Gold Manipulation is a Blessing
The Texas Hedge Report
December 10, 2004
Courtesy of www.texashedge.com
In late 2002, as the US stock market was making new lows on a
daily basis, it looked like there was no end in sight to the
carnage. The NASDAQ bubble had been popped, and it seemed like
the invisible hand of the market was doing its work and punishing
overvalued tech stocks. All of the sudden however, out of nowhere,
things started to change. It seemed that the market couldn't
go down anymore and many suspected that Treasury Undersecretary
Peter Fisher and his "Plunge Protection Team" were
bailing out the markets.
The PPT, also known as the Working Group on Financial Markets,
was created in response to the 1987 stock market crash. The powers
that be in Washington decided that the prevention of a market
panic was a national security issue, similar to a prevention
of an oil shortage. Almost every floor trader on the NYSE, NYMEX,
CBOT and CME will admit to having seen the PPT in action in one
form or another over the years. By the end of 2003, it was once
again proven that shorting overvalued tech stocks based on valuation
was not a winning trade. Shorting these stocks can be very dangerous
as XYZ.com could run from 40x earnings to 4000x earnings before
it files for chapter 11 bankruptcy. Even though these stocks
would eventually collapse and go bankrupt, there could be powerful
interests in place that would make sure the bubble would be prolonged
as long as possible. Many skeptics often point to the powerful
interests who benefit from rising stock prices - General Electric,
Dow Jones, incumbent politicians, every major bank, every major
The same people who have been accused of manipulating the stock
market have been accused of capping the price of gold & silver.
It seems that every day at 8am, some mysterious trader in New
York or Chicago comes in and kicks the teeth out of the price
of gold or silver. There have been accusations of a conspiracy
between money center banks such as JP Morgan, the various commodities
exchanges and metal producers who hedge forward production. Now
some are saying that the new gold ETF (GLD) is the just latest
step in the gold-rigging scheme.
not you believe all or some of these conspiracy/rigging theories,
we are here to tell you that this manipulation (if it exists)
may not a bad thing. We are tired of all the gold & silver
bugs complaining every time the metals suffer a large correction.
If you are a true long-term believer, then be thankful that these
forces are keeping the prices low for all of us to buy physical
metals. If you are a greedy paper trader looking for a short
term gain, then you will continue to be agitated by the choppy
behavior of the metals prices. Maybe this alleged "scam"
will continue to go on for many years, but sooner or later, market
forces will win out.
December 9, 2004
Todd Stein & Steven McIntyre
Texas Hedge Report
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Todd Stein &
Steven McIntyre are internationally known analysts and editors
of The Texas Hedge Report, a market newsletter that highlights
under and overvalued securities in the equity, bond, currency,
and commodity markets.