The price of gold is being actively managed by central planners and their proxies. The main culprit here appears to be the US authorities, as the manipulation is most apparent in the US open gold market. For the most part, this 'management' has resulted in letting the price of gold rise, but not too much, or too quickly.
The price of gold has always been an object of interest for governments and central bankers. The reason is simple enough to understand: Gold is an objective measure of the degree to which fiat money is being managed well or managed poorly.
As such, whenever paper money is being governed poorly, the price of gold becomes an important barometer. And this is why the actual price of gold is a strong candidate to be 'managed.' Or 'influenced'. Or 'manipulated'. Whichever word you prefer, they all convey the same intent.
Some who are reading this are likely having an eye-rolling moment because they hold a belief that there is no conspiracy to manage the price of gold.
This is an interesting belief to hold because it runs heavily against the odds. It's similar to holding the belief that the house in Vegas does not have a statistical advantage.
We could spend a lot of time discussing how a belief such as 'gold is not being manipulated' gets promoted and inserted into the popular consciousness, but we won't. Instead, we'll simply note that the people who hold this belief -- and you may be among them -- react to the concept at a visceral level, often with strong emotions such as anger or contempt, and even anxiety.
When a strong emotional response surfaces during a conversation of ideas, it usually means that beliefs are in play -- neither facts nor logic. Experience has taught me that when someone becomes dismissive or angry or hostile when the idea of price manipulation is discussed, it's best to simply drop the conversation and move on. No combination of logic or facts is effective against a deeply-held belief. It's better to wait until some new evidence calls that belief into question, opening the door for revisiting the topic.
But for those with an open mind, there is a very interesting trail of dots to connect.
The Logic of Gold Price Management
Unlike beliefs, opinions can be discussed and even modified without first running through an emotional thicket. They rest on data and ideas that can be consciously accessed and are therefore easier to change.
It is my opinion that the price of gold is being actively managed and/or overseen by official parties. On a strictly qualitative level, I hold this opinion because if I ever found myself in charge of a system of money rooted in confidences, as is our current fiat regime, I would consider the active management of the price of gold one of my fiduciary responsibilities.
Gold is an important signaling mechanism, and our entire money system is faith-based. Of course anything and everything that could cast doubt on that system would be controlled if it could be controlled.
To emphasize the point: If gold were suddenly to spike up to $5,000 an ounce, all sorts of troubling questions would emerge for people. Such as, is there something wrong with the dollar? Is the world falling apart? A rapid spike in the price of gold would certainly cause people to question the current state of the world of fiat money, and that is an unpardonable sin when your money is, at root, faith-based.
Instead of asking why do you think the price of gold is controlled? I ask, why do you think the price of gold is NOT controlled?
Managed Prices and Signals
Aside from my opinion that our faith-based fiat money system mandates the management of the price of gold as a matter of fiduciary responsibility for those in power, here are some other facts that we have in our possession:
- The quantity of money is managed
- The price of money is managed (via interest rates)
- Because interest rates are being managed (mangled?) to near zero, it means risk tolerances and preferences are being managed towards taking on higher risk
- The price of oil is openly managed, with strategic releases from time to time
- The price of food and energy are managed via subsidies, both direct and hidden
- Official statistics (e.g., GDP. inflation, employment) are heavily biased, massaged, and managed to tell a rosy story vs. a more realistic version, which means that perceptions are managed
Out of all these efforts, certainly the one with the most dramatic impact is the management of the price of money. That sets the stage for nearly every ill that follows, especially including the encouragement of taking on additional risk and the inevitable malinvestments that result.
Bernanke on the Fed’s Interest in Stocks
In a Wall Street Journal op-ed, Bernanke openly revealed something that was already obvious to many: The Fed has been very carefully following the equity markets because of the importance of rising stock prices in fostering consumer spending. That is, the stock market is a signaling device, and the Fed is, naturally, quite interested that it signal the correct things.
More bluntly, the Fed is interested in seeing the stock market go up instead of down.
Here’s Bernanke in an op-ed placed in the Washington Post back in 2010 discussing the effects of QE2:
This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth.
For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
(Source)
Yes, Virginia, the Fed does watch stock prices closely. And it targets their efforts to assure that the ‘virtuous circle’ is in play. No real surprise there.
Given that big list of managed prices and signals, with literally nothing left untouched because of the price-of-money effect, we are again left to wonder how likely it is that anything has escaped the attention and efforts of our well-meaning (but certainly misguided) central planners.
To my view, gold is simply far too important to be left to its own devices. The evidence strongly suggests that it indeed has not been.
Evidence for Price Manipulation
Critics of the idea of price manipulation might scoff and ask, if gold is manipulated, as you say, then how do you account for the 590% price increase over the past 11 years?
The idea here is that if gold were manipulated or controlled, there's no way it would have 'been allowed" to increase by that much.
In the above chart, we can see that gold has been in a remarkably steady run for the past three years. It is almost as if a ruler has been drawn under the price of gold, which has rarely deviated by much from that trajectory.
Certainly some might argue that this is an extremely poor piece of data in support of the idea that the price of gold has been manipulated, unless we want to argue that it has been manipulated upwards to rise nice and steadily (like air being slowly pumped into a balloon).
A fair point, perhaps, yet it is one that not only completely falls apart, but bolsters the case for price suppression when we examine the price action of gold in the daily vs. the overnight markets.
Note in this next chart that if one simply bought gold and held it only during the open and close of the US daily fix, one would have lost 70% of one’s money during the same period of time that gold rose in price by more than 500%.
As the chart above shows, the performance is dismal. For example, take a hypothetical gold investment fund starting with $100m in 2001, use it to buy gold only at the US AM fix and sell at the US PM fix until the present, and it would now be left with just $31 million, almost a 70% loss in just under ten years. Over the same time period, gold prices have risen over 590%. (more)
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