Gold and silver crashed 20 and 40 percent respectively in the course of 2 trading days. Bear market, right? Massive technical damage, right?
In normal times, perhaps.
Not now. These moves were simply the product of an unprecedented manipulation that transferred hundreds of billions of dollars from the hands of leveraged small and mid sized speculators into the hands of a few bullion banks (JPM, HSBC, BAC) and a cadre of government traders for the benefit of central banks, sovereign wealth funds and well connected political executives.
How? Simply by raising the margin requirements on silver and gold trades 8 times in 4 weeks, until everyone trading on margin (Borrowing money to trade) got squeezed out of their positions and went broke, while the Government connected Bullion traders front ran the margin announcements with massive short selling that they covered at the bottom of the squeeze.
This was done first to make a ton of money for those who always make a ton of money in todays rigged financial markets. But also because the futures exchanges have become stretched to the breaking point by large financial institutions standing for delivery for gold and silver contracts when the exchanges are trading at somewhere between 35 and 50 times the paper promises over actual deliverable ounces in storage. This squeeze enabled the exchanges to source gold and silver at much lower prices to service current delivery obligations.
The fact is, while the paper price dove during this operation the delivery price on real gold and silver as quoted on the Shanghai exchange went down at a much small rate. The premiums simply exploded.
So this is obviously a temporary fix. But one that the exchanges and corrupt government agencies can replicate any time as long as smaller traders continue to trade on margin.
However, over time, if the paper price and the physical price continue to diverge the paper exchanges will eventually cease to function and only those holding physical bullion will retain their hedge against the thoroughly corrupt fiat system.
This is why central banks, sovereign wealth funds and billionaire concierge facilities are buying bullion hand over fist Because once the paper exchanges break down real bullion will become extroardinarily difficult to source and hence extraordinariy valuable.
So what's the upshot here?
A) DON'T TRADE PRECIOUS METALS ON MARGIN!
In fact, if you're going to trade paper gold and silver in a market the has to go up over time as long as the fundementals remain in place, always trade in small enough quantities that you can survive the inevitable corrupt government sponsored raids.
B) Buy real physical metal and stick it in a (allocated) vault. Don't trade. Invest.
