Fed Will Do Anything to Keep Gold Down
Source: GATA, Richard Russell (9/9/09)
"Whatever it takes will be utilized to hold the only constitutional money down."
The battle is obvious—it's the primary forces of overproduction and deflation vs. the Fed's obsession ("whatever it takes") to fight deflation and to produce asset inflation.
The one signal for rising inflation that the world understands is rising gold. The central banks do not want to see the gold signal, which tells the world that inflation is in command.
What the Fed really wants is asset inflation in housing. Housing is collateral for almost everything in the nation, and the Fed and Treasury are frantic to get housing prices heading higher.
Yesterday most assets got the message. Oil was higher, the base metals were higher, the stock market was higher, but gold (pressured by forces we know not from where) failed to close at the highly significant number of $1,000 an ounce or better. Incredibly, after being as high as $1,009 during yesterday's session, gold closed at $999.80—just 20 cents below $1,000.
Coincidence? Mistake? Random chance?
Hardly. To me it was obvious that the Fed did not want to see the following headline in the newspapers: "Gold closes above $1,000."
Whatever it takes will be utilized to hold the only constitutional money down.
When a can is placed on a stove burner, the pressure builds up inside the can. At some point, we know not exactly when, the can will explode and the pressure will be released. That, I believe, is where gold is.
You can threaten gold with forthcoming central bank sales. You can sell gold in quantity. You can smother gold with short sales. But the primary trend of gold will win out. It will be expressed today, in a month, or in 2010. The trick for us is to hold onto our position—don't trade it, don't move in and out with it, don't hold so much of it that you get the heebie jeebies every time it dips $10.
The primary trend of gold is up. We're riding the bull. The bull will try to shake us off his back. We'll hang on.