Are Central Banks Manipulating and Suppressing Gold Prices?
For decades now, central banks all over the world have become known for price manipulation of Gold. It is no secret that gold as an asset makes central banks both terrified and amazed at the same time.
They are terrified of it since it is used in determining the relative strength of fiat currencies. The price of Gold influences interest rates of central banks and their bond prices. This much power in the hands of Gold means that it will likely be manipulated in order to favor the policies of apex banks.
Ronan Manly from the Singapore-based BullionStar in his report for RT earlier this year noted that the Bank for International Settlements, the U.S. Treasury and the Federal Reserve as well as large European central banks, including the Bank of England, the Bundesbank, the Bank de France and the European Central Bank, are all guilty of manipulating the price of Gold over the past few decades.
Central banks hold the highest quantities of Gold as a store of value, serving as their financial insurance, which is why they are always on alert in order to prevent a fully free market for gold. If that happens, they would no longer be in control of the price direction of the commodity and subsequently, market sentiment.
In the 60’s, gold price manipulation by apex banks was done via the London Gold Pool. During that time, the Gold price was kept at around $35 an ounce. With the Bank for International Settlements (BIS) in Basel, Switzerland, serving as the coordinator, the U.S Treasury and a host of other European central banks conducted their transactions via the Bank of England.
Even though that system collapsed in 1968 which led to the gold price moving to the free market, the price manipulation by the central banks didn’t stop there. The banks continued to suppress gold prices in the 1970s both through efforts to demonetize gold and also dump physical gold into the market to dampen price action.
The price suppression and manipulation continued with the creation of the Gold Futures in 1975 in the U.S. At the time, US State Department cable noted that the main aim of the creation of Gold futures was to reduce demand for the commodity. This same tactic is being used for cryptocurrencies which are springing up to challenge central-bank controlled fiat currencies.
Another way that central banks suppress and manipulate the Gold price is via the gold lending market which is mostly centered in London. In this scenario, apex banks transfer their physical gold holdings to bullion banks and this physical gold then enters the market. The transactions either go as gold loans or swaps. Through the loans and swaps, the supply and demand balance is disturbed and this has a depressing effect on the gold price.
To show that central banks manipulate the Gold price, the BIS in a presentation to central bankers at its headquarters in Switzerland in 2008 stated that one of the services it offers is interventions in the gold market.