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Is gold manipulated? Clif Droke thinks he knows without looking
4p ET Tuesday, July 28, 2015
Dear Friend of GATA and Gold:
Echoing the commentary yesterday by 321Gold's Bob Moriarty --
-- gold market analyst and financial letter writer Clif Droke today marvels at what he sees as the growing pervasiveness of the belief that the gold market is manipulated.
Can GATA really have been this successful? Is it because all those other participants in the gold market are so gullible? Or has the manipulation been documented enough and visible enough that people actually have been persuaded?
In any case, in his commentary today, posted at GoldSeek, "Is the Gold Price Manipulated?" --
-- and at 24hGold --
-- Droke sets out to refute the complaint of manipulation, and a few of his assertions may deserve a reply.
... Dispatch continues below ...
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The market for gold is immensely huge and [it is] virtually impossible for any one entity to control its price swings. Beyond the very immediate term, any attempt at raising or depressing gold prices would almost certainly meet with failure. Even a coterie of interests devoted to pushing gold prices lower would meet with certain failure due to the enormous size and complexity of the market. As one well-known market analyst of the previous century commented, "... the market itself is bigger than all the ‘pools' and ‘insiders' put together. ... The great market movements are beyond the manipulation of the combined financial interests of the world."
This is what even the ancients recognized as an "ipse dixit," an assertion made without authority -- "He said it himself." Besides, is the gold market or any market really bigger than institutions that are fully empowered to create infinite money -- central banks? Infinite is bigger than anything else. As for that "well-known market analyst of the previous century," he likely was not living in the age of modern central banking, the age when infinite money came within the reach of governments.
One commonly shared belief among gold bugs who subscribe to the manipulation theory is belief in a global conspiracy. Probably the most famous example of this is the Illuminati concept. Illuminati theorists believe in a highly organized group of elite individuals within government, industry, and finance who share the common goal of undermining the sovereignty of nations and establishing a one-world government.
Good grief! GATA wants to review the records of the Bank for International Settlements, the Federal Reserve, the Treasury Department, the Exchange Stabilization Fund, the European Central Bank, the Banque de France, and the G-10 Gold and Foreign Exchange Committee, among other government agencies, and Droke can cite only the Illuminati, a straw man for market analysts who won't examine the documents of government policy and won't put a single critical question to any central bank. GATA has peppered central banks with questions and has even sued a couple of them for critical information. Their objections have shown that they have plenty to hide. Droke should try attending them before he disparages complaints of conspiracy.
While there's no denying that conspiracies and monopolies do exist, there's also no denying that for every attempt at controlling an industry or a commodity there is a counterbalance. Within any group of would-be monopolists there are those who can never agree on a common plan for gaining control; common experience teaches this (as anyone familiar with corporate politics knows). Further, there are always other parties who would also like to gain total control in opposition to other conspiracy groups. In other words, there is no one overriding "Illuminati" monopoly group, but multiple groups of would-be controllers competing amongst themselves.
But what exactly is the "counterbalance" to institutions authorized to create and dispose infinite money? And with gold price suppression, we're talking less about "conspiracies" than about longstanding government policy, though "conspiracy" is a perfectly apt term for central banking, insofar as it involves regular secret meetings called to determine courses of action, like the meetings held every month by the BIS, ECB, and Federal Reserve.
There are several questions which should be asked by those who subscribe to the gold manipulation theory. To begin with, why would manipulators actively seek to push prices lower when there is less to be gained by a lower gold price than a higher one? The manipulation crowd is presumably in favor of multinational businesses which comprise the global economy. It's well known that higher commodity prices reflect a healthy outlook for big business due to the increased demand for raw materials and industrial inputs. Gold being the strongest barometer for commodities demand, a falling gold price is more apt to reflect deflation, which is the bane and scourge of big business. If anything, manipulators would have more interest in raising gold prices, not crashing them.
