Eighty years of manipulating gold markets….stock, bond and currency markets
The manipulation of markets is not exclusive to gold. Stock, bond and currency markets are also manipulated, but there is one difference. Gold’s price is manipulated downward, while stock, bond and currency markets are typically manipulated upward. In February 2014, Bloomberg reported there were indications that gold has been manipulated for the past decade.
Gold manipulation in the United States dates back to 1933, when President Franklin D. Roosevelt signed Executive Order 6102, forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States. This was the first time the United States was effectively bankrupt. The Order criminalized the possession of gold by any individual, partnership, association or corporation. All persons were required to deliver to the Federal Reserve, on or before May 1, 1933, their gold coins, bullion and certificates in exchange for $20.67 per ounce. Violation of the order was punishable by a fine of up to $10,000, a prison sentence of up to ten years, or both. US dollars could no longer be exchanged for gold.
On January 30, 1934, the United States Gold Reserve Act revalued the price of gold from $20.67 per ounce to $35, for a profit of $2.8 billion and a 42 percent devaluation of the dollar. In 1934 the US government set up the Exchange Stabilization Fund (ESF) at the Treasury Department for the specific purpose of trading in gold and foreign exchange markets. It was not subject to legislative oversight, and it was financed by $2 billion of the $2.8 billion paper profit the government realized from revaluing the price of gold.
In July 1944, the Bretton Woods agreement made the U.S. dollar the world's reserve currency, and stipulated that all member nations' reserves had to consist of either physical gold or currency convertible into gold.
On November 1, 1961, an agreement known as the London Gold Pool was reached. The central banks of Germany, England, France, Italy, Switzerland, Belgium, the Netherlands and the United States agreed to cooperate in achieving an explicit purpose: keeping the price of gold suppressed, under control, and pegged at $35 per ounce through interventions in the London gold market. The eight central banks contributed gold to the “pot,” and when the gold price rose, they would sell enough of the pooled gold to put a ceiling on the price. When the gold price was weak, they would purchase gold to replace what they had previously sold.
The Gold Pool was terminated in 1968 as escalation in the Vietnam War sent US debt levels soaring, putting pressure on the dollar. Massive US balance of payment deficits led to surging demand for US gold. US gold holdings declined from 22,000 tonnes to 8,000 tonnes. On Sunday March 17, 1968, the London Gold Pool officially collapsed and the global gold markets were closed for several weeks.
The laws for the Exchange Stabilization Fund were modified in 1970, in that the Secretary of the Treasury, with the approval of the President, could use ESF assets to “deal in gold, foreign exchange, and other instruments of credit and securities.” Jennifer Huang (September 26, 2008). "What's the Exchange Stabilization Fund? A pile of cash that can be used for whatever"—Slate.
By 1971, more than 60 percent of US gold reserves had been delivered to European central banks in West Germany, Switzerland and France. The United States could not risk losing any more gold, and on August 15, 1971, America effectively declared bankruptcy for the second time when President Richard Nixon announced the “temporary” suspension of the dollar’s convertibility into gold. The closing of the gold window is known as the Nixon Shock, and it signified the end of the Bretton Woods system.
An important point overlooked by the media and others that continually denigrate gold is that if gold is a useless, risky, unimportant lump of metal, then why did Nixon choose to close the gold window and default on the Bretton Woods Agreement to prevent the depletion of America’s remaining gold, instead of permitting it to be sent to West Germany, Switzerland and France? Official US gold reserves are ostensibly 8,162 tonnes, but no one can corroborate that figure because there has not been an audit of the gold bars in Fort Knox since 1953.
After the Nixon Shock, gold was free of its $35 per ounce peg. Over the next nine years it rose substantially, ultimately reaching an intraday high of $850 an ounce in 1980, which led one-time Fed Chairman Paul Volcker to say “Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."