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Aftershock Dangers and Profits
Are Governments Manipulating the Price of Gold? This is the favorite question among gold bugs, who often believe that there is a great deal of government manipulation of gold. While much of their concern is likely paranoia there are two ways governments can influence the price of gold. Central Bank Sales and Purchases: Central bank sales have actually been declining, which would increase the price of gold. China has even been purchasing gold, which also increases prices. The amount of gold sold by central banks (which lowers the price of gold) is not overwhelming on an annual basis, usually between 400 and 500 tons, and is limited by the Central Bank Gold Agreement, which was extended for another five years in June 2009. Also, sales are usually spread out so they do not normally negatively affect the price too much on a given day since that is not in the best interest of the selling central bank. Currency Manipulation: As the euro rises, gold in dollar terms often goes up with it, although not always. So the efforts by central banks to push up the dollar and push down the euro would decrease the price of gold in dollar terms. How much these two actions are used to manipulate the price of gold is unclear, although it is clear that the primary focus of currency manipulation is usually on the currency itself, not its secondary effect on the price of gold. The Fed does buy and sell some gold in the gold market, but it is unclear how much impact this has on gold prices. Of course, in the Aftershock this could change. If the price of gold rises dramatically, governments may become more interested in manipulating its price to keep it from becoming a highly attractive alternative to government bonds, etc. However, long-term manipulation, if any, will fail when market conditions overwhelm any attempts to manipulate the price of gold, just as any attempts to manipulate the value of the dollar will also ultimately fail in the Aftershock.
Will Gold Be Confiscated or Become Illegal, as It Was During the Great Depression? It’s unlikely in the modern global economy that making gold illegal in the United States would do any more than hurt smaller, middle class investors who can’t easily buy gold globally. Also, any talk of making