There is much discussion today about what happened last week. As we begin this new week, we’ll be careful in considering what’s happened and what to expect. Sometimes the graffiti on the wall is so clear that we can have reasonable short-term expectations. Sometimes it’s so encrypted that we’re just sort of staring slack-jawed and wondering what it all means. Today we’re a little slack-jawed, though it’s apparent that there has been some purposeful moving and shaking in the markets.
Central to the discussion regarding the recent drop in gold and silver prices is the question of manipulation. Some have postulated that gold dropped because of a rising dollar. As we mentioned last week, this is clearly not the case. Though the dollar and gold have moved inversely historically, the same is not consistently true in the past couple of years. Furthermore, the amount of increase in the dollar yesterday is minimal compared to the drop in metals. But, more convincingly, while Friday saw the largest drop in gold since January 22, 1980, when it lost $143.50, the dollar actually ticked down a few cents. This refutes any claims that the rising dollar led to this gold sell-off. As you can read last week’s entry, the sell-off was to a large degree centralized and focused during specific time frames.
There are those who just don’t buy the idea of manipulation though. While I can sympathize with those who don’t see it, I can’t sympathize with those who so vehemently claim that it’s not happening. One such blog is Gold Scents by Toby Connor. I’ve not read his writing before, at least not that I can recall. There may be something to the pattern he describes in today’s entry, Another Joe just doesn’t know. But he clearly is against any idea of manipulation and strives to discredit anyone who disagrees with his position. Notice his ad-hominem attack on anyone who claim to recognize clear manipulative patterns in the markets.
Anyone with a modicum of common sense can look at the long-term chart of gold and tell that this is not a manipulated market. This is just a normal secular bull market, and it is acting exactly like a normal bull market acts.
In other words, anyone who disagrees with him has no common sense. First, this is simply not responsible argumentation. Responsible argumentation provides facts rather than slinging mud at anyone who disagrees. And there are plenty of well-respected economists and financial advisers who disagree. His perspective is postulated in spite of the statistics provided by many, including the ongoing investigations of GATA. Now, it may very well be that there is some normalcy to the drop in gold and silver prices, as he’s stated. Many, including Marc Faber, have stated that gold prices over-extended recently and need more support before moving higher. Marc Faber also clearly stated that he thinks gold is over sold. To be fair, Connor does agree that we’re in a bull market, so he’s no gold-bashing dummy. Also, Marc Faber agrees that gold could continue to drop all the way to$1100, though he doesn’t expect it do drop below $1500 and plans on accumulating more immediately.
Listen, Connor’s accusation that “The gold manipulation nonsense is just one of the many scams that are going to hitch a ride on this bull” is really a disingenuous accusation. Many respected writers and researchers who claim that there is manipulation in the precious metals’ markets have nothing to gain from making these claims. They just call it as they see it in order to help their readers gain perspective. Trying to sell newsletters by slamming anyone who disagrees is simply dishonest. Connor may have a lot to offer in his service. But it would be nice to see him sell what he has to offer rather than painting all who disagree with him in this regard with such a broad brush. In the end, is he better known for what he’s for, or what he’s against? [NOTE: Several days after this post was published GATA came out with their own statement in response to Connor. We highly recommend it.]
So, what’s the real answer to the question, “Is it markets or manipulation?” Another Joe doesn’t know for sure. But from the comments of those we read and trust, it appears that it may be a bit of both. Gold did make a huge run, though there already was a bit of a pullback before this weeks drastic drop. Perhaps this is a healthy drop. But, whether it would have happened now or not without inside forces pushing we’ll simply never know. The facts remain. Central bankers did sell into the markets very heavily on Thursday and Friday. During the hours of the sell-offs every single rally was met with more sales, keeping the price from rising. Today may see more of the same. Even as we speak gold is off by over $30, though the day is still young. Interestingly, silver is slightly up, so we’ll see how this shakes out.
Again, consider the fundamentals. In this, Connor apparently agrees that gold is in a “long-term secular bull market.” He calls this current action normal. We’ve stated our reasons why we can accept his position in regard to a possible need for a correction, but consider his insistence that there’s no manipulation to be a naive stance to take. Normal or not, central bankers don’t like gold and have clearly made efforts to keep it’s price down. Furthermore, going into an election year brings pressure to bear on a market that’s already atypical. Be careful. Study diligently. Know what you’re looking at and make sober, well-informed, decisions. Then act decisively according to the facts you’ve gathered.
As with so much in the world, perception of the truth in regard to the markets is manipulated. This is no less true in regard to our understanding of who Christ is. Herod heard the reports of Jesus’ ministry as His fame spread throughout Israel. As he pondered these reports Herod was determined to see this Jesus for himself, to determine the truth of the matter. We’d encourage our readers to do the same. The answer to this question has been manipulated by many throughout history, but the truth remains untarnished and available to all in Scripture. Be careful. Study diligently. Know what you’re looking at and make sober, well-informed, decisions. Then act decisively according to the facts you’ve gathered.