In the five weeks from June 28 through August 3, the US Dollar Index fell 5.9%!
This Index reports the relative value of the dollar against a basket of other major currencies. Over that time, the dollar has fallen 7.2% against the Euro, 5.3% versus the British pound, 4.4% to the Swiss franc, 4.4% compared to the Australian dollar, 4% versus the Japanese yen, 3.9% against the South Africa rand, and 3.8% to the Chile peso.
The best result for the US dollar when compared to the 22 currencies I regularly track was no change to the India rupee. The dollar declined against the other 21, including 0.3% to the Chinese yuan, 1.1% to the Canadian dollar, and even 1.0% against the Mexican Peso.
In normal markets, when the value of the US dollar plummets so quickly, gold and silver prices take off.
Not this time.
In the same time period, the price of gold was down a significant 4.3% and silver fell 1.4%! This does not make sense. After all, other commodity wholesale prices have soared in US dollar prices during these five weeks:
| Wheat | 44.50% |
| Eggs | 28.60% |
| Sorghum | 22.60% |
| Flour | 22.10% |
| Corn | 15.90% |
| Palladium | 15.40% |
| Cheddar cheese | 14.70% |
| Cottonseed meal | 11.40% |
| Zinc | 11.30% |
| Soybeans | 11.30% |
| Sugar | 11.30% |
| Crude oil | 11.00% |
| Aluminum | 10.20% |
| Copper | 8.20% |
| Hominy feed | 8.10% |
| Butter | 7.00% |
| Platinum | 6.70% |
| Nickel | 6.40% |
| Corn oil | 5.10% |
| Oats | 5.10% |
| Unleaded gasoline | 3.40% |
| Coffee | 2.40% |
| Chicken | 0.30% |
| Natural gas | -0.40% |
| Beef | -0.50% |
| Cocoa | -1.90% |
| Lard | -9.10% |
| Tallow | -9.20% |
| Cocoa | -1.90% |
| Lard | -9.10% |
| Tallow | -9.20% |
Sources: The Wall Street Journal and London Metals Exchange
These are the commodities I track on a regular basis to warn me about changes in price levels. I find this information far more accurate then the Consumer Price Index published by the US Bureau of Labor Statistics which shows virtually no rising prices.
Why did the price of almost everything rise against the US dollar in the past month or so, except for gold and silver? I think I can explain.
Two months ago, after observing that the Federal Reserve was flooding world markets with US dollars, I predicted an imminent reaction of significantly higher gold and silver prices by the end of July. While it happened for other currencies (versus the dollar) and commodities, it specifically did not occur for gold and silver.
Gold and silver are special commodities. The price of gold effectively serves as a report card on the value of the US dollar, the US economy, and the US government. The US government has the largest budget of any nation. The US dollar pretty much serves as the world’s reserve currency. The US economy is the world’s largest—by far. Putting this all together indicates that the US government has a huge incentive to take actions to suppress the price of gold.
The US government also has the largest total of outstanding debt of any country. By holding down gold prices and lulling creditors with a false sense of security, the US government derives substantial financial benefits from paying a lower interest rate on that debt.
Silver generally trades in sympathy with gold. Therefore, in order to reinforce any manipulation of gold prices, the silver market would need similar attention.
In addition to motive and opportunity, you also have to consider that the US government has actively manipulated the price of gold going all the way back to the end of World War I in 1918. As more federal documents are declassified every year, more information about past price suppression activities are confirmed. The most recent admissions of manipulation have to do with trading in the London gold pool in the 1970s.
Kevin Warsh, a governor of the Federal Reserve Board, in a September 17, 2009 letter to the Gold Anti-Trust Action Committee, Inc. (GATA), admitted that the Fed has current gold swap arrangements with other central banks.
So, it is possible for the prices of gold and silver to be held down while the dollar is falling and other commodity prices are mostly soaring.
But gold and silver prices cannot be suppressed forever. In fact, it does not look like they can be held near current levels very much longer. With major trading partners of the US government, who almost certainly helped perpetrate the manipulations, now closing out their COMEX gold and silver short positions at a record pace, that indicates that those companies expect much higher prices soon. You can acquire your gold and silver today, or maybe have to pay a lot more for it in a month or two—if you will then be able to find any to buy!
