QUESTION: Mr. Armstrong; I have been trapped by these gold promoters and they indeed are like used car salesmen, worse since they are not regulated. I listened how they were wrong because the bankers were suppressing gold. If the bankers were eliminated, gold would soar to anything like $25,000 to $100,000. Well, the bankers have all been skewered. Here in Canada, Bank of Nova Scotia is one of the five banks accused in manipulating metals. One would think if the bankers were really preventing the metals from rallying, then why are they collapsing? I suspect you are the only person telling the truth here. Can you explain the real story?
ANSWER: Bankers have always front-run their clients. It is way too tempting to do so when you make the market and you can see the client positions. The big traders are starting to wise up. They are a bit slow. You have to excuse them. Perhaps they were in the special-ed classes growing up. They trusted the big names and are starting to experience being screwed big time. The total gold bullion trade has averaged 4,000 tons annually for the past 10 years. One metric ton equals 32,150.7466 troy ounces. So we are talking about 128,600,000 ounces per year coming into the market place aside from recycled gold. The US Mint sells about 425,000 one ounce coins. This tends to put the bullion coins in perspective.
The total gold supply annually is about two-thirds new mine production and one-third recycled gold according to the World Gold Council. Jewelry accounts for about 50% of gold sales and this is very important. About 9% of gold production is used in technology. Central Bank demand has fluctuated from 2% to 14% annually of total production and as budgets get worse, they will buy less and some will become net sellers. If we include ETFs, investment demand accounts for about 33% of world production. So without promoting gold for investment, its price would fall sharply since there is far more gold than there is demand insofar as “consumption” is concerned annually (removing new production from supply). This means you have a fresh supply every year of 128,600,000 ounces coming to the market. This means even in the “investment” category, there is another 42 million ounces coming to the market each year. That’s a lot of gold to sell. If the retail trade in the economy slows, jewelry sales decline like a stone. That is the bulk of gold sales yet the promoters want to make you think gold is suppressed solely by the bankers for nefarious reasons. There are other factors taking place. This is not all “investment” consumption.
93SilverBuffett-WThis type of “manipulation” pushing the fix one way or the other to elect stops has been like growing money on trees. This BY NO MEANS suppresses gold or any currency, no less any other commodity that they have played games with. All the big manipulations have ALWAYS been to the UPSIDE, not to the downside. It is absurd to pretend that gold is suppressed perpetually so they can make money in some strange way. Phibro made heaps of money which was enough to buy the biggest Wall Street bond house in 1981 all from the bull market in metals. They do not make mountains of cash with a market with no buyers. Both of the Buffet entries into silver were to push the market up – not down. Even GATA knew that was the game in silver back then because I spoke to them on the phone. Did they tell everyone it was PhiBro & Buffet? Why not?
The bankers got silver going from $3 to $7 and and then the promoters talk it up and the retail come in to buy the high every time and they turn around and sell it to them. That is how the bankers make real money. They even had pretend analysts on their payroll to talk up the markets. Suppressing gold to keep it down with no volume means no profit. Even the manipulation of Platinum paying bribes to Russian officials to recall the platinum inventory was the the UPSIDE. The have ALWAYS created the rally to sell to the investors. I knew the Hunts. They were buying silver back in the late 1960s. Everyone came to know their name ONLY because the promoters wanted to sell the metals and put their name out there. They rigged the exchange and made the margins outrageous to be long and nothing to be short. Phibro made enough to takeover Salomon Brothers on Wall Street.
Now that the bankers are being forced out of the game, gold was actually being supported by them and has declined – not rallied. They were keeping the hope of a rally alive. They also maintained inventory, which will no longer be the case. Without the bankers, the support will be less and we can see gold fall out of bed. Whenever to reduce the market players, volume declines. This idea that short-selling is evil has been the typical mantra of people who have no understanding of markets. That is why the stocks fell 90% into 1932 because anyone who was short was being subpoenaed by the Senate. Eliminate shorts and you destroy a market. The cause of a FLASH CRASH is an air-pocket and NO BID. It takes two to tango. The ONLY person willing to catch a falling knife is a short taking a profit. When confidence is shaken, no one in the right mind will step up to buy in a panic. They always stand back and look for when it will stop. This is what we call a Waterfall Event.
Every market has its time and place. The promoters hate my guts because they always want to make a profit getting people to buy. They could care less about the advice they are giving and they are promoters – not analysts. The market is always right to buy and they give the same advice as the stock brokers during the Great Depression – hold, buy more, average in.
People are wrong because no human can have an opinion that is 100% correct all the time. The only way to approach this is a quantitative model. We can define the levels and the time. Just let the market do its thing and learn to read what it is telling you and eliminate bias.