Is The Deep Financial Crisis
Overwhelming Gold Price
Manipulation?
Is The Deep Financial Crisis Overwhelming Gold Price
Manipulation?
By Patrick Heller, Market
Update May 13, 2008
There has been a constant stream of terrible financial news
over the past nine months. This news makes investors leery of owing US
dollars or dollar-denominated paper assets like stocks or bonds. When
investors try to protect themselves by switching to other assets or
currencies, the result is a decline in the values of the dollar and
American stocks and bonds.
Apparently, the top priorities of
the US Treasury and the Federal Reserve is that the US stock market must be
supported and the price of gold held down, so as to avoid a massive exit
from the dollar and American stocks and bonds. To accomplish this
manipulation, the Federal Reserve trades short-term repurchase agreements
with 20 approved primary government securities dealers. Among American
dealers on this approved list are Bank of America Securities, Bear Stearns,
Cantor Fitzgerald, Countrywide Securities, Daiwa Securities America,
Goldman Sachs, Greenwich Capital Markets, HSBC Securities (USA), JPMorgan
Securities, Lehman Brothers, Merrill Lynch Government Securities, and
Morgan Stanley. As long as these companies use the liquidity provided by
the repurchase agreements to do the government's bidding, they will be
allowed to make profits from the fees of the transactions.
When significant negative financial news is released, government officials
know that this could scare investors into selling their US dollars and
stocks and bonds and buying gold and silver with the proceeds. To diminish
this effect, the Federal Reserve and Treasury (who know the bad news before
its public release) give orders to boost stocks in the Dow Jones Industrial
Average (DJIA) and to knock down the price of gold.
Last Friday
we saw a perfect example of this tactic. The previous day, American
International Group, Inc. (AIG), the world's largest insurance company
announced a $7.8 billion loss for the first quarter of 2008. This followed
a $5.3 billion loss the previous quarter, when AIG officials suggested that
the worst was over. As a result, when the U.S. markets were opening on
Friday, the U.S. dollar and stocks were falling and the price of gold was
rising. In mid-morning, the manipulators struck. Gold quickly fell almost
2%, the DJIA increased about 1%, and the US dollar index rose about 0.5%.
After this counter-intuitive market action hit, then came the
new bad news: Citigroup, one of the world's largest banks, announced a plan
to dispose of about 20% of its assets over the next 2-3 years.
Almost every time over the past nine months, the pre-arranged manipulation
of the DJIA and the gold price had the desired effect of persuading
investors to sit tight. Last Friday, that didn't happen. After the
manipulators struck, nervous investors continued to sell the dollar, sell
U.S. stocks, and buy gold and silver. For the day, the DJIA was down about
1%, the US dollar index down 0.5%, and gold was up 1%. For the day, the
stock of AIG dropped almost 9%; Citigroup lost over 2%.
This
week, the ratings agencies are announcing plans to downgrade the credit
rating of several currently top-rated companies and funds.
The
gold price manipulators seem to be losing their clout. We could be in for
some serious decline in the value of the US dollar, stocks, and bonds in
the coming weeks, along with much higher gold prices.
DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of GoldIRAS.com. Past performance of any investment is no guarantee of future performance. All investments have risk.
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