John Embry, a specialist in the gold market, commented on he sharp decline in gold and silver this week.
You are seeing gold take out some short-term technical support levels. I guess the next one of significance is at $1,650. If gold were to take $1,650 out, that would get more of the hedge funds and the algorithm traders shorting.
Gold fell to $1,666. Then it rebounded to over $1,700.
As it was falling, Embry advised this.
I have said this before but every time this happens, and it’s been going on for 11+ years, buy the weakness. That’s all you do here and don’t worry about it because the fundamentals for gold have gotten better with each passing day.
He thinks that gold and silver are being manipulated.
Just to reiterate, we’ve gone through these corrections, which I call counterintuitive corrections. The very idea that a ‘risk off’ trade should knock gold and silver down is preposterous. The bottom line is gold and silver are being manipulated aggressively.
The question is: Manipulated by whom? Then this: Why?
There are always short sellers in every commodity futures transaction. To argue that either longs or shorts are manipulating a market is easy. But how are they doing this? Inside information? Government backing?
If a futures trader with a lot of money in reserve thinks he can break a particular market, he can put his money where his mouth is. He can sell short without putting up much cash. But he exposes himself to risk. If the market moves against him, he can lose a lot of money very fast. He can get a margin call.
It is possible that this is what has happened gto gold’s price in the last two days. Short sellers are getting margin calls.
Fact: the physical market determines the price of any commodity in the medium run: months. The futures market lets investors get to this price early through competition. To imagine that the futures market is the dog, and the tail is demand for the physical commodity, is to get cause and effect backward.