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Is The Deep Financial Crisis Overwhelming Gold Price Manipulation?
By Patrick Heller

There has been a constant stream of terrible financial news over the past nine months. This news makes investors leery of owing US dollars or dollar-denominated paper assets like stocks or bonds. When investors try to protect themselves by switching to other assets or currencies, the result is a decline in the values of the dollar and American stocks and bonds.

Apparently, the top priorities of the US Treasury and the Federal Reserve is that the US stock market must be supported and the price of gold held down, so as to avoid a massive exit from the dollar and American stocks and bonds. To accomplish this manipulation, the Federal Reserve trades short-term repurchase agreements with 20 approved primary government securities dealers. Among American dealers on this approved list are Bank of America Securities, Bear Stearns, Cantor Fitzgerald, Countrywide Securities, Daiwa Securities America, Goldman Sachs, Greenwich Capital Markets, HSBC Securities (USA), JPMorgan Securities, Lehman Brothers, Merrill Lynch Government Securities, and Morgan Stanley. As long as these companies use the liquidity provided by the repurchase agreements to do the government's bidding, they will be allowed to make profits from the fees of the transactions.

When significant negative financial news is released, government officials know that this could scare investors into selling their US dollars and stocks and bonds and buying gold and silver with the proceeds. To diminish this effect, the Federal Reserve and Treasury (who know the bad news before its public release) give orders to boost stocks in the Dow Jones Industrial Average (DJIA) and to knock down the price of gold.

Last Friday we saw a perfect example of this tactic. The previous day, American International Group, Inc. (AIG), the world's largest insurance company announced a $7.8 billion loss for the first quarter of 2008. This followed a $5.3 billion loss the previous quarter, when AIG officials suggested that the worst was over. As a result, when the U.S. markets were opening on Friday, the U.S. dollar and stocks were falling and the price of gold was rising. In mid-morning, the manipulators struck. Gold quickly fell almost 2%, the DJIA increased about 1%, and the US dollar index rose about 0.5%.

After this counter-intuitive market action hit, then came the new bad news: Citigroup, one of the world's largest banks, announced a plan to dispose of about 20% of its assets over the next 2-3 years.

Almost every time over the past nine months, the pre-arranged manipulation of the DJIA and the gold price had the desired effect of persuading investors to sit tight. Last Friday, that didn't happen. After the manipulators struck, nervous investors continued to sell the dollar, sell U.S. stocks, and buy gold and silver. For the day, the DJIA was down about 1%, the US dollar index down 0.5%, and gold was up 1%. For the day, the stock of AIG dropped almost 9%; Citigroup lost over 2%.

This week, the ratings agencies are announcing plans to downgrade the credit rating of several currently top-rated companies and funds.

The gold price manipulators seem to be losing their clout. We could be in for some serious decline in the value of the US dollar, stocks, and bonds in the coming weeks, along with much higher gold prices.

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