#4 $2000 Gold
It was only a matter of months ago that we were told that gold was "in a bubble" at $1400 or $1500 an ounce. Well, gold recently crossed the $1900 an ounce barrier, and appears poised to go much higher as global financial instability intensifies.
Spot gold soared to an all-time high above $1,910 on Tuesday, on course for its biggest monthly rise in 29 years, as persistent worries about global economic growth burnished bullion's safe-haven appeal.Spot gold gained 0.8 percent to strike an unprecedented $1,911.46 an ounce, before easing to $1,909.49 by 0023 GMT (1:23 a.m. British time). U.S. gold rose 1.4 percent to a record high of $1,917.9, and stood at $1,912.10. Spot gold was headed for a seventh consecutive session of rise and a monthly gain of 17 percent, highest since August 1982, as a dismal outlook for the U.S. economy and fear of a worsening euro zone crisis drove nervous investors to bullion. "We are not hearing much good news out of Europe or the United States," said Darren Heathcote, head of trading at Investec Australia. "The picture looks pretty bleak in the short term... For the time being investors are happy looking at gold as safe haven in these troubled times, and will continue to do so until we see something positive and sustainable." The current bull run in gold could mirror the climb seen in 1980, and prices have increasingly become emotion-driven, said Reuters market analyst Wang Tao. Market participants are eying an annual central bank conference in Jackson Hole, Wyoming, where the U.S. Federal Reserve Chairman Ben Bernanke is scheduled to speak on Friday. Spot silver rose to $44.20, its strongest since early May, tracking gold's strength. It was later trading at $43.89. Spot platinum hit a three-year high at $1,912 an ounce, before easing to $1,910.49. The Relative Strength Index on spot platinum rose to 76.7, its highest since last October. A reading above 70 suggests the underlying market is overbought.
(Editing by Himani Sarkar)
AS ITS PRICE CLIMBS, GOLD CONSPIRACY THEORIES ABOUND
DIE WELT (Germany)
Whether it is its solidly high price per ounce or maybe even the end-of-year visit of Her Majesty, Elizabeth II, to view British gold reserves at the Bank of England, conspiracy theories are proliferating around gold – particularly as (or so rumor has it) some kilo bars appeared in Great Britain that were filled with virtually valueless wolfram. Some insiders even believe that a large portion of Germany’s gold reserves are in fact gold-coated wolfram (tungsten) bars. The sheer values involved – a standard 12.44 kg gold bar is presently worth 500,000 euros – go a long way to explaining the stubborn attachment to theories such as these, the spread of which are aided considerably by the Internet, reports Die Welt. The precious metal had another strong week, with gold's spot price closing Friday at $1,687 per ounce. Eugen Weinberg, who heads commodities research at Germany’s Commerzbank, says that he is certain that – if indeed there are any tungsten-filled bars at all out there – the number of them is exceedingly small. German theorists’ fears are particularly fueled by the fact that, according to the German Federal Bank itself, only part of German gold reserves are actually in Germany: the bank says that “a good two thirds” of the 3,396 ton German reserves worth 145 billion euros are not actually stocked inside the country. Among the rumors accompanying the nearly two-year upward trend in gold prices is that key national treasuries – not least Fort Knox in the United States – have now actually been emptied out. Another fashionable conspiracy theory sees price manipulation of the precious metal by a powerful international elite that controls the market.
Is it really so preposterous to believe the United States and Europe would conspire to keep pole position in the global financial system? 
I don't think so - and neither does China. That much was revealed in a diplomatic cable recently uncovered by Wikileaks. According to the 2009 cable from the U.S. embassy, China believes the United States and Europe have, as a matter of policy, suppressed the price of gold to discourage its use as a reserve currency. And there's a pretty compelling case to be made for a gold price conspiracy.
The Gold Price Conspiracy
The cable summarized several commentaries in Chinese news media sources on April 28, 2009.
"The U.S. and Europe have always suppressed the rising price of gold,"
"They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency."
According to the cable, China believes that by building its gold reserves, it can not only safeguard itself against the declining value of the dollar, but encourage central banks around the world to expand their gold purchases, as well.
"China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold,"
the cable said.
"Large gold reserves are also beneficial in promoting the internationalization of the RMB."
Now, if all we had were the Chinese claiming the U.S. and Europe were suppressing gold prices, it would be easy to disregard as superficial propaganda. But in fact, there's evidence that supports this claim. In the decade between 1999 and 2009, central banks - dominated by the West - were net sellers of gold in every single year. And that's despite the fact that gold in that time soared from $250 an ounce to $1,200 per ounce - a nearly 400% gain.
Then there's the infamous "Brown Bottom." Between 1999 and 2002, Gordon Brown, then U.K. Chancellor of the Exchequer (and later Prime Minister), decided to sell nearly half of his nation's gold reserves.
