The desparation of the FED.

Imagine yourself to be Bernanke. You have inflated the monetary base like if there were tomorrow. You have kept the money sequestered as reserves, thus avoiding rampant inflation. So far. But, things don't look so good. While, the US Dollar looks good against the Euro, the Yuan hit its highest against the Dollar. Time to start unwinding the printing while it's possible. Or so you think.

Number one on the to do list is to establish in people's mind that the place for funds is in the US Dollar or the Stock Market. What stands in the way of this? Well, the gold price that is inching higher. So, in order to preserve the value of the Dollar, the gold price must be knocked down. And that's what happened.

For weeks, the Media has spread the drivel that hedge funds were dumping gold and that the Bull Market in gold was over. Short positions in gold and silver reached historical highs. Then yesterday an avalanche of paper shorts hit the COMEX knocking gold down $75 an ounce at one time. Gold finished the week $63/oz down. I calculated the sum needed for doing this and it turns out to be $10B. Is gold selling for 1,501/oz on the London Bouillon Market? No. There are no supplies as the lower price was achieved entirely with paper (naked) shorts.

Bernanke knows that if gold is allowed to rise, inflation will take off and the FED will have to raise interest rates. Higher interest rates will crash the Stock Market and the economy.

What about Larry's predictions? Correct so far. Does he have the magic formula that predicts gold prices? IMO, NO! What Larry must have is a pipeline to the FED so he knew the FED would crash the gold price.

Does this takedown herald the drop to 1,200 as Larry forecasts? I do not think so. The East is eager to buy gold, but supplies have dried up. At some point, the actual metal will win.