GO
Loading...

Ron Paul Blames Obama Administration, Goldman for Gold Decline

Tuesday, 23 Apr 2013 | 7:26 PM ET
Ron Paul's Gold Rant
Tuesday, 23 Apr 2013 | 1:00 PM ET
Former Texas Congressman Ron Paul goes off on gold, including Goldman Sachs' latest call. He also has a thing or two to say about the Fed, with CNBC's Mandy Drury and the Futures Now Traders, Jim Iuorio at the CME and Anthony Grisanti at the Nymex.

The recent 13 percent two-day plunge in gold led investors to look for reasons. People have blamed the talk of Cyprus selling their gold, gold's general underperformance this year, or a larger move away from risk-off assets.

But Ron Paul points his finger at two potential culprits: The Obama administration, and Goldman Sachs.

In a wide-ranging interview on CNBC.com's "Futures Now," the former U.S. representative from Texas noted that 53,000 gold contracts had been sold amid gold's decline, potentially moving the market. And Paul implied that someone in President Obama's administration could be behind it.

Getty Images

"When that 53,000 contracts sold in one sale, who did that? Was that the President's Working Group on Financial Markets, or somebody else?" Paul said.

Paul seemed to be referring to a comment that BullionVault Vice President of Business Development Miguel Perez-Santalla made to USA Today (USA Today: "Gold Badly Tarnished"), in which he told that paper that 53,000 gold contracts were sold on Sunday night, furthering the sell-off that had begun on Friday.

The President's Working Group on Financial Markets is actually a little-understood group that President Reagan created by executive order in March of 1988 as a response to 1987's "Black Monday" crash. Working under the Treasury Department, they periodically recommend reforms of the financial markets.

So did this secretive group, working under a government directive, purposely crash the market by engineering the sale of 53,000 gold contracts as former Representative Paul seems to suggests?

Highly unlikely, say some traders.

"It would be news to me, and a lot of people, if the government's hitting the open market like that," said Jeff Kilburg of KKM Financial. "It's a head-scratcher."

RBC Precious Metals Strategist George Gero said that "there was more to it" than any single sale.

"Since September, we lost open interest in gold steadily," as money "went to better-performing assets," Gero explained. "Gold has been a very poor performer all year, as big triple-digit stock up moves were a headwind."

Dennis Gartman, the editor and publisher of the the Gartman Letter, was similarly skeptical. "The gold market is filled with all sorts of conspiratorialist thinking," Gartman wrote to CNBC.com. "Do I think that the government trades futures in gold? Probably they do when panic hits, but I have my doubts that they want to be the creators of panic."

But the decline in gold has more than one culprit, according to Ron Paul, and he pointed his finger at venerable investment bank Goldman Sachs. The firm made a widely followed and wildly prescient call on April 10th to short gold. In retrospect, the call was itself pure gold, and came just as the shiny metal was about to embark on its worst two-day crash since 1980. After the gold short turned out to be very lucrative very quickly, Goldman reversed course on Tuesday, and instructed clients to cover their bearish bullion bets.

(Read More: Goldman Flip-Flops on Gold)

When it comes to Goldman and their calls, "I think they obviously look at the market, and they have ulterior motives, and they make a lot of comments and I have no idea what their purpose is," Paul said. "We have no idea about whether that's accidental, or what."

Goldman Sachs, for their part, told CNBC.com earlier in April that their research "is independent from other activities of Goldman Sachs."

(Read More: Should Traders Trust Goldman?)

So perhaps the government and Goldman Sachs led to gold's drop, in Paul's view. But he still says that in the long-term, "if you print money, the price of gold in terms of dollars will go up."

Still, the near-term outlook for gold remains hazy, in the opinion of this former congressman.

"This year isn't even over yet, so who knows what's going to happen," Paul said. After all, "Goldman Sachs might affect the market again some day."

— By CNBC's Alex Rosenberg

Watch "Futures Now" Tuesdays & Thursdays 1 p.m. ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter! @CNBCFuturesNow

  Price   Change %Change
GS
---

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.