Due to the strong impact gold prices have on interest rates and government bond rates, many analysts believe the price of gold has been manipulated by bullion trading banks, central banks and the U.S. Government.
While this certainly isn’t the first we’ve heard about manipulation in the gold market, it’s the first we’ve chosen to discuss it more in-depth.
One expert alleging manipulation is Bill Murphy, chairman of the Gold Anti-Trust Action Committee, or GATA. In comments to the International Business Times recently, Murphy claims that “It’s been an ongoing maneuver, especially of late. There has never been an asset class that’s been going up 12 years in a row.”
Murphy goes on to explain that gold prices have been artificially low for the last 12 years and that “…this gold cartel only allows gold to advance so much in a year.”
Another official at GATA, Chris Powell, cites a 1988 study by then Harvard economics professor Lawrence Summers, who later became Treasury Secretary in the Clinton administration.
Powell says the close correlation between gold, interest rates and government bond values is the main reason why central banks have tried to control, or “…usually suppress” gold prices. He goes on to say that gold is “…the ticket out of the central banking system, the escape from coercive central bank and government power.”
But how does this manipulation take place? We certainly understand it’s easy to make accusations when things don’t seem to be going your way. A detailed analysis by Paul Mylchreest in his Thunder Road Report provides some insight into this manipulation, which was kicked into high gear following the downgrade of U.S. sovereign debt last August.
The former resource industry analyst uses a set of daily gold price charts that he claims shows absolute proof of market manipulation.
Through these charts, Mylchreest claims that market sale algorithms take effect once gold prices rise by a certain amount. According to the analyst’s observations, these “interventions within interventions” occur at specific times on a regular basis. He uses gold market data from February 29th of this year to make his point.
That morning (London time), the European Central Bank announced it made nearly over $700 million in low-interest loans to banks in an effort to ease the ongoing debt crisis in Europe. Almost immediately, gold prices raced higher on the news. But almost just as fast, the price retreated to below the level it was at when the credit infusion was announced.
Absent any manipulation, GATA’s chairman Bill Murphy says gold could advance anywhere from $3000 to $5000 an ounce. He goes on to say that when gold is under pressure like it is now, investors should be “…looking to accumulate on these dips.”
“It’s setting up an opportunity of a lifetime,” explains Murphy.
If gold is manipulated I’d say not nearly as much as silver. Central banks hate silver for the competition as a competing currency. The world went of the silver standard starting with Otto van Bismark and Germany in 1871 the US followed suit in 1873 with the coinage act. Say thanks to earnest crud who was a bank of England lobbyist. That’s when the 16:1 gold ratio was broken. Silver was made legal tender in 1878 again but the ratio wasn’t the same. Interesting enough. The US went on the silver standard in 1934 after FDR gold confiscation. I think gold and silver will again become the backing for currencies in the near future.