How Gold Is Manipulated
The comments below are an edited and abridged synopsis of an article by Jim Rickards
There is hard statistical evidence to make the case that the gold price is manipulated, in addition to anecdotal evidence and forensic evidence.
If you go into the aftermarket, buy after the close and sell before the opening, you can make risk-free profits daily. Statistically that’s impossible, unless there’s manipulation occurring. Another way to manipulate gold is through leasing and unallocated forwards, and Rickards discusses how these manipulations occur.
Gold holders should expect these games to continue until a fundamental development drives the price to a permanently higher plateau.
How does the individual investor stand up against such forces? In the short run, you can’t beat them, but in the long run, you always will, because these manipulations have a finite life.
Eventually the manipulators run out of physical gold, or a change in inflation expectations leads to price surges even governments cannot control. There is an endgame.
Price manipulation always fails. And the dollar price of gold will resume its march higher. The other weakness in gold manipulation schemes appears in the use of paper gold through leasing, hedge funds and unallocated gold forwards.
These techniques are powerful. Still, any manipulation requires some physical gold. It may not be a lot, yet some physical gold is needed. Physical gold is rapidly disappearing as more countries buy it up. That puts a limit on the amount of paper gold transactions that can be implemented.
It’s important to understand the dynamics behind gold pricing. Understanding these dynamics lets you see the endgame more clearly and supports the rationale for owning gold even when short-term price movements are adverse.
Gold will win in the end.