Proof The Five-Year Low For Gold Is A Fraud – Jeff Nielson

Today the Corporate media gleefully trumpeted that the “price of gold hit a five-year low”. In turn, this number (supposedly) confirms the propaganda drum-beat that gold is “in a bear market.” But let’s take a closer look at this claim – and then re-examine today’s absurd price.

By definition, in every bear market, there must be weak demand, or abundant supply, or both. Is there weak demand in the gold market?

In fact, gold demand has been so rabid in India (the world’s largest gold market) that the government was forced (blackmailed?) into a temporary embargo on gold imports. Even as gold imports into India were easing; gold imports into China were soaring to new, record levels – despite the fact that China is already the world’s largest gold producer.

Meanwhile, the world’s central banks (where were previously selling 500 tonnes of gold per year) are now buying roughly 500 tones per year. That is a positive 1,000-tonne-per-year swing in gold demand, in a market which only produces a little less than 3,000 tonnes of gold per year. Obviously demand for gold isn’t merely strong, it’s ultra-strong, relative to previous years.

Then we have China’s announcement just last week that it was voluntarily disclosing some of the gold which it has added to its reserves, via domestic sources. This 600-tonne addition to China’s reserves (since its last disclosure in 2009) is 600 tones of extra demand for gold which had never previously been factored into the market, or roughly an extra 100 tones per year. Yet even after this “surprise” announcement, the price has kept falling.

What about the supply of gold? There are two components to supply: “flows” and “stocks”, or mine-production and inventories. While mine production had been inching higher by about 2% per year; it has now begun falling, and expectations are that mine-supply will continue to fall in upcoming years.

As for inventories, Comex inventories have been hovering near all-time lows for most of the past 2 years, and even those low numbers can’t be trusted. The supply of gold isn’t merely low; it’s ultra-low – and falling. Those are the facts. We have strong demand and weak supply: the definition of a bull market.

There we have it, absolute proof that everything that the Corporate media has been saying about this “bear market” for the past several years has been a complete and utter lie. The supply/demand fundamentals for the gold market don’t merely tell us that we are in a bull market, but rather an extreme bull market.

It is in the context of this extreme bull market for gold that we can now look at today’s utterly fraudulent price. The place to start is to remind readers what was coming out of the mouth of the Corporate media almost exactly two years ago:

$1,300 is not a sustainable gold price…

What did the Corporate media mean with this (partial) mea culpa? It was referring to the fact that $1,300/oz for gold was no longer a break-even price for gold producers, due to the rapid depreciation in our currencies from inflation. Miners which could mine gold profitably at $500/ounce a decade earlier were now losing money with the price of gold more than 250% higher.

What do we know about any market/sector for a hard commodity, where the price for that commodity is below the break-even price of production? The price must rise. Yet, in fact, we have seen the price of gold grind steadily lower, all the way down to today’s five-year low: fractionally above $1100/oz.

This begs the question: what is the break-even price for gold? If we look at just the gold-producers, themselves, their internal fundamentals now dictate a price of at least $1,500/oz. This is the absolute minimum necessary for these miners to operate on a break-level, while replenishing their ore reserves (over the medium term), so they don’t run out of ore to mine.

However, even that price presents an incomplete picture on the gold market. The foundation of the gold market is not actually the big producers, but rather the exploration “juniors”. It is these mining exploration companies who find the vast majority of new deposits of gold which are eventually mined by the larger companies.

Without these feeder-companies, and a “healthy” exploration sector; it’s impossible for these junior miners to find enough new ore bodies to even sustain current production levels over the long term. In fact, these companies began to wither as soon as the price of gold back-tracked below $1,800/oz – and that was three years ago. Factor in three more years of double-digit inflation (the inflation rate in the real world), and we have a break-even price for gold now at or above $2,000/oz.

With the price of gold at little more than half its break-even price, what do we have the Corporate media saying about the future direction of prices?

The monthly gold chart also shows a bearish downside “breakout” has occurred from the recent sideways and choppy trading range. The breakout to the downside of the trading range suggests a fresh leg down in prices is coming, and that [today’s] low in gold is not likely to hold.

The next longer-term downside price target for gold is the major psychological support at $1,000.00. It would not be at all surprising, from a technical perspective, for gold to hit this mark at some point in the not-too-distant future. A fall below that key price level would then open the door to still lower prices, with an ultimate downside objective being the 2008 low of $681.00. [emphasis mine]

This pure gibberish goes by the name “technical analysis”. This faux-science pretends that “price” is a variable which is totally independent of supply/demand fundamentals. In fact, nearly all of the practitioners of this pseudo-science have little to no background in either mathematics or probability/statistics,meaning they don’t even properly understand “technical analysis” themselves.

Technical analysis is the last refuge for the banksters and their mouthpieces, the Corporate media, as they try to “explain” these fraudulent prices, which are purely/completely the result of illegal manipulation. In the real world, price is absolutely determined by supply and demand. In the (criminal) fantasy world of the bankers; price can go anywhere they are able to push/pull it.

At this point, it is further illuminating to see what the bankers and Corporate media are saying about the (falling) supply of gold, even as the price of gold is at a medium-term low, and falling.

Gold Bust Means Less Mine Spending

That headline from Bloomberg carries its own message. As previously explained, gold miners must be continually reinvesting profits in order to open-up new ore bodies, just to maintain supply over the longer term. Falling spending (in depreciating dollars) = falling reserves = falling production. That equation is absolute.

Now here is the point: it is impossible for any rational analyst to be bearish on price and bearish on supply – at the same time. As a matter of simple logic/arithmetic; if you’re bearish on one of those factors, you must be bullish on the other.

Falling supply (in any market) implies scarcity, which in turn implies higher prices. Falling supply (where there is ultra-extreme demand) implies much greater scarcity, and much, much higher prices. Conversely, as previously explained, falling prices directly imply abundant supplies. The price falls because “there is so much gold” lying around. However, as also noted, total supply (stocks plus flows) is also at an ultra-extreme low, which also dictates much, much higher prices.

Here we see the Corporate media and the bankers continuing to make bearish projections on price and bearish projections on supply at the same time, even as both of these are at extreme, critically-low levels. It is impossible to rationalize this. The “analysis” is all lies/gibberish. The prices themselves are illegal and fraudulent – at an absurdly obvious level.

Using nothing more than freely available market data, and information/analysis (on supply) from the Corporate media itself; we see that today’s price for gold is an absolute fraud, in every sense. As supply/demand fundamentals dictate; this insane price could only have occurred through extreme, illegal manipulation.

Everything the propaganda machine has said previously about the price of gold is a lie. Everything the propaganda machine is saying about the current price is a lie. Everything the propaganda machine says about the future price of gold is a lie.

Demand for gold is extremely high (and steady, if not rising). Supply for gold is extremely low, and falling. That is the extreme bull market for gold today: a market where the supply/demand fundamentals are much more bullish than they were in the year 2000 – with the price of gold then languishing below $300/ounce.

What is a “fair price” for gold today, in currencies rendered near-worthless due to insane levels of money-printing? A previous commentary reasoned that a fair price for silver, today, would be $1,000/oz. Given the shrinking supply-ratio between silver and gold; this still implies a “fair price” for gold of at least $10,000/oz today.

Instead, all we see are more crimes committed in this totally lawless market. All we hear are more lies. And all we expect is more-of-the-same.

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