More Chris & Mike Maloney: Why Did Silver & Gold Collapse?

Adam Taggart
By Adam Taggart on Tue, Apr 16, 2013 - 6:52pm

While Chris and I were at the GoldSilver offices last Friday (the first day of the smack-down in the precious metals), the media team there filmed this discussion between Chris and Mike Maloney.

In it, they delve into the question Qui bono? (Who benefits?) when precious metals prices are manipulated downward to such grand extent.

From the write-up on GoldSilver.com:

From the 4,500 tons of missing gold Eric Sprott pointed to in U.S. export figures, to the 300-ton German gold repatriation, the questions of who benefited from the plummeting prices and how are all answered in this blockbuster video. 

Learn how unsophisticated investors got “fleeced,” and how this price event and media blitz may go down as one of “the cruelest jokes ever played on the people who get scared away from gold and silver at this moment in history, given where we are.” 

This is the first time in history in which currencies around the globe are failing simultaneously, as more and more currency is printed, and confidence in this mathematically untenable system under which debt is “money” collapses.

As gold and silver’s true values are realized, in the market or by revaluation, we will witness the greatest transfer of wealth ever seen in human history. Episode One of Hidden Secrets of Money, our free series, expands on the big picture view—the cycle of behavior across history revealed as it progresses toward the ultimate resolution.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

21 Comments

tv113651's picture
tv113651
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Thank You

Chris,

I have to thank you for your work on this. I've been annoyed most of the day by the immense power of the bullion banks to act in this manner but you have given me an optimistic perspective. I am tipping my cap to you, sir.

-Tim

pinecarr's picture
pinecarr
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Thanks for sharing the insight!

Thanks for sharing this short-video, Adam!   Such shared insights from Chris are always welcomed. 

Arthur Robey's picture
Arthur Robey
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Hey, I get it!

Well done Chris. I get it. And that is some going.

I never understood that when gold is leased out the lessor takes posession of the gold.

Just like leasing a car. And then they sell the car and pocket the money. All is sweet until the owner of the car (Germany) wants his car back. (Oops)

I am watching this falling knife until it bounces a bit off the floor. And then I swoop like an eagle.

mobius's picture
mobius
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Parallels with Bitcoin

This was a profound conversation, but I was left wondering if a(n international)  parallel market for physical gold is what's got the bullion banks shaking in their boots.

I mean this the context of Bitcoin:  a Pandora's box has been opened.  In this case Bitcoin's threat is not as the monatary entity but the origin of  place of extrange that is exterior to a controlled/centralised market place.

In a sense, if physical buyers all agree that the gold price in undervalued, why is the spot price still respected and considered credible.  I understand that it is in the interests of the buyer to accept the a lower spot price for their physical purchases, but it seems to me that that is the "gift" of the bullion banks to the smaller purchasers:  you get value for your purchase and we get to make money with other mechanations (options, leasing, etc).

Regards, Joanne.

VeganDB12's picture
VeganDB12
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Contrarian indicator? Our

Contrarian indicator?

Our local TV news finance guy, Bob, got on TV this morning and reported that Morgan Stanley, one of the biggest supporters of gold, has now turned and said they don't like it any more.

Direct quote:

Bob: "you know what that means, go out and buy some jewelry now!"

Thank heavens for local newscasts, they have the most honest reporting :)

 

lessco2's picture
lessco2
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Thanks Chris

I definitely have to use this opportunity entering my first post on PP to thank Chris for another clear explanation....i.e this PM market price manipultion/leasing Ponzi scheme...just a few of of the mechanisms choking the global economy today. I found the Crash course and PP about a year ago...it has significantly improved the financial toolkit and awareness my wife and I have in taking responsibility to protect our family (don't expect any government to be able to do it for you) through this historical period and out the other side. Thank you VERY much Chris for all your fantatic work! 

westcoastjan's picture
westcoastjan
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reinforcement for beliefs in the face of dischord

A prudent reminder from the past that should serve to reinforce the viewpoint that PM are the only way to go:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

From the last two paragraphs of Gold and Economic Freedom by Alan Greenspan. 1966.

After getting caught up on my reading after being away for a bit, I can see a common theme in the threads related to the PM takedown - confusion, dischord, and even defensiveness as people try to justify their beliefs. While I have no doubts about the financial intent of the take down, there was also psychological intent, so as to sow the seeds of dischord. It is definitely working, judging from how many investors have lost confidence. Setting people back on their heels is the surest way to get them to question their beliefs, and falter in their steadfastness. The people who are not strong in their convictions are the ones that will end up getting fleeced.

