Thursday, October 25, 2012

Gold Price Manipulation

Gold Price Manipulation
Gold price manipulation is not new and has frequently been noted by the Gold Anti-Trust Action Committee (GATA).

As the instability of world economies grows the intensity and proliferation of gold price manipulation grows.
This nefarious activity has been around since at least 1934 when the Gold Reserve Act was instituted to set up the Exchange Stabilization Fund within the Treasury Department.  It was authorized to trade in gold and other financial instruments.
Since then the Gold Reserve Act has been amended to allow the Exchange Stabilization Fund to trade in an expanded range of financial instruments and to do that in secret, away from the prying eyes of Congress AND Jo Blow public.*
As well as a historical record of gold price manipulation which can be found at the GATA website, a recent report originated by the German Government’s auditors was critical of the German Central bank, Bundesbank for its lack of diligence in custodianship of Germanys Gold Reserves.
According to GATA, “The auditors report disclosed that the Bundesbank had secretly sold some of the German gold reserves vaulted at the Bank of England in London. But since the sale of Germany's gold in London apparently did not reduce the total official holdings in Germany's gold reserve, the sale was probably part of a gold swap with another central bank. That is, it probably was a transaction in which Germany sold its gold in London on behalf of that other central bank and in exchange took title to gold owned by the other central bank and vaulted elsewhere.”**
Although GATA have been in front of the investigation into the deliberate gold price manipulation by Central banks, they are not the only ones to observe and, indeed, take advantage of this.
The Chinese Government, for example, has been well aware of the price of gold firmly held down and has taken advantage of that with extraordinary highest ever buying of gold over recent years. 
U.S. State Department cables obtained and published by Wikileaks last year exposed the Chinese Government awareness of the gold suppression scheme and china wisely, for them, did not expose it since it enabled them to buy gold, and even gold mines, at a fire sale price. 
In an interview with, Zhou Qiren, Dean of Peking University’s National School of Development, he said, “… a global system in which the values of currencies were pegged to gold would make “an excellent monetary system.” He went on, “if the currency of each major country is bound to gold, financial headaches would of course be reduced ... it would be impossible for [U.S. Federal Reserve Chairman Ben] Bernanke to print 600 billion USD to purchase long-term debt ... (and) the gold standard would effectively prevent each country’s government from recklessly levying ‘inflation taxes’ domestically and passing troubles to others by manipulating currency exchange internationally.”
In December 2011, Zhang Jianhua, research director of the People’s Bank of China, also observed that “no asset is safe now. The only choice to hedge risks is to hold hard currency — gold.”
So China knows all about the gold price suppression scheme, and may be a jolly good indication why China is accumulating gold so furiously. 
As financier Christopher Potter points out in a column for the Lehrman Institute’s, 
“China is preparing for a world beyond the inconvertible paper dollar, a world in which the renminbi, buttressed by gold, becomes the dominant reserve currency.” Potter’s article, “China’s Preparing for the End Game — Are We Paying Attention?” points out that the Chinese government is expected to own more gold than the U.S. government in five years.”***
What will happen to gold price manipulation then?  More, what will happen to the gold price then?
Perhaps now is the time to buy gold while the price is still at fire sale levels.

Thursday, October 18, 2012

Gold Price and Currency

Gold Price and Currency
What is the relationship between the gold price and currency?  More and more analysts and financiers are beginning to realise that printing a never ending stream of currency is not going to bring the world finances out of debt. In fact it simply exacerbates the problem.

This is affecting the gold price as, while the value of gold remains steady, more currency is needed to buy gold and so the apparency is that the price of gold changes. As was recently pointed out by one analyst, this is grabbing the wrong end of the stick.  In point of fact it is not the value of gold that rises and falls, is the purchasing power of national currencies that rise and fall.  Gold value continues to remain stable as it has done for hundreds of years.
This persistent and continual printing of currency does not accumulate wealth. It simply increases the supply of currency and reduces its ‘rarity’ value.  The more money that is printed, the less value it has, and so the more is needed to pay for goods and services. The more currency printed in an effort to pay off debt the more the debt will increase as it is the very act of printing worthless currency that increases debt. The more debt is created through the printing of currency and the more currency is then printed to pay for the debt created by the printing of money. It’s not just a dizzy circle it is also a dwindling spiral.  
Gold, on the other hand, does not create wealth either.  But unlike currency, gold IS wealth. Gold does not generate a cash flow. It attracts no interest.  Gold is money itself.  
When the price of gold rises there is simply a transfer of wealth from the person who holds the currency to the person that holds the gold.  It is not new wealth created but simply a transfer of wealth.  One could use gold to buy goods and services and, in fact, this has been done and is being done many times.
In addition, gold is ‘good value’. Its value does not become eroded as currency does by the accumulation of more gold.  One does not ‘print’ more gold.  One can dig up, out of the ground more gold and one can accumulate gold.  The value of gold is not reduced by the acquisition of more gold.  All the gold dug up out of the ground has not reduced the value of gold one wit.  All one has done is simply accumulated more wealth.
Some have said that gold can be overpriced.   This is nonsense of course as, again; the price of gold is simply a reflection of how much currency is needed to buy gold.  
Is gold over valued?  Hardly.  The value of gold in purchasing power of goods and services has not changed in the past 50 or so years and seems unlikely to change in the foreseeable future.  Again gold is not an investment, it is simply money.  It has a purchasing ability. It can be exchanged for goods, services and indeed even currency.
The true relationship between the gold price and currency is becoming more apparent in that as more and more currency is printed to solve debt problems the more currency will be needed to buy gold and so the price of gold will continue to rise.

Good for those people that prefer the gold price to currency.