Saturday, September 24, 2011


It's taken much longer than I originally expected, but we now have confirmation that gold's D-Wave decline has begun.

A D-Wave decline is a normal, regression to the mean, profit-taking event that occurs when gold gets too stretched above the mean. It is not a take down by an anti-gold cartel. Anyone with a modicum of common sense can look at the long-term chart of gold and tell that this is not a manipulated market. This is just a normal secular bull market, and it is acting exactly like a normal bull market acts.

Folks, these conspiracy theories are now bordering on the insane. I even heard the other day someone blame margin increases for the drop in gold. I guess they completely forgot that we've already had two margin increases in the last two months that had virtually no effect on gold.

Every bull market in history has its share of con men and scam artists. Think Bernie Madoff, Enron, WorldCom, etc. The gold manipulation nonsense is just one of the many scams that are going to hitch a ride on this bull. Actually it's one of the oldest scams in the book. You find a bull market, make a one-way bet on rising prices, tout these "to the moon" prices to suck in subscribers lured by the reward of gigantic financial gains, and then blame an invisible cartel every time a correction occurs that you don't foresee. It's a great way of not having to take responsibility when subscribers get caught in a normal corrective decline.

Needless to say I don't play those kind of games. I try to get subscribers out ahead of intermediate declines. Yes, I'm usually a little early. I have the same problem with tops that every other human being in the world has. They are virtually impossible to call in real time. Subscribers to the SMT/Gold Scents newsletter have sidestepped all of this D-Wave decline and instead have been 100% invested in the dollar index. The only asset initiating a strong trend higher.

Actually there is a fundamental reason for a D-Wave decline besides just a normal regression to the mean, profit-taking event. The dollar has now moved into the aggressive stage of the rally out of the three year cycle low. Deflation is starting to take hold in the world again. In a deflation defaulting debt collapses the money supply. There is a growing shortage of dollars in the world. That's the reason why the dollar index is rocketing higher. As the value of the dollar rises during this deflation it takes less and less of them to buy an ounce of gold. You can see this same process unfolded as the dollar rallied out of the 2008 three year cycle low.

On a much shorter timescale gold is now in the timing band for a daily cycle low. My best guess is that sometime over the next 1 to 2 weeks gold will move down to tag the 200 day moving average. That will trigger short covering and a very convincing snapback rally. However it's still too early for an intermediate degree bottom. There should be one more daily cycle down into November before the D-Wave puts in its final bottom.

I suspect the next daily cycle is going to be a volatile nightmare that will chew up bulls and bears alike before a final plunge down below the 200 day moving average somewhere between $1300-$1400. As all D-Wave declines have retraced at least 50 to 60% of the previous C-wave advance that would be a minimum target for the November bottom. At that point we should see a very powerful A-wave advance triggered by the extreme oversold conditions generated at the D-Wave bottom. More in the weekend report...

For the next week I am going to open a special $5 trial subscription. You will have complete access to the premium website, archives, model portfolio, etc. You can sample the premium newsletter for a week. If you decide you like the content your subscription will automatically renew on October 1 as a yearly subscription. If you decide you don't want to continue the subscription just follow the directions on the home page of the website to cancel your subscription before October 1.

Click here to go to the premium website then click on the subscribe link on the right-hand side of the page. You will see the special offer at the bottom of the subscription page. Offer has expired.


  1. hi Toby, nice analysis and thanks for the post....though I like zerohedge very much ...sometimes I feel that they try to blame every major move on the Illuminati Banking Cartel...and completely hide the fact there is something called Geometry , mathematics, crowd behaviour , cycles working on the markets ......

  2. Would like to try it for a week but the cancellation procedure appears a little tricky.

  3. It's pretty simple really. Just log in and then click on the manage subscription link. There is a big cancel button to click if you want to stop auto renew.

  4. Conspiracy theory? The FRBNY is documented as having contracted to spy on chat rooms and social media pages.

    You actually believe they don't interfere in the metals markets? How else are they going to convince people to have faith in fiat currency, fiscal discipline? No chance. Volatility scares people out of their gold and silver positions, and the FRBNY will use every tactic available to do so. Read the linked article along with the bid request from the FRBNY.

