The Gold Manipulation Conspiracy: Only ‘Unwashed’ Bears Believe It, by Al Martin

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by Al Martin

The Gold Manipulation Conspiracy: Only ‘Unwashed’ Bears Believe It

(3-27-12) You’ve probably heard all sorts of internet nonsense about the price of gold being artificially suppressed – but it’s just not true. The evidence for this assertion is that gold is a free-to-trade market and I trade it every day. For something to be artificially influenced, someone has to have the power to inhibit those markets and there’s only one entity that would have such power and that is the government – or a group of governments. In order to influence traded markets for commodities, you have to control enough of that commodity to be able to artificially inflate or suppress the value of it. Remember central banks of governments that hold gold on this planet have been net sellers for about 40 years.

There isn’t any entity on the planet now that has enough supply to control the price of gold. Gold futures, for example, which I trade every day, are simply an item whose price is based on the belief of what the price will be five seconds later. There isn’t any conspiratorial mystery to this…

The reason why the GATA people, who are essentially the Unwashed Bears that are pissed off that everything hasn’t fallen apart already. This is just sour grapes from pissed-off bears. If you understand the benchmark value of the dollar over the past 30 years and if you say that gold is a direct reflection and an opposite of the dollar, then you can come up with this cockamamie notion that gold should be 2800 or 3200. That would put it exactly in line with the decline in the value of the dollar over a certain period of time. And that’s true.

However gold is not an exact reflection of the dollar, and it is not the exact opposite of the dollar. If the dollar were pegged to gold in some fashion, then it is likely that gold would be trading at 2800 or 3200 or whatever the number they claim it should be traded at. But – there is no direct linkage – other than the dollar being used as a currency to buy or sell the commodity.

It should be noted that many of the people involved in these gold conspiracy type groups were people who had owned gold or had bought gold in the 1970s and weren’t smart enough to sell it when it was $800 an ounce in the 1980s. Then they had to hang onto it for 30 years – before they could make a profit again.

People who aren’t smart and don’t have any trading savvy and do not understand markets will invariably attempt to come up with some conspiracy theory – that it must be a conspiracy. Rather than their own shortcomings or ignorance. Why? Because it isn’t that easy. People are always looking for something – either gold trades in dollars and gold is a defacto currency, and therefore gold should move literally in tandem with the purchasing power of the dollar. The problem is that it’s not that easy.

What people want is something that’s simple. They always want to simplify something. Everyone does this. Financial media. Government does it. And you get a whole world built on oversimplification – so the Unwashed can understand it.

What the Unwashed want is something that they can understand – and that they can make money on. And don’t have to have any actual knowledge of markets or trading experience to know when to get out of something. In other words, when the value of the dollar sends an unequivocal signal as to when to buy or sell something – and it doesn’t… There are no unequivocal signals. It’s just like the Unwashed Bears that are always looking for some sort of trading system. You’ll see the trading system type of people also support the idea that there must be conspiracies.

Why? Because they’ve all lost money… Why? Because they refuse to believe that there isn’t a “system”

This is the BS (Belief System) problem.

I tell everyone the same thing. There is no single signal that determines the direction of any certain commodity. There is no trading system. Systems do not exist.

The Unwashed can’t get their minds around it at the $3900 seminars that they’re not told that the markets – particularly the futures markets – are essentially a Game of Sentiment. At that moment. And any commodity whose price fluctuates based on sentiment is something that cannot be packaged up into a system. Because for a system to work you’d have to assume that everybody would have to have the same sentiment all of the time based on the same input of data. It simply doesn’t work that way.

As time goes by there will be ever bigger number of pissed-off people joining the ranks of the conspiracy theorists. First it was those who bought gold and didn’t sell it when the time was right because they didn’t know when to get out of it and they didn’t know anything about economics to begin with.

Now you have them joined by the nouveau-electro youngsters who are so enamored of electro-contraptions and charts and graphs for everything that they believe too that in the new electro-world we can take sentiment out as a factor and place everything into charts and graphs and colored lights and faux technical buy and sell signals – which in fact do not exist in the real world. So now you have the youngsters who also don’t know anything about economics and markets and have no actual trading experience who also support this idea that there must be a conspiracy because their electro-contraption tells them that a system MUST be possible.

How can a system of anything to determine price direction on a moment to moment basis be possible when it is based on the individual perception of each individual person trading that market?

In other words, there is no 800 lb. gorilla in the gold market. At one time that was true. There was an 800 lb. gorilla prior to 1971 when Nixon closed the so-called “gold window.” You could reasonably say that until 1970 there was an 800 lb. gorilla in the room. That’s when governments controlled the majority of the surface supply of gold on the planet and could effectively dictate prices. But when gold became a “free to trade” commodity and governments removed all restrictions by the early 70s, then gold goes from something which had a set price and an ill-defined secondary market into something where there is no set price and a well-defined secondary market.

What is true for commodities and equities and bonds – everything for which there is a futures contract – is that you do get into near-term trading zones. But you don’t need charts and graphs, you just have to watch the tapes every day.

For instance, the COMEX gold contract in the last 7 or 8 days has been a pretty good example. Every time the contract has gotten above 1657 I’ve been a buyer because every time that has happened the contract has been able to move up to the top of a little zone 1664-1665. We also saw that this was the case last Friday (March 23) then people turned short sellers like I did, so I consistently bought the contract when it would move above 1657.50. I would get out at 1652.50 or 1653 and I would be a short seller at 1664 or 1665. Then cover it on a $2-3 dip because the contract kept getting turned back and would come back for a retest of the 1657 area.

So there will be this little zone and the longer the zone lasts the more people will trade it and the volume will actually start to increase in the contract because if you see a trade in the same zone day after day, people will make the same trade and they will continue to make the trade until the trade doesn’t work anymore. This protracted trading within a small zone creates pricing pressure in both sides of the zone. You will see in the coming week's trade that if April COMEX gold contract moves above 1670, it will likely create a new top around 1693.

And why doesn’t a trade work anymore? This is what the Unwashed don’t understand. Why something moves above or below a “zone” is because sentiment has changed. And what has caused sentiment to change? News flows have changed.

Something has happened in the way gold trades in relationship to equities and the dollar and the bonds. Something has changed in that relationship.

People love conspiracies but that doesn’t put any money in your pocket, particularly when I tell people about Uncle Al’s Fishing Club that there are no conspiracies and there are no “systems” You simply have to trade every day and take money out of it. Isn’t that better than believing a conspiracy theory?

Then what you find is that all the people who believe in the conspiracy theory do not have the knowledge or experience necessary to trade every day successfully. Then the belief system in the conspiracy becomes an excuse. Otherwise people would have to admit that they really don’t understand markets and economics, but since people don’t want to admit that, they will come up with some conspiracy theory, wherein they can lay off their inability to trade and simply make money make money every day. Now if I can’t do that, it must be somebody else’s fault…

* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.

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