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Gold Market Manipulation Has Created Rarest of Opportunities

Commodities / Gold and Silver 2016 Jul 04, 2016 - 07:01 AM GMT

By: Gary_Savage

Commodities

The banksters, by manipulating the price of gold and artificially creating a bear market, have created what will likely turn out to be one of the greatest opportunities ever seen. I’ve maintained all along this was their goal. To create the most destructive bear market in history, which would then generate the largest bull market the world has ever seen.

Folks, you might as well take advantage of this opportunity. The banksters aren’t the only ones that deserve to get rich. They have destroyed millions of peoples lives as the authorities stood by and watched them run the precious metals markets, and especially the mining sector, down to absurd levels over the last few years. Now they have switched sides and the attacks have stopped. It’s time for price to swing in the other direction. And it’s going to swing so far in the other direction, that I have no doubt before it is over this will be the largest bull market the world will ever see.


In 2008, as the housing bubble was imploding, the Fed embarked on a reckless campaign of rate cutting and money printing aimed at halting the real estate collapse. It did not stop the bubble from popping. As you can see in the next chart all that liquidity just drained into the commodity markets, especially energy. This had the exact opposite effect the Fed was looking for. The sudden massive surge in inflation broke the back of consumers, triggering a deflationary spiral into a recession.

I’ve tried countless times to educate investors that it is always inflation that occurs first. Inflation is what collapses consumer spending. Inflation damages the economy and leads to deflation, not the other way around.

This is one reason why I knew the stock market is not now entering a bear market. We haven’t had the inflationary shock yet. But we will. There are always consequences to money printing. Without exception it always creates inflation.

So now let’s look at the next piece of the manipulation puzzle.

In 2011 & 2012 the stock market experienced a second crash as QE2 came to an end. At this point it became clear to the Fed that they would have to continue printing in order to keep markets inflated. Without it, the house of cards would come crashing down.

But this time they had a problem. Oil was already over $100. QE3 risked a repeat of 2008 and that risk being that liquidity might flow into the commodity markets, triggering another inflationary shock and collapsing the economy yet again. As a matter of fact you can see in the chart below, right as Operation Twist/LTRO/QE3 began, markets started to surge higher.

So now the Fed had a problem. They were on the verge of repeating the mistake of 2008. They had two choices. Either end QE and let markets collapse naturally to find their true bottom… or find some way to prevent liquidity from flowing into the commodity markets. In essence find a way to direct the inflation solely into the stock market and real estate market.

In a natural market this would be impossible as liquidity would tend to flow into all markets equally (this is why I keep saying all markets will rise together). But as I’ve said many times in the past, we haven’t had free markets since the SEC banned short selling in financials in the fall of `08.

So the Fed could try to suppress all commodity markets (impossible) or they could focus the manipulation in the one commodity that tends to lead the entire commodity complex – gold.

You can see in the next chart I’ve marked the point at which the middle of the night attacks began. Notice that the entire commodity complex stagnated at that point. There was simply no way oil, or wheat, or copper, or any of the commodities, was going to go parabolic with gold collapsing.

This was right about the time that position limit laws stopped being enforced. The bullion banks were now able to overwhelm virtually any buying pressure by dumping unlimited amounts of shorts on the market, usually in the most illiquid hours, in the middle of the night. So traders would wake up in the morning to having their stops run.

It wasn’t long after this that I realized that a few big banks were going to try to create a bear market. A bear raid. The purpose being to artificially force price as low as possible before switching to the long side. Let me give you an example of what I mean.

Let’s say the next leg of the bull market had begun at $1550 and run to $5000 over the next several years. That is a 220% increase.

But now let’s take that same bull market top, but instead of starting the run at $1550, let’s factor in an artificial bear market that drops price to $1050. A run from $1050 to $5000 is a 370% gain. Almost double the natural market gains that would have been attainable if the market had been left to trade freely.

But now let me blow your mind and show you where the real opportunity was created, because it wasn’t in gold.

The HUI index was at roughly 400 when the attacks began on the metals market. If the bull had begun at that point and assuming a modest 2 to 1 outperformance we could have reasonably expected the HUI to rise to maybe 1600. A 400+% move.

But the bull market isn’t going to start with the HUI at 400. It’s starting with the HUI at 100. The banksters managed to create one of the most destructive bear markets the world has ever seen in the mining indexes.

Now if we just assume that same 1600 top, the potential gains in the mining stocks are now 1500%. And I can assure you the HUI is going a lot higher than 1600 before the gold bull is over. The level of destruction in the mining sector is unparalleled, and it’s going to generate a bull market possibly bigger than anything the world has ever seen before.

And I’m going to suggest that was the banksters goal all along. To create a massive bear market so they could then get long at the very bottom, and ride one of, if not the largest, bull market in history.

The banksters may very well have continued beating on gold if not for one unforeseen problem.

When oil collapsed it threatened to trigger another financial panic. It became imperative that the price of oil go back up. That meant the attacks on the gold market had to stop. And that my friends is exactly what has happened.

Ever since the bottom in December we haven’t seen any of these absurd 10,000 – 20,000 contract dumps in the middle of the night, and not surprisingly, the natural trend in the metals has returned.

At this point the banksters are no longer a gold bugs worst enemy, they are your best friend. This was all done to create a monster bull market. The banksters are certainly positioned to profit from it.  Are you?

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Gary Savage
The Smart Money Tracker

Gary Savage authors the Smart Money Tracker and daily financial newsletter tracking the stock & commodity markets with special emphasis on the precious metals market.

© 2016 Copyright Gary Savage - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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