With the potential reliability of regular retirement plans lowering over the years, more and more people are opting for gold IRA, as they think it can be a viable alternative. However, you must know about certain things regarding the gold market, like how once can manipulate it, before really diving deep in the world of gold investment.
Manipulation is present in a variety of financial markets as traders and experts to influence different markets for their advantage. This often leads to short term aberrations in the pricing of assets, including gold prices. That said, a more particular definition explanation by the US Securities and Exchange commission gives a clearer idea of what manipulation is.
According to them, manipulation is essentially an intentional strategy designed for misleading investors by artificially impacting or controlling the market for security. Usually, traders make this happen by rigging trades, prices or quotes for generating a deceptive idea for security demand.
There is a common belief in gold trading communities that the prices of gold are usually manipulated in downward trends, also called price suppression. In this piece, we will discuss how the manipulation of gold happens and what one must do to safeguard their assets. We will also talk about what many naysayers tend to say whenever denying claims suggesting banks control gold.
Are Gold Prices Manipulated?
To keep things short and simple, yes, the prices of gold are indeed manipulated. A large number of renowned gold investors firmly believe that the gold market is manipulated systematically. Some even believe that the prices of gold tend to fall according to the while of certain central bankers. However, there are also people who put the blame on big banks and how they utilize high frequency trading and derivatives for lowering gold prices.
Western governments, like the United States Treasury, the United States Federal Reserve, central banks and allied governments tend to manipulate the prices of gold quite often for controlling and lowering gold’s value artificially.
Why Have Western Central Banks Rigged the Gold Market?
Gold is a widely recognized and incredibly powerful international currency. Because of this, if it had the freedom to function in the free market properly, it may have determined the value of various currencies, the value of different government bonds and interest rates. More often than not in free markets, if investors do not manipulate gold prices, the performance of the currency trends in the opposite direction to cash and government bonds.
This is mainly because of people utilizing gold as protection or alternative source of money against fluctuating government currencies. People often purchase gold IRAs because of their ability to act as fail safes and not because they think its value with increase with the value of their dollar. Because of this reason, the prices of gold usually increase whenever the currency of a government goes down. This is especially true in places where governments do not create a great deal of gold. Therefore, central banks tend to manipulate gold for defending their assets or bonds against competition from the inside.
Unfortunately, the techniques most Western banks utilize for devaluing gold impact much more than simply gold. While they do all of this under the guise of right intentions, the decisions they make impact markets and greatly affect commodity producing countries.
People often use the term financial repression for the destruction caused by manipulated gold prices. Loads of academic literature and government records back these claims up. You must only take a short look at the history of fluctuating gold prices to see how it usually coincides with how Western markets perform.
How Do Gold Prices Get Manipulated?
Traditionally, gold was overtly manipulated by bankers, who unloaded it at vital moments. As time passed, the process became a regular occurrence. Once the United Kingdom, United States and numerous other European countries started doing this during the 1960s, it became more noticeable and historians called it the London Gold Pool.
Once the gold pool ended up crashing, countries started to manipulate gold covertly. Until today, experts resort to gold manipulation tactics a massive crime, especially when thinking about how much they benefit Western countries while devastating others.
Bankers often rely on tactics like leasing for devaluing gold. During this process, they often trade options contracts, futures, derivatives and make use of high frequency trading. More often than not, they do this with the help of investment banks that conceal most of their ongoings. When they sell and purchase gold outright, it tends to be quite subdued and has very little impact on markets.
Naked Gold Short Selling and Bullion Banks
Bankers manipulate gold prices with the help of short selling. Usually, this happens whenever an investor decides to sell gold that they don’t own currently. More often than not, they borrow gold just for the transaction. Short selling is called naked if the borrowing doesn’t happen prior to the transaction. So, naked short sellers can’t deliver gold to buyers on a consistent basis.
This is a major reason why short selling has been so controversial. Many people think that federal banks leverage bullion banks for using naked shorts for manipulating the prices of gold to drive them down. In some cases, banks even get incentives to do this as they get to drive the currencies of their nation.
Evidence of Gold Price Getting Manipulated
The Federal Reserve’s former chairmen have gone on record and openly acknowledged how several banks tend to manipulate gold. Alan Greenspan, one of the chairman testified to the Congress in the late 90s where he stated that that banks mostly release gold whenever there is an increase in prices. The main reason why banks do this was to suppress the value of gold instead of earning some money.
Many Factors at Play
Central banks use a variety of strategies for manipulating the prices of gold. Sometimes, they even alter markets unintentionally. It is also worth keeping in mind that it is likely for central banks to manipulate the market as most of the furtive movements happening on the side are enough, particularly because of how discreet they are.
Sadly, small investors cannot do much to take action or accuse banks for manipulating gold’s prices. All one can do is focus on the long term and invest accordingly. Doing so will allow you to steer clear from intentional market fluctuations, making sure you can get decent returns.
Remember, many large institutions like the Federal Reserve always has a massive amount of gold for stabilizing the expectations of the market. This gives small and large investors the chance to make sure gold continues to thrive in the market.
How Does Gold Price Manipulation Affect Gold’s Value?
As most of you may know, gold is incredibly undervalued in the current economy. Despite that, many people argue that people shouldn’t be too myopic. The gold trading that occurs every day affects gold markets as well as their prices in the long term.
That being said, the manipulation of Gold prices still impacts particular markets and gold’s overall value. What’s more, most investors do not have the time required to smoothen prices or introduce an honest, accountable and straightforward system.
A Contrary Opinion: Long-Term Cycles in the Gold Market
Plenty of experts may argue that there isn’t enough evidence to suggest gold manipulation. This is mainly because how gold prices behave in the long run. Most western bankers have become incredibly skilled at trading derivatives deceptively and can make it seem like gold prices are stable for the long term.
Likewise, many skeptics may point their fingers towards particular accusations regarding suppression. For instance, people often accuse banks and major financial institutions of manipulating gold prices when the rates drop. However, when the prices increase, they usually credit it to the market operating as intended.
Conclusions – What Gold Price Manipulation Means For You
It would be fair to say that the price manipulation of gold is quite a controversial topic. People often see naturally occurring bear and bull gold markets. However, bear markets don’t always point towards foul play. However, history suggests that governments and banks have been manipulating gold prices for many years.
There is also evidence that suggests western banks are still manipulating gold covertly. Despite how banks use their power to leverage international gold prices, this precious metal is still considered among the most profitable long term investment option. Even if it is for profile diversity, gold can offer you wealth, which you can repurpose later on in life.
If you want to learn more about gold and how its prices are manipulated, you will be glad to learn that there is a great deal of online and offline literature regarding the matter. Those who want to learn how to invest in gold should consider reading some of the guides and tips on our website. What’s more, if you want to trade gold or even invest in a gold IRA, get in touch with us to find the right gold IRA partner. Our experts can help you get up to speed and find ways to help you increase your assets.
