Gold Manipulation

Gold Manipulation: Fact, Fiction, or Something Else

The debate continues to rage on as to whether there are forces big enough to actually manipulate the Gold market. On the one hand, you have the mainstream folks confidently declaring that the gold market is far too large and liquid to be manipulated. Still, others have spent countless hours researching trends and reading the tea leaves to find the smoking gun that will once and for all prove to the world that their conspiracy theories are actually true.

If you are able to sit back and take a broad look at both sides of the story you may come to find out that both sides may actually be right. You will also find that this may also create a significant opportunity for you to use gold asset protection as part of your portfolio.

Too big to manipulate

We’ve all heard the phrase “too big to fail”. There may be a similar phrase that can be applied to the gold market and that is “too big to manipulate”. The gold market is huge. There are hundreds of thousands of tons of gold in the world today. Several countries and companies are continuing exploration efforts in order to find more of the precious yellow metal.

If you applied today’s relatively low price of gold to the total world supply, you would quickly see that it could take billions of dollars to effectively manipulate the price of gold. The list of entities or even countries that could afford to bring that level of financial impact to the gold market is a very short list indeed. That would seem to make finding a guilty party pretty easy if there was evidence of intentional manipulation.

Influence versus Manipulation

While the gold market may actually be too large to manipulate, it can certainly be heavily influenced in ways that may not be all that obvious. Gold as a commodity is too important to too many large countries and companies alike to be completely free from political or economic influence.

Let’s first consider the effects of political influence. The United States, Russia, and China are at the forefront of diplomatic maneuvering on the global scale. The United States not only has a significant supply of gold, roughly 3% of GDP, but it also has one of the few widely held currencies in the form of the dollar.

Both Russia and China are striving to compete with the United States from an economic as well as a political influence perspective. The best way to exert political influence is to have the economic power to back it up. In order to achieve that economic strength, both countries will need to bolster their gold reserves to offset their dollar holdings. This storm has been brewing since the United States was “temporarily” taken off of the gold standard.

It would be unwise to think that Russia and China are just willing to pay top dollar for additional gold. Therefore, it is certainly conceivable that covert forces are at work to hold down the price of gold while these two competitors seek to match the gold reserves of the United States. Once the playing field is leveled, then all countries could benefit from a market-driven price surge in the gold market.

The influence of these three major countries is only one factor at play in the potential influence being exerted on the price of gold. Several economists and researchers have found interesting opportunities for manipulation in how the prices of gold are actually set along with interesting trading practices that occur after market closings. Without going into too much detail, suffice it to say there is enough smoke around this manipulation discussion to feel pretty sure that there is a fire raging somewhere.

Navigating These Uncertain Waters

If all of this leaves you squarely stuck in the middle as to whether the market is being manipulated or not, then you are not alone. You are also not alone in the fact that there is still an opportunity to be found by adding sound gold investments to your portfolio.

First of all, it is a tangible asset that will always have some sort of value. In contrast to paper stocks and other securities that can be worth less than the paper they are printed on, gold is always going to have value as a form of currency or simply as a precious metal. Even if the price fluctuates, gold is an excellent hedge against major market corrections.

Finally, if there is a set of forces at work to keep the price of gold down, then there is certainly a buying opportunity to be had. Add gold to your portfolio so you can ride the inevitable wave upward. What is intentionally held down must eventually be let up.

Mike Brown

Mike Brown is a native of South Africa, where he followed his military service with undergraduate and higher diplomas in mining engineering from the University of Johannesburg.

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