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Showing posts with label gold manipulation. Show all posts
Showing posts with label gold manipulation. Show all posts

Sunday, January 22, 2017

Astounding correlation between gold and yen may show reasons for manipulation as being tied to carry trade

It is now a given fact that the United States government, as well as the central banks, manipulate gold pricing going back at least as far as when President Richard Nixon removed the dollar from the gold window.  But what many may not realize is that the reasons for rigging the gold markets have changed periodically over the past 45 years.

In recent times, and in particular since the 1990's, Wall Street has used the Japanese Yen as a tool for creating vast profits through a mechanism known as the Yen carry trade.  This trade is done by using dollars to purchase the much weaker Japanese currency, then using that money to buy Treasury Bonds at a larger discount.

Japan of course has been most helpful in facilitating this trade by the fact that they have kept their interest rates down near zero for almost 25 years at the same time the dollar has remained strong minus the period following the 2008 financial crisis.  But missing from this well known financial mechanism is how gold fits into it, and how the price of the precious metal needs to be rigged to ensure the carry trade continues at full capacity.


As you can see in this chart going back to 2012 when the Fed began to implement Zirp and QE, the price of gold has run nearly perfect with the actions of the USD/JPY currency trade.  And this barometer is almost flawless to utilize for gold traders as when the Yen strengthens against the dollar, gold prices rise, and when it weakens, gold prices fall.


Not known to many traders, gold is positively correlated to yen. Let’s take a look at the first chart where we compare yen futures to gold futures on a monthly time frame. You can see how gold’s peaks and troughs correspond to that of the yen’s peaks and troughs. 
Why is gold correlated to yen? 
In reality, there is no proper explanation to this. Although the fact that gold and yen both share the status as a safe haven does in a way validates this correlation. But it is merely scratching the surface. Correlations in the markets come and go. A more recent example that traders can recollect was the short term correlation between oil prices and stocks in the first half of the year, which soon faded. This brings an important point to mention, which is that with any correlation you cannot take it for granted. Therefore traders need to constantly, and at regular intervals check on the correlation between gold and yen. For example, Gold and USDJPY have a -94% correlation on a weekly basis. However, this fluctuates and therefore traders should always keep an eye out on any significant changes. - Orbex
Yet contrary to the assessment of 'no proper explanation', the reality is that the correlation between gold pricing and the USD/JPY is intrinsically tied to the Yen carry trade.  And when we are taking about a financial mechanism that encompasses trillions of dollars in derivatives and other Wall Street financial instruments, protecting this trade at all costs is a perfect reason as to why the banks would purposely manipulate and rig the gold markets.
What is the carry trade? It’s the borrowing of a currency in a low interest rate country, converting it to a currency in a higher interest rate country and investing it in the highest rated bonds of that country. The big trading outfits do this with leverage of 100 or 300 to one. This causes important moves in the financial markets, made possible by the trillions of dollars of central bank money creation. - Forbes

Thursday, January 19, 2017

Newly disclosed documents show CIA involved in gold manipulation and pushing IMF's SDR as a 'gold replacement'

Earlier this week, the CIA released millions of formerly classified documents that involved many of their plans and operations over the past 50 years.  And one interesting disclosure involves how the CIA was focused on controlling the gold markets through the London Fix, and how pushing the IMF's SDR could potentially be a replacement for the world's reliance on gold as money.

CIA Concerns of Gold Market Manipulation (link) -  Document: Intelligence Memorandum - The World Gold Market- Semi Annual Review January - June 1970. 
The 1970 CIA memorandum reviewed in the video below shows a CIA concerned about gold market manipulation by the Swiss whom they characterize as "in an excellent position to influence the London free market fixing." The memorandum points to "strong circumstantial evidence that Zurich bullion dealers, under the leadership of the Union Bank of Switzerland are again manipulating the gold markets
This manipulation in turn was interfering with an IMF agreement with South Africa to sell its gold to the IMF under certain conditions when it could not sell its newly mined out put on the free market:.  
“While the [IMF] agreement essentially provides a floor of $35 an ounce for South African gold, it guarantees a free market supply large enough to keep the free market price at or near the floor at least through 1970.” 
The CIA memorandum bemoans Swiss manipulation of the gold market: “There is  strong circumstantial evidence that Zurich bullion dealers, under the leadership of the Union Bank of Switzerland are again manipulating the gold markets” “London bullion dealers had hoped that the 1969 agreement between the IMF and South Africa would restore London as the focal point of the world gold market. It has not.” 
Ironically, as page 5 of the memorandum notes, much of the recent gold fix rigging exposed in recent year, was correctly anticipated by the CIA some 47 years ago:"Manipulation of the free market price is suggested by the extremely narrow price range that prevailed for eleven consecutive weeks -- from later January through mid-March. During this period, more than 85% of all morning and afternoon fixings fell within the $34.97 to $35.01 range, with nearly 40% of all quotations set at exactly $35.00.   
Moreover, Swiss bullion dealers are in an excellent position to influence the London free market fixing. At each of some 255 morning fixing a year, the manager of Rothschild's bullion and foreign exchange department suggests an opening price based on a previous half hour of intensive telephone conversations with people at the Bank of England and a host of others, mainly dealers in Switzerland. 
Representatives of the four other houses are in constant telephone contact with their trading rooms and these in turn are in direct communication with as many as a dozen key clients scattered across Europe. The result is that supply and demand conditions in Zurich are strongly reflected at the London fixings." - Zerohedge
And this is what they had to say about pushing the SDR:
CIA Talks up the IMF's  Strategic Drawing Rights (link) - Document: Intelligence Memorandum - Special Drawing Rights: Paper Gold In Action - September 1970 
The gold standard under Bretton Woods Agreement was showing cracks in 1970. The CIA memorandum notes: “the only available means of increasing reserves abroad was through continued deficits in the US balance of payments, But the US no longer had excess gold reserves and other countries had become reluctant to accept large additions to their dollar holdings.” 
The CIA memorandum reflects the tenuous position of the gold market and the inclusion of gold in the international monetary system just prior to the break up of the Bretton Woods Agreement in 1971. The CIA viewed the newly created SDR as a potential replacement for gold calling it:  “a new type of liquidity as permanent as gold it self - to insure increases in liquidity”... “The SDR is a form of money and credit”
“SDRs can not be extinguished by being exchanged by gold -they can only be traded among central banks. And unlike gold, there are no private uses for SDRs that compete with their use as an international currency.” 
CIA however concludes that “Nevertheless, SDRs are not soon likely to supplant the dollar in the international monetary system. Foreign central banks need working balances which are presently denominated largely in dollars.” 
The primary foundation of the American empire was its ability to control the global reserve currency through the issuance of the U.S. dollar.  And when physical gold started to show to the world how fragile that currency actually was, even the CIA became involved in the manipulation of the gold price, pushing disinformation on its utility, and ensuring that peoples in the West remained under the dominion of a devaluing currency that would sustain the empire into the 21st century.