Skip to Content

Is the Federal Reserve losing control of the gold price?

After years of being kept in the doldrums by orchestrated short selling described by myself and Dave Kranzler, gold has lately moved up sharply reaching $1 510 recently.

Published: August 11, 2019, 9:36 am

    Read more

    The gold price has continued to rise despite the continuing practice of dumping large volumes of naked contracts in the futures market. The gold price is driven down but quickly recovers and moves on up. I haven’t an explanation at this time for the new force that is more powerful than the short-selling that has been used to control the price of gold.

    Various central banks have been converting their dollar reserves into gold, which reduces the demand for dollars and increases the demand for gold. Existing stocks of gold available to fill orders are being drawn down, and new mining output is not keeping pace with the rise in demand. Perhaps this is the explanation for the rise in the price of gold.

    During the many years of Quantitative Easing the exchange value of the dollar was protected by the Japanese, British, and EU central banks also printing money to insure that their currencies did not rise in value relative to the dollar. The Federal Reserve needs to protect the dollar’s exchange value so that it continues in its role as the world’s reserve currency in which international transactions are conducted.

    If the dollar loses this role, the US will lose the ability to pay its bills by printing dollars. A dollar declining in value relative to other countries would cause flight from the dollar to the rising currencies. Catastrophe quickly occurs from increasing the supply of a currency that central banks are unwilling to hold.

    One problem remained. The dollar was depreciating relative to gold. Rigging the currency market was necessary but not sufficient to stabilize the dollar’s value. The gold market also had to be rigged. To stop the dollar’s depreciation, naked short selling has been used to artificially increase the supply of paper gold in order to suppress the price.

    Unlike equities, gold shorts don’t have to be covered. This turns the price-setting gold futures market into a paper market where contracts are settled primarily in cash and not by taking delivery of gold. Therefore, participants can increase the supply of the paper gold traded in the futures market by printing new contracts. When large numbers of contracts are suddenly dumped in the market, the sudden increase in paper gold supply drives down the price. This has worked until now.

    If flight from the dollar is beginning, it will make it difficult for the Federal Reserve to accommodate the growing US budget deficit and continue its policy of lowering interest rates. With central banks moving their reserves from dollars (US Treasury bonds and bills) to gold, the demand for US government debt is not keeping up with supply.

    The supply will be increasing due to the $1.5 trillion US budget deficit. The Federal Reserve will have to take up the gap between the amount of new debt that has to be issued and the amount that can be sold by purchasing the difference. In other words, the Fed will print more money with which to purchase the unsold portion of the new debt.

    The creation of more dollars when the dollar is experiencing pressure puts more downward pressure on the dollar. To protect the dollar, that is, to make it again attractive to investors and central banks, the Federal Reserve would have to raise interest rates substantially. If the US economy is in recession or moving toward recession, the cost of rising interest rates would be high in terms of unemployment.

    With a rising price of gold, who would want to hold debt denominated in a rapidly depreciating currency when interest rates are low, zero, or negative?

    The Federal Reserve might have no awareness of the pending crisis that it has set up for itself. On the other hand, the Federal Reserve is responsive to the elite who want to rid themselves of Trump.

    Collapsing the economy on Trump’s head is one way to prevent his reelection.

    pcroberts@app-6271a6d1c1ac18bb0c1965d2.closte.com

    Exclusively for freewestmedia.com

    Consider donating to support our work

    Help us to produce more articles like this. FreeWestMedia is depending on donations from our readers to keep going. With your help, we expose the mainstream fake news agenda.

    Keep ​your language polite​. Readers from many different countries visit and contribute to Free West Media and we must therefore obey the rules in​,​ for example​, ​Germany. Illegal content will be deleted.

    If you have been approved to post comments without preview from FWM, you are responsible for violation​s​ of​ any​ law. This means that FWM may be forced to cooperate with authorities in a possible crime investigation.

    If your comments are subject to preview ​by FWM, please be patient. We continually review comments but depending on the time of day it can take up to several hours before your comment is reviewed.

    We reserve the right to del​ete​ comments that are offensive, contain slander or foul language, or are irrelevant to the discussion.

    Opinion

    The inflation hoax

    Yes, prices are rising, but not for the reasons the Federal Reserve says. When I say inflation is a hoax, I mean the purported cause is a hoax. The Fed is fighting a consumer inflation, a “demand-pull” inflation. But what we are experiencing is a supply-side inflation caused by the Covid lockdowns and economic sanctions that closed businesses, disrupted supply chains, and broke business relationships while reducing energy supplies to the UK and European countries, thus forcing up costs in a globalized economy.

    Two-Party Pox: The Republicans suck and the Democrats want to kill you

    The Republican Party has never stood up for Americans, will never stand up for them and is not going to do what it takes. Past is prologue.

    Russia’s loss at Kharkov highlights crippling shortage of men

    KharkovThe frontline in this case relied on heavily outnumbered 2nd rate Lugansk draftees plucked from the LPR.

    A country without an honest media is lost

    For some time I have reported to you that in place of a media, a media that our founding fathers relied on to protect our society, the United States has had a propaganda ministry whose sole purpose is to destroy our society.

    Sweden’s decaying democracy

    A journalist is arrested and dragged out of the Gothenburg Book Fair because he politely asked a powerful politician... the wrong questions about his support for the ethnically-cleansed Zimbabwean dictatorship. Not only journalists, but academics and bloggers are being hounded by the leftist establishment daily. And the leftists have all the nasty instruments of the state at their disposal. Citizen reporter Fabian Fjälling looks into their excesses.

    The geopolitical future of Nordic countries

    Between unity and disunity, independence and foreign interference: Nordic countries have to either choose between creating an independent neutral block in the North, or seeing the region being divided between the great powers.

    Russian, Chinese intelligence: ISIS heading for Central Asia with US cover

    Operatives of the crumbling Islamic State in Syria and Iraq (ISIS) are moving to new battlegrounds near the Russian border, intelligence sources have revealed.

    The unraveling of US/Russian relations

    Washington has taken nuclear war against Russia from a hypothetical scenario to a real danger that threatens the future of humanity. 

    Hero commander killed in Syria – when the war is nearly won

    For most Syrians it came as a shock: One of the most popular military commanders of the Syrian Arab Army, Issam Zahreddine, was killed on 18 October 2017.

    What Is The Obama Regime Up To?

    Obama has announced new sanctions on Russia based on unsubstantiated charges by the CIA.

    Go to archive