DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets / Commodities / Gold & Silver 2019
Impeachment circus lows and stock market highsdominated the news cycle this week, and precious metals are quietly attemptinga recovery.
Bulls still have some work to do to repair thetechnical damage inflicted on both metals during last week’s selling. Gold and silver still face some overhead resistance and the potential for concentrated shortselling by financial institutions in the futures markets.
Significant price bottoms are usually reached after thecommercial sellers force the speculative longs to capitulate. We certainly sawsome of that last week. Whether there is one final washout ahead remains to beseen.
Futures market manipulation of precious metals pricesremains an obstacle to free and fair price discovery. Despite some recentprosecutions involving price rigging by banks, the Gold Anti-Trust ActionCommittee believes the rabbit hole goes much deeper.
The Gold Anti-Trust Action Committee reported this week that U.S. Representative Alex Mooney of West Virginia is pushingAttorney General Bill Barr to pursue additional investigations of price riggingin the futures markets. Mooney raises concern in particular about a mechanismfor settling metals contracts called "exchange for physicals." Henotes this may pose "some danger of a systemic issue."
Both Mooney and GATA have repeatedly raised questionswith the Commodity Futures Trading Commission that have gone unanswered. PerhapsAttorney General Barr’s office will be more responsive to credible allegationsof criminal manipulation in the precious metals markets.
In the meantime, metals investors will have to beprepared for more artificially induced price volatility in their holdings. Thebest way to beat the paper manipulators long term is to avoid playing in theirrigged casino and keep accumulating precious metals in physical form. The supply and demand fundamentals of thephysical market will ultimately win out and force their hand.
Futures contracts, exchange-traded funds, and otherderivative products tied to gold and silver prices are no substitute for the real thing. Only the actual metal is a time-testedstore of value and hedge against financial turmoil including the risk of aninflation outbreak.
Speaking of inflation, on Wednesday the LaborDepartment reported that U.S. consumer prices rose more than expected in October. The consumerprice index increased 0.4% last month as households faced higher costs forfood, energy, healthcare, and a range of other goods. It was the largestmonthly CPI gain since March.
Many economists believe the CPI actually understatesreal-world inflation. The Federal Reserve has other preferred gauges forestimating inflation, but they all have their flaws as well.
Fed Chairman Jerome Powell talks over and over againabout pursuing a “symmetrical” 2% inflation target. But this number iscompletely arbitrary and is found nowhere in the central bank’s original“stable prices” mandate.
Prospective Federal Reserve Board nominee Judy Sheltonis skeptical of the prevailing thinking at the Fed on inflation. Shelton wasfloated by President Donald Trump as a Fed member several months ago and isstill waiting for an opportunity to be confirmed by the Senate.
She will have a difficult time given her unorthodox butvery common sense views on things like true price stability. She appeared on CNBC this week and offered these thoughts:
JudyShelton: There are so many indices for evaluating inflation that right away,it's confusing. Of course, for me, a dependable dollar wouldn't lose value atall. Instead, we have this regimented built in 2% obsolescence and I wouldrather, and I think Paul Volcker has expressed this as well, not have 2%because that very easily can become 4%. I've seen some economists saying, wellthat would make life a lot easier for central bankers. They would have moreroom to maneuver, but it makes life infinitely more complicated for the people whohave to use money.
I'mleery that the Fed now talks about symmetrical inflation. If they ever do hittheir target, it now sounds like they're willing to go above that amount for anon-determined period of time so that somehow they balance out and say, well,over the long run we hit 2%. At least, people are not listing inflation astheir primary concern these days, but still it's a very interestingintellectual challenge to discuss what is the right rate of inflation. I guessI prefer zero.
Sound money advocateswould certainly welcome Shelton’s perspective having a seat at the Fed’s policymaking table. She has previously expressed support for reintroducing gold intothe monetary system as a way of tethering the value of the dollar to somethingsolid.
But for now, the monetarysystem isn’t tethered to anything except the unlimited demand by bankers andpoliticians for new dollars to be created out of thin air.
By Mike Gleason
Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.
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