Source: The French Saker
Translation: Jack & Robin
December 22, 2014
Starting today, December 22, 2014, fluctuations in precious metal prices, which were not truly free of manipulation, will be strictly regulated in US markets. The dollar’s value in terms of gold will be an officially set constant amount and will in no way be representative of any inability to buy an ounce of gold, even for an astronomical amount of dollars.
On December 11, the futures market regulator announced new rules for the two main markets, the Comex (Commodity Exchange) and the Nymex (New York Mercantile Exchange), based on rule no. 589, Special Price Fluctuation Limits. The spirit of this maneuver is adroitly buried in technical complexities summed up in a clever grid of permitted fluctuations in absolute values (not percentages), with price ranges that differ from one metal to another, since obviously the same absolute value (e.g., $100) does not in any way represent the same percentage of the value of an ounce of a given metal, such as copper or platinum.
It will not be said that the maximum fluctuation is 20% for all metals. But a careful reading of the grid shows, for example, that if the last price of gold was less than $1,000, the maximum fluctuation allowed (upward or downward) is $100, and if the last price was in the range of $1,000 to $2,000, the allowable fluctuation is $200, with the maximum range for gold in the grid being $3,000 to $4,000 (there is no open-ended range of, say, “$4,000 or more”).
With this new rule, the reader of the grid can only imagine what will happen when the price of gold reaches $4,000 (barely more than twice its price on 6 September 2011) – will it be unlimited free fluctuations or a definitive closure of the markets? – unless the regulatory authorities of the world’s leading marketplace believe, and expect everyone else to believe, that it is inconceivable that the price of gold in dollars could double from the price freely determined by supply and demand before the outrageous manipulations of September 2011.
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Below the maximum price, whenever an intraday move, relative to the last closing price, reaches the price fluctuation limit, trading will be halted for five minutes and then resume at the previous day’s closing price, and it is relative to that price that the maximum price fluctuation limit is determined, subject to incremental adjustments (by an “additional increment” – the opacity is intentional), but it is always measured against the previous day’s closing price, not the market price just preceding the trading halt.
And if the dynamics of supply and demand have to be interrupted two or three times, trading will resume each time at the previous day’s closing price, with an incremental adjustment to the fluctuation limit…one has to keep in mind that a variation of $200 for an ounce of gold represents a fluctuation of only 17% relative to today’s price, or that three dollars for an ounce of silver represents a fluctuation of 19% in relation to today’s price.
And if the same thing happens four times on the same day, the market will be closed until the next business day. And unless I have misunderstood the memorandum, the next business day (if any) will start at the closing price of the next-to-last trading day, as if the surge on the previous day had simply not occurred.
In other words, if you want to buy or sell, and a balance between supply and demand allows you to, you must do so within the price fluctuation limit, and this rule will be enforced four times a day, with trading suspended until you agree to trade within these limits or withdraw your offer to buy or sell.
The prices as this system goes into effect correspond to the second range for gold, and to the first range for silver, but it is possible that an increase considered reasonable, and therefore authorized, could cause gold to appreciate 15% the first day, then 15% the next day and so on, relative to the dollar, giving the US authorities time to take the required measures.
So forget about those alarmist YouTube videos showing in five minutes a chain of events unfolding in five minutes and leading to the collapse of the dollar and the US economy in a matter of hours, from dawn in Tokyo to dusk in Los Angeles.
Henceforth it will take at least four trading days for gold to return to even the level it was at before the outrageous manipulation.
The organization that runs the markets, the CME, or Chicago Mercantile Exchange, is obviously preparing for a major, and probably imminent, default involving a significant metal on the market that sets the pace worldwide.
It has protected itself by simultaneously limiting the free interaction of supply and demand for the major metals, namely gold, silver, copper, platinum and palladium, to prevent a default on gold from generating a run on silver or platinum, for example, whose surging prices would show what the closure of the gold market was intended to hide: that the dollar can be used only to buy sand. (The depletion of copper reserves is not imminent, even though China might be suggesting otherwise by stockpiling enough to run its industries for several years.)
Meanwhile, the United States is obviously preparing for the definitive closure of the precious metals markets.
