Money always moves from weak hands into strong hands
Over the last 15 years I have come to realize just how much disinformation and simply bad information there is available to readers of financial matters. Much of what you watch and hear is simply wrong. People wonder why they consistently lose money and it's simple. The best-informed investor is the most profitable investor. But that's not in terms of quantity of investing information; it has far more to do with quality of investing material. Listen for the signal and learn to ignore the noise.
If you reduce investing to the financial atom level, it really has to do with money flow. Money always flows from weak hands into strong hands. That's something you should have learned in kindergarten. The smart money buys at bottoms and sells at tops. The dumb money sells at bottoms and buys at tops. I've heard that 70–90% of investors lose money and if the number is accurate, that's why.
So anytime you make an investment, forget location, management and balance sheet. Look to see what the smart money is doing and what the weak hands are up to. Do the opposite of what the dumb money is doing. That makes you the smart money automatically.
Nowhere is this truer than with commodities. The amount of disinformation is absurd. No matter if you worship at the house of God the Father, God the Son and God the Holy Gold, metals are an investment first and a religion last. Those who claim gold and silver are religions have no more credibility than any other T.V. Bible thumpers. They want your money and they want you ignorant. An ignorant person can never grow rich.
So when you hear about gold derivative time bombs, naked short selling, bullion banks and Comex defaults, you know that you are listening to the scammers. There is no such thing and they know it.
If you take a gander at the numbers for derivatives from the BIS, you can easily see that interest rate derivatives totaled $384 trillion at the end of December 2015, while gold derivatives only totaled $286 billion. While $286 billion sounds like a big number, compared to interest rate derivatives, gold is less that 2/3 of 1%.
In other words, a "bullion bank" front running interest rates by one basis point would have to manipulate gold by $13.40 an ounce to accomplish the same thing. And that just doesn't happen. One basis point is tiny and $13.40 moves in gold are far larger in context. In short, banks don't give a damn about the price of gold or silver. Why should they with interest rate derivatives being 134 times bigger than gold derivatives?
Let's take a look at the COTs and see what they tell us. As I said before, anyone talking about bullion banks being short gold doesn't know what they are talking about. The U.S. Commodity Futures Trading Commission (CFTC) reports producer merchant or processor/users. Those are the commercials not bullion banks.