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500 Metric Tons of Gold sold via ‘Naked’ Shorts last Friday!!!

April 15, 2013

Counterfeit shares are suppressing gold and silver to record lows! The interview of Dr. Paul Craig Roberts, Economist, on King World News (www.kingworldnews.com) confirms my view that select traders (such as Goldman Sachs and other large Hedge Funds) are SHORTING gold and silver via ‘counterfeit’ (phantom) shares. Eric King and Dr. Roberts reported that some 500 metric tons of gold has recently been shorted. How can this be accomplished and Why?

The concept of ‘shorting’ a commodity is a valid strategy for traders to make money on a price decline. ‘Shorting’ is done when shares are ‘borrowed’ from an existing universe of shares. This is a legal strategy. The concept of ‘naked’ shorts, however, is supposed to be illegal but it apparently is not illegal for the trading desks like our Central Bank (administered by the Trading Desk at the N.Y. Fed) and other large Hedge Funds such as Goldman Sachs, et al. These trading desks can ‘short’ via a unique strategy called the ‘naked short’. How does this strategy work?

  • My research has revealed that a Hedge Fund trader can sell ‘short’ via a ‘phantom concept’ where the Market Maker (broker) allows the trader to borrow via an IOU (to be settled or covered some 3 or more days later). This IOU then becomes a phantom substitute for the real shares within the existing universe of shares and acts like a real share from the buyers point of view. Usually, the naked short seller will cancel his position prior to the settlement date thus there is no covering of the naked short position. Short term price suppression seems to be the object of this strategy.
  • The strategy of selling ‘short’ via this methodology allows a trader to introduce ‘counterfeit’ shares into the market during this interim period (where settlement is delayed for days). Since we now use HFT computers and Algorithms for much of our trading, this strategy creates huge ‘price’ suppression for a commodity like gold and silver.
  • The Gold Community knows that the demand for gold and silver globally is strong and increasing (especially from foreign sources like India, China, Russia, et al) yet the ‘price’ of gold and silver is declining (irrespectively) from this ‘naked short’ strategy…which the Central Bank trading desks (like our N.Y. Fed trading desk) and other large Hedge Funds (like Goldman Sachs) are using to suppress these prices.
  • None of this behavior is proper and/or legal for us retail traders (our penalty would be huge). We can ‘short’ a stock or commodity by borrowing from an existing universe of shares, but we can not use the ‘naked short’ strategy as the TBTF entities can use to affect confidence within the markets. Today, we witness additional ‘price’ suppression from these Sources and Authorities. Gold and silver are being driven DOWN further in ‘price’ via trading Algorithms, HFT trading computers, and the strategy of Naked Shorts.

What has transpired via all this illegal trading is the creation of  a huge disparity between the normal price structure…which is set via Supply and Demand… and the current suppressed price structure created via ‘counterfeit’ shares entering the market. This is creating a huge loss in confidence among the retail gold and silver investors. Apparently, this is precisely what the Authorities desire. They desire to suppress these prices so that their VIRTUAL $ (created now mostly via QE operations) continues to grow in confidence.

My sense is that all this ‘manipulation’ and ‘price suppression’ by the U.S. Authorities and their Proxies (Goldman Sachs, et al) will eventually backfire and create a much greater problem down the road. Today’s markets are real-time markets where the informed traders and investors will discern the real crimes that are being played. The long-term trend is for much higher gold and silver prices. My advice is to HOLD your positions and IGNORE the price suppression schemes of our Authorities. To witness a great interview on this issue go to King World News and listen to the dialogue between Eric King and Dr. Paul Craig Roberts (www.kingworldnews.com).  That is my missive for today! I am:  https://kingdomecon.wordpress.com.

P.S. Here is another article on this issue:  http://www.fool.com/investing/general/2013/04/14/the-worlds-top-bank-tells-investors-to-shun-gold.aspx

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