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Catherine Austin Fitts: Another Gold Smackdown Coming?

by John Rubino on April 25, 2013 · 27 comments

Last weekend the disturbingly-brilliant Catherine Austin Fitts, publisher of the Solari Report, passed through town, giving us a chance to finally meet face-to-face. In the following excerpt from a much wider-ranging talk she explains the deeper, more sinister reasons for the recent action in precious metals.

DollarCollapse: It’s great to finally meet you, Catherine. The timing couldn’t be better, what with the recent, um, correction in gold and silver. What’s your take: was it driven by fundamentals or manipulation?

Catherine Austin-Fitts: We’re in a world where we have markets and we have management, so the question is which is dominant at any given time. In terms of fundamentals, the global economy is slowing, no doubt about that. The timing of the big drop in precious metals coincided with an announcement that growth in China had slowed. So there’s lower growth, particularly in the markets where there’s big demand for gold.

That tracks with the split about nine months ago between commodities and equities, when copper diverged inexplicably from the S&P 500. Can copper show that we’re in a powerful deflation and corporate earnings imply a recovery? Not at the same time. So either copper goes up or the S&P 500 goes down. If copper is right and deflation is the now the dominant theme, then people who need to raise cash will have to sell assets, including precious metals.

The argument for these being managed markets is that with Cyprus we saw the dawning of the realization that insured deposits may not be what they used to be and that regulators are planning bank resolutions without too-big-to-fail, which is to say at the expense of depositors and creditors rather than taxpayers. The Bank of England and Fed recently published an overview of how this would happen, with equity investors, uninsured depositors and creditors taking a big hit. There’s a lot of discussion in the blogosphere about the fact that that derivatives will have seniority in these kinds of circumstances.

Uninsured depositors and creditors in the fixed income markets are worried, and there’s a danger of real contagion in which paper wealth flows into physical precious metals. For regulators, the last thing you want is the gold price going to the moon while you’re trying to keep people in their bank deposits. In that circumstance gold becomes the safe haven, making it even harder to hold the bond market together.

So how to you make gold look riskier and more dangerous than an FDIC-insured deposit? You smash the price down. If you want to argue the case that this was a managed move, then I would say if you’re running the G7 nations you’re in the business of keeping the bond market going, so how do you keep trillions of dollars in the bond market that’s earning no money? You make the price look stable and make everything else look volatile.

DC: What does all of this mean for precious metals going forward?

CAF: I think we are in a long-term secular bull market for precious metals that primarily reflects the ongoing expansion of the money supply. In theory this could be wrong and the bull market could be over but I see an 80% chance that the primary trend reasserts. One of the reasons I believe this is that Mr. Global – that’s my nickname for the people who govern and manage the global economy — wants a managed rise. To grossly oversimplify, he used fiat currency to steal everything, but once he’s stolen everything he’ll want to flip to sound money to keep what he’s stolen. We’ve literally had a financial coup d’état and now that the coup is over Mr. Global wants to move to a sound currency. So to me this is simply a reset and doesn’t change the long-term trend. If I’m wrong about that and he doesn’t want a managed rise, then the system absolutely has the power to drive gold back to a low price.

DC: Based on the recent surge in demand for physical precious metals, it seems like the smack-down had the opposite of the desired effect. Instead of discouraging small investors the price drop has energized them. They’re converting their bank balances to gold and silver coins, and supplies at the retail level have evaporated.

CAF: The reports I’ve seen show that there is certainly demand for physical. The premium for 90% silver coins went from 3-4% to literally 12% and the market still didn’t clear there. So something’s going on. But I’ve also had reports from hedge funds saying they’re not having trouble getting physical in size. So the shortage is primarily at the retail level. At the same time there have been major transfers out of GLD and the other precious metals ETFs that dwarf the amounts being bought by individuals. The big question is, where is that gold going?

DC: So the takedown was about rebuilding physical inventory?

CAF: My guess is that they’re trying to bring in large inventory to cover a variety of tensions in the unallocated institutional system. If I need gold and want to confiscate as much as possible, I could pass a law and go out and take it. But you would never bring in as much as they brought in this past month by playing with the price and extracting metal from the ETFs.

DC: Still, if the goal was to tarnish precious metals’ safe haven status, the surge in buying implies that a lot of people came to the opposite conclusion. Will Mr. Global intervene again if the buying continues?

CAF: Normally when you see this kind of economic warfare it’s never just one whack. You’re trying to purge the market, and it’s hard to believe that the purge is over. If you look at the charts and know where the support lines are, once you move through $1,530 it’s easy to envision going all the way down to $1,100 and still be in the primary trend. If that turns out to be the case then we really are in for a very long-term bull market.

