by Jeff Nielson, Sprott Money:
Over the past several months, readers have received several warnings in connection with the fake-rally in precious metals. The nature of these warnings can be easily summarized.
The Next Crash is almost here. Another one of the Big Banks’ eight-year, bubble-and-crash cycles is coming to an end. Even many of the talking-heads in the mainstream media are now echoing that U.S. markets (in particular) are ripe for a crash .
When the Big Banks (and their owners) deliberately detonate these bubbles, just like they did in 2008 , precious metals markets will also be taken down hard, in order to make it appear that the world’s premier,safe-haven financial assets are not “safe havens.” Today, we see the mainstream media duplicating this warning …sort of.
Another reason for gold to see a sharp, albeit short-lived fall is that in times of financial stress, it can be used as a source of cash to cover losses elsewhere.
Sharp declines in equities, for example, could push investors to liquidate gold positions to free up capital.
Gold fell to a near 14-month low in September 2008, at the height of the 2008-2009 financial crisis, and was for a short time positively correlated with riskier assets, as liquidity dried up.
This was the script for the Crash of ’08. Gold (and silver) was one of the few asset classes – in a world of paper – which retained value during that crash, and thus (according to the propaganda) its price is supposed to fall during any such financial crisis. Note how the propaganda machine took one paragraph, and broke it up into three, separate paragraphs, just to make sure its absurd message was read and understood loud-and-clear.
Note also the perversity of this propaganda. Precious metals retain value during a financial crisis (as the safe havens that they are) so their price is supposed to fall in a crisis: “to be used as a source of cash to cover losses elsewhere.”
Really? The only assets which investors could use in 2008 to “cover losses elsewhere” were their gold and silver holdings – even though only a microscopic percentage of investors held any precious metals, at all. What about U.S. Treasuries?
Unlike gold and silver, U.S. Treasuries prices went straight up during the Crash of ’08 (as interest rates went straight down). This means that U.S. Treasuries could have been liquidated “to cover losses elsewhere” at a handsome profit, rather than selling gold and silver into a falling market.
Total holdings in U.S. Treasuries exceed the entire value of precious metals markets. Furthermore, we’re told that “everybody loves U.S. Treasuries” even though they pay no interest, because holding them makes people feel so “safe.” So, apparently, most or all of these investors could have liquidated their U.S. Treasuries holdings (at record-high prices), because while hardly anyone was holding gold and silver at the time of Crash of ’08, supposedly everybody was holding U.S. Treasuries.
If the propaganda machine’s nonsense-explanation had any validity to it, at all, we should have seen a dramatic liquidation of U.S. Treasuries to “cover losses.” We did not see that. Instead, we saw a “sudden liquidation” of an asset class which nobody was holding .
In a more recent commentary , readers have been informed that the fake-rally in precious metals is now over, and the propaganda machine has returned to the same, vacuous gold-bashing to which we have become accustomed over the past 5+ years. This was also confirmed, in the same piece of Reuters propaganda.
Gold’s sharp gains on uncertainty over Britain’s European membership are likely to come to an end, regardless of whether Britons vote to leave or remain in Thursday’s referendum.
Translation? “Heads”, gold loses; “tails”, gold loses. All roads lead to lower gold prices, just like we heard every day from the propaganda machine, for five, long years. But not for long. As Reuters also reminds us, the take-down in precious metals markets which was engineered by the Big Banks during the Crash of ’08 did not last very long.
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