Big Upward Move in Gold?


“‘. . .big upward revaluation of gold may figure heavily in the Fed's attempt to rescue the U.S. economy,’ according to former Federal Reserve Governor, Lyle Gramley.”

Did you know that the Federal Reserve Bank owns gold certificates? Mounting evidence suggests the Fed intervenes in and participates in the gold and silver markets on a regular basis, and “a big upward revaluation of gold may figure heavily in the Fed's attempt to rescue the U.S. economy,” according to former Federal Reserve Governor, Lyle Gramley.

Interviewed last week on the "Trading Day" program of Canada’s Business News Network, Gramley was asked about the seemingly grotesque expansion of the Fed's balance sheet in recent months. "I've heard it said that the Fed has turned into a government-owned hedge fund, leveraged at 50 to 1. Do you feel nervous about what this might actually do to the Fed's reputation?" Gramley replied: "I think you have to reckon with the fact that one of the Fed's assets is gold certificates, which are priced, as I remember, at $42 an ounce, and if we were to price them at market prices, the Fed's leverage would look a lot less than it is now."

What did Gramley mean by "...the Fed's leverage"? That would suggest that the Fed not only owns "gold certificates" but also future contracts and options on futures. They might be big benefactors in a gold squeeze. I read another report that the Comex is warning brokers of a December gold squeeze. . .alerting various futures firms about the potential of a squeeze on the December contract. It advised the $840 December shorts to exit their positions. That is the remaining open position.

There have been 12,636 notices of delivery. As I understand the situation, that represents about 40% of the gold available at the Comex, and, of course, someone could enter the scene late, buy February gold, and then spread into December, which would stun the shorts.

This sort of alert is highly unusual and the concern is real, not only for gold, but for other commodities too, as there is a good deal of talk of taking deliveries there, too. But gold is the one for which the advice to cover went out.

This is an extremely productive development and could spur the price of gold up quickly as word spreads. As we all know, buying Comex gold and silver (the cheapest way to buy precious metals) makes all the sense in the world in this financial environment.

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