Let’s talk gold.
I hear that the Justice Dept. and the commodities cops at the CFTC have a precious metal probe of Wall St bulge banks about to unfold.
The probe is along the lines of the LIBOR and FX investigations, which amounted to billions in fine (and no criminal charges against any individuals).
I have written extensively on JPMorgan’s Blythe Master — who oversaw precious metal and commodity trading at the firm — and how the bank controlled the silver market after taking over Bear Stearns silver position.
Allegedly UBS — the Swiss bank that spoke with regulators in the FX probe — is cooperating again with the feds in this precious metals investigations.
Now what happens on the Monday morning when this is announced to the price of gold and silver?
I would say there is a bias to the upside. Not a huge initial spike, but a trend to move higher.
Another news event that will have an even larger move to higher precious metal prices is the planned announcement in late September or early October by China of its gold holdings.
In order for the Chinese to join the IMF they need to disclose their metals position as well as other audited assets that can back the currency.
The conventional wisdom is that China holds 1,050 tons of gold. The new number may be about 10 times that figure on the low side of an estimation.
If that low-ball number of 10,000 tons is true, where does the price of gold and silver go from there?
I believe that announcement will spike precious metal prices much higher.
Not to mention that by September the US will be mired in a recession with the first two quarters in negative GDP, which will fuel higher prices as dollar weakens.
So that’s my take on the track of gold and silver prices over the shorter term.