Many hardcore gold bugs are convinced that there’s a conspiracy in the gold market – and central banks are acting in concert with investment banks to manipulate prices.
The price action in gold has been suspect…
As perennial gold bull, Eric Sprott, noted in a letter to the World Gold Council, when gold demand was approaching twice the level of supply, prices were still falling!
Indeed, the price of gold has tumbled in the face of all sorts of buying – and in the face of the biggest financial crisis of our generation.
That’s enough to send shivers up any gold bug’s spine. But are we in a conspiracy exactly?
As you’re about to see, it wouldn’t be out of the question…
After all, the price of gold isn’t set at the wellhead or the mine. In the short term, prices are controlled by investors and speculators on the futures exchanges.
So it would certainly be possible to artificially move gold prices.
Heck, it even seems likely when you see analysts from the same firm issuing two wildly different forecasts about the commodity…
Mysterious Discrepancies in Analyst Projections
French banking giant Societe Generale needs to get its people in line.
As MarketWatch reports, one of its analysts recently said that the bank “expects [gold prices] to average just $825 between 2017 and 2019.”
This particular analyst’s thesis is based on monetary tightening and economic growth. Valid points, to be sure.
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But here’s what another Societe Generale representative had to say in April 2013 (also reported by MarketWatch):
“The S&P 500 Index will tumble to 450. Investors will bid up haven assets like gold, which will climb seven-fold.”
At the time, gold was trading at around $1,430. So this price target implies a move to $10,000 per ounce!
When you see such wildly different predictions being thrown around, sometimes it’s hard to believe that we’re NOT seeing a conspiracy in the making.
But I’m not convinced…
What’s Really Going on in the Gold Market
More likely, the reason for the discrepancy for gold prices is based on a number of factors…
For one, there’s more gold being produced, sold from inventory and other nefarious sources than is being reported.
We’re also seeing the recycling of gold in the secondary markets and the overstatement of demand.
As a result, we can expect prices to fluctuate in the short term. But demand for gold is going to continue to rise, as the population grows and wealth increases in emerging countries.
That’s a long-term trend you don’t want to bet against.
In an upcoming article, I’ll delve into a gold royalty play that’s looking very attractive during this most recent swoon.
And “the chase” continues,