The Gold Market: The Truth Will Come Out Eventually

This article is based on an interview with Jesse, courtesy of GoldBroker.com. In it, Jesse looks at five specific topics related to the gold market and investing in gold.

The COMEX and LBMA are two key markets to analyze in order to understand gold:

JessePrices for gold globally are still being set largely by the COMEX and the LBMA, despite the remarkable shift in physical markets and bullion buying to the developing countries, especially those in the Mideast and Asia.

This may not make sense, as ‘the tail wagging the dog.’ How can what are highly leveraged markets (paper markets) that are dominated by speculation and short term transactions and wild price volatility, be setting the prices and thereby the resource allocations for a global market which has to some extent grown beyond them.

This is the symptom of the changes which we have been seeing in the evolution of the international monetary system. It has become outmoded to the point of instability, as the forces of the old Anglo-American banking cartel attempt to maintain the status quo in a system that no longer works.

As the physical exchanges continue to grow I am adding them into my thoughts, very actively. I expect the changes in the monetary system to be driven by their countries and by them. It is the old story of thesis and antithesis. The synthesis will be a new monetary system globally. What that will be I cannot yet know, but I think we can know where to look, and what to look for.

The mechanics of gold price manipulation on the COMEX and LBMA market:

Jesse: Most manipulations of markets are control frauds by their nature, and contain all the usual characteristics of fraud. There is opacity, because frauds thrive in the dark, and on the asymmetric availability of information. There are always a few and very powerful insiders who have the ability to know more than others, to have access to privileged information, and to be able to manipulate the rules and the market mechanisms for their own purposes and advantage.

This is the heart of it. Everything else is detail, which you can surely find out in any amount of depth you may wish. But anyone who is watching these markets closely can no longer miss it unless they are naive or willfully blind.

To which extent should this gold price manipulation be a reason for concern for long term gold/silver investors?

Jesse: Corrections are all a part of a bull market. I would suggest that people not hold over large positions or use leverage if they are worrying. That is often a sign that they have not come to terms with what they are doing, and have not taken a position that serves them and their needs suitably. But to be direct, based on my own portfolio and positioning I am not concerned. My investment horizon is very long term. I am playing the turn of a page in history and these only have the appearance

The « political » angle of owning gold, next to the investment angle:

Jesse: I liken gold to a refuge, a place where an individual may seek to protect some of their wealth from the uncertainty of uncertain times, which is what all times of major change become as you know. I think the political battles will be conducted on the world stage by very powerful players, and it would be better for the average person to ‘keep their heads down and stay out of harms way.’

The signs that would signal an end to the manipulation in the gold and silver markets:

Jesse: I think that the tension between the paper markets and the physical bullion markets is growing little by little, almost daily now. And it has reached levels that are noticeable.

A few saw the financial crisis of 2008 coming, but predicting when it would arrive was quite a challenge. That is because imbalances can grow and grow, seemingly without end, and make one wonder if they are real. But as they grow, there comes some tipping point, that causes that imbalance to topple.

How can one predict when that tipping point will occur ? Many try but I believe it is not possible. As the imbalance grows, the power required to enable a tipping point becomes less and less, until at times something almost inconsequential can trigger the avalanche of consequences.

Sometimes it is the outbreak of war, sometimes it is the failure of a single banking institution, sometimes it is a piece of news that flashes across the public consciousness like lightning across the night sky.

What I can say is that we are now seeing some odd things happening in the gold and silver markets, increasing volatility and concentrated actions amongst a few powerful players. There is a struggle going on, and when something will happen to cause this tension to slip cannot be predicted precisely.

Those who claim to predict it follow roughly the same pattern, they forecast the even over and over and over, and when it does happen they say ‘see I did predict it.’ And all other past incorrect predictions are forgotten. People fool themselves this way in the market every day with their ‘systems.’

Watch for a break in the market, the failures to deliver. There will be little ones, here and there, and the powerful will seek to ‘fix them’ like plugging holes in a dike. Their supporters and representatives will actively downplay them, and ridicule those who sound any concerns over it. And for a while they will be in control, because the truth remains hidden and events will be difficult to predict.

But at the end of the day, the truth will come out, and things will make sense again, always. And then these same ones will say, ‘Who could have seen this coming ?’ This is how it always is, if you look back over the history of bubbles and crises.

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing