According to Doug Casey, founder of Casey Research, he is finding the climate surrounding the pricing of gold to be one of manipulation and influenced by the political systems.
The last thing that the powers in control of the financial monetary systems want is to see the price of gold skyrocket even while all the stars seem to be in line with that development [ref: The stars could be aligning for gold to return to its decade-long bull run]. Suspicion is definitely believed by those that accept the theory that the U.S. Treasury is involved with a group of bullion banks which trade the precious metal regularly.
We certainly see this in other industries like agriculture where the USDA influences the price of wheat and corn on the market through their program price controls. The price and interest rates are purposely kept low in order to prevent financial collapse of the industry. Likewise, we see this with the Plunge Protection Team, also referred to as the Working Group on Financial Markets, President’s Working Group on Financial Markets, the Working Group, created by executive order 12631 under President Reagan on March 18, 1988. This group was created in response to Black Monday, October 19, 1987, when stock markets crashed.
The group claims to have the purpose of “enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence”. The troubling point of this group can certainly be seen from recent events as the JP Morgan Chase billion dollar blunder and the fact it was able to evolve. So the point is that the regulatory aspects of this group are questionable.
So if this group is supposedly involved with the financial mainstream channels what would prevent them from also being involved with precious metals and their market activity?
Historically we have an event of which this did indeed occur. It was from 1961 to 1968 we had the London Gold Pool. Where the U.S. and other foreign governments made and attempt to suppress gold activity. This event involved eight U.S. central banks and seven European working in cooperation to maintain the Bretton Woods System [ref. Should the Dollar ever be as Good as Gold?]. A situation where a fixed US gold price of $35 per troy ounce intervened in the London gold market.
This activity occurred for another three years until President Nixon devalued the dollar and the gold window was closed in 1971.
What we do know is that we do not know how much gold is above ground exactly anymore than how much more gold has yet to be explored in regions around the world. What we do know is in the days of the London Gold Pool there was about three billion ounces in existence and was valued at about $105 billion.
That was 1971 and now the same amount is worth about $10 trillion which represents about 100 times the value of back then. So with world governments owning their billion share of the precious metal market then, and representing about 35% of the total world market, this was certainly significant in controlling the price. What could they possibly gain from attempting to control the market when in reality they would be losing in their attempts?
With central banks in recent events we certainly have come to know their controlling actions from a Federal Reserve and U.S. Treasury perspective combined with the action of the Federal Chairman. As we have seen the root of inflation is poor monetary practices being employed to influence markets (i.e bailouts, stimulus loans, etc.). All this in an attempt to influence the population in further placing a declining fiat currency into a manipulative financial banking system.
So as we see with the financial services world we can then also see the same manipulative practices being employed in the world gold market. At the same time, history has been a rising price standard for the precious metal. We know why governments want low interest rates, high real estate and stock markets but for them to invest billions into a rising gold market or silver market to keep the price down does not make a lot of sense.
The reason could certainly be that for global financial services (JP Morgan Chase, Barclays, HSBC Group, Fidelity, etc.) they would be acting for the U.S. Treasury since they do not personally go into the precious metals market themselves. Even though these groups actually have no vested interest in the pricing of the metal nor a reason to manipulatively influence the market.
However, for eight U.S. central banks and seven European working in cooperation they do have a good unified source in their court and it is Wall Street. But there has never been any evidence of bullion banks working collectively or as separate entities in collusion with Timmy Geithner, economist and central banker or the Federal Chairman.
So with apparent rise and lowering of the precious metal price in the market, and in apparent political fashion, it is certainly without question there is some manipulative strategies being employed. But to say controlled pricing strategy models are being employed would not explain the approximate $1,500 price gain increase in the U.S. since 2000.
With aired commercials we certainly see the bullying tactics being employed to the small prospectors. Their effort is to employ various technical trading systems to influence prospectors into buying or selling. In effect, the small traders have hurt themselves in the market by using too much margin in the metals market and ended up pushing themselves out of the trade.
Basically, out of the small prospector’s actions toward the “not knowing” we see similar activity with the central banks where they have employed very little good financial knowledge and instead political hacks to markets. So out of the their miscues then come other strategic actions to cover their failures, which impact financial customers, and even these do not last very long.
With the various entities we have in precious metals, I still remain bullish to the market. So as history tell us, the gold price has never returned to years past pricing models, but there is certainly good speculation and history to tell us gold pricing, and precious metals are not accurate in their pricing.