What Is Causing Gold To Be Undervalued?

The relationship between gold and the Dollar is well documented, when the Dollar does well, gold typically suffers and vice versa. When there is no major economic pressure directly affecting one or the other, the two values should travel in opposite, but proportionate directions. Nevertheless, the last time the Dollar traded at today’s level (a 13-month low), the value of gold was more than 10% higher. All of the factors supporting fair and proportionate movement between the two have been and continue to be present, but the factors supporting gold have mysteriously lost their weight. Global economic uncertainty, global failures to meet growth targets, and the complete inability of the Trump Administration to muster any sort of legislative momentum well explains the Dollar’s demise, but why hasn’t gold responded?

Crude oil prices are also a good barometer for comparison. Oil and gold frequently travel together, again unless specific major economic (or political) pressures directly affect one or the other exclusively. Thirteen months ago, oil traded at $46.92 a barrel. Today it’s trading at $46.99 a barrel. In sync, as expected. So why is gold so undervalued? The answer is simple, manipulation. Have you noticed that the U.S. Government condemns gold at every opportunity? They’ve gone to great lengths to cloak their real intentions, while continuing to solicit investment in U.S. Treasuries. By manipulating global perception of the value of gold, an opportunity is created to acquire as much gold as possible, at the lowest possible price.

Pushing gold to the lowest price requires the use of derivatives, so as to gather producers and commercial users priming short sales, thereby attracting speculators and encouraging more short sellers. This also explains why the government has become so lax with the exponential increase in the use of derivatives, a major contributing component of the 2008 banking debacle. The longer the price can be kept at artificially low rates, the greater the stash that can be assembled. With a national debt approaching $20 trillion, failed easing actions on the part of the Fed, and antsy Asian Treasury Note holders looking for a better investment, a plan to suppress gold until it can be doubled or tripled to their best advantage, may not be a bad idea.

And the Fed is not alone. Central banks around the world have been net bullion buyers since 2008. Regardless of their verbiage, developed and developing countries alike have shown greater affinity for gold lately and are utilizing it as bedrock for the country’s reserve. It should be a clear indication to investors who have fallen for the government’s head fake, that gold is more important than ever before. Gold and other precious metals should be utilized as a necessary insurance policy, against the growing list of economic calamities preparing to unfold. Don’t let lower prices deter you from the right decision. They’re just a bonus.