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Tuesday, March 3, 2020


Gold Levels-Off At $1,600; Is The Road Clear?
The coronavirus has now entered over seven states. The death toll is minimal, though. The world went into this weekend thinking that on Monday the sky would fall. Instead, it realized that the authorities have done their homework in North America, that the Chinese factories are back to work, that businesses are re-opening in many regions of Asia and that global forces are stronger than perceived.
This, again, can be totally wrong; it's only the current THEORY that drives sentiment. We might see more news later this week that turns the markets on their head again.
The fact remains, though, that China is already bouncing back. This gives confidence and inspiration to all other regions that Covid-19 will not take humanity down with it.
Seriously, last week, when I was buying select stocks in the dip, my broker implored me not to. The majority of my limit orders did not fill; stocks are still expensive, but with continued buybacks and with few sellers (where else would you park your proceeds?), Wealth Research Group sees more gains this year and this decade.
Because of 2008's flashback, the instinctive reaction of investors is to SELL. Market participants went from having a big smile on their faces to an attitude of desperation in days!When you saw gold and silver getting thrown off a building last week – when the price went down like it was poisoned – it was because we had reached the December ‘18 mentality of end of the world.
Back then, the Plunge Protection Team, President Trump, Treasury Secretary Mnuchin, Jerome Powell and any other bigwig, were advocating remaining LONG.
Just like in December 2018, investors have shifted this week from being extremely overweight in equities to very underweight.
This is the chief reason that the 10yr bond, the BAROMETER for the rest of the asset universe, is now generating ONLY a 1.06% yield.
There is simply TOO MUCH money in the financial system and it chases any safety it can possibly find. This is unethical, risky, ineffective and will only bring drama of epic proportions in both the near and distant future.
I can't speak highly enough of owning rental properties or investing through crowdfunding REITs for cash flow. Each of us needs to have steady income, which is tied to renters of all kinds (residential, commercial and specialized), when these shakeouts test the nerves and doubt creeps in.In a globalized world, where money travels at the speed of light, where ideas traverse the globe in minutes, where technology elevates billions out of poverty, and where human beings can fly from Los Angeles to London in twelve hours, we are prone to disease.
Superior nutritional regiments are AVAILABLE to us all and we should stick to the best foods we can find. Health is more important than ever, since longevity is allowing millions to live great lives after retirement.
Investing now and letting the gains compound for two or three decades virtually ensures that you'll have a beautiful nest egg, when you need it most. Postpone spending. Build your ark.
Fewer than 7% of Americans work in occupations that pay a six-figure salary. The solution is to have this SECONDARY engine of passive income, growing alongside your main one (your career).We do not live in a NORMALIZED world any longer. The market cap/GDP ratio, which is at an all-time high, is NOT as expensive as it was in the late 1990s. Back then, you could have earned 4%-5% safe returns in bonds. Today, when your options for yield are limited, I expect stocks to be more valuable.
Stocks are not in a bubble; bonds are. The bond bubble is so ugly that it makes stocks look inflated.
This past week, I came up with several new goals for this newsletter and we'll be releasing new reports on blockchain technology, Artificial Intelligence and a number of important trends, as the year progresses.
How Gold Is Manipulated.Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.
There is hard statistical evidence to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.
I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.
I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period.
He was dumbfounded.
He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.
He said statistically that’s impossible unless there’s manipulation occurring.
I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She has actually testified in gold manipulation cases.
She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.
How do these manipulations occur?
Currently the price of gold is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks.
In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold.
The easiest way to perform paper manipulation is through COMEX futures. Rigging futures markets is child’s play. You just wait until a little bit before the close and put in a massive sell order. By doing this you scare the other side of the market into lowering their bid price; they back away.
That lower price then gets trumpeted around the world as the “price” of gold, discouraging investors and hurting sentiment. The price decline spooks hedge funds into dumping more gold as they hit “stop-loss” limits on their positions.
A self-fulfilling momentum is established where selling begets more selling and the price spirals down for no particular reason except that someone wanted it that way. Eventually a bottom is established and buyers step in, but by then the damage is done.