In 1944, the US authorities arbitrarily set the dollar at 1/35 of an ounce of gold, stocked up on gold at that rate, and then one day in 1971, unilaterally and in violation of international treaties (the Bretton Woods agreements they had concocted to have the world’s gold supply passed to them), refused to return the gold to countries that had entrusted it to them, believing the US was their friend. They then tolerated the existence of supposedly ostensibly private markets selling gold by the eye dropper or, in any case, in a manner not designed for the exchange of the hundreds or thousands of tons needed by governments and central banks, at rates theoretically determined by market dynamics, but well above $35 an ounce. And then the price of gold was suddenly capped at $1,927 by outrageous manipulation, just a minute before Switzerland’s capitulation was announced (as a result of a US ultimatum) on September 6, 2011.
These markets (mainly the Comex) have two main functions: first, to manage a deceptively moderate depreciation of the dollar relative to gold; and, second, over the last five years, to postpone the revelation by China that the United States is bankrupt. They do so by means of deliveries of gold at the official rate, a situation that still cannot exhaust the mountains of dollars that China wants to get rid of and anyway that will end shortly once the artificially low prices no longer induce the last holders of gold in the western world to sell. In these markets, prices are driven by promises of sale (namely the futures markets) representing a hundred times the amount of available physical gold.
However, with the acceleration of the hyperprinting of dollars, the real value of the dollar can only have fallen since 2011.
In 2006, the United States stopped publishing the aggregate M3 money supply – the only country to do so of all the major economic powers – a scandalous act, since they assert that they have the only reserve currency, yet refuse to disclose how much money is in circulation. According to the Federal Reserve Bank of St. Louis, however, the money supply has again doubled since 2011. So if a dollar was worth 1/2,000th of an ounce of gold in 2011 (in fact the dollar was already highly overvalued then), arithmetically it is worth about 1/4,000th today.
This new arrangement will work beautifully!
If the markets had surged upward, as they could have until last week – and that’s if we ignore any hyperinflation or hyperdevaluation, but simply multiply or divide by five, for example, taking into account the time it takes the authorities to react (sometimes it takes more than five minutes)–, they could have been closed (excuse me, trading could have been suspended indefinitely) at the price of $10,000 for an ounce of gold, meaning a reduction of the dollar by a factor of five compared to 2011 or 10 compared to today, and that price would have gone down in history as the last value set more or less freely by the markets.
From now on, trading will be temporarily suspended as soon as the dollar depreciates by 15% in relation to gold (when gold increases 17%, the dollar goes down 15%). And if such depreciation occurs four times, it will be canceled, and the market will close at the previous day’s price. There’s no doubt about it. They can then say there are no longer enough precious metals for sale to justify a market, ignore the ire of China, which will declare it no longer accepts payment in dollars, allow China to sell gold in Shanghai for any price in yuan if it so desires, and announce to the rest of the world that gold is definitely worth X dollars an ounce, for example, the price during the next-to-last session, perhaps increased by $199 if it was in the range of $1,000 to $2,000.
The value of the dollar in terms of gold will thus become an officially set constant in no way representative of the inability to buy an ounce of gold, even for an astronomical amount of dollars.
Sometime later they will tolerate the opening of an exchange in Chile for copper, an important metal in terms of volume, or let consuming industries deal directly with the producing mines.
The dollar’s value will have been locked in forever, for those who will want (or will be forced) to continue using it after the market-moving development that the CME calls the “triggering event”.
The “manipulations of September 2011” refers to the manipulation of gold prices via gold futures trading and sudden dumping of 400 tons by some secret coordinator in the minute preceding Switzerland’s announcement. The issuance of large amounts of futures, which have nothing to do with actual physical sales prices, suppresses the gold price artificially, as explained here: http://www.davejanda.com/blog/2014/11/06/the-manipulation-of-financial-markets
“Switzerland’s capitulation” referred to above is explained here: http://www.zerohedge.com/contributed/its-war and here:
http://www.stratediplo.blogspot.com/2014/11/revolution-edelweiss.html or here:
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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of Oceania Saker.