Lawrence Williams: Gold Price Manipulation – Probably; Conspiracy – A Matter of Semantics!

LONDON – Is the gold price being manipulated?  There are those who say no, while others say yes – notably The Gold Anti Trust Association (GATA) – and on balance it looks to an impartial observer (relatively) that the answer is probably in the affirmative.  But perhaps no more so than any other commodities and some stock prices.  There is a whole mammoth industry out there – the big banks, hedge funds etc. – whose whole purpose is to make money from money and the more you have in the first place the easier it is to do.  Not by producing anything useful, but through manipulation of prices through short selling in huge volumes to drive prices down, buying on the turn, allowing prices to rise back up, taking profits, then more short selling to drive prices down again and the cycle continues.  This works better in a bull market, which gold has been in for the past ten years or so.

The amount of money that can be devoted to such exercises is almost beyond belief – and the regulators turn a blind eye to such blatant manipulation that works strongly against the small or even medium-sized investor in favour of the really big ones.  If there is anything that may bring the capitalist system crashing down it is, perhaps, the power of big money to rule all our lives.  They are not doing God’s work, as Goldman chief Lloyd Blankfein stated, but more like Mammon’s.

Sometimes they get it wrong – and when that happens badly the world teeters on the brink of economic collapse as happened with the subprime mortgage fiasco (basically another financial institutions’ manipulation affair).  But do the people who caused the problem in the first place suffer – for the most part no.  They are simply too big.  Maybe the odd institution is allowed to collapse, but the majority go on as before, bailed out hugely by government money, while the bank executives continue to pull in their obscene bonuses.  Meanwhile the taxpayers, most of whom have little by comparison in the first place, are bled dry to pay for the government (and big bank) excesses.  In the U.S.A. the frightening thing is that virtually all the government’s financial administrators have come out of the big banks – notably Goldman Sachs – and are from years of financial brainwashing totally predisposed to support the bankers and their agenda.

Jason Hamlin of the Gold Stock Bull Letter has just published an interesting analysis – illustrated with daily gold price charts – of what he sees as the pattern of such short sales depressing the gold price immediately ahead of options and futures expiration dates each month this year – in some cases very sharply indeed.  Of course the savvy investor can note these movements and climb in on the back of the banks by trading down or up on the same days assuming the big money is, in fact doing this!

But, in our capitalist system such trading is an integral part of the really big investment sector’s raison d’être and it is, perhaps, the moral objections of just using money to make money that gall. 

But enough moralising.  The ‘manipulation’, if you want to call it that, is a continuing part of our financial lives and, unless it is legislated against we probably have to live with it.  But whether or not there is a worldwide conspiracy to suppress the gold price is a little less clear. 

Certainly there is currency manipulation by governments and central banks to maintain the values of certain currencies vis-a-vis others.  The recently ended Chinese yuan peg against the dollar, however unjustified by financial reality, has been a prime case in point.  And virtually no-one thinks that the ending of the peg will actually result in a free float of the yuan against the dollar.  It will remain tightly controlled by the Chinese who have the money available to do so. 

If one looks at gold as a currency, which the precious metals proponents do, then it is almost certainly just one of the currencies which is being manipulated by central banks and their allies to exert control on the global financial balance – and if one looks at the U.S. Fed as an extension of Goldman Sachs, which many do, then the big banks are, by association, part of the system.  Because gold is thus a currency against which the US dollar is compared, then by logic, there is probably some attempted control of the gold price (which could in theory be upwards or downwards) by the U.S. Fed and its banking allies in play at any given time – and perhaps by other nations who wish to keep the dollar stronger than a rapidly rising gold price would suggest.  Whether this is actually a ‘global conspiracy’ probably depends on one’s interpretation of the word. 

Perhaps whether one believes in a conspiracy theory or not thus all boils down to a matter of semantics.  The main difference between gold and most other commodities (including perhaps silver) is that gold’s primary usage is monetary, and thus the main area of demand is from investors and bankers (jewellery demand in much of the world is actually investment related), while the others are more controlled by their key demand sources in industry and thus more directly dependent on the state of the global economy.  The one can thus be used to try and control/stabilise the global economy, while the others are dependent on the economy itself. Wheels within wheels.