This is not the time to waver. If one has a good plan in place for personal resilience, and trusts themselves to assess, respond to, and weather any storm, then let them play these games. Right now it's all about them trying to maintain control of a dying system, and they will pull out all the stops to do so. Don't let their ridiculous actions cause you to question what you know to be true.

Jan

cmartenson's picture
cmartenson
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Well said!
westcoastjan wrote:

(...)

After getting caught up on my reading after being away for a bit, I can see a common theme in the threads related to the PM takedown - confusion, dischord, and even defensiveness as people try to justify their beliefs. While I have no doubts about the financial intent of the take down, there was also psychological intent, so as to sow the seeds of dischord. It is definitely working, judging from how many investors have lost confidence. Setting people back on their heels is the surest way to get them to question their beliefs, and falter in their steadfastness. The people who are not strong in their convictions are the ones that will end up getting fleeced.

This is not the time to waver. If one has a good plan in place for personal resilience, and trusts themselves to assess, respond to, and weather any storm, then let them play these games. Right now it's all about them trying to maintain control of a dying system, and they will pull out all the stops to do so. Don't let their ridiculous actions cause you to question what you know to be true.

Jan

Jan, that is all very well said.  The psychological component of the takedown was one of the important targets, I believe.  

However, the early returns from US bullion dealers, and from Japan, Australia, India and China is that demand is now more, not less, robust than before the slam.  So cross off that 'desired effect' from the achievement list.

 

rhare's picture
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Definitely a gift
mobius wrote:

In a sense, if physical buyers all agree that the gold price in undervalued, why is the spot price still respected and considered credible.  I understand that it is in the interests of the buyer to accept the a lower spot price for their physical purchases, but it seems to me that that is the "gift" of the bullion banks to the smaller purchasers:  you get value for your purchase and we get to make money with other mechanations (options, leasing, etc).

It's not that the spot price is considered respected or credible, it's that the spot price is what a buyer of gold is able to purchase large quantities of gold from the bullion banks who lease it from central banks.  It doesn't matter if that buyer thinks the price is too low, they can get it at that price and mark it up a bit and sale in smaller quantities to others at a premium.  You can't ask too much of a premium otherwise you loose your sales to someone who will.

This is absolutely a gift to buyers of physical metal.  Anytime the price is suppressed by artificial means, in this case the very large paper gold market that doesn't match the physical supply (rehypothication) and by large holders of gold (central banks) leasing out the gold at below market rates to keep faith in their fiat currencies.  This scheme will work until those large suppliers are unable to deliver physical metal, then the paper gold manipulations will be revealed as a giant ponzi scheme and the physical market will then set the price.

This doesn't just apply to gold, it applies to any market that has a parallel paper trade (oil, corn, etc).  The only difference is that in most of the other markets there is no participants (central banks) that have an incentive to keep prices artificially low for extended periods.

Silver is even more interesting in that the price of silver was artificially distorted for decades by the US government dumping it's huge stockpile of silver which was finally depleted in 2000.  This coincided with a nice increase in the use of silver in the large number of consumer electronic devices (cell phones, portable games, etc), PV, and anti-septic uses of silver (silver coated counter tops, door handles, shoes, other clothing, ...).

Eventually the demand for physical in both gold and silver (most likely sooner in silver due to the consumption) will overwhelm the supply, the paper contracts will be settled in paper instead of physical metal, and the game will be up.  Based on Chris's article a few months ago about Comex living hand to mouth in the silver market, it may occur soon (relative to the decades of suppression that has occurred).

Just like all Ponzi schemes, they look/work great and then suddenly fail when delivery can't be made.  Gold & Silver paper markets, Political promises (the unfunded SSN, Medicare, pensions), are all the same - they just haven't been revealed - yet.

 

Mots's picture
Mots
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There IS NO COLLAPSE in Silver

The silver "spot price" is NOT and has never has been a discoverable market price. This BS paper price is diverging from the real price seriously. I note that American Precious Metals Exchange (a big bullion dealer) is offering to PAY 2$ above the BS paper "spot price" for your silver, and will SELL you silver at 6$ above the BS paper "spot price." (with an announced delay). The actual price for buying silver has not changed much over the last few weeks, from my perspective............... Hopefully this divergence will increase until the BS paper guys get busted. I am not optimistic tho.

