Gold’s Bull Market End: What Could Bring Gold Down?
The question on the minds of many is what could make gold go down? Generally, the individuals who ask this question have not bought any gold, silver, platinum and palladium. Also, generally, they trust the government and transnational corporations whose critical mass dictates our economic fate. So, I thought I would try to think up the scenarios in which the price of gold, and therefore the other metals, would precipitously fall.
The question is complicated, and the amount of turmoil in the world makes it an impossible question to address without immense research and many pages dedicated to the topic. But, with enough creativity, there are practical scenarios which could be cooked up. First things first, the prices could theoretically be brought down via economic circumstances in an overall paradigm much different from today, as well as market manipulation within the current paradigm. I will approach each.
1. The financial crisis must have come to an end.
This means a debt jubilee. All debts would have to be forgiven. This would cause massive dislocations across the world economy as global lending institutions go bankrupt. In the ZeroHedge article, “What Could Trip Gold Up?” an overt debt default by the United States as an impetus for a decline in gold is outlined:
In this scenario, Uncle Sam rolls out of bed one morning and announces that Treasury debt will henceforth be redeemed at only pennies on the dollar. To lessen the domestic political blowback, perhaps he announces a process whereby domestic holders are redeemed at a higher rate than foreigners… or maybe he most disadvantages debt held by those foreigners labeled as currency manipulators. There is much historic precedent for this extreme action – and, other than some negative consequences over a relatively short initial period of time, countries that have defaulted have suffered no lasting effect. Case in point, both Russia and Argentina now have debt-to-GDP ratios well under 10% – among the lowest in the world. In concert with resolving the debt, the government could promise a new regime of austerity, as well as issue a new dollar with at least some limited backing. Change-o, presto, problems solved, and gold heads into the tank.
- Part-and-parcel of an end to the financial crisis would be significant declines in unemployment numbers. Presumably, a debt jubilee could do just this as small-to-medium sizes business are able to use capital, not to pay back debts, but, instead to grow and hire. 300,000 jobs a month would signal an end to the financial crisis.
- The debt jubilee would mean homeowners are no longer under water on their homes. This would cause home purchases to rise, something which must come to pass for an end to the financial crisis to come to fruition.
- Quantitative Easing will have ended and real interest rates will turn very positive.
So, how do these conditions come to be? In this question we come across a core conundrum facing human society. Worldwide, politicians will have to break with their corporate donors. The trends suggest we are not heading towards this. In the US, for instance, corporations can give their candidates unlimited amounts of money to carry out the agenda of big business. Budgets will have to be cut in such a way that the politicians get re-elected for more than one term so as to ensure that their reductions go through. The cuts will have to be so popular with the people that like-minded politicians are elected and protected on into the future. That means that a majority of the cuts will have to take place in “national defense” at the military-industrial complex. With much of the population, especially in the United States, this national debate will be heated, and many will not relinquish their perceived “defense.”
Moving on, the energy crisis will have to be solved, and a freer market in energy will have to bring competition to the oil dominated sphere. Oil, coal, solar, nuclear and cold fusion will all have to makeup a new, bolstered energy market.
2. Ultimate Gold Manipulation
Then, there is manipulation. What sorts of manipulations, within the current economic paradigm of unending quantitative easing and geopolitical crisis, could bring down the price of gold? I do not believe that paper manipulation alone can forever stave off the price rise in gold. What I do believe it can do is effectively manage the metals in such a way so as to inspire in individuals a perception of the world, economy and precious metals that is acceptable to the powers-that-be. But, even this can only go on for so long. In the long run, gold and the other precious metals will have considerably appreciated as their inverse trade mediums – fiat currencies – grow more abundant in the contrived manner that they do.
In the physical world, the powers-that-be could release hoards of gold locked-up and un-mined. As Bix Weir has helped to expose, the United States has, since the early 20th century, has hidden its own natural resources – oil, gold, silver, copper – behind boundaries such as Wildlife Preserves, Ecologically Sensitive Areas, National Parks, Offshore No-Drill Zones and military bases. Or the powers-that-be could sell into the physical market century old hoards that they have accumulated through Empire and have never been required to declare.
In the first scenario, the government announces contracts awarded to military contractors or other private enterprise to begin mining gold within national park boundaries, et cetera, where current domestic hoards exist – effectively increasing the gold reserves of the United States and making public to the world these secret reserves.