There is little doubt that the price of gold has been manipulated throughout history. The only question today is why is it being manipulated right now? Gold had moved continuously, in stair step fashion, upward since 2001 and all of a sudden gold was forced off its highs in February and driven down to its current price of $1,584 per ounce. What gives, and why now?
In the past, the price of gold reflected the the value of the fiat currency that it was compared to. Today, “the powers that be” recognize this and are doing everything in their power to avoid a lack of faith in the fiat currency of the United States because the financial system is based on the theory that paper money is a proxy for the productivity, labor, capital, property and the entrepreneurial spirit of the people that reside in the issuer’s boundaries.
The amount of money in the economy should always be directly related to the proportion of these 5 things in the economy. The greater our productivity, the more we create. Work is a direct response to the entrepreneurial spirit, which enhances capital and property value. The expansion of the money supply is perfectly normal, if it reflects an expansion in the real economy.
Today, the government and its willing accomplice, The Federal Reserve, are perpetuating a hoax on the productive class in the United States and bleeding them dry of the value of their labor and especially of the value their savings. In order to do this, they have to convince the public to park in the dollar, rather than go to the traditional security of gold and silver.
So far their plan is working, because every time there is a downward move in the value of the dollar, they go in and sell gold short in order to destroy any chance that the public will move into that market. It is interesting to note, that despite their efforts to date, $1,520 has held and the dips to the $1,550 range have been met with aggressive physical buying.
Quantitative Easing Is Essential to the Manipulation of Gold!
Quantitative Easing is essential in order for the government to keep the “Ponzi scheme” going forward. The alternative to “kicking the can down the road” involves recognizing the truth and resorting to taking the steps required to restore sanity to the fiat monetary system. In a few words, the political class receives nothing for acting as the laws of physics requires. They only make money when they pander. Prostitution may be the oldest profession, but the political class makes prostitutes look admirable when they are compared.
“QE” Equals Inflation!
Quantitative Easing serves two masters. The government is the primary beneficiary of the “QE” policy because it is able to borrow much more money at cheaper rates, when it should be reigning in its spending. The reason for this is simple, because the government uses the “QE” money to buy bonds, which forces down the yields and with it the borrowing rates. This is manipulative and will only last so long, until the wheels come off the cart. When inflation rears its ugly head, it will be very difficult to shove it back in the box, no matter what the government tries.
The Government is essentially using the “QE” money to finance its existing debt and to expand the welfare state with a “bribes for votes” program. These bribes give the political class a way to stay in power at the expense of the productive participants of the country.
The second part of “QE”, is money that is given directly to banks, which in turn, grease the wheels that turn, by selling government bonds at a profit. Money that is created out of nothing keeps the powerful, for lack of a better word, powerful at the expense of the taxpayer. An incredible scheme if you are the right side of the table, which in this cases is the “left” or “Progressive” side.
In both of these uses of “QE” money, productivity, labor, capital, property and the entrepreneurial spirit of the people are debased simultaneously. We will see it in the higher prices for everything that we purchase. On the bright side, all of those that are currently underwater in their mortgages will soon see a return to profitability, but unfortunately, the money that is received from a sale will not buy the same goods as the money spent to obtain the original mortgage.
A Change Is Coming Soon!
Gold and silver are the correctional forces for the markets, because gold increases in value as fiat currencies decrease in value. This assumes that the markets are functioning normally and manipulation is minimal. That is currently not the case because, as you can see in the following chart, gold has been systematically driven down from its high of $1784 that was reached on February 29, 2012, while nothing has changed in the economic scenario for the better and in reality the situation has gotten worse.
The decreasing triangle is funneling gold towards a break out which should occur relatively shortly. No one can predict which way it will break, but break it will. It should break to the upside, but like I said, we will soon see. The manipulation in gold has removed one more store of value from the “little guy” right after they have seen a 50% plus drop in their property values. Something has to give, and for my money, I think gold is going to break sharply to the upside, and soon.
To sum it all up, gold is being manipulated by the government so that they can continue to keep their spending game going. The longer they succeed with this manipulation, the more severe the move upward in the price of gold will be. Time is running out, so accumulate gold, silver and mining stocks while the market is depressed.
Till next time, good luck and good trading!
More Gold Market Analysis:
- Once Upon A Time We Had Free Markets, Now They Are Manipulated
- Quantitative Easing Explained (Simply)
- Why It’s Different This Time!
- Gold, Is $1,528 the Bottom?
- George Soros Is Not Worried About Junior Minors, Why Should You?