Best of the Week
Most Popular
1.Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - Nadeem_Walayat
2.Gold And Silver – A Reality Check - Michael_Noonan
3.The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - Nadeem_Walayat
4.Stock Market S&P 500 Volatility-Based Price Probability Range - Richard_Shaw
5.A Stocks Bear Market Is Now More Likely Than Not - Richard_Shaw
6.Money Supply and the Fed’s Serious Inflation Risks - Zeal_LLC
7.More Selling for Stock Market, Gold? - Brad_Gudgeon
8.Gold, Silver Precious Metals: a Critical Week Ahead - Rambus_Chartology
9.Gold Price Change in Character - Gary_Savage
10.Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - TLSReport
Last 5 days
Stock Market Rally May be Broken - 9th Oct 15
Gold Stocks Major Breakout - 9th Oct 15
Contrarian Investing - Being the 10th Man - 9th Oct 15
U.S. Can Expect Recession in 1-3 Years - 9th Oct 15
The Greater Economic Depression Deep State - 9th Oct 15
Financial Markets Calm Before the Storm? - 9th Oct 15
Stock Market History Calling, Says Performance will be Crappy for Another ~10 years! - 9th Oct 15
Why This Feels Like an Economic Depression for Most People - 9th Oct 15
Dr Copper Back from the Dead - Time to Buy or Blink - 8th Oct 15
Glencore Rout Blamed on Short Sellers Playing With CDS - 8th Oct 15
The Real Reason for the Refugee Crisis You Won’t Hear About in the Media - 8th Oct 15
US Stocks: The [Trend]Line Between Bull and Bear Market - 8th Oct 15
Bundesbank “Reassures” Re. Gold Bullion Reserves as Deutsche Bank Shocks With €6 Billion Loss Warning - 8th Oct 15
How Our Aversion To Change Leads Us Into Danger - 8th Oct 15
Moving Stem Cell Research Forward: Bernie Siegel of the Genetics Policy Institute - 8th Oct 15
Stock Market VERY IMPORTANT Turn Date - 7th Oct 15
The 5th Convergence…An Economic & Financial Superstorm That Will Devastate America - 7th Oct 15
Summers Grades Janet Yellen's Fed Performance 'Incomplete' - 7th Oct 15
Gold Versus Central Banks Paper Ponzi - 7th Oct 15
QE3 is Over Get Ready for QE4 - 7th Oct 15
How to Profit from Government Mandates in Biofuels - 7th Oct 15
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Gold Price Suppression Game Goes On

Commodities / Gold and Silver 2013 Apr 08, 2013 - 09:22 AM GMT

By: Alasdair_Macleod

Commodities The slide in precious metal prices has done much to undermine investor confidence, yet the indications are that demand for the physical metals remains strong. This leads many observers to comment that paper gold and silver and not bullion are driving prices. The current sell off is a combination of long paper positions capitulating, new short positions being opened by trend-chasers, and importantly, bullion banks squaring their books.

A better way to differentiate between futures and forward markets and physical demand is to regard the former two as used by speculating investors and the latter by buyers seeking financial protection from systemic risk. In the middle there are those who buy futures to take delivery, but they are a minority. This divergence of motive explains why paper markets seem to be playing a different tune from the physical market.

While speculating investors are losing their nerve, they are ignoring three recent bits of information worth considering. In a radio interview given by former Assistant Treasury Secretary Paul Craig Roberts to Goldseek Radio over Easter he concludes that the Fed is suppressing the gold price so that markets do not lose confidence in the dollar and drive up interest rates. His reasoning is clear, logical, and importantly, well-informed. The Treasury Secretary, who was his immediate boss, has a duty of oversight of the Exchange Stabilisation Fund, which was set up in 1934 to “deal in gold and foreign exchange and such other instruments of credit and securities as he may deem necessary….” Roberts therefore knows what he is talking about.

The second bit of information was research into US imports and exports of gold, conducted by Eric Sprott and Shree Kargutkar which analysed US trade statistics since 1991 to conclude that at least 4,500 tonnes of gold over and above US gold production and recycling had been exported, and possibly as much as 11,200 tonnes when private sector demand in the US is included. This gold can only have come from official sources, which confirms deductive analysis over the years by our own James Turk and Frank Veneroso, that substantial amounts of gold have been supplied into the markets by Western governments and their central banks.

The third bit of information was my paper written for GoldMoney a month ago that concluded that the Bank of England’s custody of monetary gold cannot be more than 3,320 tonnes, the balance of a minimum of 2,220 tonnes being non-monetary gold held mostly for governments and perhaps sovereign wealth funds. So contrary to appearances, at a maximum, only 60% of the gold in the Bank’s custody is actually monetary gold.

Furthermore, when news such as the Cyprus banking debacle hits the headlines gold and silver get sold down aggressively. This contrary action is consistent with intervention designed to bolster confidence in paper money. The evidence that central banks and their agencies have been suppressing the price of gold is therefore overwhelming, and Paul Roberts’ analysis confirms why this is happening. When Western central banks rig markets, punting against them is a mug’s game. But for those that recognise that central banks have dug themselves into a hole from which there is no escape for the banking system, governments and ultimately paper currencies, there is an irrefutable logic in possessing physical gold and silver.

Instead of worrying about prices going down, we should count our lucky stars for the gifts of artificially cheap gold and silver, courtesy of our central banks.

Alasdair Macleod runs, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2013 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History