Always nice to see the media B.S. refuted periodically by a few not so naive individuals. The unknown metals trader, Daniel Shak, was without doubt used in an attempt to mask the usual NY cartel suppression in the precious metals pits. The odds of this one trader taking down the gold market in January is about the same as the following events being considered random:

1. Gold and silver being unable to move above $1,350 and $29.50, respectively, after numerous attempts today.

2. The DOW rising continuously regardless of economic and earnings data, AND...

3. ECU selling off late in trading for the umpteenth time over the past few years, on the day of a positive news release.

Yeah right - VHF

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Suicide Bombers in the Gold Market?

Jeff Nielson

February 7, 2011

I was listening to another fine interview on the King World News site, this one with Ben Davies of Hinde Capital, when I was immediately intrigued by some of Davies’ remarks.

He stated that he considered the entire, recent trading-episode in the gold market “suspicious”, for two reasons. First of all, he was susprised that any (competent) trader would have leveraged himself into such a dangerous position in the first place. Secondly, and connected with his first observation, he expressed equal surprise that the so-called “regulator” (i.e. the CME Group) would have allowed such a flawed and vulnerable trading position to have been created, in the first place.

What Davies (and others) have apparently not considered is that this “leveraged”, “dangerous” trade was created to fail – in spectacular fashion. Essentially it appears that the Wall Street banksters (and the corrupt institutions who serve them) have imported the terrorist concept of “the suicide bomber” to precious metals markets.

For those not familiar with the episode Davies refers to, a previously unknown “metals trader” named Daniel Shak used $10 million to leverage his way into an $850 million “spread trade” (i.e. 85:1 leverage) in the U.S. gold futures market - equal in size to more than 10% of this entire market.

With the banksters printing-up “money” by the trillions, $10 million is nothing more than “pocket change”, and even eating the entire $850 million loss represents just slightly more than 0.1% of Bernanke’s most recent money-printing. Does anyone here think that Wall Street would be happy to throw away a mere $850 million – when default in the precious metals market threatens JP Morgan (and others) with out-and-out bankruptcy?

The logic here is elementary. When you have a committed hyperinflationist like Ben Bernanke ready to create another $600 billion (out of thin air) with merely a mouse-click – any and every time Wall Street requests a new shipment of Bernanke-bills – then throwing away (deliberately) a few billion dollars on a “bad trade” is (literally) no different than losing a game of “Monopoly”.

The “game” ends, another batch of Bernanke-bills is printed up – and another “suicide bomber” enters the precious metals market. While readers may be horrified at yet another example of Wall Street’s incessant “economic terrorism”, precious metals investors need have no fear of yet another desperation tactic by this crime syndicate.

As I regularly remind readers, none of the games the bankers play in markets (and “terrorism” is currently their favorite game) can do anything more than briefly stall the rise in precious metals. The bottom-line will always remain that once the last of the banksters’ (real) bullion has been given away…by themselves…at rock-bottom prices, then their manipulation games are finally over.

Yes, the banksters have leveraged their actual bullion by (at least) 100:1. Yes, these reckless criminals will continue to increase that insane leverage – to 1000:1, or even 1,000,000:1. The only important number in this ratio is the “1” on the right. It is totally irrelevant (on a long-term basis) how far the banksters are able to ratchet-up their leverage – on their road to self-destruction.

Once the “1” on the right becomes a “0”, the game is over. A “hundred times” zero is still zero. A “billion times” zero is still zero. When their “physical” bullion is gone, their entire empire of manipulated bullion markets, and bogus “bullion products” will simply evaporate into thin air – just like the rest of the banksters’ fiat-paper empire.

In the meantime, all that the invention of precious metals “suicide bombers” really means is that there will be even greater “volatility” in this market. This has several implications. Over the short-term, idiot-traders who continue to try to “play” this market with leverage will be wiped-out at an even greater rate/speed. Ultimately this is “good news”, as wringing all of the leverage out of the “long” side of this equation simply puts all that gold and silver into “stronger hands” – who can never be forced out by the bankers. In this respect, the CME Group’s short-sighted decision to recently jack-up margin requirements (only for gold and silver “long” investors) also makes the longs stronger over time.

The other implication here is the old adage among veteran investors that “volatility is a friend of the investor”. All readers need to understand that without “volatility” there is no money to be made in markets. If all assets are/were perfectly and fairly priced, then there would be no potential for either profits or losses.

“Volatility” (by definition) pushes assets above or below their “fair market value”. This makes the rules of the game ultimately very simple: when the banksters push-down bullion prices, we buy “physical” bullion (and the shares of the precious metals miners), when volatility causes a “spike” in the sector, we take some profits with our shares in the miners – and look for the opportunity to reinvest those profits at better prices.

We do not sell our bullion – because our bullion represents our financial “insurance”, not a mere “investment”. Would any homeowner sell off the “fire insurance” they have on their home – simply because they could unload their insurance at a “profit”?

Rather than allowing the Wall Street banksters to make us their “victims”, ordinary precious metals investors need to think like “the big buyers” – and allow the banksters to work for you, not against you. Ignore their terrorism, and conquer your own fears. “Defeat” in the precious metals market is inevitable for the banksters. These Wall Street “ambushes” of the precious metals sector now truly only represent one thing to the rational investor: a “sale” on precious metals assets.

“Fear of the unknown” is one of the greatest weapons of Wall Street (just like all “terrorists”). In this respect, merely identifying these “suicide bombers” as another transparent bankster tactic greatly diminishes the impact of this terrorism. We need not “fear the Reaper”, we only need to understand him.