Gold wars - Miners versus the Manipulators of Wall Street

It has been a well reported FACT that the central banks around the world have been in a competitive drive to debase their respective currencies. The currency wars that are rolling through the economy are obvious and clear for all to see as central banks engage in the direct manipulation of both the foreign exchange and the bond  markets through Quantitative Easing (QE). The evidence of the QE trickle down can be seen in other asset classes such as the property market rebound and in the huge equity/stock market rally to record highs.

The GOLD WAR is the hidden war. It is being waged behind the scenes and is getting less coverage in mainstream media. Central banks, The Department of Justice along with the big players in the banking sector and the government want to try and cover this up. Below is an article published in the Wall St Journal which highlights governmental resistance to funding the in depth investigations needed to bring the market manipulators to justice.

http://stream.wsj.com/story/markets/SS-2-5/SS-2-370323/

There is no doubt that there are valid cases amongst some of the ongoing investigations. As the article above reported:

“J.P. Morgan agreed in October to pay $100 million to settle CFTC allegations its aggressive trading bets recklessly manipulated derivatives markets. The firm admitted the agency’s factual findings, that its traders acted recklessly and dumped huge amounts of swaps in trying to defend their positions”. 

This settlement agreement along with JP Morgans admission to the agency’s factual findings shows the need for a more stringent set of rules and punishments for market manipulation. The huge increase in banking sector fines being dished out show that current measures and penalties are more a joke than a deterrent.

Below is an article highlighting a gold trade that took place where 500,000 ounces of gold were dumped on to the market in one hit for sale at market price. A market price order has no restrictions and means the sell order keeps driving the price down until all the gold is sold. Logic says that if you had 500,000 ounces of gold you wanted to sell, to maximize the price you could you would be better served sprinkling the gold on to the market in an orderly fashion. The market dump, therefore, had traders screaming MANIPULATION and the gold miners seeking revenge.

http://www.moneynews.com/StreetTalk/Traders-Gold-Price-Manipulation/2013/10/15/id/531238

I believe the largely unreported GOLD WAR that is ramping-up is one that investors need to be on top of and exploit over the upcoming months. With the lack of adequate punishments being dished up to the manipulators, it seems that Gold Mining companies are taking matters into their own hands. I feel the Miners are fed up with the manipulation game. They were played into mining expansion by the manipulators pushing gold prices past $1,900 an ounce back in 2011 only to see prices fall  approximately 50% once supply came on line. Before you say 'well an increase in supply vs demand will cause the price to fall naturally' I want you to read the article below.

http://www.bloomberg.com/news/2013-11-01/u-s-gold-coin-sales-this-year-top-2012-as-futures-slump.html

The fact is physical gold purchases are solid and on the rise. Gold miners are doing all of the hard work often producing less than 3 grams of gold to a tonne of dirt while Wall St. and the manipulators control the price they get through paper trade and derivatives.

It seems that all of the gold miners are rallying together now and are engaging in the war. They can see, what I have been pointing out for a while now, that they have been used and abused, chewed up and spat out. It seems like the memo has gone out to all the miners. The memo is their plan of attack, their war strategy. Physical gold demand is increasing yet the paper price is not reflecting this. Miners are questioning why they should sell at a discounted price to the all time high of $1,900 + an ounce just because the manipulators and Wall St. want them to. With all of this in mind it seems the gold miners have formulated a simple, effective and almost vindictive plan to choke the supply of physical gold to expose the manipulation of the paper and derivatives markets.

This choke down of supply is a retaliatory response designed to leave those that have shorted the metal in a vulnerable position. Covering the short positions may become increasingly difficult as I believe gold has moved from weak traders hands into strong investor hands. Below is an article published by Reuters that highlights the response by miners mentioned above.

http://www.reuters.com/article/2013/10/31/barrick-results-idUSL1N0IF1UF20131031

Barrick Gold is one of the stocks I have been signalling as a strong buy at the price range it is currently trading of $18 to $19. Refer to my previous blogs for more discussion. Many other gold miners are restructuring and moving towards only mining highly productive mines. Even Newcrest Mining - another of my strong buy recommendations - at the recent $10 to $10.50 trading range signaled profitability rather than production was key. Here is an article published in July this year indicating the direction Newcrest Mining was going to take in the face of falling gold prices.

http://www.theaustralian.com.au/archive/business/newcrest-cuts-production-costs-as-gold-fails-to-shine/story-e6frg9do-1226685262756

Newcrest Mining has implemented the changes and joined in the war against the market manipulators by beginning the supply choke-down. Gold mining and physical gold production has a very inelastic time frame. Closing a mine or shelving it takes time, reopening it and ramping up to full production even longer. This being said the effects of Newcrest Mining and Barrick Golds moving to reduce costs will impact supply as non productive mines face either a temporary pause or potential closure.
Make no mistake, this is trench warfare, miners vs manipulators. I say the miners will get what they want as demand for physical product will create an even bigger disconnect between the paper/derivatives market and the real physical market.

So just as the pillar of trust among central banks has been broken via currency wars, the trust between the miners and Wall St. has been shattered by the manipulators and lack of penalties or enforcement. The war is now ramping up. It is about to get ugly. Those that ignore the signs and do not buy the miners and physical gold NOW will more than likely end up a casualty in the upcoming stampede of the Gold Bulls.

GOLD is currently trading at $1,315 oz – recommend strong buy
Barrick Gold (ABX) – $18.31 – STRONGER BUY
Newcrest Mining (NCM) on Aussie Stock market – Currently trading $10.00 STRONG BUY
Silverlake Resources (SLR) on Aussie Stock Market – Trading under 70c – STRONG BUY

I hope blog followers bought some JC PENNY at $7.50 – they are up more than 10% since my recommendation about a week ago.

Please do not miss this opportunity on the Gold mining stocks mentioned above. They are an absolute gift as a long term investment with loads of upside in the next few months as the pendulum shifts the money out of equities and back into the precious metals.

If you like this article please forward it on to whoever you feel may be interested. For those of you on twitter you can add me @carneycapital