I have written many times regarding the “manipulation” of various markets. I have explained that money supply, currency crosses and interest rates are all “admittedly” manipulated and done so officially. When this is done, we usually get some sort of explanation as to “why.” Such as the economy is too weak, too strong (days long gone by), inflation or unemployment are too high or what have you. These “levers” are pushed and pulled and done so publicly. Years ago this was never done “publicly” but later in Alan Greenspan’s term and more so during Bernanke’s reign, in an effort to create “transparency” (sarcasm intended by both myself AND the Fed) the Fed started announcing what they were doing. I could go on a long tirade on this topic alone but suffice it to say, the Fed started to “announce” policy to get more traction with jawboning.
I have also explained many times “why” gold would surely be manipulated and that the Fed (and other foreign central banks) would be foolish not to try to suppress the price. Gold is THE main competitor to fiat currency, an exploding price is like a neon sign advertising policy failure and currency flaws, as Paul Volcker once said, “It was a mistake to let gold get away from us.”
That said, “How” is it actually done? In the old days back in the 60’s and 70’s during the London Gold Pool, the manipulation was quite “physically mechanical” meaning actual gold was sold to meet the excess demand. This worked for a while until it didn’t (stockpiles were being depleted) and the result was the 1980 $850 spike. Then as the 80’s progressed and pressure again began to build for higher prices, “hedging” came along. The big brokerage houses convinced many gold mining companies (Barrick was the largest) to “forward sell” their product. This was pitched to the miners as a way to lock in their sales price which helped them plan (their demise). But what did it REALLY do? It brought 1,000’s of tons of gold “forward” for sale and on to the market. It had not been mined yet but the true intent and result was to place excess supply (which had not even been mined) onto the market to depress the gold price. This scheme was reported extensively by Frank Veneroso back in 1998.
Around that same timeframe, the Bank of England then publicly announced the sale of some 400 tons which again depressed gold’s price. It also guaranteed that the British would get the absolute worst possible price for their sales…which was the intent, DEPRESS the price. As the century turned, gold slowly started to dig its way out from under the hedging (leasing) and central bank sales. By 2003 or 04, a “new” way to invest in gold was conjured up. The ETF “GLD” was announced. Many gold enthusiasts jumped with joy because this would finally allow the “little guy” a way to purchase gold with simplicity. I said at the time, “This thing is only a pressure valve and will divert capital AWAY from the real thing.” I still say the same thing. GLD has bled 500 of its alleged 1,300 tons this past year. Are the remaining 800 tons real gold? In my opinion no but we will soon see I suppose.
On a daily basis the manipulative “tool” of choice is the COMEX and their futures contracts. These can and have been sold far in excess of any gold inventory in the world. It has been speculated (and confirmed by Jeff Christian regarding the LBMA) that paper contracts represent real gold on a “100 to 1” ratio. Meaning that 100 “paper ounces” have been sold for every 1 real ounce. We had 6 or 7 major “flash crashes” in the price of gold last year along with more than 200 smaller ones. We just had another one on Tuesday and if you care to see “how” it was actually done, Zerohedge did a great piece using NANEX charts and data to prove beyond a shadow of a doubt that a preprogrammed computer algorithm was to blame.
The last and longest lasting method to manipulate gold’s price has been the “leasing” of central bank metal. Starting around 1996, Robert Rubin began “the strong dollar policy.” To “prove” this policy it also meant that gold’s price MUST be weak…so, why not lease out central bank gold? It went (goes) like this. The central bank would lease out gold at half a percent to a bullion bank, they would then sell the gold and invest the proceeds into a 6% Treasury bond. This was a no brainer or “free money” if you will …as long as gold’s price did not rise, which it has. The problem is that when this gold was sold, 70% of it became jewelry and is no longer available to “re purchase.” Oh, and another little problem as the Germans have now realized…their “safeguarded” gold was also leased. Some countries like Portugal (and Italy with LTCM) leased out their gold on their own free will and face the same problem, the gold is gone!
Any and all of this could be proven beyond any doubt and the perpetrators brought to justice and jailed within just a few days. There is a paper trail for all of this and the Justice department would have slam dunks all over the place…but there is a small problem. They can’t (and won’t) prosecute “themselves” because ALL of these schemes had one goal in mind, suppress the price of gold. This is exactly the “unofficial”…official policy. “Whodunnit” in today’s high tech world is a piece of cake but don’t hold your breath waiting to hear who sold naked contracts, naked shares or whatever… we are still waiting to see who bought all of those airline puts back in 2001 right?
I know that this piece was very very basic and thus the “101” in the title. Some may not have even read this far because it’s only been a recap of how we got here but it may shed some light for those who have only woken up recently or are still rubbing the “sleep” out of their eyes. It has been so obvious and “in our face” that it’s sickening. But what is “so obvious” to anyone with half a brain that is “open,” is conspiracy whacko alien stuff to those who don’t want, can’t or won’t see it. Take heart though, Mother Nature is still alive and will exact her revenge and then some when all is said and done, she always does.