Best of the Week
Most Popular
1.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
2.Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - Clive_Maund
3.UK Regional House Prices, Cheapest and Most Expensive Property Markets - Nadeem_Walayat
4.US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - Rambus_Chartology
5.Silver Price, COT, US Dollar Updates and More - Dan_Norcini
6.Will Gold Price Drop Below $1000 Soon? - Brad_Gudgeon
7.UK Regional House Prices Analysis - Video - Nadeem_Walayat
8.Crude Oil Swinging For The Fences - A 20 to 1 Option Play - Bob_Kirtley
9.Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - Bloomberg
10.UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - Nadeem_Walayat
Last 5 days
Globalist Lockdown is here to Stay - 1st Dec 15
Bank Regulations Continue To Hinder The U.S. Economic Recovery - 1st Dec 15
Thanksgiving Amid the Terror Threats - 1st Dec 15
Collapsing Global Economic Trade - 1st Dec 15
Gold Demand in China Heading For Record and Reserves - 1st Dec 15
Stock Market Mixed Expectations Ahead Of December, New Economic Data Releases - 30th Nov 15
The First Prophet - The Day God First Spoke to Man - Video - 30th Nov 15
America's Rendezvous With Destiny - The Fourth Turning - 30th Nov 15
Stock Market Consolidation Week - 29th Nov 15
A Black Friday for Gold Prices - 29th Nov 15
Politicians Driving The World Towards War - Fourth Turning - 29th Nov 15
Stock Market Down Monday, Gold Price Bottoming? - 29th Nov 15
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

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