3 Minute Gold News – Jim Rickards – Gold Flash Crash – June 28, 2017

3 Minute Gold News

A Quick Read for Busy People

A synopsis of communications with Jim Rickards, New York Times bestselling author of The New Case for Gold, The Death of Money, Currency Wars and The Road to Ruin, by paid subscription services Collide and Gold Speculator with Byron King.

Jim is the editor of Strategic Intelligence, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and U.S. Department of Defense.

by: Elaine Diane Taylor

This synopsis is followed by my thoughts. Thanks for reading. Looking forward to hiking and chatting gold with Jim again in July in Vancouver, Canada. We’re planning on hiking The Chief if you have any comments or suggestions.

Topics:

 

GOLD FLASH CRASH

GOLD MANIPULATIONS

A BIT OF GOLD MANIPULATION HISTORY

 

Jim Rickards

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CRASH IN SECONDS

The gold market crashed this week in a matter of seconds.

The price went from $1,260 US to $1,240 in seconds when some unknown person or persons sold about 18,000 gold contracts equivalent to 56 tonnes of physical gold.

That’s about 1.6 million ounces of gold worth $2.25 billion and it’s a massive amount.

It’s 60% more than the yearly output of huge mines like Barrick Gold’s Cortez Hills Mine or Goldstrike Mine, or Freeport-McMoRan’s Grasberg Mine. It’s a huge amount of gold that was sold in an instant.

Some people think it was a ‘fat finger’ trade meaning someone pressed a wrong button by mistake.

Some think it was a party like the central banks doing the selling to manipulate the price lower.

It doesn’t really matter.

These things have happened with gold and they’ll happen again.

PAPER GOLD

What was sold was ‘paper’ gold not physical gold.

The sale of paper gold contracts affected the spot price of physical gold.

This means what was really sold was the equivalent of 56 tonnes of gold in a paper contract. There was no physical gold needed.

No one really sold physical gold because no one has such a large amount to sell.

If you wanted to buy 56 tonnes of physical gold you couldn’t do it. All of the significant gold miners in the world already have a buyer for the gold they mine.

You’d be lucky if you could buy even 5 tonnes of gold in less than 30 days.

The last time anyone laid hands on 50 tonnes of gold was when NATO invaded Libya in 2011. Libya had about 100 tonnes of gold, which hasn’t been seen since.

Gold is fungible. It could be in a vault somewhere for the future benefit of the Libyan people, or it could be melted down and recast, and you’d have no idea where it came from. Gold is an element, atomic number 79, untraceable. It could be anywhere at this point.

The last time before that was in 2010 when the IMF sold 400 tonnes of gold in a couple of deals. About 200 tonnes went to India, 2 tonnes to Mauritius and 10 tonnes to Sri Lanka. (Ronan Manly’s Bullionstar Blog article covers this)

The IMF didn’t disclose where the other 200 tonnes went but Jim believes it went to China.

That’s how hard it is to get that much physical gold.

Will things like this big paper gold sell off stop? No. There’s a lot of vested interest in being able to trade paper gold contracts.

The exchange gets fees, the brokerage gets commissions, the traders get bid-offer spreads — there are a lot of people who love trading paper gold.

But it has nothing to do with gold. They could be dealing with soya beans, coffee beans or lumber. Could be a lot of things.

WHY HAVE GOLD IF IT CAN BE MANIPULATED

Manipulations work in the short run but not in the long run.

Gold is like insurance. In the long run, it preserves wealth when there’s economic turmoil or uncertainty.

From 1944 to about 1969 there was no real reason to manipulate the price of gold. We had the Bretton-Woods system and the US guaranteed a price of $35 US per ounce.

There was a private market in gold and also gold mining, but no speculating.

Then in the late 1960s the system began to break down and the private market in gold began to go up.

Gold was trading at about $40 in the private market and $35 in the official market.

Easy money.

If you were France you’d just trade your US dollars with the United States for gold at $35 per ounce and sell it in the private market for $40.

Eventually the US was going to run out of gold, with the European nations trading their dollars for gold, so Richard Nixon closed the gold window in 1971 and stopped trading US dollars for $35 gold.

It’s been all chaos and manipulation since then.

In the late 1960s the major G7 countries and a few others set up the London Gold Pool. They all agreed to sell gold when the price got too high and buy it when it got too low. This way they would keep the price at about $35 an ounce.

They ended up just selling because the price of gold kept going up.

Eventually the London Gold Pool broke up and the Bretton-Woods system ended.

In the late 1970s, after Bretton-Woods, the US and the IMF did a price manipulation where the US sold about 1,000 tonnes of gold and the IMF sold about 700 tonnes. Together they dumped 1,700 tonnes on the market.

That manipulation also failed and we had the great inflation between 1977 – 1981 when the US dollar lost half of its purchasing power.

By January 1980 gold was $800 per ounce.

In the late 1990 and early 2000s there was another gold manipulation. This time the US didn’t sell gold but they pressured their allies to sell.

The UK sold 2/3rds of their gold and Switzerland sold over 1,000 tonnes.

There was the Central Bank Gold Agreement among France, Germany, Italy and others on how much gold everyone would sell.

That also failed.

There hasn’t been one ounce of Central Bank Gold Agreement gold sold since 2010.

