Gold – a strange story


I’ve been trying to reconcile the price of gold lately. The below linked page as well as the embedded youtube video (mentioned in the article – long but worth the watch), are illustrative of the reasons behind the recent price of gold.

A few tidbits I’ve picked up and wonder about – outside of this article:

U.S. Quantitative Easing and 0.0% interest rates should have inflated the dollar. They haven’t. One of the reasons is that the central banks who have received the QE have basically sequestered 2/3’s of this fiat cash on their balance sheets rather than loan it out where it would have an impact – an inflationary impact. (The same central banks as those below.)

The U.S. Fed has a catch 22 situation: their QE 1,2,3,4 has inflated (or should have and will eventually) the dollar. They like inflated dollars for various reasons – cheaper to pay debt with worthless dollars. But an inflated dollar begins to cause concern for countries that buy the U.S.’s debt. So the Fed want’s a strong dollar too to ensure that the USD$ remains the reserve currency of the world.

Foreign currency central banks have also been quantitatively easing (weakening their currencies) which has pushed the dollar higher; a strong dollar equals weak gold (and most other commodities).

The Commitment of Traders report on gold and silver have dipped to very low levels ( per a custom chart I build (below)). When the COT line is low (or way low) commercial buyers tend to step in buy and lift price.

These points are just oddities that raise more questions as to why gold and silver are so price depressed. Why is gold (and silver) falling like they are?

This page helps to answer that question.

In a nutshell, or rather a shell game,
• gold is loaned out from central bank to bullion bank in a fractional scheme.
• One gold bar may be loaned out 10 or 100 times – at the same time – for various uses.
• Central banks are supposed to keep a big chunk of their gold reserves as real gold reserves. But it may be that they haven’t.
• Countries that have deposited physical gold over the years in central banks like London or the NY Federal Reserve are now asking for that gold back. And the banks are having a hard time returning what they don’t have.
• But never fear, they have built in mechanisms to manipulate the price of gold.
• They want the price to go down so that when they have to re-acquire physical gold to return to the countries that want it back – that they won’t have to pay top dollar for it. If word ever got out that the central banks didn’t have the gold they say they do – then there would be a “run on the gold bank.” And that’s something that scares central banks (apparently).
• So, they’re systematically suppressing the price of gold to ensure that when or if there is a run on the gold bank, the price is manageable.

Physical gold is seemingly being bought up around the world.

And we all know the Golden Rule…

(The COT page – takes a while to load – gold is the symbol “GC” in the list)