Recovering From The ‘Smackdown’
Metals experienced wild volatility last week. Weak economic data out of
Europe and China hurt the metals, but safe-haven demand from Greece’s
default helped gold to a small gain. However, those weak overseas economies
dragged down the more industrial metals, even silver. For the week, Gold
rose $2.50 or 0.15% to $1713.50. Silver fell $0.41 or 1.18% to $34.32.
Platinum declined $12 or 0.71% to $1695. Palladium slipped $2 or 0.28% to
$708. And copper lost 0.0445 or 1.14% to $3.8585.
Why are gold basically flat last week when it seems like safe-haven assets
should be in high demand? Many traders have bought gold, silver, and other
commodities using leverage. They are also highly leveraged in other assets,
including stock and European sovereign debt. Thus, all of them are moving
together. Back in the 2007 to 2009 stock market crash that erased about 60
percent of the market’s value, gold declined about 30 percent while silver
dropped about 60 percent. During times of great turmoil, traders move to
cash. We are seeing that now.
However, we are no longer in normal times. The day is approaching
when gold will be considered cash and Dollars and Euros are considered
speculative. But for the meantime, as brokers and exchange require paper
money or Treasury bills as collateral, gold will act as a risky asset at times.
However, notice that gold fell less than the stock market during that last
crash. Also remember that gold has more than doubled since hitting that low
in late 2008 and is up about 60 percent from the early 2008 high. That 30
percent decline is now barely noticeable on the charts. This current decline
will also be a distant memory a few years from now.
This makes today a great time to accumulate more gold and silver.
A pretty dramatic ‘smackdown’ in gold on February 29 was coincident with
a Leibovit Negative Volume Reversal . And, yes, we witnessed some further
downside follow-through, but it was mild as compared to the washouts we’ve
seen in the recent past, for example, the September, 2011 ‘smackdown’ that
resulted in a $400 correction versus the $130 correction we just experienced.
That the gold market can be manipulated on COMEX by big forward paper
sales now seems to be obvious. If you’re wondering why I use the term
‘smackdown’, the answer is simple. In my opinion, the selling was not
a result of normal free-market (supply and demand – level playing field)forces, but rather the result of a planned scheme to ‘suppress’ the price of gold (and silver) by the ‘Working Group of
Financial Markets’ – more fondly known as the ‘Plunge Protection Team’ (PPT). The PPT doesn’t work alone. It’s
cohorts likely include financial institutions that it has developed long-term relationships with including JP Morgan and
Goldman Sachs among others. Here is a link to the U.S. Government Archives site which describes the Executive
Order by President Reagan that created this monster.

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