Dont let the MSM fool you with their stupid quotations of spot price. The real price is much higher and actually not much different than two weeks ago. Anyone who actually paid a near-spot low price for silver this week is very lucky and the seller unsophisticated or a little behind the Curve of Understanding. The internet is a tool used by others via over-information and misinformation. The Elite Dollar Managers are hard  at work messing with our minds with control of the media to keep the dollar game puffed up. Dont slavishly believe Elite pronouncements as words from up high and pundits who are mesmerized with the elite's riches.  There is no collapse  in the price of silver.  Think for yourself and follow none.  .

Hrunner's picture
Hrunner
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WCJ-What has changed in the real world since Friday?

WCJ,

Thanks for an important thought.

I would add to your cogent post, what has changed?  Only a number on a computer screen.

In the real world:

Did someone announce a breakthrough in non-fossil fuel energy technology?

Did some government announce a breakthrough agreement to get expenditures in line with tax revenues?

Did someone discover a 50,000 ton deposit of gold?  Did a silver meteor hit the earth?

Did the Fed announce the definitive conclusion of QE (ditto ECB, BOJ, BOE)?

Just thought I may have missed some key event(s).

H

Wendy S. Delmater's picture
Wendy S. Delmater
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price controls?

To me, this smacks of an on-going attempt at price controls for PMs, and other commodites that were a part of the smackdown. And what's rather alarming to anyone who's been paying attention is that is does not seem to be government price controls, but an attempt to create price controls by non-governmental entities in the financial world.

Silver is what got me thinking about it. Whenever the price of a desirable item or commodity is artifically set low, there are shortages. Just like we are seeing in the physical silver market.

Jim H's picture
Jim H
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Anecdotal reports of Gold buying frenzy in Thailand

From ZH comments section of this piece;

http://www.zerohedge.com/news/2013-04-17/gold-buying-frenzy-continues-ch...

 

whopper

whopper's picture

From Thailand. Gold panic buying today. Long lines with numbered cues. I have lived here a long time and never seen this.  

Wed, 04/17/2013 - 09:00 | 3460264 JustObserving
JustObserving's picture

Thailand had a holiday and markets were closed on Monday and Tuesday.  My Thai friends were itching to buy gold.

Wed, 04/17/2013 - 09:06 | 3460293 Marigold
Marigold's picture

I can confirm near panic buying in Bangkok's Chinatown gold shops. Thai television showing images of gold shops with customer 4 deep. I bought Tuesday in Mega Bangna.

 

Woodman's picture
Woodman
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Gold questions

Thanks for sharing the interview and illustrating the manipulation.  Questions from a simple but interested mind...

Chris sounds like you think a primary reason for the takedown is to destroy confidence in gold, over other objectives such as covering shorts or making money off the takedown?  Do they make money, or is it a cost to the bullion banks to do the takedowns that lets them reap greater profits elsewhere in dollars.

Do the little folks like us matter much or are we just the side show?  Seems like big players should not be fooled by this game?  Why set stops knowing the potential to get fleeced?

How is the world's gold distributed, real or paper, among central banks, investment banks, hedge funds, small investors, jewelry owners, etc.?

Helix's picture
Helix
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Why the crash?

There is very little doubt in my mind that the crash was engineered.  However, I think there are some simple explanations for the why and how.  It's been long-rumored that JPM has had a large short position in Silver.  I suggest the decline was triggered by short selling -- perhaps naked short selling -- with the goal of running the stops.  This would, and did, cause a large number of holdings to be placed on the market automatically.  This initiated the crash.  Stage two was margin calls on leveraged positions.  Pony up to your margin call or your broker sells your position.  Given the severity of the drop, I think there were a lot of margin calls that could not be met.  Another sell-off.  This was Monday's event.  It was a two-stage crash.

I'm just guessing here, but I suspect JPMs short position in Silver is now substantially unwound and it has acquired a ton of PMs in the last few days.

Sad that it's come to this.  It's an old game, and one that should entail jail time.  But I'm not waiting with baited breath.

CleanEnergyFan's picture
CleanEnergyFan
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Buying More PMs TODAY

Thanks Chris for the interview and your earlier explanation for the PM collapse.  Jan I think you are right on!  I am enjoying this buying opportunity and very comfortable to be increasing my exposure to PMs and opting out of the fiat money scheme as well as the Fed's desire for us to increase our risk asset exposure.  Thanks for helping us keep the faith and pursue what we know is right.  They can't rig markets forever and I have to believe when it finally springs back it might do so with a vengence, meanwhile we will continue to sit, wait, and accumulate.

