Echoing the commentary yesterday by 321Gold's Bob Moriarty --
http://www.gata.org/node/15595
-- 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?" --
http://news.goldseek.com/ClifDroke/1438107705.php
-- and at 24hGold --
http://www.24hgold.com/english/news-gold-silv...price-manipu...
-- Droke sets out to refute the complaint of manipulation, and a few of
his assertions may deserve a reply.
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:
http://www.gata.org/node/14839
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.