DC: But you still have your clients in gold, right?

CAF: To me gold is going to be at the very heart of what happens. It’s one of the great power positions. I have a hard time looking at it through whatever the price is because nominal prices are very much manipulated to play people. In an economic war if you allow your enemy to set the value of your assets you’re going to get played. It’s the case that we all have to buy food in dollars so we can’t just ignore what the dollar price of anything is. But as gold has gone from below $300 to where it is now, we’ve lived through some wild swings. It’s inconceivable to me that those wild swings, both up and down, are over.

The people managing the system are doing everything they can to tighten down the hatches. This is like a ship going into a storm and all the sailors are tightening everything down. Banks are announcing that you can’t take delivery in gold, you have to take it in dollars. The Bundesbank wants its gold back and the Fed says it will take seven years. Every day for months it’s been a different story, but every story is about institutions getting ready for a period of real trouble. They want their systems to survive a period in which millions of people say “I’d rather have gold than Treasuries”.

  • Tom

    I’d say this is a cogent summation of where we’re at with gold. Fitts is correct about the falling copper price pointing to a strengthening deflation. You see the same evidence with oil prices – Brent crude dropped below $100. I doubt gold will escape the downdraft as world economies slow. The real question is will there be a reset by the central powers and will it include a place at the table for gold. Gold is up 500% in ten years and prior to 2012 its price rise looked parabolic. I don’t think the decline is over yet. I also agree with Fitts that the gold bull will charge again. I’ll wait for a six month bottoming process.

    • pipefitter9_3

      “… falling copper price pointing to a strengthening deflation.”

      Huh? Then why is unleaded regular selling for $3.70/gal, even with declining sales volumes?

      If deflation was the risk, the authorities would jamming the gold price higher to mask it.

  • kopavi

    I’m sure I’m not the only one to notice that the recent bit of a rally in gold these last few days has generated what looks an awful lot like a bearish flag. Or perhaps not.

  • Robert

    Mr. Global is really the Empire. It may surprise people in finance, but for the Empire the POG or share prices is only a secondary priority. Power still comes from the barrel of a gun. And for the Empire military power over any combination of conceivable adversaries and now (more than ever) absolute power over their own citizens is the name of the game.

    The economic analogue of this is control over global resources.

    In general however the Empire hates gold. Their central banks will always collude with their money center banks to trash gold on the Comex any time they get the chance to. But the Comex is a paper tiger. If real gold is not being sold Comex shorts are going to get killed.

    So with few real buyers out there JP Morgan had a field day shorting gold and silver from 1981 through 2,000. Once China and India became major players the game was temporarily over.

    Now apparently the banksters have the perception that China and India are going to have less impact on the buying side of the metals markets. They also believe that the US is going to be energy independent soon and that will lead to an economic renaissance, and therefore a boom in share prices.

    This boom will be amplified by the relatively low growth rates in the rest of the world, which will keep commodity prices low and corporate profits high. This will also bring about the resurgence of the US dollar.

    So the banksters are going to bet that they can convince the weak handed holders of thousands of TONS of gold in Western ETFs to sell their holdings for stocks or maybe real estate. And they will do this by essentially naked shorting or smack downs on the Comex.

    Low commodity prices do NOT mean that the US is not going to boom. It just means slow global growth. So the banksters are saying that Catherine is wrong, you can have high corporate profits and low commodity prices living side by side, at least until China has reorganized its economy to one that is primary driven by internal demand and Europe has finished its next level of integration (with a few all powerful mega banks) and be ready again for growth.

    Once synchronized global growth happens again, then it will be the time for commodities and gold again. But until then the gold price will be driven by two factors. One how much the Empire can convince Westerners to disgorge their gold from their ETFs and how much of that disgorged gold will in fact be bought by Asians and developing world central banks.

    On the other hand the Empire may be lying (no, they wouldn’t do that:-), as to Americas energy production potential and with it its renaissance. In which case US share prices could be taking a long walk off a short peer. In which case we really will have a global deflation scenario, with the only short term remedy being money printing and therefore higher gold prices.

    Place your bets folks in the international casino. And hang on to your seats because as long as there are government empowered banksters there will be turbulence.

    • PaperIsPoverty

      Even if we had a surge in domestic energy supplies (not that we do), I don’t see what use we would make of it since we’ve hollowed out our industrial sector & gasoline sales have been at 90’s levels recently.

