Phil Anthropy

The End of Gold

As mentioned in other comments, gold prices appear to some to be manipulated heavily. I have heard of a bank carry trade, where banks lease each other gold, the lessee pays 1% for the lease, sells the gold to drive the price down, uses the received funds to buy a gold future, and invests the rest in U.S. treasuries or insured bonds. At the end of the day, the lessor receives the 1% on what should actually be in-house gold reserves. The lessee gets a few percent, and the price of gold is driven down. Regardless of whether this is true or not (and I do not accuse anyone of wrongdoing), gold price fluctuations, mysteriously, do not correspond to market conditions that would be anticipated to drive the prices up or down.

Interest rates are also manipulated (some say), such as treasuries being bought by the billions with Chinese and Saudi recycled dollars, to keep rates low. Some believe that there is very little actual honesty in the markets at this point, if indeed there ever was,

The battle between inflation and deflation has been joined, but there is not yet a predictable outcome. It looks to me as though deflation will win out, because the destruction of money and credit resulting from unwinding the astounding amount of leverage used by large international interests seems too much to overcome. We can invest billions of dollars, but when credit (money) is destroyed, its multiplier effect is also destroyed. I do not believe it is possible to inflate enough trillions of dollars into the U.S. economy to overcome the destruction of credit and its multiplier.

In terms of gold, some believe gold prices will be manipulated to fall in order to make the dollar -- a fiat currency worth nothing but the ink and paper used to print it -- a safe haven. In the long run, many believe that gold will emerge victorious, when the dollar becomes hyperinflated. One thing is clear: so far, the track record of gold is better than the track record of the dollar as a store of value.