Maguire:  “Eric, this is a highly volatile and leveraged paper market tail wagging the larger spot/physical market dog, and the price action has absolutely nothing to do with the very strong fundamentals....

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“We started the week some $30 above the $1,250 options sweet spot, and it was no coincidence that on the following day, (with most participants on the side-lines ahead of FOMC), that at the exact moment of option expiry we hit that precise level.  Of course this price manipulation pays no attention to the strong wholesale market and because of this divergent action, it allows large volumes of physical gold to exit the Western system without driving up the price. 

Physical buyers are fully aware that options expiration and rollovers have historically always created strong buying opportunities, so savvy buyers such as sovereigns just patiently wait in the wings for these events to take place.  They then move in to accumulate physical gold at the cheapest prices as the downside manipulation unfolds -- something we saw once again this week.

After the FOMC meeting, we saw the first real evidence of official intervention this year.  Footprints strongly suggested it was the BIS who was actively intervening in the gold market.  With stocks collapsing and gold rising, a worst case scenario was unfolding for the Fed.  However, what was different this time around was that the FED had nothing but propaganda, or short term tricks to attempt to control the gold price. 

Gone are the days where they are willing to unload large tranches of leased bullion to depress the gold price.  This leasing strategy has massively backfired on the Fed, leaving them sitting on an enormous rehypothecated pile of paper promises, where they owe tremendous numbers of entities large amounts of physical gold which they simply cannot deliver.

The large scale selling which took place yesterday came in size just before the news release.  This was highly suspect and almost certainly related to this official supply.  And nobody places such large bets minutes ahead of a major news release without knowing the outcome in advance.  The BIS and the primary agent bullion banks have the data at least 24 hours ahead of the market, and in this instance they planned to use this insider information given to them by the Fed to drive down the price of gold back through key short-term moving averages, in order to trip large long stops and draw in additional momentum short selling.

Without this intervention, gold would have almost certainly risen and large short covering would have ensued.  These kinds of footprints are totally visible and indicate official selling.  This also has the effect of sending a message to hot money short sellers to further increase their short positions.

The contract rollover provides camouflage for this type of manipulation and intervention.  However, the wholesale market has remained extremely strong during this intervention.  The BIS has their agent bullion banks counterintuitively tricking the market into further short selling.  The bullion banks then take the long side of these short sales and capitulated longs. 

It amazes me just how hook line and sinker this hot money continues to take the bait.  As long as this gullible hot money falls in to this trap, it will continue.  However, structurally and fundamentally most of the low hanging fruit has been picked and this game will not be continued for much longer.

So in all of this chaotic trading the bullion banks have gotten even more long, physical buyers have increased purchases, and the hot money crowd is now holding an even bigger bag.  Shortly after the London fix today, we are seeing more opportunistic short selling that waited for the physical market to be settled.  But these are nothing but opportunities.

I am now looking for gold to break the $1,300 level within a matter of weeks.  I don’t expect this move to occur in a straight line, but, given the current structure and fundamentals, it would not be surprising to see a large short squeeze quickly develop.”

Eric King:  “Do the Chinese have their agents in the market buying gold, even though China is on holiday?”

Maguire:  “Yes.  They never stop.  China may be absent, but the PBOC is not.”

© 2014 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

IMPORTANT - KWN will be releasing interviews all day today and this weekend with former US Treasury official Dr. Paul Craig Roberts, Egon von Greyerz, Andrew Maguire, John Ing and many others. 

Andrew Maguire’s trading service has returned over a staggering $134,000 for each and every (single) contract traded in the gold and silver markets over the past 16 months.  For those who would like to get more information on Maguire’s incredible trading service and to sign up you can do so by CLICKING HERE.

The audio interviews with Dr. Paul Craig Roberts, MEP Nigel Farage, James Dines, Gerald Celente, Michael Pento, Eric Sprott, Andrew Maguire, Rob Arnott, William Kaye, David Stockman, John Mauldin, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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