Still more mere "ipse dixits" when answers to Droke's questions can be found throughout the official documents of gold price suppression, which we'll cite below. Essentially governments have sought to suppress the gold price because gold is a potentially competitive currency whose value, if set in a free market, powerfully influences the value of government currencies and bonds and the level of interest rates.
Secondly, what interest could gold manipulators have in lowering gold prices when it automatically presumes a stronger dollar? A stronger currency does no favors to the U.S. economy over the longer term. It results in lower export prices for U.S. manufacturers and strains profit margins. As the Wall Street Journal reported on April 24, the strong dollar has been "wreaking havoc" on the profit margins of American multinationals. A stronger dollar forces multinationals to raise prices in order to offset currency issues, yet as WSJ pointed out, this only tends to depress profits due to lower sales.
Yes, there may be times when governments want gold to rise to devalue their currencies and debts generally. Yet as one of his undersecretaries told Secretary of State Henry Kissinger at the State Department in April 1974, gold is "the reserve-creating instrument" for central banks, whoever has the most gold can determine its value and the value of other currencies, and that value has to be suppressed and gold excluded from the world financial system to maintain the dominance of the U.S. dollar as the world reserve currency.
In fact if a gold conspiracy did exist, the only conceivable reason for knocking down prices would be for the sole purpose of allowing the manipulators to buy the gold back at bargain levels. This in turn would allow them to profit from the inevitable bull market which always eventually follows a long-term bear market. To this end, I can't recall gold bugs discussing manipulation during the glory years between 2002 and 2011 when the gold price was rocketing to all-time highs. Indeed, it would seem that cries of "manipulation!" are selectively applied to only those times when gold's prospects have dwindled.
Yes, some analysts lately have speculated that China has joined the Western central banks in suppressing the gold price precisely so China can obtain more metal inexpensively. But this is speculation, not fact, and it would be nice if we could stick to facts -- the documentation -- when examining this issue. Droke may not be able to recall "gold bugs discussing manipulation during the glory years between 2002 and 2001 when the price was rocketing to all-time highs, but he could find plenty of that in GATA's dispatch archive. We've been complaining about gold market manipulation since our founding in 1999. Droke purports to be refuting complaints of gold market manipulation, but his admission of ignorance of GATA's work shows that he is not the least familiar with those complaints.
Finally, if the conspiracy theorists truly believe that the gold price is subject to manipulation, why do they advocate owning gold? This is probably the biggest inconsistency of their hypothesis. Why even touch gold if its price is subject entirely to the whims of an elite group of power brokers? Could it be that the ringleaders of the conspiracy theorists haven't bothered to smooth out this dissonance because so many of them have a vested interest in promoting gold coins?
GATA can speak only for itself. But one reason for owning gold is a belief that enough publicity will help expose the manipulation, push investors out of imaginary gold underwritten by central banks and into real metal, and liberate gold into a free market, wherein its value relative to other currencies will rise. In any case GATA isn't telling people how to invest and is not an investment adviser. It's a nonprofit educational and civil rights organization aiming to advance free markets, especially in the monetary metals.
If Droke is ever interested in reviewing and rebutting specifically the major documents of gold price suppression by central banks, he can find them here:
In the meantime, no analysis of the gold market is worth anything if it fails to address these questions, which Droke has failed to address even as he pontificates about everything else:
-- Are central banks in the gold market surreptitiously or not?
-- If central banks are in the gold market surreptitiously, is it just for fun -- for example, to see which central bank's trading desk can make the most money by cheating the most investors -- or is it for policy purposes?
-- If central banks are in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?
-- If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?
Of course since he is selling subscriptions to a newsletter of technical analysis, Droke has a powerful interest in ignoring the documentation of central bank intervention in the gold market, for it would reveal that he has been analyzing mere holograms, and he'd be out of business. But if GATA ever succeeds, there will be plenty of actual markets for him to analyze again.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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