One Bank says The Quiet Part On Gold Manipulation Out Loud

TL;DR

• [O]bvious temptation on the part of a major central bank to seek to try to manage the gold price.“
• "[A] soaring gold price is not in the interest of the relevant authorities any more than a surging oil price is".
• “The biggest risk [to Gold] remains official attempts to manage the price down."
• Why ha[d] Gold not risen by more in the [QE] era[?]”

In this week’s Greed & Fear report Chris Wood devotes a significant portion of his analysis to all things Gold before moving on to his regular work.

Jefferies is a respected global capital-market firm, and while Chris Wood is knowledgeable and writes on many markets, (with Asia as a specialty), most of his published macro work focuses on data and equity drivers. We’ve read him for years when we got his stuff. He is an elder statesman of macro2 and also one we wished had picked up on manipulation of precious metals markets earlier as readers.  He’s no newbie or Youtube rabble-rouser

Here, Wood stops just short of directly accusing the Government of manipulating Gold prices calling it “the biggest risk” of this rally now.

It was also Chris who recently vindicated us confirming he heard China bought Oil and paid Russia with Gold last year. Anyway.. he does the work, knows his history and pleasant to read.
What's more, for an experienced macro analyst such as Chris to say these things out loud when he and his brethren may have suspected them for years begs the question: “Why now? But that is for another time.

Anyway, know we were all correct about government’s habit of intervening in the gold and silver markets for years. Also know that the gaslighting of investors by banks is slowly ending because it is no longer profitable for them to do so on the government’s behalf.

1. Volcker’s Mistake
2. The Comex 3 p.m. Slam Down
3. Little Physical Evidence For Gold’s Rally
4. No Love For Gold Miners Yet
5. Is China Driving This Rally Then?
6. China Miners Also Outperform
7. Impressive Despite Late-to-the-Party US Funds
8. This Biggest Risk is Government Intervention

Gold matters (excerpted)

Authored by Christopher Wood, Global Head of Equity Strategy at Jefferies [emphasis and subtitles ours]

1- Volcker’s Mistake

An old contact told GREED & fear this week of something GREED & fear was not aware of. That is that former Federal Reserve chairman Paul Volcker once said that the one mistake he had made in the late 1970s was not stopping the price of gold from rising as much it did in that period when the American central bank was engaged in fighting inflation. Back then gold rose from US$220/oz in January 1979 to a peak of US$850/oz in January 1980.

This was during the period when the Volcker Fed raised the federal funds rate from 10% in early 1979 to a peak of 20% in March 1980 (see Exhibit 1). US CPI inflation peaked at 14.8% YoY in March 1980 while the ten-year Treasury bond yield peaked at 15.8% in September 1981 (see Exhibit 2).

Volcker’s observation, if true since GREED & fear can find no documented evidence of it, is interesting given the obvious temptation on the part of a major central bank to seek to try to manage the gold price. [GoldFix- how can an “obvious temptation” be discovered all of a sudden?]

2- The Comex 3p.m. Slam Down

On that point, Comex trading records showed that at 3pm New York time last Thursday there was a US$1.6bn sale of gold futures in about three minutes which temporarily knocked the bullion spot price from US$2,306/oz to US$2,268/oz before it rebounded to US$2,330/oz on Friday (see Exhibit 3).

GREED & fear has no idea of who or what was behind such a trade save to note that a soaring gold price is not in the interest of the relevant authorities any more than a surging oil price is.

Gold is up by 29% since early October and by 18% since midFebruary, while the Brent crude oil price is up by 25% since mid-December (see Exhibit 4)

3- Little Evidence For Gold’s Rally

Meanwhile if the causes of the rally in the oil price are reasonably self-evident, not least of which are the supply constraints enforced by Opec Plus, the near-term drivers of the current gold rally are much less clear even to a long-term gold bull like GREED & fear. For now at least there continues to be a notable lack of inflows into gold ETFs in the Western world. Rather the reverse is the case. Gold ETFs’ holdings have declined by 120 tonnes year to date to 2,542 tonnes as of Wednesday following a decline of 254 tonnes in 2023, according to Bloomberg (see Exhibit 5).

It is also the case that GREED & fear heard this week that the physical premium on gold bars and coins traded in Singapore are at only a normal 1-2% compared with the 7-8% levels seen at the peak of the last bull market in 2011 and 2012.

There is also no evidence of a sudden pickup in sales of American Eagle Bullion coins, one of the most popular series in the US. Indeed American Eagle gold bullion coin sales declined from 19,500oz in February to 12,000 oz in March, the lowest level for the month of March since 2019.

More here