Federal Reserve knobbles the gold price creating a major buying opportunity for precious metals
Posted on 04 April 2013
This week’s take down of the gold price has all the classic hallmarks of a major intervention by the Federal Reserve say gold traders who know exactly what they see on their screens. Only the Fed can manipulate and coordinate the bullion banks in this way.
The Federal Reserve is trying to stay one step ahead of the curve and keep its money printing show on the road for a bit longer by propping up the US dollar with an attack on gold. How can the greenback be losing it if the monetary metal is falling in value? It’s a sign of desperation to be doing this, a warning sign that things are going wrong under the hood.
This is a known ruse but then traders know it will have an impact on prices so they still jump on cue. The pack follow and reinforce the price fall. However, if you look back over more than a decade of gradually rising gold prices and this never lasts for very long.
This is a temporary distortion in a market driven by ever expanding monetary aggregates and the relatively fixed supply of gold. It’s rare stuff, hard to find and hard to mine. Buy on the dips and it’s a surefire winner in the longer term.
Besides what are we to make of the longer term future for the Fed’s policy of quantitative easinng, the printing of $85 billion a month or $1 trillion a year? What does this hold for the price of gold or silver for that matter as the only other monetary metal?
If QE stopped tomorrow then the US bond market would crash. Interest rates would rocket and bond prices fall through the floor. As this is the world’s largest and most liquid financial market, way bigger than the US stock markets, then this would be a major event indeed.