Turk - The Cartel Getting Desperate In The Gold & Silver War
Today James Turk told King World News that the ‘cartel’ which has been manipulating the gold and silver markets is now entering a stage where the situation is becoming more desperate. This is yet another fascinating chapter in the gold and silver war. Here is what Turk had to say: “The last few days have given us a good example of how the gold cartel operates, Eric. It is a classic example of how the big players in the paper market can move the price of physical gold and silver.”
James Turk continues:
“On Wednesday, just a few days ago and after the Fed announced its new QE program that is so bullish for the precious metals, silver closed above short-term resistance around $33.20. Gold rose that day too, but interestingly, did not manage to close above its key short-term resistance level at $1720.
Nevertheless, as one would expect, these price jumps are a result of a lot of new buying that came into the market in response to the Fed's new program aimed at debasing the dollar by funding the federal government's horrendous operating deficits....
“We know there was new buying because open interest on Comex gold rose 1.2% on Wednesday, while Comex silver's open interest rose even more, jumping 1.4%. These are relatively big increases for just one day.
We also know that the buying was from trend-followers - those traders who studiously follow the price direction of a market and then position themselves accordingly on a breakout like the one that occurred in silver. Even though gold did not close above $1720, it traded above that level so there was most likely some new buying in anticipation of a break-out.
The question then becomes, who was selling? It was the group that GATA nicknamed the “gold cartel.” These are the guys that are tearing the heart out of the gold and silver market. They keep selling until the buying stops, and then sell some more until the power of their selling turns the market lower.
Gold actually started turning on Wednesday, but the shorts let silver climb Wednesday afternoon, no doubt capturing more unsuspecting longs in the plus-$33.50 area. But the upside momentum quickly changed after the Comex close, which is the least liquid time of the day because trading in the States is ending, it's night in Europe and Asia has not yet opened.
So few people are in the market and it is an ideal time for the shorts to paint the tape by selling as much as necessary to make the price drop. This starts triggering stops as Asia opens and selling then accelerates throughout the day.
The result is that the new buyers start to unwind their positions and sell. But who is buying? It is the gold cartel covering their shorts that they put on at $1720 and $33.50. The trend followers bought high and sold low, taking a loss. T he gold cartel sold high, and bought low, making a nice short-term profit.
By Friday, Comex gold's open interest was back to Tuesday's level, and for silver was actually even lower than Tuesday. All the new buyers of paper metal were trashed by the gold cartel.
It is not surprising therefore that systematic traders - those that follow their black-box mathematical models designed to identify trends - are doing so poorly. You may have noticed that one of the legends in this area, John Henry & Company, closed last month because of poor performance.
Barron’s report of hedge fund performance shows how poorly these systematic traders are doing, and one of the biggest of them all, Man Group, here in Europe, has been in turmoil because of poor performance. The gold cartel is killing its feedstock, and in turn, killing the market for paper gold and silver as well.
This explanation of what happened the last few days also illustrates the big picture, Eric. When gold and silver hit 8-month highs back in October, open interest soared, particularly in silver. Selling by the gold cartel eventually turned both precious metals lower. By November, gold dropped over $100 and silver dropped $4.
But here's the interesting point, Eric, when the price decline stopped in early November, open interest remained relatively high, particularly in silver. The gold cartel did not manage to cover as many shorts as they would normally expect, which leaves them vulnerable in case they are called on to deliver physical metal. So this latest take-down over the past few days is just another attempt by them to unwind their short positions at a profit.
The question for KWN readers becomes, how do you fight the gold cartel and central planners? Two things are important. First, the house is rigged, so don't play the game. Stay out of the paper market. Stop using the Comex. Don't be feedstock for the gold cartel. The second thing of course is far more important, which is to buy physical metal. In other words, accumulate physical gold and physical silver; don't trade them.”
Turk also added: “I’ve not lost any of my bullish outlook for the metals, Eric. Once you understand how the gold cartel operates, accumulating physical gold and silver on these orchestrated price drops is much less nerve-racking.”