You have written a very thoughtful, well researched article which is informative and helpful to me. I study gold and silver from a macro economic and justice stand point. I thought these comments might shine some light on some of the historical and macro economic as well as the central bank issues surrounding gold.

The parameters of gold are far different than they were in the 1970s. At that time central banks were flush with gold compared to today. Ironically, the reason Nixon took the UNITED STATES and by extension the world off the Gold standard was because of a familiar problem. We were “spending way too much money” and the War Machine was the usual culprit at that time.

After Nixon took us off the Gold Standard the world followed and governments started “spending way too much money,” but without gold to backstop the “money” the party was on.

To keep that pesky gold down, the central banks no longer bound by law to back their currency with other than promises and IOUs, were free to sell whatever amount of gold was necessary to keep the price of gold down or worse lease out their national treasure but never being required to report it leaving the vault.

They lost control temporarily around 1980 but then stepped and used brute force and lots more selling, leasing, swapping and so on to change the rules, especially in regard to silver.

That operation continued and the picked up a lot more energy when Summers introduced his thesis related to gold prices and interest rates and starting in the late 1990’s the gold suppression scheme was accelerated and was best exemplified when England sold about half of its national gold treasury at the absolute bottom of the market.

Gold and the gold standard represent the antithesis of borrow and spend and of fiscal conservatism. It is much more difficult to go to war when you can just print up a new stack of debt notes without worrying about repaying them at today’s dollar worth.

To me the other side of the coin is that we are in a debt bubble. We also have a collateral quality dimple or perhaps I should say crevasse. As the Fed has moved from lender of last resort to buyer of last resort with massive amounts of agency paper and what appears to me to be collateral of questionable valuation, the dollar and other deeply and irrevocably indebted currencies like the yen will never be repaid at their current purchasing power.

Gold is not about the dollar, its about its incorruptibility in the face of broken promises and IOUs that can not be repaid.

Its about governments being irresponsible because they can and its about a systemic illness in the political system that would allow a half a trillion or so in OTC derivatives to go unregulated.

Up until recently many of the largest central banks cooperated in the gold suppression scheme in my opinion but you can only sell off, lease out, swap or otherwise deplete your gold reserves so far before it becomes evident that you will need to buy some more gold or pay a heavy price in national credibility and in financial viability in my opinion.

As the long term gold price suppression operation and its mechanisms are more and more broadly recognized, despite the fact that the mainstream financial media will not do the full spread interview with GATA that they should, more mainstream investors will begin to realize how much potential price energy is built into gold and silver especially as a result of the long term weight of highly concentrated primary dealer and central bank manipulation on the gold and silver ball prices is.

While all other major commodities seem to have passed their inflation adjusted highs in the last run up, silver remains at less than 1/6th of its inflation adjusted high and well below ½ of its non inflation adjusted high. While gold is in the neighborhood of ½ of its inflation adjusted high. This is pretty clear evidence (among a much larger body of evidence put forward by GATA) that gold and price remain under long term price suppression.

So yes, Gold and Silver can and will shoot up to meet their actual value. How high that is open for debate but to at least inflation adjusted highs around $2,300 for gold and $130 for silver are where they would be if we had free markets. Ultimately, despite ever increasing levels of intervention, there is a limited supply of central bank gold and naked short derivatives are slowly being exposed for what they are and eventually demand and supply and the need to have some actual trustworthy store of value (i.e. money) will decide the issue despite the illegal and ongoing manipulation of gold and silver prices in my opinion.

Duffminster
http://www.duffminster.com/SilverandGold