Gold - did you know?
Gold Price Fluxuations
Over the years I have noted many different events, being market driven or politically driven, which have resulted in price in-creases or decreases.
A market that is in incline (going up) is what we call a BULL market. This is a market that is charging forward just like the characteristics of a great male bull. When a bull charges and misses his target and falls down, after a short period of time he gets back to his feet and charges ahead all over again.
The Bull market in Gold is the same. Even though the price ebbs and flows back and forth with price increases and price declines, after a decline, it soon recovers and charges for-ward again. As confirmation of this fact, back in August 2005 Gold was trading at $465/oz and then charged forward in May of 2006 to approximately $730/oz. Then by August of 2006 the price set back to approximately $565/oz. At this point in time those driven by the emotions of greed or fear exited the market not realizing that the setback was merely a normal consolidation. This phenomenon is quite normal, much the same as waking up one day feeling excited then the next day feeling not so excited. In hindsight when we look at the bigger picture, from the year 2001 at approximately $250 per once until today to over $1,100 per ounce, the trend of Gold and Silver on the constant increase has been confirmed and set in stone.
Governments have a constant reputation for interfering with the free market process. They even enforce it by law as per the USA's executive order 12631.
PLUNGE PROTECTION TEAM
The Working Group on Financial Markets (also, President's Working Group on Financial Markets, the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631 and signed on March 18, 1988, by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday"), to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of (United States) financial markets and maintaining investor confidence."
As established by Executive Order 12631, the Working Group consists of:
• The Secretary of the Treasury, or his designee (as Chairman of the Working Group)
• The Chairman of the Board of Governors of the Federal Reserve System, or his designee The Chairman of the Securities and Exchange Commission, or his designee
• The Chairman of the Commodity Futures Trading Commission, or his designee
With comments coming from the leaders of private and governing institutions such as:
24 Jul 1998 - Testimony of Alan Green-span, former Chairman of the Federal Reserve in the US Congress, stating, "Where Central banks stand ready to lease gold in increasing quantities should the price rise."
17 Nov 2009 - European Central Bank president Jean-Claude Trichet, seconded by Federal Reserve Chairman Ben Bernanke and the United States Treasurer Hank Paulson's support for a strong dollar. But analysts said it was likely just a blip in the greenback‟s downward trend.
Comments like those above have constantly been confirmed throughout the last decade on a regular basis from as late as last year affecting markets in the short term. However, the fundamentals for fiat currencies long-term downtrend are intact.
STRONG DOLLAR POLICY
I find it amusing when we hear notions of a strong US$ policy. How does inflating more into existence keep the Dollar strong? Have you ever wondered how our financial engineers achieve such a thing?
It's simple; keep the price of Gold down! Maybe it should be called the weak Gold policy in jest as per the previous Federal Reserve Chairman Alan Greenespan statement above. Early in the last decade this was achieved through central bank sales of Gold from their reserves via the Washington agreements signed by its participating banks. This has now dwindled over recent times as central bank reserves have declined and also due to pressure from their own constituents. These banks have now started to turn back around and go from being net sellers to net purchasers adding even more pressure to a market's supply fundamentals driving the prices higher on a consistent basis as we move forward in this Bull market.
It‟s simple; keep the price of Gold down! Maybe it should be called the weak Gold policy in jest as per the previous Federal Reserve Chairman Alan Greenespan statement above. Early in the last decade this was achieved through central bank sales of Gold from their reserves via the Washington agreements signed by its participating banks. This has now dwindled over recent times as central bank reserves have declined and also due to pressure from their own constituents. These banks have now started to turn back around and go from being net sellers to net purchasers adding even more pressure to a market‟s supply fundamentals driving the prices higher on a consistent basis as we move forward in this Bull market.
Another and one of the biggest bogeyman in relation to some Gold business owner‟s or investor‟s concerns is that there may be an announcement about IMF Gold-funded debt relief for Heavily Indebted Poor Countries (HIPCs). In other words, a massive selloff flooding the market with over supply. Recent comments from the governments of the UK, Germany, Canada and South Africa support these notions.
THE FUNDAMENTAL TRUTHS
Out of the 41 Heavily Indebted Poor Countries (HIPCs) listed within the IMF (International Monetary Fund), 33 of them are GOLD producers! Therefore, if the IMF sells their gold (3,000t), it would supposedly reduce the price of Gold significantly by artificially flooding the market (temporarily). Please also bear in mind that under the Washington agreement a participant is only allowed to sell up to 400 tonnes maximum per year if they so choose. This would only be a quick fix and postpone the HIPC's inevitable problem which is debt and poverty due to unemployment because of a lack of being productive. Sure, it would reduce or clear their debt, but within a short period of time they would be right back where they began having to borrow again. And from whom? You guessed it - the IMF.
"When the gold price soars, what does the financial market ALWAYS focus on? Answer: inflation, crisis, safe-haven investing. Wall Street (and its bullion banks), the Fed and US administrations abhor a higher gold price for those reasons and have done all they can to manufacture a lower gold price than should be over the last decade." - Quote by Bill Murphy, Gold Anti-Trust Association.
As Bill Murphy mentioned above, the kind of media propaganda we have been hearing about Gold sales is designed to keep the US$ strong and precious metals down.
In each one of those HIPCs, between 70% and 80% of the employment comes from their mining industry. If the market is flooded with Gold, we will have a low price; therefore, reducing mining operations and put-ting miners out of work!! The HIPCs need a free-market price in the precious metals to create more employment thereby making them self-sufficient so they don't end up in debt or worse, poverty.
PRICE SUPPRESSION - a moral issue that Fails in the long term
For every miner employed in those countries, you effectively feed about ten dependants because of culture and dependence upon the family unit within most of these nations. Meaning if you put 100,000 miners to work, you will feed and clothe about 1,000,000 people! SELLING ALL OF THE IMF GOLD OR PART OF IT IS A MORAL ISSUE for those nations making them even poorer than they are now.
THE TRUTH OF THE MATTER
The IMF will never sell all of their Gold. Why? Be-cause most of the members of the IMF are HIPCs (Mali, Tanzania, Ghana, PNG, Indonesia, South Africa and some South American countries) depending on gold mining for a good chunk of export revenue, in-vestment and even Gross Domestic Product (GDP). The IMF website points out that it would take a majority vote to sell all of its Gold, which makes it highly unlikely for them to vote for Gold sales creating higher unemployment for themselves.
"The IMF may sell gold outright on the basis of prevailing market prices and may accept gold in the dis-charge of a member's obligations at an agreed price based on market prices at the time of acceptance. These transactions in gold require an 85% majority of total voting power. The IMF does not have the authority to engage in any other gold transactions such as loans, leases, swaps, or use of gold as collateral nor does it have the authority to buy gold." - IMF Constitutional quote
After three decades, the IMF finally had a deciding vote to sell a 400 tonne quota of its Gold. Out of this amount earlier this year they sold just less than 200 tonnes to India for approximately $1,040/oz. Most market participants expected the price to go down, yet it did not and rose as high as approximately $1,200/oz. Though media and government reports over the last decade would spook fears of price declines among traders and drive prices down temporarily, when it actually happened after much speculation, the fundamentals have held the Gold price to its steady incline regardless.
It is well noted that those selling precious metals are selling into strong hands, unfortunately with futuristic regretful consequences to themselves. Those who can see past the smoke and mirrors being produced by our financial engineers via our media are adding to their positions at artificially produced low prices on the dips.
The media never lets the truthget in the way of a good story.
At the end of the day, do not be moved by what you see or, in this case, what you read or hear in regards to banks or governing authorities regarding Gold sales.
Until next time,
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