  5. Really? That's all you got? That somehow if the government tweaks the gold market it's magically going to make people trust fiat currency?

    Where do you people come up with this stuff?

  6. The timing you project (for the D wave bottom) seems highly reminiscent of gold and gold stock technical behaviour in late 2008. If I remember correctly the stocks had a pretty impressive launch just before Christmas once it was apparent the lows from Sept/Oct were holding. Where do you see the Dollar at this juncture?

  7. GATA (GOLD ANTI-TRUST ACTION) have been collecting data on market manipulation for twelve years and they have thousands of pages of material if you want to be convinced ... but perhaps you don't? The govenor of the Bank of England even admitted it some years ago in an interview. And why wouldn't they manipulate the market if they are in a position to do so, they've got a lot to lose.


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  9. They have absolutely nothing to lose. All currencies are purely fiat now days.

    Central banks are free to print as much money as their little hearts desire. Gold is completely irrelevant.

    If the powers that be wanted to manipulate something they need to manipulate oil. Rising oil prices depress economic growth. Rising gold prices just means your engagement ring costs more. I seriously doubt any government gives a damn about the price of jewelry.

    Folks if the con men didn't make the scam seem believable then you wouldn't believe in it. You've got to be smarter than that.

  10. The claim that there is no market manipulation in the gold and silver sectors simply doesn't hold water. Gold and silver contracts rose dramatically both Thursday and Friday. Silver almost tripled from Wed to Fri. And, contrary to the idea that the rising dollar brought about lower gold prices, the dollar actually was down a few ticks on Friday, the day Gold fell the most.

  11. And that proves that there's manipulation in the gold market to you?

    You have a lot to learn about this business my friend.

  12. No, it's not all. I just didn't think you needed years' worth of pertinent information, such as relevant times in which banks clearly dumped bullion on the markets. Friday was one of the classic examples with London selling off early, from about 9-11, then NY coming on board mid-day to drive the price down another 70 bucks.
    I don't think it'd be very classy to offer links to your competition, so dyodd.
    Incidentally, I'm not selling anything, so have nothing to gain either way.

  13. Tommorow is option expiry day.
    It's that simple

  14. With regards to PM manipulation, there's a third alternative:

    Major financial events, such as the current deflationary cycle, are most probably the result of decades of worldwide deficit spending by central banks.

    When it becomes fairly obvious to the markets that the trillions of money creation have not worked to ward-off deflation, the 'four or less' bullion banks [but mostly JPM], EASILY push COMEX PM prices down.

    After all, they ARE the de facto PM market makers. Who can deny that? Even one of the CFTCs own commissioners, Bart Chilton, has all but said that abuses are inevitable when a tiny number of bullion banks control the ENTIRE short side of the market.

  15. Gary, I see all your answers go with attack the messenger and straw men:
    You've a lot to learn...
    Where do you come up with this stuff...
    Really? thats all you got...
    If they wanted to manipulate something...

    Instead of your pat answers, how about specifically addressing some issues GATA has and trying to disprove them rather than making fun of your commenters?

    Each time, you attack and make fun you prove your arguments are invalid.

  16. I for one quite enjoy the "manipulation" that creates volatility. I made a bunch of money as the gold went up. When it got to the top I sold it short and made a bunch more money on the way down.

    You can say those fiat dollars aren't any good if you want to (and you have a valid point), but when I go to the grocery store to buy food, they want greenbacks. And I now have a LOT more of them at least in part due to Gary's excellent tracking of the market. I can also buy a whole lot more gold this week than I could last week because of this.

    So . . . I'm happy.

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  18. I have yet to have one single person give me a credible reason why the government or Fed cares one bit about gold.

    When Nixon took us off the gold standard gold became irrelevant. The Fed was free to print as much money as they want, and that's exactly what they've been doing ever since.

    You can't have manipulation without a motive. Other than hedge funds gaming an option expiration I can't for the life of me come up with any reason why the powers that be give a damn about gold.

    Obviously they don't as it was recently over $1900.

