Central banks are manipulating the gold market, says Chris Powell of GATA. They are interested in supporting government bonds and the dollar and keeping interest rates low, while buying as much gold as they can on any weakness.
He believes there are huge naked short positions in gold, and estimates that 75% to 80% of the gold that the world thinks it owns does not exist, but is merely a claim on a bullion bank underwritten by the British and American central banks.
Meanwhile, borrowing costs continue to soar in Italy and Spain. Large structural issues remain unaddressed and mountains of debt continue to pile up. This explains much of the current machinations in the gold and silver markets.
Gold is now more than 50% below its real record high of 32 years ago; in January 1980 gold traded at $2,600 per ounce in real terms, adjusted for inflation. There are few assets today that are trading below their real price in 1980. Example: the Dow was trading at 1,000 in 1980 and is around 12,600 today, nearly 13 times higher than its nominal high in 1980.
The gold market has yet to see any kind of irrational exuberance, let alone any kind of mania. The majority of people have no allocation to gold whatsoever, and there continues to be a complete failure to understand gold’s importance as a store of value, an important diversification asset and a crucial safe-haven asset.
To read Aubie Baltin article: Gold and Hyperinflation
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