The Fed has long abused the dollar. Consumer prices, if not commodities prices, are rising. Shouldn’t gold go up to respond to Fed abuse, if not to keep up with inflation?
There is a popular theory to explain why gold is going down: a massive price-suppression scheme. Gold, in this view, is kept down by central banks who are surreptitious selling gold and keeping it on their books as swaps.
We must ask, if this is so, then what of silver? The central banks haven’t got any silver. So if they are suppressing gold, but not silver, then silver would be much higher. How do you explain a gold-silver ratio of nearly 80 to 1?
So there is another explanation of suppression, that the banks sell paper futures. At least, it is true that such a scheme would equally apply to silver as to gold. However, Monetary Metals has proven in our Thoughtful Disagreement with Ted Butler that this is not occurring. In brief: if we look at how each futures contract behaves as it heads into expiration, we can determine if the banks are naked short. Monetary Metals has the data on every contract going back to 1996, and we share the data in that article.
Gold is money and the dollar is the much-abused irredeemable credit of the Federal Reserve, backed by the irredeemable credit of the US Treasury. Gold is not going anywhere, it’s the dollar which moves. At the moment, it is going up. Since April 19, the dollar has gone up about 2.58mg of gold.
The SPDR Gold Trust ETF (GLD) fell $0.73 (-0.65%) in premarket trading Wednesday. Year-to-date, GLD has declined -8.56%, versus a 6.81% rise in the benchmark S&P 500 index during the same period.
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