a new blogger discusses fixing the price of gold and silver

I just heard an interview with Jeff Christian here:

http://www.netcastdaily.com/broadcast/fsn2010-0410-1.asx .

I was so incensed by Jeff Christians omissions that I decided to start a Blog to help people see through his deeply flawed reasoning.

Firstly in describing how a Swap Dealer Hedges (shorts) Gold on the Comex he makes many HUGE omissions. The most notable may be that Swap Dealers aren’t the large shorts on the Comex. The largest shorts are the big Commercial banks like JPMorgan and HSBC and they reside in a different category called Producer/Merchant commercials or PMs. This is where the large Bullion banks live. So in mentioning Swap Dealers Short Hedging he is simply misrepresenting the facts. Swap Dealers are legitimate hedges but Bullion banks while they may hedge their predominant positions are taken for speculative gain only.

Before I explain in more detail his other mistakes I should review the Miner/Swap Dealer relationship. First a miner will pull raw Gold out of the ground and sell it to the Swap dealer before the Gold is in its final form (usually of London Good Delivery Bars). The Swap Dealer will then go Short on the Comex to Hedge their position. So far so good, everything makes sense. During the interview Jeff Christian speaks based on this assumption. And in the interview Jeff Christian, just as he did for the CFTC, provides a perfectly rational explanation of why Hedgers enter Short trades on the Comex.


Where Jeff Christian runs out of bounds is that he omits to explain why Short positions are routinely entered so recklessly. Common sense would dictate that a legitimate Hedger who buys Gold from a miner at $1200 would then proceed to Hedge that purchase by going Short on the Comex at $1200. But that's not what happens in reality.

What we see time and time again is the Short positions are entered by traders acting like bulls in a China shop. They don't spread the Short sale out over minutes and hours like a legitimate Hedger would who wanted to protect themselves. They slash and burn often driving the price down $10,$20, $50 even $100 at a time.

http://goldmatters.blogspot.com/2010/08/why-jeff-christian-is-wrong.html