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What's Behind The Wild Chop In The Price Of Gold
Published:
June 10, 2008
by GoldSpeculator
Posted On: Tuesday, June 10, 2008, 1:58:00 PM EST
What's Behind The Wild Chop In The Price Of Gold
Author: Jim Sinclair
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Dear CIGAs,
You need to understand the truth of how the short on gold and silver comes about and how metals dealers do their deeds.- Metals dealers buy metals from producing companies at a discount to form, condition and location.
- The metals dealer prices their buy according to their ability to sell the metal in the forward market.
- That transaction is a true hedge.
- The short side of the gold trade as in this example is risk free at that point.
- In the old days a modest profit fulfilled the desire of the metals brokers.
- The short was covered when the purchased bullion metal was sold to industry.
- Today the world has no ceiling on desires.
- The metals dealer of today wants to make $50 or more, not 50 cents.
- The gold market becomes prone to declines from time to time by entities like crude oil or the euro.
- The metals dealer has a risk-less short position on.
- At this point risk is taken by selling to hammer prices lower, not to sell volume.
- This can be identified by a floor trader in open outcry or later by computer entry offering thousands of gold contracts for sale when a few hundred or even ten is the only buyer showing.
- The bravado has a purpose. That is to scare the gold market lower using the least sales required.
- As gold moves into areas of major support the metals dealer buys back the short.
- As the producers continue to sell, dealers then buy as in number one but play the market and back higher the gold price goes.
- The short is then put on by the metals dealer at Angels or round numbers.
- This along with mindless black boxes and follow the leader hedge funds results in the largest money on the planet playing the smallest market on the planet. This creates a large degree of unprecedented volatility.
- The net result is that people assume a huge dedicated short, which is wrong.
- What is correct is a turning short that keeps the number high but in fact is made up mostly of risk-less trades.
- The trades are not registered as hedges rationalizing that; in today’s world a hedge is defined as a different transaction than outlined.
- Since these trades are made generally either as broker or principle by the big six who can do no wrong, who cares how they report it.
- The metals dealers do all possible to invite the assumption that they are dedicated shorts when they are NOT. This benefits their desires as up moves try and push a short that in fact turns over at a profit and has no dedication to anything other than the 21 points just made.
- What people refuse to believe is that just those that are identified as the enemies of gold will be the ones that make the most long gold.
- We will discuss 24 as times moves along. I have outlined to the attendees recently in New York and Toronto why 23 is FACT, not fancy.
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