Gold Price Manipulation and Reserve Currencies

A
A
A
Finanza Operativa di Finanza Operativa 11 Maggio 2015 | 13:30

Zerohedge referred to the BIS (Bank for International Settlements) in connection with manipulation of the gold price, and a sale order for gold futures of $560 million brought the price down about $20.00. The obvious inference is that the BIS does not want the gold price to increase, and the immediate question that follows is why the BIS wants the gold price to remain low. An altruistic interpretation could be that western banks want the gold price to remain low so that the PBoC can pile up enough of the yellow metal to justify inclusion of the yuan in the basket of currencies making up SDR.

This answer is contradicted by assertions from the US that the yuan should not be promoted to the Club of exclusive reserve currencies. The advantages accruing to the US thanks to the US dollar being the major global reserve currency were noted in an earlier newsletter. Any encroachment on this prerogative on the part of the Han would be to the detriment of the Yankees.

One possible explanation is that the promoters of fiat currency, who believe that gold as a currency is an anachronism, want to eliminate gold as a source of central bank reserves by pushing down the price in order to discourage investors from putting any faith in gold bars or gold coins. After all, as already pointed out, fiat currencies need people to believe in them if they are to function. There is practically no alternative to fiat currency in the modern world, where numbers in a computer have replaced bank notes and coins. Technology continues to develop and improve so that even credit cards are threatened with extinction due to mobile phone apps and machines that can read the swipe of a phone. What place does gold have in such a world? Sophisticated bankers say that it has no place.

If that is so, why should the BIS even bother about the price of gold? The problem is that people do not trust those in control of central banks just as they definitely do not trust politicians, who are prone to spend too much and make huge debts.  QE can help to mitigate and liquidate government debt, but it produces nasty side effects, like pushing up equity prices when there is no justification for euphoria while share buy-back programmes push up prices even more. The current near-zero interest rates and historically low returns on fixed-income have made investors desperate. They have not yet become gold bugs, but what will happen to the almighty dollar when the yuan yawns? Wall Street is overpriced, and the dollar overvalued. Keep in mind that rats leave a ship before it sinks. They know what is coming.

Vuoi ricevere le notizie di Bluerating direttamente nel tuo Inbox? Iscriviti alla nostra newsletter!

Condividi questo articolo

NEWSLETTER
Iscriviti
X