There is an ongoing debate as to whether or not there is manipulation in the gold and silver markets. Further, there is also a debate as to whether or not ALL markets are manipulated. Why is this important? Does it matter one way or the other? I will concentrate on the “why” it is important for gold and silver, I imagine that you can discern “why” it would be important if all markets were manipulated.
I’m not really sure where to start but I guess the first and most obvious place would be because “this is America.” “America” for a lack of better term “stood (notice past tense) for truth, justice, and free/fair markets.” This along with our rule of law, stable political system and strong military was the reason that foreigners preferred to invest here rather than anywhere else. It “was” always perceived that investors could get a fair shake in the U.S. and not have to worry about political coups, fraud or graft, shady financial reporting or outright financial theft. We were the “beacon” of truth and light when it came to investing.
The proof of, admission of or discovery that our markets are manipulated, rigged, supported or suppressed would change this perception. If the perception (or the reality) were to change then so would the willingness of investors to believe in the U.S. as a safe haven.
So why the relatively small gold and incredibly small silver markets matter if they were manipulated? First, in my opinion these two markets are by far and away the two most important markets to world finance. I say this because even if Americans have been brainwashed into thinking that they are not important and not “money,” foreigners disagree and the reality is that gold is money as is silver by its “blood kin” relation.
You see, gold is a thermometer. If it is rising, or better yet, if it is “high” and rising it would signal that something is wrong. When I use the terms “high” or “rising” I am talking about versus an individual currency. A rising price versus a single currency would mean that something is wrong within that country and the currency is devaluing. In the case of the U.S., the dollar is the world’s reserve currency and the entire global financial and banking systems rely on it.
Whether we are looking at a dollar/gold price that is either freely discovered and market based or is “made up” is of utmost importance and this is why. Our past secretary of Treasury Lawrence Summers did a study back in the late 1980’s (Gibson’s paradox) that premised (and was correct) that a low and falling or stable gold price would allow for lower real interest rates than would otherwise be the case. Think about what this means. It means that if the price of gold could be held in check, real interest rates could also be held down. As you know, lower interest rates make stock and bond prices levitate, lower rates also helps the real estate market as your monthly payment amount “goes further” or qualifies you to purchase a larger house than you otherwise would. This also goes for businesses that borrow, they can expand operations more than they could if higher interest rates were prevalent. Of course, this also goes for governments themselves as they can borrow more than they could if real interest rates were higher and we all know that governments like to borrow…so that they can SPEND!
The question, “Does it even matter if markets are manipulated or not” is the MOST important question in my opinion of all. Think about it, if you knew that your favorite casino was “rigging their tables,” wouldn’t you go to another casino? Or if you knew that a poker game was rigged, would you even play? No you wouldn’t and you would find another game to play right?
Which brings me to the gold and silver markets. They “are” money. Another way to say this is that they are savings or even they are their own “banks.” If the public finds out that gold and silver are “rigged,” or worse, ALL markets are rigged…what will they do? They will become buyers of real, “hold in your hand” gold and silver. They will do this because no matter what, they know exactly what it is they have in their hand. Will they know what their bank or broker deposit is “worth” or will purchase? Will they even know that tomorrow morning when the sun comes up whether or not their institution will open their doors? No they won’t and during unsettled times, people will seek “certainty.”
The above said, if it turns out that the gold and silver markets are rigged or suppressed (I believe this to be a 100% probability with zero chance they are not), what is the direct ramification? A suppressed market means that prices are lower than they would be in a free market. It means that anyone who buys while suppression is ongoing is being “subsidized.” Subsidized by how much? We don’t know this for sure and any answer is merely opinion but the important thing is that the answer, any answer, is “HIGHER.”
Do you see what I am getting at here? I am telling you that the argument of whether or not gold and silver prices are suppressed is at the core of it all. It is the core reason to make purchases because if you know there is manipulation then you know that the free market price is higher. It is also at the core of international finance because the dollar is the cornerstone or foundation of “everything paper.” “Everything paper” by the way includes EVERYTHING you have planned for and saved “in.” Banks, insurance, stocks, bonds, your house, your retirement and anything else you can think of …except precious metals because they themselves are the benchmark. Going one step further, if gold prices are lower than what a free market would discover…this means that the dollar is artificially higher than it would be in a free market. In other words, the dollar is overpriced.
I hope that after reading this you now fully understand “why” gold would be manipulated lower. The above is the “motive” pure and simple to rig prices. Larry Summers was even kind enough to illustrate and tell us this before he became Treasury secretary and actually implemented the policy. It is quite simple, lower the price of gold which stretches the price of and creates a better perception of the dollar. I’ve written this piece because I believe it is so important for you to understand how important free markets are. If they are not free and are in fact manipulated, it means that your entire financial life is a lie. It means that what you “have” or think that you have today can change overnight should the “rig” fail which it has many times before in many different currencies, most famous being the dollar in 1971. This time around it will be all currencies, everywhere on the planet!