Dear Friends,

Gold is not acting in a manner outside of what should be anticipated in the smallest market anywhere being played by the largest money in the world.

The violence you are experiencing is based on the above along with a misunderstanding of the mechanics of a metals dealer.

The big six that are generally identified as the enemy of gold also represent major metals dealers and in some cases are metals dealers themselves via subsidiaries such as J. Aron in London.

1. Metals dealers buy metals from producing companies at a discount to form, condition and location.
2. The metals dealer prices their buy according to their ability to sell the metal in the forward market.
3. That transaction is a true hedge.
4. The short side of the gold trade as in this example is risk free at that point.
5. In the old days a modest profit fulfilled the desire of the metals brokers.
6. The short was covered when the purchased bullion metal was sold to industry.
7. Today the world has no ceiling on desires.
8. The metals dealer of today wants to make $50 or more, not 50 cents.
9. The gold market becomes prone to declines from time to time by entities like crude oil or the euro.
10. The metals dealer has a risk-less short position on.
11. At this point risk is taken by selling to hammer prices lower, not to sell volume.
12. This can be identified by a floor trader in open outcry or later by computer entry offering thousands of gold contracts for sale when a few hundred or even ten is the only buyer showing.
13. The bravado has a purpose. That is to scare the gold market lower using the least sales required.
14. As gold moves into areas of major support the metals dealer buys back the short.
15. As the producers continue to sell, dealers then buy as in number one but play the market and back higher the gold price goes.
16. The short is then put on by the metals dealer at Angels or round numbers.
17. This along with mindless black boxes and follow the leader hedge funds results in the largest money on the planet playing the smallest market on the planet. This creates a large degree of unprecedented volatility.
18. The net result is that people assume a huge dedicated short, which is wrong.
19. What is correct is a turning short that keeps the number high but in fact is made up mostly of risk-less trades.
20. The trades are not registered as hedges rationalizing that; in today’s world a hedge is defined as a different transaction than outlined.
21. Since these trades are made generally either as broker or principle by the big six who can do no wrong, who cares how they report it.
22. The metals dealers do all possible to invite the assumption that they are dedicated shorts when they are NOT. This benefits their desires as up moves try and push a short that in fact turns over at a profit and has no dedication to anything other than the 21 points just made.
23. What people refuse to believe is that just those that are identified as the enemies of gold will be the ones that make the most long gold.
24. We will discuss 24 as times moves along. I have outlined to the attendees recently in New York and Toronto why 23 is FACT, not fancy.