Richard Russell says it again: Fed is suppressing gold
Richard Russell says it again: Fed is suppressing gold
By Richard Russell
Dow Theory Letters
Thursday, November 20, 2008
Question — Russell, I see December gold is up 12.80 this morning before the opening. But gold has been up every morning by $10-$15, yet it closes up only $2 or $3 if it’s up at all. What’s going on?
Answer — I have to think that one way or another gold is being manipulated by certain sources. What group would least want to see gold heading higher? My immediate answer is the Fed. The Fed is now exploding the money supply. This would ordinarily foment inflation. Surging gold is a red flag that the public understands. The Fed is doing everything it can to hide the fact that it is devaluing the dollar via its current massive production of dollars.
Question — How will this all play out?
Answer — I believe gold is in primary bull market. When the kettle is boiling, you can seal off the kettle. But eventually sealing off the kettle will lead to an explosion, as the expanding steam builds up more and more internal pressure. This is what I think is happening to gold. The longer gold is artificially bottled up, the greater the bull forces within gold will struggle to express themselves.
Gold Rises a Second Day in London as Dollar Falls, Oil Gains
By Nicholas Larkin
Nov. 21 (Bloomberg) — Gold rose in London, heading for a third weekly gain, as the dollar weakened against the euro and oil prices gained, adding to bullion’s appeal as an alternative investment to the U.S. currency and hedge against inflation.
The U.S. currency may weaken 16 percent against the euro in the next 12 months as oil prices gain, Barclays Capital said. Oil rose today from near the lowest since May 2005 on speculation governments will increase efforts to revive economic growth, while Goldman Sachs Group Inc. cut its U.S. recession estimates.
Bullion is “following the stronger euro,” Gerry Schubert, a director at Fortis in London, said by phone. Higher oil prices “are having a positive effect,” he said.
Gold for immediate delivery gained $21.14, or 2.8 percent, to $766.20 an ounce by 1:32 p.m. in London. December futures were $17, or 2.3 percent, higher at $765.70 in electronic trading on the Comex division of the New York Mercantile Exchange.
The metal rose to $758.50 in the morning “fixing” in London used by some mining companies to sell production, from $738 at the previous afternoon fixing. Gold, heading for a 1.9 percent gain this week, has slipped 27 percent since reaching a record $1,032.70 an ounce in March.
The dollar dropped for the first time in four days against the euro and pound. Bullion generally moves in the opposite direction to the U.S. currency. Crude oil rose 1.6 percent to $50.41 a barrel.
Gold demand gained 18 percent to 1,133.4 metric tons in the third quarter from a year earlier, as lower prices encouraged purchases by jewelers and investors sought a haven, according to the World Gold Council. Declining production this year and next adds to the metal’s attractiveness, said Evy Hambro, who runs BlackRock Investment Management’s $5 billion World Mining Fund.
“Looking at gold today, it’s just a wonderful, wonderful outlook,” Hambro said in an interview in London. “Demand has been very strong” and production “is going to be down probably 3 percent this year and probably 5 percent next year.”
Europe’s manufacturing and service industries contracted in November at the fastest pace in at least a decade, according to Royal Bank of Scotland Group Plc, while U.K. home repossessions by mortgage lenders rose 12 percent in the third quarter. Goldman Sachs said U.S. gross domestic product is declining at a 5 percent annual rate in the current quarter and will drop 3 percent and 1 percent in the next two quarters.
Among other metals for immediate delivery in London, silver added 24.75 cents, or 2.8 percent, to $9.215 an ounce. Platinum rose $22.50, or 2.9 percent, to $800 an ounce and palladium was $2.25, or 1.3 percent higher, at $182.50 an ounce.
Platinum has slumped 48 percent this year as sales at automakers, the biggest users of the metal, plummeted amid rising unemployment and tighter consumer lending. Honda Motor Co., the only major automaker to expand North American auto output so far this year, is trimming production plans at U.S. plants by 18,000 more vehicles as sales decline.
“A rebound in U.S. equities could support platinum and palladium in particular,” Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a note today. “An equities rebound could be spurred by prospects of a bailout plan for U.S. carmakers.”
Congress is trying to reach a compromise on giving U.S. automakers $25 billion they say they need to survive the next year, either by speeding up the use of funds already approved to develop more fuel-saving technologies and models or providing a new source of funds.
Automakers account for more than half of global platinum consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.
Last Updated: November 21, 2008 08:34 EST
Interesting article by Richard Russell, Fujisan. It is consistent with a number of writers I have read who believe the price of gold is being intentionally held down, to keep the public from perceiving gold as a safe haven and alternative form of "money", its historical role when times are very tough. They hope to prevent people from leaving USD based assets en masse to flock to gold, which could mean a more rapid decline of the dollar. But, as Richard Russell says, they too believe that whoever is manipulating the price of gold will only be able to do so to a certain point, at which time gold will explode upward. As many have observed, this is consistent with what you see when you look at the difference between what is happening with gold funds like the GLD etf vs physical gold. Physical gold costs more to obtain, and is getting harder and harder to come by.
Then there are others who think gold will keep deflating.
So it is very interesting to watch and try to understand what is going on with gold right now!