In any market, the worst thing that can happen is for a particular asset to rise or increase too fast because this normally indicates that the move is either speculative or bubble driven. And quite often when assets like stocks or gold move up too quickly, price movement down can be just as volatile as market forces seek to 'fill the gap' between buyers and sellers.
For years gold and silver owners have lamented the obvious and brutal manipulation that has suppressed metal price and values to protect the dollar and other central bank created fiat currencies. But in the case of gold price manipulation over the past month, it might actually be a good thing, and will ensure that the gold bull market continues forward in the months and years to come.
The manipulators are making it easier for us to accumulate gold at a cheap price. Every time they hit gold I buy.
I exchanged emails with Dr. Paul Craig Roberts yesterday about the sell-off of the price of gold this week caused by the obvious “invisible” hand of the Fed. Note this was a week in which Japan was supposedly going to drop $100 billion in helicopter money at Ben Bernanke’s behest – an announcement which should have sent gold soaring:
Me: I agree this was a manipulated take-down of the price but, you know as well anyone, markets never go straight up except the Dow/S&P 500 when the Fed wants to make those indices go straight up – like now. Gold was overdue for a trading correction. I agree there’s some idiots out there who think the Fed is powerless now over gold – that’s ignorance or sensationalism.
Dr. Roberts: Is there such a thing as a trading correction when the price is controlled and manipulated? Is it a trading correction when the bullion banks dump, as we have shown numerous times, massive paper shorts in the futures market?
Me: I agree with your point there – but to be honest, I like to see any market pullback after it has the type of run that gold has had since early February. Should it be pulling back from a much higher price platform? Yes. But gold was on the verge of going parabolic, which is never healthy in any market. The Fed is doing us a favor. I have been moving a lot of money from my checking account into my Bitgold account this week every morning. If gold was not being pushed down, I might not have added any.
The other interesting aspect of your point there is the amount of paper the Fed is needing to throw at gold to keep the price down. The open interest has been more or less at an all-time high on the Comex for a few weeks now. The last time the open interest was this high was when gold was pushing $1900.
In other words, it is requiring a much bigger relative effort for the Fed to prevent the price of gold from spinning out of its control now than it did when gold was about to launch over $2000. - Dave Kranzler, Investment Research Dynamics