At the time, just the advance notice of these substantial sales drove gold's price down from $282.40 an ounce to $252.80. Those gold sales yielded an average price of $275 an ounce, raising a total of $3.5 billion. Today, those 395 tons of gold would be valued more than $19 billion. You have to admit, it doesn't make a whole lot of sense to sell a solid asset whose price is moving steadily higher each year - especially when the United Kingdom's debt problem then wasn't nearly as bad as it is today.
The answer: Because there's a conspiracy a foot.
Gold Dust on The Fed's Hands
Here's more damning evidence.
A U.S. District Court this year ordered the U.S. Federal Reserve to disclose to the Gold Anti-Trust Action Committee (GATA) the minutes of an April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, as compiled by an official Federal Reserve Bank of New York. And it's a bombshell. The minutes suggest that officials from the G-10 governments and their central banks were, in fact, conspired to synchronize their policies to affect the gold market. It turns out that U.S. policymakers aren't just worried about preserving the dollar's role as the world's main currency reserve. They're also worried about the effects higher gold prices could have on the nation's debt burden. The minutes include comments by a U.S. delegate identified only as "Fisher," which is likely Peter. R. Fisher, head of open market operations and foreign exchange trading for the New York Fed. Fisher, the minutes say, made the case that rising gold prices would increase U.S. debt. Fisher "explained that U.S. gold belongs to the Treasury. However, the Treasury had issued gold certificates to the Reserve Banks, and so gold also appears on the Federal Reserve balance sheet," the minutes say. "If there were to be a revaluation of gold, the certificates would also be revalued upwards; however [to prevent the Fed's balance sheet from expanding] this would lead to sales of government securities. So the net benefit to Treasury would need to be carefully calculated, since sales of government securities would expand the public portfolio of government securities and hence also expand the Treasury's debt-servicing burden."
Indeed, Fisher's remarks are an open acknowledgement that the United States has an interest in suppressing the price of gold. So, clearly, there is a growing body of evidence that Western governments, central banks, and even some of the largest investment banks have a vested interest to subdue the price of gold. Furthermore, they've already acted on behalf of that interest. But now the tide is turning. The dollar and the euro are on the ropes and emerging marketshave been steadily increasing their gold purchases. While authorities in developed countries are making it more difficult for investors to build gold holdings, large China and other developing markets are doing just the opposite. They're actually encouraging their populations to adopt physical gold and gold investments like futures and exchange-traded funds (ETFs). So I think it's high time the average Westerner looked to the East for cues on wealth preservation and their attitude towards gold.
News and Related Story Links:
Gold Anit-trust Action Committee:
- FLASH: China knows about gold price suppression, and U.S. knows China knows
- GATA: As gold price suppression grows more brazen, maybe Asia will defeat it
- GATA: G-10 minutes from 1997 show central bankers conspiring about gold
- Money Morning: China Seeks to Dethrone the Dollar, Transforming the Yuan into the Dominant Global Currency
- Money Morning: China Continues to Push for Global Currency Overhaul
- Money Morning: Why Gold Will Replace U.S. Treasuries as the World's Last Risk-Free Investment
- Money Morning: Three Ways to Profit as China Causes Gold Prices to Spike
- Money Morning: Gold Will Hit $5,000 an Ounce Long Term ... But the Near-Term Profit Prospects Are Even Bigger
- Money Morning: Chinese Investors Drive Gold Imports Five Times Higher on Inflation Fears
Conspiracy Watch: All the Gold in Fort Knox, Has the Ft. Knox gold gone AWOL?
The latest installment in our ongoing collection of wonderfully weird (and totally whack) conspiracy theories. Find more Conspiracy Watch entries here. Is Fort Knox secretly empty? Did Glenn Beck—or perhaps aliens—move the gold to an even more secure location? Yes, it's time for another installment of Conspiracy Watch, our ongoing collection of wonderfully weird (and totally whack) conspiracy theories.
The federal government keeps more than half of its gold—some 5,050 tons—stashed inside the bullion depository in Ft. Knox, Kentucky. At least it says it does, since it won't let anyone in there to check. Why all the secrecy? Because much—or all—of the gold has disappeared.
THE CONSPIRACY THEORISTS:
Fears that Ft. Knox is being emptied date back more than half a century (see "Gold Bug Variations"). Rep. Ron Paul (R-Texas) says his measure to auditthe Federal Reserve, which passed the House last December, would force the first open audit of Ft. Knox in decades. The Gold Anti-Trust Action Committee, a nonprofit that promotes "the liberation of thee precious metals markets as a matter of international human rights," suspects that the gold has been raided to manipulate commodities markets in an effort to sink gold prices and bolster the dollar. Some gold bugs go even further, claiming that Ft. Knox's gold bars have been replaced with fakes filled with super-dense tungsten.
MEANWHILE, BACK ON EARTH:
Mint spokesman Michael White says the Treasury conducts a "comprehensive audit" of Ft. Knox annually, and the gold's all there—you'll just have to take its word for it. And Ron Paul's plan to open the Fed's books might not penetrate the vault: The US Mint and the Federal Reserve say that Ft. Knox is not even part of the Fed.