Press "Enter" to skip to content

That fraud in the metals markets

If you watch the precious metals markets (and don’t we all, if we’re into preparedness, even if we can’t afford to do much with our observations), you’ve probably been hearing allegations of monstrous frauds festering beneath the surface. But as with so many doings in financial markets, the specifics of metals manipulations are arcane and … well, they hurt the brain.

But I finally found a human-readable explanation. (And here’s another pretty good one from the inimitable Mogambo Guru.)

Terrible news, if true, for people who have invested in gold funds or who are under the illusion that they own actual, physical precious metals that are stored for them in bank vaults. And it’s a sad state of affairs for anybody who would like to be able to trust bankers and brokers and fund salesmen someday (sigh). But it could be red-hot good long-term news for anybody who already owns and hangs onto their own real, verifiable physical store of gold or silver.

(I know we’ve got a few serious metals mavens among Living Freedom blog readers. If I’ve mis-stated or under-stated anything, or if you have deeper insight into what’s going on … let ‘er rip in the comments section.)


  1. C Wood
    C Wood April 21, 2010 8:29 am


    Last November there was some noise about the discovery of a huge number (millions) of 400 ounce bullion bars that were actually tungsten coated with a thin layer of gold. I haven’t heard anything since and I wonder if it was just an urban legend.

    Not being literate in high finance I have always avoided investing in gold or silver (not that I ever had much to invest anyway). The precious metals market seems to be such a snake pit for the unwary to fall into. My only metal “investment” was that I saved all my silver dimes and quarters since they replaced them with slugs in the1960s.

    Being poor means never having to worry about your portfolio!

  2. roger
    roger April 21, 2010 2:35 pm

    If you saved very many of those silver dimes and quarters, you’ve done a lot better than most people!

    Hi Claire,

    I have long collected gold soverign coins (here in the uk). I have always bought a mix of proof coins and near mint. The proof coins tend to hold their value well with collector but if things go belly up I have always realised the value would be no greater than ordinary gold. I have always used spare cash for this and not intended it as a savings investment. My wife and I always refer to this as, excuse the term, our f%^k off money. For use when things go badly wrong, we can throw them into a bag and simply run.
    It is not a perfect stratagy but we have always figured it is better to be alive and with enough cash to start over.
    We have not bought any for over a year now mainly because they are overpriced because of so many people cooking the market. But also because the recent recession has hit our income badly.
    But what ever you invest in with metals or antiques etc never ever take anyone elses word that it exists, if you can`t touch it and hold it it`s not yours.
    We have also quite a large collection of silver coins too. My advice to anyone collecting them is to buy ones from the UK national mint or reputable dealers. Piedfort coins are a better investment, these are coins from solid silver but double the normal thickness( and more than double the value) and much rarer.
    BTW love the blog.

  3. Phssthpok
    Phssthpok April 21, 2010 6:48 pm

    Some time back I helped out a friend by buying and delivering a cheep set of wheels, for which I was reimbursed in 90% silver 50 cent pieces.

    Shortly thereafter (like….2 DAYS) the spot price dumped from $20-ish FRNs down to about 15-16 FRNs.

    It sucked, but I was fairly certain that it would eventually rebound. The price is not quite there yet, but I’m not too worried about it…the good karma I got from helping a friend offsets the paper ‘loss’.


  4. Claire
    Claire April 21, 2010 7:21 pm

    Phsstpok — I’ll bet your friend remembers that event with both gratitude and guilt. Very, very much good karma for you in that transaction.

    Pretty darned ironic, though, about that silver crash.

  5. Ellendra
    Ellendra April 21, 2010 9:29 pm

    Haven’t been able to buy metals in a while, but I always thought gold jewelry seemed easier. I could buy chains of almost any length, or plain wedding bands, even plate or casting metals, at the jewelry making supply store. The one in town is reliable and I’m familiar with the purity tests.

    Spending gold in that form is also a bit less conspicuous. I hate to say it, but if you had to buy groceries or something with gold or silver coins, you’d end up drawing a lot of attention. Once when I was a cashier someone paid with silver, by the time the transaction was done every employee in the store had swung by to take a look. But pulling the wedding ring off your finger to barter with makes you just another desperate soul. Nobody has to know that you’ve got ten more of them in your pocket :p

  6. Ellendra
    Ellendra April 21, 2010 9:36 pm

    PS: Watch for the price of platinum to skyrocket. The government of South Africa announced recently that they’re considering nationalizing the nation’s mineral resources. That would affect all metals to some degree, but it would hit platinum the hardest, as SA produces 80% of the world’s platinum.

  7. Claire
    Claire April 22, 2010 7:27 am

    Ellendra … Interesting. I can see how the jewelry ploy might work for keeping a low profile, especially if you’re buying in places where people don’t know you. But what about the cost? Jewelry usually sells for so much beyond its plain gold value that unless you get your jewelry at wholesale or via flea markets, scrap dealers, etc., that seems like a very expensive way to go.

    Good point on platinum. I don’t know much about it, but I’ve heard others say it’s set to soar. Thanks.

  8. -s
    -s May 6, 2010 2:30 pm

    This is old news. The point that is rarely discussed is fairly simple:

    EVEN IF TRUE, manipulation of the price of gold benefits us small fry. We get to buy our physical gold cheaper as a result, and in the process we chip away at the vast hordes that make such manipulation possible. So if you believe in the conspiracy, prove it by buying physical gold and silver.

    Note also that even if every word the whistleblower says is gospel truth, he only gives evidence of a very short (about a day or two) manipulation. This is reasonable; it’s not that hard to influence prices in the short term, but very difficult to sustain a price other than what the market would set.

    But nearly everyone jumping on this story touts it as proof of long-term manipulation of the price of precious metals. Not so.

    Notice that the GATA folks, the whistleblower, and most of the other parties complaining about price manipulation and conspiracies have a material interest in trading paper gold – futures and such. IF they are correct, and it’s a big if, they may have a legitimate gripe. But I don’t care for how the odds are arranged in the stock exchanges for big versus small investors – so I don’t trade there. Same principle here. If you don’t like the rules of the game, don’t play.

    The stuff about vast quantities of fake gold bars is eyewash. No evidence, just a bunch of unsubstantiated allegations. Nonsense. I have fake gold – because I look for it. I also have the instruments to detect it – including tungsten fakes. It’s not hard, and no fake fools a real gold business, ever. It’s too easy to detect fakes.

    Sure there are people making fakes, and some people foolish enough to buy them while hoping that they are real. Gold isn’t like that. When someone offers to sell you a gold bar worth $480,000 for $120,000, you have all the information you need. An ultrasonic tester is just a luxury.

Leave a Reply