Gold Suppression

There is a popular conspiracy theory related to gold, that its price is systematically manipulated lower in order to mask inherent weaknesses in our current financial system. This manipulation takes on three forms:

1. There is direct intervention in the gold market
2. There is the suppression of positive news related to gold
3. Disincentives keep people from buying physical gold

This is not some crazy over the top idea. Governments sell and buy gold, and there is a definite tendency to portray gold as somehow antiquated and quaint in mainstream media.

As of late, financial papers have replaced their gold ticker with a Bitcoin ticker, which is odd because Bitcoin is a true feather weight compared to gold. While the gold market is bigger than all the companies traded in the S&P, Bitcoin is comparable to a single company in that same index.

Another global trend is the shutting down of safety deposit boxes. Banks are contacting their customers, telling them to take their valuables home. Some may react to this by selling their gold. Others may be dissuaded from buying physical gold, choosing the apparent safety of paper contracts over the apparent risk associated with physical ownership.

The overall effect of all this has no doubt led to lower prices than would otherwise have been expected. Physical gold is made invisible, and as the saying goes: what's out of sight is also out of mind.

However, there is no good alternative to physical gold. A paper contract is merely a promise that can be defaulted on. Its price can easily be manipulated lower through naked shorts. Having a contract is not the same thing as having the thing itself.

My personal take on this is that it doesn't matter, certainly not at present. The reason for this is that the price of gold is likely to be close to where it cannot be suppressed farther down. Daily price movements are therefore similar to what they would otherwise be, only at a lower level. In this perspective, price suppression is actually to the benefit of the investor. The price is artificially low. There is therefore tremendous upside potential in case of systemic collapse, while at the same time very little downward risk due to the fact that the downward potential is already taken out.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link