By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
On February 29, shortly after the massive inflation of the money supply in Europe, the prices of gold and silver were subject to severe price suppression tactics.
The best reports I have seen are that at least 225 million ounces of paper silver contracts were sold between 10:00 and 10:30 AM Eastern time that day. This huge amount represents almost one-third of annual global new mining supplies.
The London trader who spilled the beans in 2003 that the Chinese government was purchasing gold reserves, which the Chinese did not reveal until 2009, stated in a recent interview that more than 29 million ounces of paper gold were sold in a 4-hour period on February 29. This huge quantity equals somewhere about 40% of annual worldwide gold mine output!
I have seen neither of these reports of paper gold and silver sales volume on February 29 in the mainstream financial media.
There has also been very little coverage of just how much physical gold and silver were purchased by major buyers that day. A spokesman for the bullion department at one of the major banks stated that they were only aware of four to five tons of physical gold being purchased on February 29. The London source called this statement a deliberate lie because he personally handled or observed purchases of at least 50 tons that day!
The buyers this insider saw on February 29 were almost all central banks or from the Far East. He further stated that there has been heavy buying since.
You may ask why a representative of the bullion bank would lie to the media about the actual demand for physical gold. The reason is obvious. It is almost certain that these bullion banks, who are trading partners of the US government, were some of the same parties who sold gold and silver paper contracts to support the effort of the federal government to suppress prices. Along with trading activity, another tactic to suppress prices is to mislead the public about the huge increase in physical demand. If potential buyers of precious metals don’t think there is much demand, they will sit on the sidelines.
The following week’s Commitment of Traders Report confirmed the extent of the short selling by the bullion banks, but the damage to prices had already been done.
This London trader, who has been remarkably accurate in his assessments for the past several years, thinks that physical demand is closer to overwhelming the paper market. He anticipates that there will be significantly higher precious metals prices in the short-term.
As always, there are some experts calling for much lower gold and silver prices in the near future. One expert forecasted gold falling as low as $1,200. I think there is virtually no chance of that happening simply because I don’t think the US government wants to make that large a gift to the Chinese government.
Expect prices over the next few months to be extremely volatile. Be ready to be surprised by how high precious metals may soar. Ultimately, it won’t matter if bullion banks try to hide the truth. What will carry much more weight are the efforts of governments and central banks around the world that have the result of destroying their own currencies.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles) and at http://www.coininfo.com. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.