• Hedge fund, PhD statistician claims gold market is the most blatant case of manipulation
  • PhD: Statistically impossible unless there’s manipulation occurring
  • Gold serves as political chips on the world’s financial stage.
  • Price is being suppressed until China gets the gold that they need
  • Gold will go higher when all central banks ‘confront the next global liquidity crisis’
  • ‘When that happens, physical gold may not be available at all.’

Jim Rickards: The Golden Conspiracy

Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.

There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

These are the opening lines of Jim Rickards’ piece ‘The Golden Conspiracy‘, an op-ed that may surprise even the most seasoned followers of gold markets.

Gold and silver price manipulation is not a new topic to regular readers. For years the idea that precious metals markets are subject to more than just free market forces has been dismissed by the mainstream. Many have referred to gold and silver manipulation as topic fodder for the conspiracy and deep web forums. This is despite evidence to the contrary.

In the last eighteen months or so what was dismissed as anecdotal tales of manipulation has finally been recognised by the regulators and lawmakers as something very real and serious. Fines have been doled out and regulators have been slowlyimplementing new rules.

But what if the manipulation goes above institutions that can be called to account? Can they be fined? Can it be somewhat controlled by the authorities? What if it is a country doing the manipulation? Rickards believes it is.

‘where is the manipulation coming from? There are a number of suspects but you need look no further than China.’

Role of China

Previously we have been excited about China’s role in the gold market. In April last year they launched yuan denominated gold bullion trading. We not only expected this to further boost its power in the global gold and forex markets but to also lead to increased transparency and reduce price manipulation.

However the country is not only keen to increase transparency in the market for their own long-term gain, they have short-term goals as well to increase their gold reserves.

Rickards explains:

China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right (SDR).

China accomplished that last September when the IMF added the yuan to its basket of currencies.

The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same.

Right now, China officially does not have enough gold to have a seat at the table with other world leaders. Think of global politics as a game of Texas Hold’em.

What do want in a poker game? You want a big pile of chips.

Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.

For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power – but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy. And Russia has ramped up its gold purchases recently.

The U.S. gold reserve at the market rate is under 3% of GDP. That number varies because the price of gold varies. For Russia, it’s about the same. For Europe, it’s even higher – over 4%.

In China, that number has been about 0.7% officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the U.S. and Russian level. But they want to actually get higher than that because their economy is still growing, even if it’s at a much lower rate than before.

Where is the evidence for this?

As we have explained previously, manipulation is often dismissed as a conspiracy and anecdote driven theory. But Rickards has academic evidence:

I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.

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