ScottT's picture
ScottT
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Bullion dealer delays

Notice: Please note that due to high volume, new orders may take an additional 10-15 business days to process. Thank you for your patience.

When I contacted my PM dealer eysterday who was still processing an order I made 3 weeks before the price crash I got a testy response that they would "do their best to get my order shipped late this week or next".  Bullion silver coins are listed as "delayed" on their website.

craig_slater_nl's picture
craig_slater_nl
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Another perpsective

Chris,

What can be observed (as with the recent shortages) is that as price gets lower driven by paper trading, physical demand increases. As you mention, GLD pukes inventory during these instances. Only Authorised Participants (bullion banks et al) can redeem the baskets of shares from GLD in large quantities of 100,000 shares. So I am not sure where the idea of small investors redeeming came from. We can see this pukes as physical demand and physical being moved from unallocated to allocated.

In fact what we have in general is lower price driven by western paper trading, leading to increased physical demand mainly from the east. Now, physical demand will make the system very unstable as you point out. The eventual result will be collapse of the paper markets and a establishment of physical only market sending the gold price to the moon.

So, lets do this again. LOWER PRICE = PHYSCIAL DEMAND = SYSTEM INSTABILITY = GOLD PRICE TOO MOON = BYE BYE DOLLAR.

So, if you think the price take down is driven by the Fed/Bullion Banks. Then i ask you this. Why would they make the system more unstable and kill the paper market which is the price suppression mechanism in itself? Why would they collapse themselves? Are they that stupid?

Try another perspective. RIGHT NOW THE FED HAS INTEREST IN A HIGHER GOLD PRICE NOT A LOWER ONE.

I would suggest the recent activity is a result of technical western trading factors, charts bearish etc, breakdown of technical levels. Yes the manipulation you saw overnight happened, but a much more likely story is eastern traders manipulating market lower to buy physical at better prices.

Now, I am not suggesting that the Fed wants a very high price gold price. What I am saying is that the Gold is price is tightly constrained right now. To the DOWNSIDE, because physcial will be drained and the system collapses. To the upside because the perception that creates and because of the GOLD/OIL Ratio.

Look at this chart:

Oil-vs-Gold.jpg

Gold and Oil has remained in a very tight band since Bretton Woods. The reasons behind this are another story, however, we see the ratio at an average say 15. So consider that for this ratio to stand, then gold at 3000 $/ounce is going to give us 200 $ per barrel. Gold at 4000$ gives us 266$. I dont think the economy can stand this do you?

So in conclusion,

Gold to the downside right now does not help the Bullion Banks nor the Fed (the ECB love it by the way). Gold to the upside has its issues as pointed out. Either  way something is going to snap.

Perhaps it is worthwhile revisting your premises, because i dont believe a FED/Bullion Bank conspiracy is the correct perspective and the incorrect conclusion to be drawn from the data.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rob P's picture
Rob P
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Posts: 85
Buying now

On mining stocks:  Took a hit, but I've held positions and I'm cost averaging in over the next two months.  Definitely takes guts, but this is where the money is most likely to be made.

(This is extra money, all physical was purchased in 2005).

Sun East's picture
Sun East
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Gold standard...

Hello Chris

Greetings from Hong Kong!

 

First of all the value of the dollar was calculated according to gold standard not the other way around; however, after President Richard Nixon took off the gold standard in 1971 the dollar was on a spiral ever since but not gold.  Gold and silver have been authentic money for thousands of years until the clever bankers invented the note to represent the amount of the gold and silver with the excuse that gold and silver were too heavy and inconvenience to carry around.
From the day the dollar went off the gold standard, and the words “silver certificate” was deleted from the dollar bill it was on its own and no longer represents anything except for the worthless piece of paper.  Gold rightfully cannot be valued by the fiat paper except for within the global banksters’ territory.  When the grand-ponzi-scheme finally gets exterminated and the criminals brought directly to the firing squad the sheep will obey and judge gold by the monopoly dollar.  For all I care if the gold stock falls off the monopoly chart, my physical gold is not an investment – it is real money from out of this world that human cannot reproduce it or print it except for counterfeiting it with tungsten by the global bastards…so watch out.
 

socaljoe's picture
socaljoe
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I don't understand why the

I don't understand why the 6517 tons of demand were not available for export. In other words, could the 4500 tons exported not have been part of the 6517 tons purchased and then subsequently exported? I would think, if I buy a ton of gold, it would show up as an additional ton of demand. What is to stop me from then subsequently exporting that ton and having it also show up as an additional ton of export?

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