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If you study the gold and silver market
long enough you can’t but acknowledge that the precious metals are
manipulated. Last friday drop (october
11th) in gold was another example : 2 millions
ounces of paper gold were sold in less than 3 minutes (read
the explanation here) at a time when the market is the most illiquid and
when the CFTC (US market regulator) is closed due to US government shutdown.
The manipulation that triggered a 2 years
correction can be very difficult for gold
investors to experience, unless they recognize that it create an opportunity
to acquire physical gold at an artificially low price.
The question all gold investors have in
mind is “When will the manipulation end ?”.
In the interview below, James Rickards, author of
the bestseller “Currency Wars : The making of
the next global crisis” give some very interesting answers you
won’t read in the mainstream media. It is high level information from an an expert who anticipated
long ago what’s happening today.
With China now openly
calling for the end of the dollar as the international reserve currency,
we are getting closer to major events that will change our international
monetary system.
You can read my interviews of two
other prominent analysts about the gold and silver manipulation here: Chris
Powell (GATA), Jim
Willie (Goldenjackass.com) and James Rickards.
Here is the third interview with James Rickards.
James Rickards is
the author of the national bestseller, "Currency
Wars: The Making of the Next Global Crisis" and a Partner in
Tangent Capital Partners, a merchant bank based in New York. He is a
counselor and investment advisor and has held senior positions at Citibank,
Long-Term Capital Management and Caxton Associates. In 1998, he was the
principal negotiator of the rescue of LTCM sponsored by the Federal Reserve.
His clients include institutional investors and government directorates. He
has been interviewed in The Wall Street Journal and has appeared on CNBC,
Bloomberg, Fox, CNN, BBC and NPR and is an Op-Ed contributor to the Financial
Times, New York Times and Washington Post. Mr. Rickards
is a visiting lecturer at Johns Hopkins University and the School of Advanced
International Studies, has delivered papers on risk at Singularity
University, the Applied Physics Laboratory and the Los Alamos National
Laboratory and has written numerous articles on risk management. He is an
advisor on capital markets to the Director of National Intelligence and the
Office of the Secretary of Defense. Mr. Rickards
holds an LL.M. (Taxation) from the NYU School of Law; a J.D. from the
University of Pennsylvania Law School; an M.A. in economics from SAIS and a
B.A. from Johns Hopkins.
Follow James Rickards
on Twitter : @JamesGRickards
Fabrice Drouin Ristori (FDR): Mr Rickards,
thanks for accepting this interview. How long the manipulation of the
precious metal markets can last ?
James Rickards: Central bank manipulation of gold markets
can and will last until physical shortages become so acute that banks and
exchanges can no longer deliver on futures and forward contacts when
requested by customers. At that point, contracts will be terminated and
exchanges will order that trading be conducted "for liquidation
only" which means that futures customers can close out or rollover
contacts, but they cannot receive physical delivery of gold.
FDR: What will put an end to it ? Physical demand ?
Geopolitical event (BRICS) ?
JR: Physical demand will remain strong
until the world returns to a gold standard. Once the world is on a gold
standard, gold may move from country to country in settlement of balance of
payments accounts, but there will be no reason to acquire extra gold because
the value of gold will be fixed in terms of each major currency. When you are
on a gold standard, gold and currency are freely interchangeable. However,
gold will continue to be in demand until a gold standard is implemented. This
is because the market price of gold is considerably less than the implied
non-deflationary price of gold under a gold standard. As long as this
situation prevails, there will be an arbitrage motive to exchange currency
for gold.
FDR: What will be the signs proving
that the manipulation is ending ?
JR: The signs that the manipulation is
coming to an end will include depletion of warehouses, price spikes and
notifications from banks that they will no longer allow the conversion of
gold forward contacts into physical gold.
FDR: Do you anticipate an overnight ending
of the manipulation or a progressive process ?
JR: Both. The process will proceed slowly
at first, then gain momentum, then reach a panic
buying stage where the termination of deliveries under futures and forward
contacts will be announced very suddenly. At that point, physical gold will
be scarce and interested parties will not be able to acquire it in small
quantities at any price.
FDR: Is the gold/silver paper spot price
still relevant to value physical gold and silver ?
JR: It is relevant in the sense that
it is still possible to acquire gold and silver at prices significantly below
the implied non-deflationary price under a gold standard. This is a type of
arbitrage that will be available until the world returns to a gold standard or
until countries use executive orders to abolish gold trading.
FDR: What direct consequences would a free
gold/silver market have on people worldwide -- not investors, people in general ?
JR: We have a free gold/silver market
today. Anyone can buy or sell as much gold or silver as they like at market
prices and exchange it freely with willing counterparties. To the extent that
central banks act to depress the price of gold or silver, this acts like a
gift to those interested in purchasing it at an artificially low price. If
the world returned to a gold standard, the price of gold would be boring and
the trading uninteresting because it would be fixed in terms of a currency
and interchangeable with the currency.
FDR: I would like to thanks
again James Rickards for taking the time
for this interview.
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