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Precious Metals Market Manipulation?

Posted by
May 18, 2012
in Blog

 

 by Doug Casey

For many years now, a meme has been floating around that the prices of gold and silver are being manipulated, which is to say suppressed, by various powers of darkness. This is not an unreasonable assertion. After all, the last thing the monetary powers-that-be want is to see is the price of gold skyrocketing. That would serve as an alarm bell, possibly panicking people all over the world, telling them to get out of the dollar. It’s assumed, by those who believe in the theory, that the US Treasury is behind the suppression scheme, in complicity with a half-dozen or so large bullion banks that regularly trade in the metals.

The assertion is bolstered by the fact that governments in general, and the US in particular, are always intervening in all kinds of markets. They try to control the price of wheat and corn with various USDA programs. They manifestly manipulate the price of credit (interest rates), now keeping it as low as possible to stave off financial collapse. And they may well be active, through the so-called Plunge Protection Team, in propping up the stock market. They were largely responsible for the boom in property, through numerous programs and parastatals like Fannie Mae and Freddie Mac. Why, therefore, shouldn’t they also be involved in the monetary metals? Central banks regularly intervene in (i.e., manipulate) each others’ currencies. So it’s not unreasonable to imagine they’d try to manipulate gold as well.

In fact, the US and other governments did try to suppress the gold price from 1961 to 1968 through what was known as the London Gold Pool. The US alone persisted in trying to do so until Nixon devalued the dollar and closed the gold window in 1971.

But if it was ever doable, that was the time. Although nobody knows exactly how much gold there is above ground, a reasonable guess might be six billion ounces. There was a possibility of controlling the price, in the days of the London Gold Pool, when there were only three billion ounces in existence and when all the gold in the world was worth only $105 billion ($35 x 3 billion = $105 billion).

Today, however, the value of the world’s gold is around $10 trillion ($1,650 x 6 billion = $10 trillion), nearly 100 times as much. And governments own about a billion ounces, only 16% of it, whereas the last time they tried to control the price they owned about 1.1 billion ounces, which was about 35% of the world supply. And the governments, their central banks and almost all large commercial banks are bankrupt; they have vastly less financial power than they did in the days of the London Gold Pool. Why would they try to do something that’s so obviously a losing game?…

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