Gold – Most Manipulated Commodity
2008 October 22
Gold is perhaps the single most manipulated commodity by governments worldwide.
It is always in the interests of the gov. to encourage gold leasing, gold paper contracts short sales, and falsifying government reserve holdings. Considerable evidence has been published to show this is exactly what is happening.
As the world comes to a new era of the unwinding of the great credit bubble of 1983 to 2008–metals and commodities will be primary beneficiaries.
In the short term, (two years) gold and other commodities may fall another 20%–but the bull market is intact for commodities, and gold.
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Neither of them can be created willingly as is the Case of the Dollar currently. When the chickens come home to roost, they will find a burning hen house. The world is awash in dollars, more so every day. All it will take is a few small emerging market nations to sell their dollar reserves to bolster the purchasing power of their own currencies i.e. prevent inflation.
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I am not an economist or anything even remotely related to such professionals. However, one thing which I cannot understand is why would the commodity prices (including Gold) will fall in the long run when every country has decided to print more currency and flood the banks with more currency. At some stage this currency will be in the hands of people who will use it to pay higher prices for the same goods we buy now, inflation will have to be high and under those conditions, all commodities will have to be high as well. Can someone explain why there can be deflation and falling commodities when trillions of dollars (and Euros and Pounds) will flood the system with paper money.
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Because of clever manipulations of gold swaps and leases and other paper games and in some cases even outright sales of physical gold by governments that are desperately trying to keep the right to print money, most people are unaware or still not convinced of the value of the precious metals and don’t consider paper to be just that paper… yet.
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In a financial crisis and recession, shorting gold for financing represents an almost exponential amount of risk, since you´re shorting something that performs very well (theoretically) in a recession because it´s a store of value. Also, you would typically use this financing to buy much higher yielding debt, and during a financial crisis the risk of this debt defaulting goes up. Thus, you have gold going up in value and the value of your bond going down if things get worse, and that represents a very large amount of risk, since you could theoretically be out an infinite amount of money if gold went up in value an infinite amount (that would never happen, but it´s what could happen theoretically).
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I really don’t see a big difference as the Printing presses go into overdrive in the Developed world to prevent a monetary crisis.
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Think about it, we rapidly increase the amount of money to stabilize money. If gold could be created the same way, it wouldn’t be worth much in the Future.
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The reality is we are seeing currency and credit DEFLATION.
The central banks can ‘print’ as much money as they want, but when no one will borrow/take it and loan it into circulation it doesn’t matter… You can’t get fiat money into circulation any other way.
Money and credit are being destroyed at a faster pace then the central banks can push new money back into the system.
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