These are from an article by David Upham..Government intervention to keep gold’s price down is nothing new. In 1975, the U.S. Treasury announced two public gold auctions. The purpose was to exert downward pressure on the price of gold in the upcoming free market. From the Treasury’s point of view, these auctions were highly successful. Very little of the gold was actually sold at these auctions, but the presence of the Treasury in the market was a major factor in the price of gold then. A high price would have established gold in the public mind as a store of value and a true way to protect assets against fiat money inflation. A low price would cause the public to lose interest. The auctions amounted to taking what had always been a strategic asset of the United States and dumping it in order to depress the price. In May of 1976, as a partner in crime, the International Monetary Fund (IMF) announced that it would auction 780 thousand ounces of gold every 6 months until 25 million ounces had been sold. The schedule was changed in 1977 to 524.8 thousand ounces every month. As you might imagine, gold fell in price reaching a low of $103.50 per ounce on August 25, 1976.
Subsequent US Treasury and IMF gold auctions took place for several years. Despite ongoing auctions of increasing amounts of gold, the price of gold turned around, climbing to $186.60 at the end of March, 1978. Everything possible was done to depress the price. The reason stated was that U.S. Treasury officials, the IMF and other central banks wanted to "continue progress toward the elimination of the international monetary role of gold."
Monetary history details the relentless pursuit of inflationary policies of the US government and the Federal Reserve Bank over the ensuing years. Because of the inflation problem and despite massive gold sales, gold’s price rose eventually to $850 per ounce in 1980. More gold was sold, but the primary reason that gold fell after that was the successful effort of the Federal Reserve to curb inflation. Rather than institute a program to establish sound money over time, the Fed chose to inflict draconian interest rate increases on the economy by switching from targeting interest rates to targeting the money supply. Short-term, the program was successful and inflation’s back was broken. Gold prices came down.
Subsequent to that time, the rate of money creation has again accelerated. The problem for the Fed became how to maintain a stable currency without having to resort to monetary discipline. Answer: target the price of gold. It has now become common knowledge that the Fed continues to engage in actions to do just that. It knows that a rising gold price is indicative of a weak dollar. So keeping the price of gold down should keep the dollar strong. For the dollar to keep its status as a reserve currency if not the reserve currency, it must remain relatively strong. In "cooperation" with other central banks, large gold dealers and the US Treasury, there is an ongoing effort to keep gold at or near a target of about US $300. So far the program has enjoyed remarkable success. The dollar remains relatively strong despite economic fundamentals that would normally have weakened it. Gold has seldom been over $300 since mid 1997. |