Futures have a huge amount of leverage that can easily reach 20 to 1. For $10 million of cash margin, I can sell $200 million of paper gold.
Hedge funds are now large players in the gold market. To a hedge fund, gold may be an interesting market in which to deploy its trading style. To them, gold is just another tradable commodity. It could just as well be coffee beans, soybeans, Treasury bonds, or any other traded good.
Hedge funds use what are called “stop-loss” limits. When they establish a trading position, they set a maximum amount they are willing to lose before they get out. Once that limit is reached, they automatically sell the position regardless of their long-term view of the metal.
Perhaps they don’t even have a long-term view, just a short-term trading perspective. If a particular hedge fund wants to manipulate the gold market from the short side, all it has to do is throw in a large sell order, push gold down a certain amount, and once it hits that amount, these stops are triggered at the funds that are long gold.
Once one hedge fund hits a stop-loss price, that hedge fund automatically sells. That drives the price down more. The next hedge fund hits its stop-loss. Then it sells too, driving the price down again. Selling gathers momentum, and soon everyone is selling.
Another way to manipulate the price is through gold leasing and “unallocated forwards.”
“Unallocated” is one of those buzzwords in the gold market. When most large gold buyers want to buy physical gold, they’ll call JPMorgan Chase, HSBC, Citibank, or one of the large gold dealers.
They’ll put in an order for, say, $5 million worth of gold. The bank will say fine, send us your money for the gold and we’ll offer you a written contract in a standard form. Yet if you read the contract, it says you own gold on an “unallocated” basis. That means you don’t have designated bars.
There’s no group of gold bars that have your name on them or specific gold bar serial numbers that are registered to you.
In practice, unallocated gold allows the bank to sell the same physical gold ten times over to ten different buyers.
It’s no different from any other kind of fractional reserve banking. Banks never have as much cash on hand as they do deposits. Every depositor in a bank thinks he can walk in and get cash whenever he wants, but every banker knows the bank doesn’t have that much cash. The bank puts the money out on loan or buys securities; banks are highly leveraged institutions.
If everyone showed up for the cash at once, there’s no way the bank could pay it. That’s why the lender of last resort, the Federal Reserve, can just print the money if need be. It’s no different in the physical gold market, except there is no gold lender of last resort.
Banks sell more gold than they have. If every holder of unallocated gold showed up all at once and said, “Please give me my gold,” there wouldn’t be nearly enough to go around. Yet people don’t want the physical gold for the most part.
There are risks involved, storage costs, transportation costs, and insurance costs. They’re happy to leave it in the bank. What they may not realize is that the bank doesn’t actually have it either.
Gold holders should expect these games to continue until a fundamental development drives the price to a permanently higher plateau.
How does the individual investor stand up against such forces?
In the short run, you can’t beat them, but in the long run, you always will, because these manipulations have a finite life.
Eventually the manipulators run out of physical gold, or a change in inflation expectations leads to price surges even governments cannot control. There is an endgame.
History shows manipulations can last for a long time yet always fail in the end. They failed in the 1960s London Gold Pool, with the United States dumping in the late 1970s, and the central bank dumping in the 1990s and early 2000s. The gold price went relentlessly higher from $35 per ounce in 1968 when the London Gold Pool failed to $1,900 per ounce in 2011, the all-time high.
Price manipulation always fails. And the dollar price of gold will resume its march higher. The other weakness in the manipulation schemes appears in the use of paper gold through leasing, hedge funds, and unallocated gold forwards.
These techniques are powerful. Still, any manipulation requires some physical gold. It may not be a lot, perhaps less than 1% of all the paper transactions, yet some physical gold is needed. The physical gold is also rapidly disappearing as more countries are buying it up. That puts a limit on the amount of paper gold transactions that can be implemented.
My advice to investors is that it’s important to understand the dynamics behind gold pricing. Understanding these dynamics lets you see the endgame more clearly and supports the rationale for owning gold even when short-term price movements are adverse.
Gold will win in the end.

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