  19. Gary:

    With regard to a motive for PM manipulation:

    GATA has uncovered a Greenspan statement to the effect that keeping gold prices down is a very good way to hold down interest rates.

    In addition, GATA has available at least one academic study from a very influential economist that supports Greenspan's notion.

    Gary, whether you believe in this gold/interest rate cause and effect relationship to be logical is irrelevant.

    If mainstream economists at the FED believe it, isn't that sufficient?

    After all, the vast majority of financial 'experts' have been trained in Keynesian economics.

    This fully bankrupt economic theory has has put world economies on the brink of disaster.

    It this theory logical? No.

    Has it dominated worldwide economic policy for decades? Yes.

    Powerful financial interests and governments (is there any difference?)do not need (or like) logical economic policies if such policies do not suit their self interest.

  20. Roger,
    Greenspan was talking about the period before we went off the gold standard.

    The bond market dwarfs the stock market and the precious metals are a fly speck compared to the bond markets. Gold is completely irrelevant to what happens in the ocean that is the credit markets.

    Go back and find the debate on between Jeff Christensen and Murphy.

    Christensen refutes every single claim Murphy makes with cold hard facts. Murphy's response is always the same "that's my stance and I'm sticking by it"

    What kind of debate is that? The guy has no actual proof and when confronted with the facts he has no response.

    Amazing that people actually believe this guy.

  21. Gary:

    I'm pretty sure that Greenspan made that statement WELL AFTER the US went off the gold standard.

    In addition, the history of gold manipulation STARTED DURING the gold standard for the simple reason that the Fed had to buy or sell gold to maintain the then $35 per ounce rate.

    So the gold manipulation machinery was well in place to continue this manipulation well after the US went off the gold standard.

  22. But there is no motivation to continue manipulating gold once we went off the gold standard. As I pointed out the Fed was free to print as much money as they wanted and that's exactly what they have done.

    What would be the point of throwing away money trying to fight a secular bull market. It's just money down a rat hole for no reason.

    Again I urge you to listen to the debate on

  23. Gary:

    If there were no motivation for central banks to control the price of gold, how do you explain the following Greenspan statement in 1998?

    From testimony of Fed Chairman Alan Greenspan before the House Banking Committee and Senate Agricultural Committee in July 1998 (

    "Nor can private counter-parties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."

  24. Roger,
    That article was just about preventing parties from cornering the market in specific commodities.

    This is exactly what I'm talking about. Taken out of context a good con man can use something like that to "prove" there is manipulation. That article proves no such thing.

  25. Unless I'm blind no where in that article did I find this:

    "Nor can private counter-parties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."

    Where did you see that sentence as it doesn't appear to be from the link you sent.

  26. Gary:

    I copied and pasted the part I thought was the most important. Shown below (after my remarks to you)is the entire reference.

    I am going to end my responses at this time since you are at a point where you are making SUBJECTIVE interpretations about Greenspan's statements rather than accepting them at face value.

    The bottom line is obvious to me:

    Central banks around the world stand ready to push down the price of gold when, in THEIR assessment, it is in their interest to do so.

    Your chose to interpret that stated fact in a beneign way. That's your choice. On the other hand, any objective observer should conclude the following, and I'll use (approximately) your own words to do so - To paraphrase one of your earlier comments:

    "Now that the world is off the gold standard, why the hell should any central bank care one whit about gold prices?"

    In my opinion, the fact that they're mucking around with the gold price is prima facia evidence that they HAVE AN IMPORTANT MOTIVE TO CONTROL IT.

    From testimony of Fed Chairman Alan Greenspan before the House Banking Committee and Senate Agricultural Committee in July 1998 (

    Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise. [Emphasis supplied.]

    From Chairman Greenspan's letter to Senator Joseph I. Lieberman, Connecticut, dated January 19, 2000, elaborating upon the foregoing testimony (

    This observation simply describes the limited capacity of private parties to influence the gold market by restricting the supply of gold, given the observed willingness of some foreign central banks -- not the Federal Reserve -- to lease gold in response to price increases. [Emphasis supplied.]