      We all know we’ve de-industrialized, but you really know it when you live near Detroit and Flint and other communities decimated in the process, now full of empty railway yards, empty ports on the Detroit River, the ruins of factories, in fact the ruin of an entire major city. So now we have energy? Yeah, well, maybe we can export that to someplace that actually makes stuff.

      We aren’t going to have growth. The elites know it’s a sham, a hallucinated economy, and they’d better get rid of their hallucinated paper wealth before the game of musical chairs ends… just as Catherine Austin Fitts suggests.

      • Robert

        It’s all about the energy. If it is there, yes there can be an American renaissance of sorts. Many if not all industries that relocated for cheap labor abroad will return to build plants close to energy sources. And just as they did not sweat using initially unskilled labor to work their plants in China they will retrain Americans for the new jobs.

        It is unlikely however that many of these jobs will pay all that much. This is not going to reverse the horrible effects of crony capitalism. The people who will benefit from this will for the most part be the top 20% of the population. There will be some trickle down but not enough to change long term trends towards inequality in income and net wealth.

        For that the average American is going to have to find a political party that represents them. No matter what propaganda you hear or read, economies operate within social structures not the other way around.

        Of course if the energy is not really there, then this is a scam (by guess who?) to pump and dump stocks, as you and Catherine suggest. In that case gold (IF AND ONLY IF YOU CAN HOLD ON TO IT) is the place to be.

        • http://twitter.com/Cannonfodder54 Ian Mathers

          Good points, Robert; however if the first point were true, Saudi Arabia would have become a major industrial nation over the last 70 years.

          • Robert

            Oil is just a raw material. In order to make something of it that is useful, you have to know what to do with it. And as oil producing countries make money just by sitting on something that is of value to others, they have little intensive to get off their duff, innovate a produce. That is the curse of oil.

        • PJ London

          I posted this 4 days ago, but advised clients 10 years ago of the same, as US-EU-UK economic model is insane and unsustainable..

          I have been expecting this because a) much of the physical gold was found to be tungsten with a gold plating, b) USA told Germany that they cannot have their gold, but only 20% over 5 years, c) Amro (and now others) told customers that they no longer have access to gold, but will have to take cash d) Swiss bank says government will not allow customer who deposited Gold bullion to withdraw it from the bank, e) US requires name and ID of all Gold / Silver transactions.
          What I think will happen is that the price of gold will be driven down, with few or no bullion deliveries. No-one will want to buy contracts and gold could go back to $500. One Friday after close in NY, there will be a world-wide (US EU, possibly South American countries, Africa, India bullion )announcement that all positions on contracts will be settled for cash at closing price.
          Then Governments will again give 2 weeks to turn in all gold at close price and any gold in private hands after this date will be contraband and seized with dire penalties, and now they have records of who has purchased / sold, and who is holding in Commercial banks .
          Gold will be Central Banks only, I do not know about China, Russia Middle East and will rise to $10k, $15k or more. Someone is quoting $50k per oz.
          Rothschilds make killing and little people will get scalped.
          I have no idea of time scale “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”
          — Rudiger Dornbusch

          My only comment is that once they decide to come for citizens assets, it won’t matter what form the asset takes. Cyprus style / deposits, Gold swap / confiscation, land taxes, seizing overseas cash (as undue tax avoidance) all will be sequentially grabbed once the move is made, welcome to the Gulag.

          “No matter what propaganda you hear or read, economies operate within social structures not the other way around.”

          I would love to debate that in another forum perhaps.

        • Bruce C.

          You have an interesting theory but it seems a little inconsistent.

          Your argument seems to be based on the premise that the US will soon be energy independent and that will fuel an economic renaissance, at least until China/India/Europe gets back to growth.

          First of all, besides the US possibly producing more oil/gas domestically, why would that matter? Fracking technologies are only viable if the oil price is relatively high. Just because less oil would need to be imported doesn’t mean it would be cheaper, so what economic difference would that make? Why would so many manufacturing companies incur the expense of returning to the US, and paying higher operating costs because of so much US regulation, just to be “near” energy sources?

          Also, why would corporate profits be so high if the rest of the world is in slow growth mode, that 80% of the US population have low incomes, and the dollar is strong? That’s a triple whammy AGAINST higher nominal corporate profits.

          And why has China continued to accelerate their purchases of gold lately, and India’s capital controls on gold not slowed its demand? You’re right that gold ETF investors have weak hands but at 100-1 leverage that means only 1/100th of the ETF sales dumped physical gold on the market. I guess that’s why the Asians couldn’t buy more than they did. Much less physical gold was released from weak hands than most realize, and the Asians are buying more than ever because of the lower price.

