I had a thought the other day… it could be crazy, but it also could just be crazy enough to ring true. Central bankers are up to their old gold manipulation tricks again; however, unlike in the past when oil supplies could be increased at will by domestic or foreign suppliers, their attempts to fake strength in the dollar by punishing gold has instead shifted wealth to oil and food. The Fed is powerless to prevent oil prices from rising as peak production arrives and the more they destroy gold as an alternative to dollars the more they inflate the price of oil and endanger the American economy.
Everybody knows a parabolic rise leads to a parabolic decline, the occasional correction is welcome because it helps prevent unreasonable growth and often presents a valuable buying opportunity. The gold chart is replete with 5% and 10% corrections that are quickly erased a few weeks later.
The recent pullback in gold prices has many commodity bears calling for a major correction in gold prices, possibly another $50 or more per ounce. While I certainly can’t rule out the possibility of a minor correction, the upward trend should continue over the next few years for the same reason it has been steadily trending upwards for the past several years — inflation.
Many have long suspected government and central bank manipulation of gold prices, but in this case, as all others, eventually the market overwhelms incompetent bankers. A watchdog group is now claiming that half the American gold reserve has been sold in a failed attempt to end the rally by flooding global markets with excess supply.
Over the course of a few days, a reader who goes by the name “General Public” discussed with me the merits of using food as money, instead of gold. I’m still not sold on the idea, but it was a meaningful discussion that deserves more publicity.
What follows is a fantastic debate between Ron Paul and the Federal Reserve bank of New York governor Charles Partee from 1983. It’s quite long, but I highly recommend watching all the way to the end, including the rebuttals and Q&A.
Those of us who invest in gold may already consider it to be mainstream, but if you ask most casual investors, more likely than not, they have never really considered buying gold. They may not even know it’s a serious option. For them, perhaps the ubiquitous cartoon image of a bag and big black printed dollar sign comes to mind. But now that ETF’s are beginning to enter the language of typical mutual fund investors, gold bullion has become more accessible than ever.
