This first part is by Lou Scatigna and the second part is from myself and from someone that was once on the inside.
The Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.
A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big too fail” balance sheets. The financial system would be in turmoil, and panic would reign.
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.
The Fed HAS USED naked shorts in the paper gold markets. Goldman Sachs wants to trade more BONDS. AND - Goldman would fail from having problems meeting the required regulations of too big too fail. The Fed wants Goldman to sell many more bonds, where many banks aren't interested in selling as many, because their client base prefers equities. So Goldman and the Fed made the NEW DEAL. ALL other bullion banks have a hand in this and have shorted including JPM. The Fed knows that QE is on the line and must defend the dollar, so gold was the victim. The fall in metals will not last S + P.