Gold: The End Of An Era, And Price Manipulation



  • The market is experiencing tremendous demand. Gold has taken the limelight as fund managers and institutional investors are starting to invest in gold over concerns with the US dollar.
  • The collapse of the market in March this year meant that the shorts suddenly could not cover and the physical market lacked the supply to cover all the shorts.
  • The Fed has little room to manipulate interest rates and the gold market is beginning to realize that this is the end of the manipulation of gold.
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Over the past seven or eight years, with the removal of the uptick rule, central banks and big institutions could short the gold and silver markets without the ability of buyers to get out of a position. By selling short on the paper market, price discovery got skewed far below where the real price should have been. The paper shorts that were sold were far in excess of the physical amount of gold that was available. The collapse of the market in March this year meant that the shorts suddenly could not cover and the physical market lacked the supply to cover all the shorts. Gold was then free to find its real price based on supply and demand, without the paper manipulation which had been suppressing the price. Central banks supported the manipulation in order to prop up the US dollar as the world’s reserve currency. If gold rose in price too much, then the US dollar would fall in value, casting even further doubt on fiat currencies, of which the US dollar is the leader.

Gold is a commodity, an economic indicator, and a currency. For thousands of years, gold has been highly valued. It's the last resort of protecting your asset’s value when we have a paper currency. Before 1971, the US dollar was backed by gold. Then Nixon took the dollar off the gold standard to help pay for the debt from the Vietnam War. The dollar then became a fiat currency with no physical backing. It then began to fall in value and has lost more than 90% of its value since then. In large part, that's why many US dollar-backed assets have inflated so much since 1971. The asset itself is not worth any more, it's just that the US dollar is worth so much less that the asset has to rise in value to remain the same.

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