Raul…. Duke of huh?

in association with The Prospector Exploration and Investment

Bulletin.

Here's a piece for all you gold conspiracy theorists out there...

Inflation Manipulation

By A.Canon Bryan

The market for gold historically has not operated as a function of

its fundamentals. On the other hand, gold has acted as a store of

value which provides a hedge against adverse socio-political

conditions. We look in the world around us and we see a global

deflationary spiral; we see the world's only super military and

financial power mired in a leadership question as well as a brisk

police action in the Middle East, to say nothing of a challenge to

it's reserve currency status; we see the collapse of major financial

systems around the world, including Japan, Brazil, and Russia; we see

a growing uncertainty with respect to a technical glitch which

threatens the very status quo of orderly society.

These are all good examples of the symptoms that would tend to give

gold extrinsic value. However, if this is true, then why is gold

performing so poorly?

World authorities in gold consistently report that demand continues

to soar to record levels, and that central banks, on a policy basis,

have no particular desire to either accumulate or dispose of gold,

save Switzerland. And yet price has stagnated. This means that even

on a fundamental level gold should be performing.

An extremely brilliant trader used to tell me over and over, 'the

market never lies'. Reluctantly, I came to accept this sagacious

saying as being law. Extrapolating the ramifications of this onto

the depressed market for precious metals over recent months, one is

forced to make the following inference: there are unseen forces

which have been, and may continue to, contribute to a burgeoning

supply of gold in the marketplace.

The Financial Times of London has reported steady sales from Goldman

Sachs. They also report that Goldman Sachs is the broker of choice

for United States Treasury Chief, Robert Rubin. They do not,

however, ever make the inference that the US Treasury could be on the

short side of the gold market. Then there's Barron's, who won't let

it's readers forget that Rubin is absolutely the button man for the

US. As well, they wonder how the IMF and hedge funds can continue to

be financed. And yes, they too, wonder about the bear market in

gold.

It seems to me that all the piecesof the puzzle are there, but the

major publications refuse to put them together. Why?

It's no secret that hedge funds, particularly in the US, have

suffered astronomic losses last year, betting on weak Yen and strong

Rubles. It's also widely known and reported that the Fed is far and

away the largest holder of gold in the world. As a matter of

necessity, it would seem prudent for the Fed ( or the Treasury ) to

have a ( secret ) policy to dispose of gold - slowly, in order to

finance floundering enterprises within. But there may another

motivation for the US to sell gold.

The Fed - and the G7 it would seem - have gone out of their way to

annihilate rates to their lowest levels in a generation, while at the

same time maintaining the lowest unemployment for the same period.

As a rule, high employment comes with a cost of inflation. But with

low rates, how could there be inflation? Well, there is no inflation

- there's deflation. At any rate, what are the best indicators of low

inflation? Low interest rates and low commodities prices;

particularly gold. Would it not suit the US Fed, in the interests of

creating a perception of low inflation, to manipulate the price of

gold lower?

Why else would the US want to manipulate a perception of low

inflation? The Barker Letter has reported previously that the US

Dollar is a currency in trouble. With unthinkable debt levels,

growing fiscal deficits, and fast disappearing global demand, no

currency is safe from outright collapse. I believe the Fed

understands this and wishes to artificially manipulate the perception

of strength in the Greenback. This could never happen, however, with

any hint of inflation. I believe this further quantifies my theory

of 'Inflation Manipulation'.

Gold, in the meantime, continues to be subject to constant

unexplained downward pressure. Under this scenario, the gold price

in US$ would not improve until the US$ began a significant decline;

the supposition here being that a gold price in a control currency

would not change, but quoted in a declining currency would improve.

These are things that the gold investor may wish to ponder.

Be careful out there

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