On the morning of Friday 8th November in the US, the gold price plunged by around $20 an ounce. CNBC reported that the fall took place about 20 seconds BEFORE the release of the market moving jobs report. Clearly, someone got the information early and made the most of it, targeting the market most vulnerable to bullish news right now — gold.
This isn’t necessarily evidence of gold price manipulation. Rather, it’s just another example of the lack of integrity in the financial markets these days. Traders knew that gold was vulnerable ahead of the data release, and that a fall below US$1,300 would quickly take it down to US$1,280. It was easy money.
That’s not to say that the gold price isn’t subject to manipulation. If interest rates, foreign exchange and oil markets are, then gold certainly is.
What most people who complain about manipulation don’t realise is that it’s systemic. It happens across all markets because the system of finance that we have facilitates it. The massive derivatives market creates enormous opportunities to push prices around. It’s a system guaranteed to lose integrity over time because it allows humans to abuse it for personal gain. There is no natural check on this behaviour.
Gold used to perform this ‘natural check’. But over the past few decades it too has been ‘financialised’. There are now many more paper gold claims (whether in the form of futures, swaps or gold as a currency) than there is actual physical gold in existence. This allows the price to be ‘managed’, ‘manipulated’, ‘contained’, or whatever you want to call it.
Many people still like to dispute this. But there is one organisation that has amassed a wealth of documentation to prove that the gold price is indeed managed at the highest level. That organisation is GATA, the ‘Gold Anti-Trust Action Committee’.
I recently had the opportunity to conduct an on-camera interview with their Secretary Chris Powell, who was in Melbourne to give a keynote address at the Mines and Money conference. I don’t agree with everything that GATA claims, but there is no other organisation that has raised such awareness about the gold market and official attempts to control its price.
In the interview, Chris articulates clearly how the gold price suppression scheme works, guesses how it might end, and responds to some criticisms I make of GATA.
I hope you enjoy it.
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