    From the same letter by Chairman Greenspan:

    The Federal Reserve owns no gold and therefore could not sell or lease gold to influence its price. Likewise, the Federal Reserve does not engage in financial transactions related to gold, such as trading in gold options or other derivatives.

    Most importantly, the Federal Reserve is in complete agreement with the proposition that any such transactions on our part, aimed at manipulating the price of gold or otherwise interfering in the free trade of gold, would be wholly inappropriate.

    From the Complaint in Howe v. Bank for International Settlements, et al., United States District Court for Massachusetts, No. CV-00-12485-RCL ( The reaction of the Fed and other central banks to the sharp rally in gold prices triggered by announcement of the so-called "Washington Agreement on Gold" in September 1999, as described by Edward A. J. George, Governor of the Bank of England and a director of the BIS, to Nicholas J. Morrell, then Chief Executive of Lonmin Plc, a principal shareholder in Ashanti Goldfields Ltd. (paragraph 55):

    We looked into the abyss if the gold price rose further . A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K. [Emphasis supplied.]

  27. Roger,
    First off I didn't find that quote in the link you posted. The link you posted was about third party manipulation and how the Fed could step in to stop it.

    Nothing in there suggests that the Fed has any intention of manipulating gold just that they think they have the tools to stop someone from corning commodity markets. Similar to what the Hunt brothers tried to do.

    This is what I'm talking about. Taking something completely out of context and twisting it to your agenda. This is what GATA has been doing for years.

  28. Gary:

    If the Fed were simply interested in protecting gold and silver prices from getting too high, why is it they they never seem to intervene when other commodities were going to the moon such as recent highs in sugar, cotton, copper and soybeans and corn?

    It seems to me that they have a special interest in keeping gold and silver prices in check (which, according to our Fed Chairman are not money anyway, but merely assets similar to treasury bonds), but have not done so for virtually every other commodity.

  29. Cotton had about a dozen margin increases. Is that proof that the Fed is trying to manipulate the price of cotton?

    If there is manipulation in the gold market, then why do the corrective moves always seem to occur in a normal timing band for a cycle bottom?

    If gold is manipulated then why do the shorts cover after a hard correction? If they really wanted to force price lower they would pile on more shorts to keep the panic going.

    The fact is the gold market is acting exactly like a secular bull market acts. It climbs a wall of worry to the point where it gets too stretched above the mean and then a profit-taking event occurs.

    If you sold during the recent correction then you are part of the reason gold declined. Are you a hidden minion of the Federal Reserve?

    The precious metal sector is driven, like all markets, by the emotions of greed and fear. Those never change, and since they don't, we will continue to see gold have periodic profit-taking corrections. It really is as simple as that.

  30. Gary:

    OK Let's take each one of your observations one at a time...

    Cotton: You just made my point: The Fed in NOT interested in cotton.

    Gold: The shorts have ALWAYS covered after they have driven prices down. That's how the bullion banks have made billions over the years.

    I never said the bullion banks are pushing the PM markets around every minute, or every day, or even every week. They have professional traders who can paint the tape to create set-ups so they can hit the PM markets when they are most vulnerable.

    I believe the May 2, 2011 Sunday night silver take down is one example. Another is the PM take down minutes BEFORE the Swiss announced their 1.2 peg to the Euro.

    The Bullion banks may be brazen, but they certainly are not stupid. They time their MAJOR PM take downs to time periods when all commodities and the stock market are most vulnerable to legitimate market forces.

    Gold and silver are MONEY, not commodities. The fact that they APPEAR to act like commodities over the last few years is by Fed design.

    Prior to Fed PM manipulation PMs acted far differently during times of financial stress. Doesn't that tell you something?

  31. Roger,
    You are just describing a regression to the mean trading strategy. It's one of the most successful strategies in the world and virtually all large commercial traders trade this way.

    There is nothing evil or manipulated about that. When something stretches far above the mean commercial traders, understanding that the law of regression to the mean will eventually drive the asset back down, start to sell into higher prices.

    Then they cover once the asset has moved back down to or close to the mean (200 day moving average).

    This is just normal commercial behavior and it happens in all markets.