          Furthermore, your ‘US energy-independence’ theme is an easy concept for people to understand, so why isn’t that promulgated more in the financial news to herd the sheeple into stocks? It sounds patriotic. Instead all we hear about is the Fed isn’t going to stop monetizing the deficit, so it’s “risk-on” baby! Let’s see how important domestic oil production seems if the Fed stops painting itself in a corner. And if the Fed doesn’t stop, oil and gas prices are just going to get a lot higher, along with gold, especially if the demand for oil and gas drops off.

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  • http://www.facebook.com/people/Keith-Cossairt/1203480379 Keith Cossairt

    if the scam dont work…..
    then its storm troopers a comin.

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  • http://twitter.com/demianbell Demian Bell

    The British Empire is behind all of this.

  • Tonto

    If copper is going down, then as a similar commodity, that “powerful deflation” is going to drag going down too. That’s simple enough to understand. Consumers simply don’t have enough money to buy more gold at this point.

    When I read articles like this, articles written with the obvious purpose of hyping gold, I cannot help but discount the authors. Not everything in the daily chain of individual events can reduce to the conclusion that “investors” should go long in gold and silver.

    But here again we have such an article. These writers pull this gold prognostication crap out of their lazy fat asses I think. There’s a June 2011 article on the web that gold- believers should read. Google, “90 analysts who foresee $5000 gold.” It’s worth the laugh.

  • billy bob

    until the bankers are arrested and sent to prison and the dollar collapses the criminal manipulation will continue, until the politicians who allowed the bankers and other institutions to rape the country are arrested and tried for treason, nothing will ever change in america or the world.

  • CogitoMan

    To all who have no clue…

    I am fully invested in real gold since right after 9/11. I admire Catherine for many things, political and economic but in this case she is wrong on few issues. First of all indicators show that GLD is PAPER MARKET backed by very little if any real gold. Most of you don’t know that this paper can be sold SHORT (same as company shares) not by small investors but by big players like banks and hedge funds. It was specially created for small guys like you to keep them out from real thing….it’s just another form of paper gold. On top of that we have HUGE outflow of eligible gold from two most important markers that trade gold, Crimex aka Comex and LBMA. During the last few months they have lost most of their eligible gold to the outflows. JP Morgan vault (part of Comex storage system) is EMPTY now. They, according to most uncompromised professionals who spent their lives trading gold like Eric Sprott, Jim Sinclair, Egon von Greyetz, Andrew Maguire Rick Rule and many many others, they all are saying one and the same thing….the gold is gone and the last push back by JP Morgan (sole seller of 95% of total paper gold in that big swoon) is an act of desperation. Yes they can do another raid on paper gold but the only result will be that spreads between paper gold and real thing will just increase to reflect that faske paper price

  • CogitoMan

    Oh sorry I have to apologize for the mistake…

    Here is the real thing :)

    JPMorgan Accounts For 99.3% Of The COMEX Gold Sales In The Last Three Months


  • Franklin

    Excellent discussion that jibes with everything my own research and observataion finds. Readers of this would appreciate the articles of Emmet Kodesh on Seeking Alpha.
    Good luck to everyone surviving the grand game.

  • http://twitter.com/3rdbasegeorge Nicholas O’Brien

    The Russians et al have already learnt their lesson via the collapse of the Soviet Union. The Politicisation of Progressive Tax Rates destroys the efficiency of regulation. The resulting complexity and inconstancy makes total avoidance desirable and politically rational. The solution? De-politicisation, political efficiency, simplicity and constancy. The vehicle? The Russian Two Tier Flat Tax Rate, a strong security state and a highly critical and motivated political culture. Everything else is as inevitable as the collapse of the Soviet Union.

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  • Ducksfeet

    One thing that CAF forgot to mention is that the most populated areas of this planet are not keen on being ruled by the UK and US ,and Europe would think twice about letting go of the connection to the US dollar meaning looking at special drawing rights when it comes to energy transactions.If China can secure it’s energy needs and improve countries economies that provide that energy they will be China’s next consumers like Iran,Iraq,Russia,With India being both consumers and providers of new technologies.Brazil and the other countries in South America have had past bad experiences with the IMF and the World Bank that take there orders from US and Europe they would gladly provide raw material to both China and India using a BRICS currency rather than the US dollar.That is why the US wants took install pupit dictators in the Middle East so they can dictate to Russia and China that the US currency is and will remain king.But the problem is the US is bankrupt and they have and are destroying the ecology of there country and have neglected there infrastucture for way to long. This is the real obsticle that the US will face if it is to gain control of the global economy and maintain dollar hedgemony.

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