Sunday, December 7, 2008

Is the Gold Price Being Manipulated?

Bob Murphy at his blog raises the interesting, and I think important question, with regard to gold price manipulation.

My quick reply to Bob was in the comment section of his post:


I think it is a myth that gold goes up during a recession/depression.

What is occurring during these periods is a movement away from goods that benefit from inflation.

I believe the myth came about because of what happened during the Great Depression, when those that held gold stocks [including Keynes and Bernard Baruch] made a fortune, but this was only because FDR pushed the gold price higher and higher, with a floor.

That said, I believe gold will go much higher if Bernanke keeps up his current double digit money printing, which he started in September.
And I continued with a second comment:

As for the shortages, I believe they are of specific coins minted by the Treasury.

A coin dealer telling you he is out just means he can't order anymore from the Treasury.

As you and I both know there is no such thing as a shortage in a free market. You can readily buy or sell gold bullion at the current price, and I would venture to say that if you contacted a numismatic coin dealer, he would be able to find you any coin with any markings you wanted, even the ones that your regular gold dealer is out of, of course it would be "at the market price."
Clearly, the belief that a downturn is good for gold sticks with some, as the gold bullion coins provided by certain governments are out of stock.

For example, the huge online gold dealer, Kitco, is reporting this on its site:

The following products have been temporarily removed from our Precious Metal Store until further notice due to production and delivery delays that retailers are currently facing; Gold Eagle 1 oz, Gold Maple 1 oz, Special Gold Maple 5 X 9 pure 1 oz, Gold Buffalo 1 oz, Gold Krugerrand 1 oz, Gold Bar 10 oz, Gold Bar 1 oz, Kitco Gold Bar 1 oz, Kitco ChipGold 10 g, Kitco ChipGold 20 g Gold Philharmonic 1 oz, Silver Philharmonic 1 oz, Silver Eagle 1 oz, Silver Maple 1 oz, Silver Bar 100 oz, Platinum Eagle 1 oz, Palladium Maple 1 oz, Silver Maple Olympic Coin 1 oz.

These products will be relisted and available for order as soon as fresh inventory is readily available. In the interim, we will focus on completing pending orders as our top priority.

Please note that all remaining products listed in our Precious Metal Store are available for delivery including 1000 oz Silver bars
I can attest that this is highly unusual as I have personally in the past purchased from Kitco significant quantities of some of the coins listed, and have always received them without delay.

However, Kitco does have many other gold and silver products available for sale:

*Gold Bar 400 oz (Bob, I think you should pick up one of these with part of the advance from your forthcoming book)

Gold Bar 10 oz
(Only shipping to US)

Gold Bar 1000 g

Gold Bar 100 g
(Only shipping to US)

Silver Bar 1000 oz

Platinum Bar 1 oz
(Only shipping to US)

It is clearly an out of stock situation of certain coins rather than a gold "shortage"--not much different to what is going on with Amazon's electronic book reader, Kindle:
Amazon Kindle is a wireless, portable reading device with instant access to more
than 200,000 books, blogs, newspapers and magazines. Whether you're in bed or on
a train, Kindle lets you think of a book and get it in less than a minute.

Due to heavy customer demand, Kindle is sold out. Please order now to
reserve your place in line.

If you are trying to push the demand curve for a product downward, the last thing you want to do is give the impression the product is in short supply. Thus, a conspiracy to push the gold price down by limiting the supply of one ounce gold coins seems quite a stretch.

But, I do have something for conspiracy theorists to chew on. Although all local dealers seem to be out of popular one ounce gold coins, as is Kitco, there is one outfit that does not seem to have problems with supply. Blanchard & Co., which is owned by the ultimate military-industrial complex insider, GE, has no problem getting supplies of the American one ounce gold and the one ounce Canadian Maple Leaf. They are selling both on their site.

Says Blanchard:
Blanchard and Company, Inc. has seen unprecedented investor demand for physical gold in recent weeks, so much so that the U.S. Mint and gold suppliers cannot provide inventory to many retailers. Being the largest and most respected tangible asset investment firm of American rare coins and precious metals in the United States allows Blanchard and Company, Inc. to get first access to gold bullion, even as supplies dwindle.


  1. Guess you're not a believer in the "gold is money" thesis?

  2. *Gold Bar 400 oz (Bob, I think you should pick up one of these with part of the advance from your forthcoming book)

    I think if there were a gold clause in my contract, they might owe me $304,240 by the time I turn in the manuscript, if Big Ben continues with his ways. But of course at that point, I could no longer get 400 oz. of gold with that kind of cash.

  3. @ Bob

    That's what the futures markets and call options are for, lock in the price now.

  4. @ notgreat

    What did I write that gives you the impression I am "not a believer in the 'gold is money' thesis"?

  5. These canadian platinum bullion coins resemble their gold counterparts we displayed

  6. These platinum bullion coins resemble their gold counterparts