    My point is if the government was actively trying to suppress the price of gold they would not cover their shorts once the asset had moved down. On the contrary, they would pile on more shorts to drive it below the mean and induce further panic selling.

    Overnight selling is easy to explain. Someone in China got nervous. Once the selling started futures traders panic and the selling intensifies.

    This only happens when an asset is stretched far above the mean, and more importantly, in the timing band for a cycle low.

    Like I said, just normal bull market behavior.

  32. Gary:

    I want to believe this is my last post on this subject, so I'll give you the last word. Again let's take your points one at a time and let the readers decide which perspective makes the most sense.

    The first half of your response supports one of the arguments I made in my last post. Bullion banks use professional traders. The last thing they would do is 'fight the tape'. In and of itself, this premise is not evidence of market manipulation. To understand PM manipulation, one would have to review all the points I made in my earlier posts.

    Anytime a small number of bullion banks holds the ENTIRE SHORT POSITION IN GOLD AND SILVER, BY DEFINITION, WE HAVE MARKET MANIPULATION. Unless you think the bullion bank traders are instruments of God, as our boy Lloyd over at GS(whose says he's doing God's work)would have us believe.

    As far as your argument of overnight panic selling of maybe 20X normal volume (in a generally
    very illiquid market)... Common Gary, that is a streeeeeeech beyond my comprehension. That initial silver takedown got the ball rolling that saw silver prices drop from $50 to about $32 in a week or two.

    At that time, there was NO NEWS to prompt such a panic sale. Do you really believe what you wrote?

    I ask that question because a couple of months ago you were railing about the manipulation of the S&P when it rocketed higher for, as I recall, 7-9 days in a row. Would you have us believe that the Fed occasionally rigs the stock market, but never, never rigs the PM market?

  33. I've chosen not to enter the debate too much here because it seems a bit superfluous. However, it seems GATA chose to on their own account.

    "GATA can't answer for every letter writer in the precious metals markets; GATA can answer only for itself. But as a custodian of the market manipulation case, GATA will ask whether Connor can answer for his own failure to examine and dispute the evidence before drawing his conclusion. Can Connor really believe that, as governments and central banks increasingly intervene openly and desperately in the currency, bond, and even the equity markets, they're leaving only the gold market alone? Has Connor ever tried putting a single question about gold to any central bank? Or does he really think that his charts tell him everything he needs to know about the gold market?"

    It's a good read and well worth the time. Gary, you might recognize things about the markets and be able to help your subscribers very well. I simply don't know. But denial of market manipulation in regards to gold and silver is simply disingenuous.

    It's not a matter of whether it's happening. It's a matter of how we respond and what are the underlying fundamentals. We can't stop them. But how can we capitalize on the fundamentals in order to gain regardless (Or even because) of the manipulations? May you serve your subscribers well in that endeavor.


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  35. Joe,
    I'm just using common sense. What possible reason could the government have for manipulating gold? I have yet to have one single person give me a credible answer to that one very simple question.

    The cold hard facts are that when Nixon took us off the gold standard gold became meaningless. The Fed at that point was free to print as much money as they desired with absolutely no restrictions other than inflationary pressures. And that is exactly what they've done.

    Central banks around the world are now net buyers of gold. Am I expected to believe that the US government is actively trying to lower the price of gold so other countries can buy our gold at bargain prices?

    Not to mention basic economic''s 101 says that anything that artificially lowers price will increase demand leading to shortages and ultimately much higher prices in the long run. We saw this in full effect with the price controls in the 70's. It did not control inflation and only caused shortages and ultimately much higher prices.

    We also saw it during the market crash in 08 when panic selling collapsed the price of gold. That led to severe shortages causing price to rocket back up to $1000.

    The simple fact is that if the government is trying to manipulate the price of gold lower then they are the reason gold went to $1900 instead of $1200, because artificially low price increases demand and contracts supply resulting in sharply rising price as supply gets tight.

    If GATA really wants rising gold prices then they should be cheering for the government to manipulate price instead of fighting it. Because any manipulation just means the price will climb higher and faster than would occur normally.