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes "Liberty's Outlook," a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles". His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com
It’s understandable that the Federal Reserve manipulate gold and silver prices, they manipulate everything else. If gold and silver does rise to the exorbatant amounts that the economist predict. The economy is going to be in serious trouble. One of the better ways to insure some type of financial stability may be buying gold and silver coins as well as bullion.
Why should the Federal Government go through the hassle of seizing gold today? In the grand scheme of our modern economy, gold and silver are comparatively minor players. Why not seize the over $3 trillion dollars in 401k assets held by US citizens? Keeping Social Security and the Health System afloat would be great excuses for such a move. In addition, there’s no need to kick down people’s doors to search for hidden caches of gold coins. The Feds know exactly where all the 401k funds are and could freeze and confiscate those assets with the stroke of a pen!
Good article… I agree, I don’t believe they can keep this price suppression scheme in place for too much longer.
Every time they knock the price down, physical buyers are coming in droves now to buy at a discount. No amount of paper will hold the price down as physical shortages will completely destroy their con game.
“But gold and silver prices cannot be suppressed forever.
OH YES THEY CAN, AND THEY WILL, UNTIL SPECULATORS DECIDE TO TAKE DELIVERY OF THEIR GOLD AND SILVER ON THE COMEX WHERE THE CRIME IS CENTERED.
GOLD AND SILVER ARE THE ENEMIES OF THE GOVERNMENTS AND THE CENTRAL BANKS. THEY ARE THE BAROMETER OF WHETHER THE EMPEROR HAS ANY CLOTHES.
THE CRIMINALS WILL DO WHATEVER IS NECESSARY TO PROTECT THEIR FIAT FINANCIAL SYSTEM THAT HAS BEEN SO GOOD TO THEM. SO DON’T HOLD YOUR BREATH.
I agree the gold and silver manipulation (a crime in progress) is about over with (within 6 months or less).
Our paper dollar (fiat money) is about to collapse according to many world eceonomist. Of course it is only worth about 5% of its value since the Fed was created in 1913. What would you have wanted your grandparents to save for you (if possible) paper money or gold? Wow, if my grandparents would have put a dollar back for me in 1913 it would now buy a nickel’s worth of stuff. How nice of our government to inflate the value of our money away.
In 5,000 years of history gold and silver have always been considered valuable, but paper money has never survived when it wasn’t backed by gold.
The United States has already had 2 fiat paper money failures (the colonial script and confederate money). Our present dollar is next.
If you like paper money, I wish you good luck.
If you own paper gold or silver, I’m praying for you. I’m afraid you may become a victim.
If you own physical gold or silver, you and your family should survive very nicely.
What about ETF PHYS? Is that paper gold or is that considered physical?
ETF PHYS is from Eric Sprotts and you’re paying a hefty 30% premium (I think). With PHYS you can take delivery if you desire, but at a certain level.
Has anyone consider if other nations such as China is in on the supression? I mean if China is on a quest to accumulate gold would they rather buy it at a lower price?
I have no doubt about the formal price suppression manipulation outlined above.
What I’m most curious and concerned about is just HOW EXACTLY the Comex will crash, considering how much stock (pun intended) the US and UK governments put into suppressing gold & silver prices.
In other words, what order of events would be involved in fulfilling Pat’s below statement?
“…gold and silver prices cannot be suppressed forever. In fact, it does not look like they can be held near current levels very much longer.”
The way I understand the gold swaps is that the gold (actual ownership is the depositors in regional banks ?) is pledged to the EU Central Bank at a given value. If the value of the pledged gold is held down until the end of the pledged period, is it logical that the regional banks will forfeit the gold to the Central Bank ?
Central banks crave gold. The Fed even drilled safe deposit boxes open in the 30′s.
My favorite story on how the Fed has stolen the value of money from the people is to price automobiles. In 1932, 25 ounces of gold would buy a fine new Ford Model A. Those same 25 ounces of gold would buy much more automobile today. The difference in list price is what has been stolen.