Have you ever wondered how the price of gold is manipulated?

If you are wondering how the price of gold is manipulated, this analysis is for you.

You will see that bullion banks that sell gold to investors possess only about 1% of what they sell, a fraud that is possible only because most buyers are content to leave their gold on deposit with the sellers, thinking that it is in safe keeping.

All they really have is a piece of paper that says they own gold, but the gold doesn't exist. When the price of gold starts to rise, they simply sell more 'paper gold' to bring the price down again. Gold is actually the secret knowledge of the financial universe!

Rigging the gold market?
By dishoarding their gold reserves at strategic moments, and then by dishoarding their gold reserves regularly, every day, as the United States, United Kingdom, and seven of their Western European allies did during the 1960s through a public operation called the London Gold Pool.

The London Gold Pool held the gold price at $35 per ounce until it collapsed in March 1968 under rising demand that drained the U.S. gold reserve from 25,000 tonnes down to just more than the 8,000 tonnes officially reported today.

After the collapse of the London Gold Pool the United States and its allies regrouped to figure out how to rig the gold market surreptitiously -- not just with dishoarding but also with the so-called leasing of gold; the issuance of gold derivatives, including futures and options; and, more recently, high-frequency trading undertaken through investment houses that were happy to serve as government's intermediaries in the gold market as they could front-run government trades.

When the rigging is done surreptitiously like this, much less central bank gold has to be dis-hoarded and the dishoarding that is done has far more suppressive influence on the price.

But Western central bank market rigging goes far beyond gold!

Gold has not kept up with inflation since gold's last great rise around 1980. Somehow no one disparaging gold asks why it has not kept up with inflation.

The answer is that gold derivatives have created a vast imaginary supply of gold for which delivery has not been demanded, most gold investors choosing to leave their gold purchases on deposit with the bullion banks that "sold" them the gold. As a result the world now has a fractional-reserve gold banking system that is leveraged in the extreme.

All commodity futures markets have created paper promises of supply that could not be covered by real product and have always been settled in cash. But most commodity markets are for goods that are to a great extent delivered and consumed.

Gold is different, for gold is not consumed but rather hoarded, as a means of exchange, as money, and most gold purchased in the futures markets is never delivered at all but rather left on deposit with those financial institutions that purport to sell it.

This system has produced a very disproportionate amount of imaginary, elastic, but undeliverable supply, even as people buy gold precisely because they assume that its supply is not elastic, that its supply is limited to total past production plus annual mine production…That assumption is a terrible mistake.

You can get an idea of the vast imaginary supply of gold by reviewing the incomprehensibly huge gold and interest rate derivative positions attributed to the U.S. investment bank JPMorganChase in the reports of the U.S. Comptroller of the Currency.

These derivative positions are almost certainly not JPMorganChase’s own positions at all but, as GATA consultant Rob Kirby of Kirby Analytics in Toronto has written, rather U.S. government positions effected through JPMorganChase.

The purpose of all this market rigging is to suppress not only the price of gold but to suppress commodity prices generally. It is just the latest manifestation of the everlasting war of the highest levels of the financial class against the producing class, only this time the producing class hasn't yet figured out what's going on.

Tragically, much of the gold mining industry itself doesn't understand what is being done to it, doesn't understand that it's not just digging metal out of the ground but minting money and competing with all other issuers of money and that this competition is far more cutthroat than imagined. Should Hong Kong currency stay pegged to the dollar? I really don’t think so.