Should You Believe Conspiracy Theories about Gold?

You’ve heard conspiracy theories. There’s one going around now that holds that the government is forcing new fluorescent light bulbs on us because they hypnotize us and make us easier to manipulate. And some people believe that NASA never landed humans on the moon – it was all an elaborate hoax.

 Photo of shady character, used to discuss conspiracy theories about the manipulation of gold prices, on Goldrefiners.com

People buy into conspiracy theories like those because although the stories are crazy, they play to our fears and seem plausible on some level or another. That could explain why over the years, precious metals have been the subject of a lot of conspiracy theories like this one . . .

Someone out there (a bank, a foreign government, a cartel) is hoarding a huge amount of gold in order to create demand and drive up prices. When the price rises, that evil “someone” will sell off vast reserves of the precious metal and make astronomically high profits.

It sounds kind of plausible, right? And its narrative is valid on some level. After all, lots of people are holding quantities of precious metals and waiting for prices to rise. The flaw in the hoarding conspiracy is that it is really not possible for any one evil organization to own enough of any precious metal (gold or silver) to drive prices up. If some foreign country had bought up 40% of the world’s gold, for example, everybody would know that had happened. But it sounds plausible, so people tend to believe it.

But What About This One?

Here’s a conspiracy theory that could have some validity. Last November, one major international bank essentially admitted that it had engaged in short-term tactics to manipulate gold prices. To quote from “Gold Price Rigging Settlement with UBS – Other Banks to Follow,” an article published on The Market Oracle website:
“Suspicions that the price of precious metals are frequently manipulated by a few international banks were further confirmed over the weekend. UBS agreed to settle with various international regulatory bodies investigating rigging in foreign exchange and precious metals markets . . . Futures contracts representing vast quantities of gold, up to forty tonnes worth, are dumped onto the electronic futures market over the course of a few minutes. This frequently happens after trading in Asia has finished and Europe is not yet open for business. In other words - at a time when the least amount of traders are available to buy. This guarantees a precipitous fall in the price.”

To summarize, there are allegations that big banks are dumping gold in strategic ways to manipulate prices.

What Does This Mean for You?

Okay, this is one conspiracy theory that seems to have a basis in reality. But even if it is true, can it hurt you?

It could if you are a person who trades large quantities of gold every day, or who currently owns a large quantity of gold that you might need to liquidate on short notice if you become cash-strapped and need money suddenly.

But as the article in The Market Oracle notes, “Manipulation can be effective in the short term. However, prices will eventually be dictated by real world forces of supply and demand for physical precious metals.”

In other words, the purported dumping of gold to manipulate prices only has a short-term effect and in the long view, cannot depress prices.

If you have quantities of gold or other precious metals to recycle, consider contacting GoldRefiners.com, part of Specialty Metals Smelters and Refiners, at 800-426-2344 to learn more about how to profitably recycle your gold and other precious metals today.

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