The long-side speculators who trade paper based claims to gold, silver and other precious metals (futures contracts) are, generally speaking, get-rich-quick schemers. They are the managers of independent hedge funds. They vie for control over the futures markets with institutions that include some of the largest banks in the world and the hedge funds that are owned or operated by current or former executives of those banks. Both long side and short side speculators at futures exchanges, like COMEX in New York, operate at extraordinarily high levels of leverage. The long side speculators are pure gamblers, as they have no influence over central bank policy. In contrast, their opponents take no gambles at all. They are the big international banks that control the world's major central banks and finance ministries.
In spite of repeated complaints, the players in "paper gold" market still set precious metals prices. When I speak of "paper gold" I include silver and platinum, because both of those metals are also traded in the form of futures contracts and futures markets also set their prices. The same dynamic is at work, and a large number of gold traders take heavy cross positions in the two other metals. Although there is not a 100% correlation between the metals, cross positioning generally means that when gold goes up, silver and platinum go up also, regardless of the state of the physical market. Indeed, physical market surpluses and/or shortages end up having little to do with precious metals pricing, at least in the short to medium term.
On October 4, 2016, for no apparent economic reason, the paper gold market was suddenly flooded with 1000 tons of fictitious yellow metal. This was likely done by the bullion bank divisions and controlled hedge funds connected to those same international banking firms I mentioned earlier. As noted, the "gold" used for this takedown is a work of fiction. It doesn't exist in the real world. It is purely in the form of paper futures contracts which promise potential delivery of the yellow metal. Those who issue such contracts and the governments that back them, however, know that no more than about ½% of the speculators who purchase gold for "future delivery" will ever actually collect the physical gold. The rest are just heavily leveraged get-rich-quick schemers. Thus, the U.S. Treasury, which is probably behind most sharp movements in the price of gold, like this one, will end up losing a mere 5 tons of physical gold from the US gold reserve. That isn't much, when you consider what was accomplished. Gold dropped like a stone… down $42.80 an ounce, or -3.26%. Similarly, silver was down even more in percentage terms, by $1.01 per ounce, or -5.38%, while platinum dropped by $21 or 2.09%.
By now, some of you may be asking why the bullion bankers can't force gold down to, let's say, $800 an ounce or even a lot less? After all, if they can accomplish so much by losing only a net 5 tons of real gold, why not? The US gold reserve is probably somewhat depleted by now, but it once stood at over 8,100 tons of gold, and probably several thousand tons still remain...
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