Bullion Banks to Spoil the Party?

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The Fed’s tightening cycle is basically done, save for a possible 25bp hike at the next FOMC meeting on May 3. Once the Fed pauses, they plan to keep rates higher for longer to address inflation. But history shows that when the Fed pauses after a tightening cycle, it is bullish for markets, including Gold and Silver. At the same time, fears have receded with respect to the banking crisis for the time being. This explains the persistent strength we’re seeing in monetary metals and miners despite being extreme overbought and bullish. A pullback would make sense at this point. It should be welcomed as healthy for the continuation of the rally to new record highs. Perhaps we get that pullback over the Easter holiday.

Last week, I showed that the Bullion Banks have been racing to get short over the previous three weeks. They loaded up at the third fastest pace on record. Manipulation of the metals (always to the downside) by the Bullion Banks is a hot debate, but from my perspective, it is obvious to the point where it is predictable.

In order to push the prices of Gold and Silver down, all the Banks have to do is create new futures out of thin air and sell them into the market, i.e., go short, as they’re doing now. Then when stops are triggered and momentum develops to the downside, they just wait to cover those shorts at lower levels and reap significant profits in the process. They can maximize the effectiveness of the manipulation by executing their selling during ideal market conditions, such as:

• Thinly traded, illiquid markets. Typically around holidays, when trading volumes collapse. This means that a given amount of futures being sold on the market will have a far greater impact on prices than during normal trading conditions. Stops are also cannon fodder for such shorting programs.
  
  
• Big events are also preferable because markets tend to be more volatile and such events provide cover for their actions. The FOMC meetings, or key data such as inflation or Non-Farm Payrolls, fit the bill.
  
  
• Following a large rally and approaching a key resistance level, e.g., record high at 2089. Over-extended buyers are easier to squeeze out and can trigger momentum to the downside. It also makes sense that the market reverses after a big run up and facing resistance, again providing cover for their activities.
  
  
• When Gold and Silver are extreme overbought and extreme bullish. Sentiment is a fantastic contrarian indicator, especially in perhaps the most emotional markets such as Gold and Silver.

The Banks don’t need all of these conditions to manipulate markets lower, but having all of them in place would be ideal.

All of these conditions are in place this weekend.

It’s a holiday tomorrow, celebrated around the world. Markets are closed. The Non-Farm Payrolls report is being released tomorrow when the markets are closed. Gold and Silver have had tremendous rallies recently. Gold has risen well above 2000 and the next big resistance is the all-time high of 2089. It’s no coincidence that bullishness in the metals is at its highest level since March 2022 when Gold reached 2089 and Silver hit 27.50.

I am not saying that this is a certainty, but I am saying that the ideal conditions are in place for the Bullion Banks to push prices lower should they choose to do so. In fact, we’re already seeing weakness ahead of the holiday tomorrow. Gold has fallen back from 2049 to 2016. Silver has dropped from 2530 to 24.70.

If the Bullion Banks do spoil the party, I don’t expect it to last long. Support is at 1960 in Gold and 1900 below there. Support in Silver is at 23.70. Should this reversal play out, I plan to buy the dip in Gold for the test of the record high at 2089 next and 30 in Silver to follow.