Keeping our Clients Informed About Gold
February 14, 2020
We at SendGold believe that one of our jobs is to help our customers stay informed about the precious metals markets so they can make better investment decisions. We do that by trying to separate gold market fact from fiction.
Part of this includes separating gold “conspiracy theories” from “conspiracy facts”.
Gold in The Ocean
One conspiracy theory for example says that there is a practically unlimited supply of gold that could be mined from seawater.
But it’s fairly simple to fact check this: according to New Scientist the amount of gold that exists in 100 million tons of seawater is 1 gram: MIT Scientists: Gold in Seawater.
Gold In The Markets
Another prominent conspiracy theory that has circulated for years about gold is that its price is manipulated by the big banks (the so-called “bullion banks”).
Today we can report that this has now moved from the realm of “conspiracy theory” to that of “conspiracy fact”.
And no, it’s not the careful analysis by the team at SendGold that says so, it is the U.S. Department of Justice (DOJ).
Justice Is Served
Last Fall the DOJ handed down an indictment to J.P. Morgan bank. In it they stated that J.P. Morgan’s precious metals trading operation, one of the largest in the business, was (to quote) “a criminal enterprise” that “had manipulated the precious metals markets for at least a decade”.
Most interestingly the DOJ used The RICO Act, which is normally only used for big drug cartels and the Mafia, in the indictment.
What This Could Mean
It’s widely thought that banks want to suppress the price of gold since it represents competition for all of their paper-based offerings: currencies, bank accounts, shares, and bonds.
Curbing price manipulation will mean that gold prices will better reflect actual market conditions. Supply (which is low) and demand (which is high) would be allowed to seek a more realistic equilibrium.
And the DOJ enforcement action against J.P. Morgan has reportedly sent the Compliance Departments of the other bullion banks (HSBC and others) to their own gold trading operations to make sure they are complying with the law.
We can speculate, but the DOJ reflects the will of the U.S. Government. President Trump wants the dollar lower (a higher gold price would help achieve this), and a few weeks ago nominated well-known “gold standard” advocate Judy Shelton to the U.S. Federal Reserve Board.
And the Fed itself has been vigorously seeking higher inflation. A higher gold price would also help achieve this.
Is Gold a Bond?
One respected observer, commenting on gold in light of these enforcement actions, said that “gold is a high-yield bond of infinite duration and limited issuance”.
We agree, and are working to make SendGold the fastest, easiest, and most liquid way to own it.
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