    None of GATA's nonsense stands up to plain old common sense reasoning.

    The cold hard fact is that this is just another scam, and not even a new one. It's been used in every bull market since the beginning of open markets.

    Again I urge you to find the debate between Mr. Christensen and Mr. Murphy on

    GATA's propaganda wilts in the face of cold hard facts.

  36. By the way I may have to modify my target for the D-wave bottom. Sentiment and the COT reports this past week are suggesting that gold may already have put in or is very close to putting in a final bottom right now.

  37. I would submit that GATA has shown us what "common sense" reveals. Notice carefully in their article that they're not calling this a mere conspiracy theory. They're just submitting facts from the files of those they investigate.
    Understanding all the causes and implications of it is one thing. Realizing that something is going on is another. And, frankly, I don't even begin to pretend that I understand the mechanisms involved. Very few do.
    I have some good connections in the precious metals' industry. Right now I'm being told that certain coins that can't hardly even be found just won't go up in value. It's baffling. Coins such as old silver dollars, gold pieces, rare European coins and such are becoming more and more difficult to get a hold of. Yet the premium on such coins has actually dropped significantly, not only in percentage, but in actual dollars. Some of this is common for a bull market. But the degree at which they're seeing it is perplexing in many ways.
    Yes, manipulating the price down will eventually result in sharper increases. However, it's worth noting that a controlled ascent can be spun more easily than a meteoric one. For instance, with many fleeing the euro for obvious reasons they have only a couple of places to go, the dollar, gold, silver and a few other stores of value that they deem "safe." As the flood began to turn back to gold it makes sense to suppress such interest in order to bolster the value of the dollar by making it appear to be the only place of refuge. Some don't care and buy gold anyways. But many get scared easily because they see gold as merely a commodity rather than true money.
    This brings up an important point to consider; that the government does not "print money." Actually, that's impossible, from a historical perspective. Money has intrinsic value. Dollars have no intrinsic value whatsoever. It wasn't gold that became meaningless. History will show that separating the dollar from gold ultimately rendered the dollar meaningless. They went from representing true money to becoming fiat currency. Unfortunately the difference in meaning has been blurred over the past few decades. Keynesians have certainly done their work well in this respect.
    As for your charts: I hope they work and serve you well. I really do. Though I hope we see more of a drop in the short-term, especially in silver, for personal reasons.

  38. Hey if you need to believe in something irrational in order to explain why a bull market acts the way it does then be my guest.

    I just try to trade the markets with the tools I have available and I don't make up nonsensical excuses for why corrections happen, I just try to avoid them.

    We completely avoided the current correction in gold because the market was showing signs of getting too stretched above the mean.

    We are now preparing to re-enter the market once I'm convinced the selling pressure is finished in the stock market, which it should be by the end of next week, possibly on a big washout day Friday if the employment report stinks.

    BTW the reason the price of specific coins aren't rising is because no one wants to buy them at current prices. Nothing mysterious about that. Once price comes down to an acceptable level demand will pick back up.

    Or maybe you think the men in black are standing around the corner and corral anyone that might be heading into the coin dealer with the intention of buying a coin at full price or at least the price you think they should sell for.

    This is exactly the kind of nonsense that GATA claims is "proof" of manipulation.

    I just can't believe anyone is gullible enough to fall for these scams.

  39. I tried to find the debate you discuss. I found this article, where Christenson seems to essentially agree with Morgan regarding the presence of manipulation. Murphy is referenced. It seems that the difference in opinion is in regard to degree, not whether or not manipulation takes place.

  40. I will exit this discussion on this note. I've attempted to show my disagreement with your position with civility.
    However, you continue with derogatory statements. If anyone disagrees with you then apparently they lack common sense, are irrational and subscribe to scams. While I don't pretend to know how much you know, this argumentation is an effort to discredit others through ad hominem attacks rather than by simply providing facts to back up your claims. Such argumentation merely reveals what you're against, fails to make it clear what you're for and alienates those who disagree with you.

  41. If you are really interested in learning the facts instead of being mislead by con men.

    Click here.

    I'm still trying to find the debate. It may be in a link in that article.


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