The Federal Reserve has been short selling gold contracts through central banks without the underlying physical gold, Global Research reports. Over the past two years, manipulation of the gold market has become increasingly pronounced, to the extent that the Royal Bank of India recently reported a 93:1 ratio of paper claims to physical gold available. In January 2013, Germany requested that the Federal Reserve return all its gold. In response, the Federal Reserve denied Germany’s request and ultimately settled on an agreement to return just 20 percent of Germany’s gold over a seven-year timeline.
The Feds have been manipulating gold prices through several exchanges and markets. The biggest venue for manipulation is the New York Comex Exchange. COMEX, where the world trades gold futures, is referred to as a paper gold exchange. Each gold futures contract represents one 100-ounce gold bar. According to Paul Craig Roberts and David Kranzler, short selling drives down the price of gold, potentially intimidating shareholders to sell their gold futures; bullion dealers then buy these shares and present them to gold trusts, such as GLD, for reclamation in physical gold. The purpose of short selling these contracts on COMEX is to satisfy Asian demands for physical gold.
The financial news media has interpreted the manipulation of the gold market as a sign that the public is rejecting gold as an investment. However, Roberts—the former Assistant Secretary of the US Treasury and Kranzler—the co-founder and principal of Golden Returns Capital LLC—believe that if the Feds had to deliver purchased gold by default, it would terminate their ability to manipulate gold prices. “The entire world would realize that the demand for gold greatly exceeds the supply, and the price of gold would explode upwards, Roberts and Kranzler write. “The Federal Reserve would lose control and would have to abandon Quantitative easing. Otherwise, the exchange value of the U.S. dollar would collapse, bringing to an end US financial hegemony over the world”
Paul Craig Roberts and David Kranzler, “Naked Gold Shorts: The Inside Story of Gold Price Manipulation.” Global Research, January 18, 2014, http://www.globalresearch.ca/naked-gold-shorts-the-inside-story-of-gold-price-manipulation/5365360.
Student Researcher: Nicholas Millsap (Sonoma State University)
Community Evaluator: Luis Samartin (Marin County)