The Fed Is Desperate To Keep Gold From Exploding Higher – Dave Kranzler

TND Guest Contributor:  Dave Kranzler

The Federal Reserve’s “invisible hand” in the markets is no longer “invisible.”  It’s become obvious to most market participants that the Fed is working hard to keep the stock market from collapsing and the price of gold below $1300.  But why?

The price of gold moved up $15 overnight from the time the Asian markets opened until the Comex gold pit opened.  Shortly after the Comex paper gold market trading was underway, an avalanche of paper contracts was dumped onto the Comex – both the electronic trading system and the floor.  This is what it looked like:

Gold’s path looks like Niagra Falls in the graph above shortly after the Comex opened this morning because “someone” decided to dump over 55,000 contracts onto the Comex.  55k contracts translates into 5.5 million ounce of theoretical gold.

“Theoretical” because it’s only in theory that the Comex has 5.5 million ounces of gold to deliver.   Currently the Comex is reporting a little over 697k ounces that are available to be delivered into the paper gold contracts that the banks print up and dump on the market.  The Comex vaults are showing a little over 7 million ounces in total in the vaults.  This is highly theoretical because most of the gold is accounted for the big bullion banks.  I use “accounted for” loosely because there is no mechanism in place to hold the banks accountable for what they are reporting.

In other words, the amount of “physical”  gold reported by the Comex is likely nothing more than a “suggestion.”

In the graph to the left (click to enlarge) there’s been a definitive trading pattern that doesn’t take Einstein’s eyes and brain to see. For the last three trading days, gold has moved higher prior to the opening of the Comex floor in NYC only to be price-smashed with a deluge of paper contracts representing little more that theoretical gold.

But I prefer the real thing. I actually welcome these price hits because it enables me to move theoretical electronic currency from my bank account into a bona fide gold currency in a BITGOLD account. When gold moves higher, my net worth will be the beneficiary of the Fed’s market interventions. I look at it as grabbing my share of the wealth being transferred by the Fed/Government from the besotted middle class to those who know what’s going on.

Of course, the more interesting question begs to know the real reasons the Fed is compelled to make its market intervention activities so blatant.  One look at the economic reports being released from non-Government sources and the condition of the U.S. Government’s balance sheet readily answers that question…

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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