Trades smash silver

July 13, 2017
Pat Heller

In the previous two weeks, there have been three large dumps of precious metals. Although the regular media has tried to generally portray these as likely “fat finger” erroneous, the frequency of these trades and their precise timing is extremely coincidental. If “someone” was really trying to suppress gold and silver prices, these would be textbook examples of how it is done.

On Monday, June 26, about 9 a.m. London time, a single transaction selling 1.8149 million ounces of gold hit the market. Almost instantly, the price of gold fell $20, though it recovered about half of that later that day.

If this really was an erroneous trade, there would have been extensive reporting of the details of what happened. There were no such reports.

If this trade was really done by a broker trying to balance a position, this is absolutely not how it would have been conducted. Legitimate sellers want to realize the maximum proceeds from a sale. To achieve this result, a large position would have been allocated among multiple brokers so that no one of them would know the full size of the liquidation. These sales would have been conducted in a variety of markets around the globe, and possibly over multiple days. Further, for larger trades, they almost certainly would have been included in the London market P.M. fix, which has the highest trading volume as it is during the hours when European and U.S. markets are active.

Next, on Monday, July 3, a large quantity of silver sales in Asian, European and U.S. markets knocked the price of silver down almost 10 percent. This is suspicious because July 3 was part of a four-day holiday weekend for many U.S. traders and investors. As a consequence, trading activity was much thinner than typical. Such days associated with holiday weekends tend to have more volatile prices than other trading days. As a result, anyone liquidating a large silver position would avoid doing so near any major holiday periods anywhere in the world.

Third, on Friday, July 7, shortly after the Tokyo TOCOM opened, 24.77 million ounces of silver were sold within one minute on the New York COMEX overnight market (this was actually in the evening of July 6 in New York). In that minute, the price of silver declined from $16.06 to a low of $14.34 and ended at $14.68. In the following three minutes, another almost 17 million ounces of silver were traded as sellers tried to bail out and bargain hunters jumped in to buy. At the end of the four-minute period, the price of silver was back up to $15.90, only 1 percent lower than at the start of the frenzy.

Within 20 minutes of this flash crash, CME Group, which owns the COMEX, announced that it had investigated all of the trades and, without going into any detail of what it had found out, retroactively repriced all trades below $15.54 up to $15.54 per ounce and said trades above $15.54 and under $15.64 were being repriced to $15.65 per ounce.

The net effect of these three sudden and unexplained sharp declines in gold and silver prices has been to scare existing and potential precious metals investors away from the market. Consequently, the price of gold fell down close to $1,200 and silver closed late last week at its lowest price of 2017.

The important point to keep in mind when looking at these three events is the role that precious metals play in international financial markets. The price of gold (and silver, to a lesser degree) is effectively a report card on the value of the U.S. dollar, the U.S. economy, and U.S. government. If prices are rising, that would wreak havoc with federal government finances. Foreign holders of U.S. currency and Treasury debt would either want to repatriate such assets or for the debt demand to be paid a higher interest rate.

The U.S. government’s Exchange Stabilization Fund is explicitly authorized to use its assets to manipulate the price of gold. Of past records that have been released thus far, the U.S. government actively manipulated gold prices from the 1930s up into the 1970s. There is no reason to expect this pattern of behavior has ever changed.

In my mind, such desperate acts to clobber precious metals prices three times within two weeks are a major signal that something scary is looming over the U.S. economy. Well, there are multiple near-term crises in the works. One significant one is that state, county and local governments and government school districts that have fiscal year ends from June 30, 2017, onward will be required to record on their balance sheets for the first time ever the amount of unfunded liabilities for employee pensions and retiree health care benefits. These unfunded liabilities total in the trillions of dollars. For a more detailed discussion on this one imminent financial shock, you can read the June 7, 2017, issue of Liberty’s Outlook that I wrote (posted at https://libertycoinservice.com/wp-content/uploads/2017/06/libertys-outlook-newsletter-june-2017.pdf).

There are a number of developing signs that the U.S. economy has slipped into a recession or depression. Among them are declining auto and truck sales, the slowdown in housing starts, rising consumer debt, soaring student loan debt and rising default rates on vehicle loans.
As governments start to release their June 30 financial statements around the beginning of August, I expect significant demand to develop in the U.S. for owning physical gold and silver. Stay tuned.

Donald Mackay-Coghill

If you have an interest in bullion-priced gold, you should know about Donald Mackay-Coghill.

He is a serial gold marketing entrepreneur.

He began working for the South Africa Chamber of Mines in 1963. While there, he was credited with the introduction of the South Africa gold Krugerrand in 1967, the first globally traded bullion gold coin. In 1971, he went to work for the International Gold Corporation (Intergold) in South Africa, rising to Chief Executive Officer in 1980.

In 1985, the U.S. government banned new imports of gold Krugerrands to punish South Africa for its apartheid policies (it also banned imports of Russian gold coins to give the appearance of some political balance). As a result of this action, demand for the Krugerrand fell sharply, which, by the way, provided a perfect opportunity for the U.S. Mint to introduce a series of gold and silver Eagle bullion coins in 1986.

Mackay-Coghill was not deterred. He approached contacts in Australia about hiring his entire South African marketing team to introduce the Australian Gold Nugget bullion coin series. The proposal was accepted, and he left Intergold to become CEO of Gold Corporation (an Australian company owned by the government of Western Australia) to operate the Perth Mint and to serve as managing director of the Western Australian Mint.

After his retirement as CEO of Gold Corporation in 2004, he was elected to the company’s board of directors and is the board’s current chair.

During his career, Mackay-Coghill also served on the board of directors of the World Gold Council and as CEO of the Sydney 2000 Olympic Commemorative Coin Program. He has also worked as Chairman of AGR Matthey, a precious metals refining joint venture between Gold Corporation, Johnson Matthey Australia and Newmont Australia.

For all of his efforts, Mackay-Coghill was inducted into the Gold Industry Hall of Fame in 2016.

If you own any modern bullion-priced gold, silver, platinum, or palladium coins or bars, it is highly likely that the efforts of Donald Mackay-Coghill directly or indirectly had a hand in the introduction of such issues.