tenuous connection, if any, between the paper gold futures market and the physical gold market. The reports I've read show very high physical demand internationally, particularly in Asia, while my contacts in the United States are telling me that buying here, while still somewhat depressed, is picking up.

The futures markets don't transmit these supply/demand signals. They are in fact completely insulated from them and those trading the markets don't care in any case. Their only motivation, outside of any covert intentions to manipulate the price, is to sell their positions to some greater fool at a profit.

The simple fact that they can "create" unlimited quantities of paper metal at a keystroke, without any repercussion, would make it a surprise if the gold market wasn't manipulated to some extent.

Given all this, on a day like today it's easy to believe that the gold price is being manhandled to some extent.

Regardless, the long-term factors that I've been discussing virtually guarantee much higher levels for gold over the next few years. ...


Brien Lundin is editor of Gold Newsletter and sponsor of the annual New Orleans Investment Conference. This essay is excerpted from Tuesday's Gold Newsletter Alert 1002. For subscription information:

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