[DEBATE] : Dominic Frisby: Is the gold price really being manipulated?

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Dominic Frisby: Is the gold price really being manipulated?

Submitted by cpowell on 12:26PM ET Wednesday, February 6, 2008. Section: 
Daily Dispatches

By Dominic Frisby MoneyWeek.com, London Wednesday, February 6, 2008

http://www.moneyweek.com/file/41862/is-the-gold-price-really-being-manip...

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 www.GATA.org to learn more).

On the other hand, the strongest case I have been able to find against 
the existence of gold-price fixing isn't exactly watertight. 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 he's 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 --

http://www.gata.org/node/wallstreetjournal

-- 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.

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