The Failure of the Second London Gold Pool

08-19-2010 • ZeroHedge.com

However, it is clear from the chart that since 4/24/2009 (marked with a vertical dashed black line) the anti-gold cartel has entered a new phase. It is their equivalent of “Houston, we have a problem.” And do they ever! They have ramped up their dumping of gold into the PM Fix to a level that exceeds even what was dumped to bring down the price in 2008, but the gold price refuses to yield. Judging by the way the market was managed until 2009, if the gold price could be brought back into line, it would already have been done. The fuse is lit. This is a covert London Gold Pool that is about to fail as catastrophically as its predecessor did in 1968. Notice how large and aggressive the selling of gold into the PM Fix was between the points marked by “A” and “B” in Figure 5. This corresponds to a period from 12/2/2009 to 3/30/2010. The bullion banks would need a lot of extra bullion to conduct such an attempted “shock and awe” bombing of the gold market. Where did this gold come from? I wrote an article recently entitled “gold manipulation scheme is coming unraveled”. This article discussed how 346 tonnes of gold that were part of a hushed-up swap arrangement between the Bank for International Settlements (BIS) and more than ten bullion banks were essentially a bail-out for the bullion banks concerned. We now know why these banks desperately needed such a vast amount of gold. Together with approximately 15 tonnes of gold being sold surreptitiously by the International Monetary Fund (IMF) each month since February this year, it is new ammunition in the war they are waging on the gold price. The BIS gold swap occurred in the first three month of 2010 which falls in the period marked by “A” and “B” in Figure 5. The evidence of significantly increased dumping of gold that coincides with the timing of the BIS gold swap (the largest in history) is damming, to say the least. However, the mobilization of this gold is futile. When anything in a market goes parabolic, it is unsustainable. The bullion banks on behalf of their Western central bank masters are dumping gold into the PM Fix at such a rate that the cumulative daily price change between the AM Fix and the PM Fix is becoming more and more negative in a parabolic blow-off. It looks like the demise of the gold price suppression scheme is very close at hand. Over the years GATA has uncovered a lot of anecdotal and circumstantial evidence that the Western central banks have been dishoarding gold at an unsustainable rate in order to suppress the price. This is the first concrete evidence that, just as GATA has long been predicting, the gold price is set to blow up because physical demand for gold is overwhelming the manipulators’ ability, or willingness, to provide it. The result of the 1968 failure of the London Gold Pool to suppress gold was an appreciation of the gold price from $35 to $850 per ounce. A similar percentage today would carry gold to almost $30,000 per ounce. This is not a price forecast but an indication that when free market forces have been frustrated by market manipulation for a very long time, the equilibrium price can be many multiples of the suppressed price, and the rise is typically rapid when the suppression is overcome. The opportunity to acquire bullion before prices go dramatically higher is disappearing fast.

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