How can a central bank manipulate the price of gold downward? Let’s assume that you have 8,134 metric tons of gold in the depository. Recently, a 50 ton sales order was issued. The following table provides the latest estimates of official reserves (http://en.wikipedia.org/wiki/Gold_reserve):
![CropperCapture[191]](http://www.servias.org/wp-content/uploads/2013/07/CropperCapture191.png "CropperCapture[191]")
As you can see, only a handful of countries could back a single sale of 50 tons. From a practical matter, the U.S. is the only country that could put 50 tons on the market without a notable outcry.
Step 1: Create a contract to lease 50 tons to an agent such as Morgan Stanley or Goldman Sachs. With a lease in place, you can still claim ownership of the 50 tons of gold on your balance sheet. The leasing price is set at 1% per annum. The return of the metal is “indefinite” or on demand. (Wink, Wink)
Step 2: The agent bank sells 50 tons into the market causing the price to plummet. The market is overwhelmed with such a large sell order thus the price goes down until more buyers enter in.
Step 3: The agent bank allows the momentum of price decline to take hold as “momentum traders” jump on board to ride the price downward. They sell short into the gold futures market and push the price down further.
Step 4: Once a new price level becomes stable, the agent bank starts buying back the original gold (with the proceeds in Step 2) at a much slower pace, booking a profit and hoping to keep the price at the lower level.
So, what is the problem? Gold has been rising in price for over a decade and the agent bank cannot recoup the gold sold into the market. The central bank may not be able to get the gold back into its physical possession. The gold reserves then only represent what is on paper versus what is physically in inventory. Some observers believe that there are virtually no reserves left in some countries. The Germans want their gold back from the New York Federal Reserve Vault but have been told it will take years to get it back on their soil.
China is ranked #6 with 1054 tons but there are sources who claim that China has at least 4,000 tons, possibly up to 8,000 tons. Add India to the mix and you can see how the Kings of the East could move the world’s reserve currency to their control. Both countries continue to aggressively accumulate gold, especially at these low prices.
If the U.S. Dollar loses reserve currency status, the price of gold will skyrocket in terms of the U.S. Dollar. Paper wealth will substantially decline for those who hold the Dollar. The only thing keeping the Dollar from tanking is the perceived safety of holding Dollars. If that perception changes, volatility would occur overnight. Why do you think that the media is so focused on managing the perception of the populace? Why do you think that there are so many Executive Orders in place to handle a widespread upheaval? What reason did the authorities put in place capital controls so wealth could not flee the borders? Why do you think the military is now being used for domestic police assistance? The central planners are concerned that they will lose control. If they only realized that Our Heavenly Father is really in control, they could rest easier at night. Love will prevail. Yes, it is counterintuitive to what a person thinks is needed. However, Love framed the universe. I think it can resolve a few economic issues.
P.S. If gold is such an ancient relic, why do countries keep their reserves?