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April 04, 2005

No Gold Manipulation, Right?
by Alex Wallenwein

I have no idea why no one has done this yet. Maybe someone did, and I missed it. That's very likely, judging from the amount of stuff I have to read every day. Nobody can read everything, of course.

Despite the massive evidence which the likes of GATA and its supporters, including Frank Veneroso, James Turk, and others have amassed over the past six years or so, there are still people (especially mining execs and mining web site owners who should know better) who continue to pooh-pooh the very notion of it.

Once a gold analyst has shown me a CRB-Gold chart some time ago that looked something like this:

Of course, the chart raised this question: If gold is so "manipulated", then why does it so perfectly track the CRB? Are all commodities manipulated in the same way? Doesn't this prove there is no manipulation?

Well, that depends.

It depends on the time frame you are looking at. The shorter the time frame, the closer together appear the starting points for any particular price line on a multi-commodity chart. Just playing around a bit while checking how far gold is below the rest of the CRB, I hit the "1950" button on my trusty "Economagic" service, and look what I found:

While the other, truly industrial, metals sub-index (the green line) sometimes over-and sometimes undershot the CRB Futures Index, gold has just languished far below the $400 line since 1981.

Isn't that kinda strange?

Kinda strange, also, that precisely since 1971, when Nixon took the dollar off the international exchange standard, the other commodities took off and soared while gold kept scraping the bottom of the barrel until only a couple of years after it was "officially demonetized" (demonized??) in 1976.

At that time it began a humongous catch-up bid, which it almost won - except for Paul Volcker's 1980 interest-rate trapez-act born of sheer desperation.

After that, the CRB rarely ever retraced its path to less than midway between it's 1981 high and the barrel's bottom, and on the only two occasions it did, it jumped right back above it. Only gold was condemned to a rueful existence far below the $400 water mark - until recently.

The question naturally comes to mind: Why?

If gold was and is truly "just a commodity" as so many brain-washed (or worse) financial analysts are claiming, then why didn't it move right along with the other commodities?

Manipulation? Naah! No way. It just can't be, ... right?

Well, if you have a better explanation, one that equally jumps right in your face, and which equally comports with all the underlying factors and historical developments, I'd like to hear it.

By the way: do you notice the indexes' collective action since 2001? At right around the very same time, all three of them bottomed and have gone nowhere but up since then. Interesting.

Hmm...; Could gold be in the process of repeating its feat of 1980? Might it even break its own record?

The picture gets especially interesting when the dollar is added into the equation. (Now the dollar is represented by the green line):

Note the vertical black line showing that all three commodities reversed course within months from each other. Gold and the CRB in 2001, and the dollar in January of 2002, when the physical component of the new euro currency hit the markets.

And now to the absolute strongest part of the proof that gold was, is, and will remain, the focus of world-wide monetary policymakers, and remains the standard against which they measure their "performance." (Drum roll, please.)

The strongest evidence lies in what you don't see.

You simply don't see any of the mind-boggling contortions among virtually all of the economic parameters in the pre-1971 period. Prior to the dollar coming off gold in 1971, the world's economic seas were - well - calm.

Yes, there was the Great Depression. Yes, there were wars, recessions, inflations, depressions, etc., but when compared to the whiplash-causing aberrations we have experienced ever since, it was all a cakewalk. I suspect that even the "great" depression will be remembered as a mere cakewalk when the new, far greater, depression that is yet to come sets in.

It may come gradually, or it may come abruptly, but come it will, and the effects will be severe.

If you are an economist and have ever wanted to see a visual representation of the imbalances that result from following Maynard Keynes idiotology too much, all you have to do is look at this chart. Maybe you'll decide to seek another field after that. It's gonna be very stressful if you decide to support the establishment version of why things are the way they are.

What the world needs to do is to pour some "yellow oil" on these crazy economic waves that we (or rather our leaders, with our ill-informed acquiescence) have created for ourselves. Only gold can calm this mess. No euro, no optimum currency regions, no implanted RFID chip system, can hide this turmoil any longer.

Any government, any business, any individual who (or which) does not align himself (or itself) with this undisputable reality will eat dirt. Maybe first-class dirt - but it will still be dirt.

This chart literally cinches all attempted arguments to the contrary right into the garbage sack where they belong. There isn't really anything else to be said about it.

Got gold?

Alex Wallenwein
Editor, Publisher
The Euro vs Dollar Monitor

Just like driving your car, investing only makes sense if you can see where you are going. The Euro vs Dollar Monitor is your golden windshield wiper that removes the media's greasy film of financial misinformation from your investment outlook. Don't drive your investment vehicle without it!

Copyright © 2003-2008 Alex Wallenwein

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