Is the gold price really being manipulated?

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Most hardcore gold bugs will tell you the gold price is manipulated – or that the authorities at least attempt to manipulate it.

Our Glorious Leader, Gordon Brown’s gold sale was, apparently, all part of a scheme to suppress the price – otherwise he would not have sold it when he did and in the way he did, would he?

Of course, it doesn’t occur to them that this might just have been down to plain old incompetence. Judging by other government fiascos like the tax credits system and the Northern Rock debacle, the incompetence argument certainly carries a lot of weight.

But let’s not dismiss the conspiracy theories too hastily…

Is the gold price being manipulated? I can categorically state, with 100% confidence, I don’t know. But far greater minds that mine have studied the matter for many years and in great detail. People like GoldMoney founder James Turk, Gold Anti-Trust Action Committee (GATA) chairman Bill Murphy, and fellow GATA member Chris Powell.

They are convinced it is at least ‘managed’. And to be honest, when you follow their research and reasoning, the case is extremely compelling. (There’s far too much to go into detail here, but it’s well worth visiting GATA to learn more).

On the other hand, the strongest case which I have been able to find against the existence of gold-price fixing isn’t exactly water-tight. It boils down to dismissing the whole thing as “just a conspiracy theory” and arguing that the perpetrators of the conspiracy are cranks, crackpots and Cassandras. (Cassandra, in case you’re not up to the minute on your Greek mythology, was a princess who was given the ability to see the future, but was also cursed so that no one would believe her predictions. So deriding someone as a Cassandra is actually admitting that they’re right).

Even so, I have some sympathy with this view. I belong to the school of thought which says “Never ascribe to malice that which can be explained as incompetence” as my comments on Gordon Brown might suggest.

However, I do not believe that men as intelligent as James Turk, who I have interviewed many times on my radio show, would devote a lifetime’s research, study and endeavour, let alone face so much criticism, to prove something, if there wasn’t more than a grain of truth to it.

So, to conclude, I think there’s something to it.

The gold conspiracy hits the mainstream

And here’s an interesting thing. Last Thursday, GATA spent a quarter of a million dollars buying a full page ad in the Wall Street Journal (which you can read here: GATA’s advertisement in The Wall Street Journal) – entitled, ‘Anybody Seen Our Gold?’. In the ad, they declare that US gold reserves have not been audited for over 50 years and they call for the US Government, via the Freedom Of Information Act, to come clean about how much gold it really has.

The first thing to note about this is how expensive advertising space is in the Wall Street Journal. The second is that it put gold in the mainstream news, if only for a day. The third is that the following day, after rallying to an all-time high during London trading, the gold price was absolutely hammered down in a big way.

A coincidence? Maybe.

A rising gold price says to the world that “something is rotten in the state of Denmark”. People buy gold when they’re scared that the financial system isn’t working correctly, and there’s plenty of evidence of that. We know the banking world is trying to conceal the rot. They surely wouldn’t have wanted the gold price rising to record highs just as the mainstream press was talking about that frighteningly expensive ad in the Wall Street Journal.

Where next for gold though?

Short-term traders, a re-test of $850 an ounce is more than possible – as is a breakout to new highs. Without wishing to state the obvious, it’s a gamble. A friend of mine made a small fortune shorting this market on Friday. Me? I thought he was barmy. Short this market? You’re better off picking a fight with David Haye.

It’s not time to sell the miners yet

In Monday’s Money Morning, John was suggesting we take profits on the big miners. I’m not sure I agree. The miners soared in the wake of the Autumn rate cuts and I see no reason why they shouldn’t again in the wake of last week’s. I’m holding on to mine for now. I know M&A is often a sign of an impending top, but I believe we are going to see a lot more M&A in the coming year, particularly in the junior sector. Exploration and development has never been so expensive and so risky – so why not just take over an undervalued junior instead? You can read about some of the juniors I’ve been keeping my eye on in the cover story I wrote for MoneyWeek magazine in autumn last year – just click here: Get out of money – and into things

Turning to the wider markets…


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Stocks tumble as recession fears resurface

In London, the FTSE 100 index slumped 158 points to end the day at 5,868, with losses for all but four blue-chips. Housebuilders, including Persimmon and

Taylor Wimpey, dominated the fallers after broker HSBC named the sector’s January rally a ‘false dawn’. For a full market report, see: London market close.

Taylor Wimpey, dominated the fallers after broker HSBC named the sector’s January rally a ‘false dawn’. For a full market report, see: London market close.

Elsewhere in Europe, the Paris CAC-40 fell 196 points to 4,776. And in Frankfurt, the DAX-30 was down 235 points, at 6,765.

Elsewhere in Europe, the Paris CAC-40 fell 196 points to 4,776. And in Frankfurt, the DAX-30 was down 235 points, at 6,765.

Across the Atlantic, the latest ISM data, showing that the service sector is contracting, plus the first admission from a Fed official that the US faces recession, prompted sharp falls yesterday. The Dow Jones registered its biggest one-day drop so far this year – 370 points – to end the day at 12,265. The S&P 500 was down 44 points, at 1,336. And the tech-rich Nasdaq was 73 points lower, at 2,309.

Across the Atlantic, the latest ISM data, showing that the service sector is contracting, plus the first admission from a Fed official that the US faces recession, prompted sharp falls yesterday. The Dow Jones registered its biggest one-day drop so far this year – 370 points – to end the day at 12,265. The S&P 500 was down 44 points, at 1,336. And the tech-rich Nasdaq was 73 points lower, at 2,309.

Recession fears saw Asian stocks fall heavily today too. The Japanese Nikkei was down 646 points to 13,099 as exporters weighed, whilst the Hang Seng was 1,339 points lower, at 23,469 in Hong Kong.

Gold falls on stronger dollar

Crude oil futures were , which fell nearly 2% yesterday and continued to slide this morning, last trading at $87.62 a barrel. Brent spot was at $88.56 in London.

Crude oil futures were , which fell nearly 2% yesterday and continued to slide this morning, last trading at $87.62 a barrel. Brent spot was at $88.56 in London.

Spot gold had edged slightly higher to $887.50 this morning, having hit a low of $885.30 yesterday as the dollar strengthened. Silver had fallen to $16.25, down from $16.37 late yesterday.

Spot gold had edged slightly higher to $887.50 this morning, having hit a low of $885.30 yesterday as the dollar strengthened. Silver had fallen to $16.25, down from $16.37 late yesterday.

Turning to the currency markets, sterling was trading just above a two-week low of 1.9575 against the dollar and was also lower against the euro, at 1.3393. The dollar was at 0.6833 against the euro and 106.40 against the Japanese yen.

Turning to the currency markets, sterling was trading just above a two-week low of 1.9575 against the dollar and was also lower against the euro, at 1.3393. The dollar was at 0.6833 against the euro and 106.40 against the Japanese yen.

And in London this morning, mining giant BHP Billiton raised its hostile takeover bid for peer Rio Tinto to $147.4bn. Dual-listed BHP shares were down by as much as 5% in London, and earlier fell 7.5% on the Australian stock exchange (though there were sharp falls across the board in Asian markets overnight).

And in London this morning, mining giant BHP Billiton raised its hostile takeover bid for peer Rio Tinto to $147.4bn. Dual-listed BHP shares were down by as much as 5% in London, and earlier fell 7.5% on the Australian stock exchange (though there were sharp falls across the board in Asian markets overnight).

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