NOW

Now we have a flash crash that could be central bank manipulations. Or it could be China. Or it could be a fat finger. Or a hedge fund.

It doesn’t really matter.

All the manipulations have failed.

They succeed in the short run and fail in the long run.

Gold always comes back. The fundamental forces are still at play.

Paper gold has the upper hand right now in terms of price setting, but that will break down.

Jim talks to people who handle physical gold. He speaks with miners, refiners, vault operators and physical bullion dealers.

The story is consistent — they cannot source the physical gold they need.

They can’t meet demand and the supplies are extremely tight.

There will be major failures to deliver in the not-too-distant future. The whole gold market is an inverted pyramid of more and more paper gold contracts and less and less physical gold to prop it up.

We can be quite certain that it is unstable and will tip over.

AUTOMATED TRADING

When something drops in price that dramatically then the automated trading triggers “stop losses”. This means the day traders and hedge funds have put in a price point where the system automatically puts out a sell order.

So the selling feeds on itself because the computers sell the gold, and when price drops then other stop losses are triggered by other computers.

That means that if the original paper contract trade was a fat finger trade there was a lot of trading on top of that trade.

This is called ‘signal amplification’.

Jim Rickards can be found on Twitter and at James Rickards Project.

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My thoughts…

 

I’m living in White Rock, Canada at the moment, where I’m hiking the hills and walking the beach each day.

I took a few product photos this week as I’m getting ready to launch a line of raw, unrefined gold bullion jewelry. It’s weird how long a person can stare at an endless line of handdrawn “E”s wanting to find just the right one that has the right feel.

I’m not worried about a flash crash. The whole point of having some physical gold is that it’s shield against weirdness that’s outside my control. Those with power are trying to jossle themselves into position since we all know a reset is coming.

It’s coming because there’s a level of debt in the world that can’t be paid off and can’t be sustained. Digital technology in finance is changing how we’re all going to do business. It’s already changing.

There was also a big crash in the price of most cryptocurrencies. It doesn’t matter (unless you’re a day trader or an instant trader). I’m not savvy enough to trade like that so I don’t bother.

What I did instead is I bought a cryptocurrency called Maxcoin. I did this as pure fun speculation. That’s it. I bought some Bitcoin back when it was about $350 and I wrote Bitcoin Barbarians. That song still applies and is still ahead of any kind of mainstream bellcurve.

I picked Maxcoin because I’ve followed Max Keiser and Stacey Herbert for years. I have a different angle than they do, but I respect their research so I’m into their cryptocoin. I’m not a pitchfork person, and it’ll probably never be my way of looking at the world. But all movements and changes require different types of people before a critical mass is reached. That’s a good thing.

So here’s what I did. 1. Bought Bitcoin at a Bitcoin ATM and sent it to a new wallet I set up at Blockchain.com 2. Sent a bunch of Bitcoin to the exchange YoBit.net. 3. Bought some Maxcoin with my Bitcoin.

It immediately dropped and I might lose it all. That’s okay. Everything crypto took a hit. That’s what speculating is about. The whole crypto market is now coming back up and I think it’s the coming tech and will be large and pervasive. Very high risk with possible very high reward. For fun.

I’m good with that. Just holding the cryptocurrencies quietly, very calm and cool. Nothing there that I would cry over losing. It can be hacked, it can be manipulated, and it’s controlled by parties that are way over my head. That’s all fine.

Gold is what I have for when the world goes crazy.

And it’s just beautiful to hold and melt and build beautiful things with.

What I really have is music making, and people I love. So the rest is all just fun.

Have a great week.

Elaine Diane Taylor~

June 28, 2017

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Gold is $1,249.20 US per ounce today.

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I just returned from a trip through the interior of British Columbia, Canada to meet with my independent gold supplier, and to purchase another round of 100% raw gold nuggets and flakes for the line of fine bullion and glass jewelry I’m creating. It’s important to me that the gold is ethically sourced and fair paid.

I love the wild. I love how nature moves and grows and dies all in a cycle of sacred geometry and math.

I’ve played music these past months with musicians in B.C., Alberta and Manitoba, and have been writing and creating, but nothing recorded yet. When the time is right that is going to be amazing fun.

Thank you for reading.

 

 

 

 

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Not Much of a Holiday (Greek Debt and Media Persuasion)

words and music Elaine Diane Taylor

© 2015 Intelligentsia Media, Inc. All rights reserved.

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Single available on iTunes

The Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.

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Preparing for the Fall live boutique album available on iTunes — featuring Wag the Dog, Black Swan Dive,  American Pie and Gods of the Copybook Headings.

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Coins and Crowns

words and music Elaine Diane Taylor

© Intelligentsia Media Inc. All rights reserved.

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from the album Coins and Crowns available on iTunes

Single featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.

 

The Gods of the Copybook Headings

words by Rudyard Kipling and music by Elaine Diane Taylor

©2014 Intelligentsia Media Inc.

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from the album Preparing for the Fall available on iTunes

 

The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

Another Week on Wall Street

words and music Elaine Diane Taylor

© 2013 Intelligentsia Media Inc. All rights reserved.

SOCAN/ASCAP

from the album Coins and Crowns available on iTunes

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.

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