Perhaps if the Bank of England, the US Treasury and the US Federal Reserve had not been surreptitiously suppressing the price of gold futures through their puppet bullion banks on Wall Street for decades, I would agree with George Soros that gold was the ultimate asset bubble. Had this been the case, gold’s price would be multiples of its current price given the low interest rate environment that exists worldwide. But since this is not the case, there currently is no greater asset bubble than the US dollar and US Treasury bonds.
In considering Soros’s statement, perhaps it’s an apropos time to revisit a couple of articles I penned. One titled “Gold and Economic Freedom, Reinterpreted for the 21st Century” that is six months old; the other titled “JS Kim Uncovers Four Parallel Markets for Gold” that is over sixteen months old. In the first article, I essentially reviewed and updated Alan Greenspan’s seminal 1966 essay “Gold and Economic Freedom” for today’s world economic environment. In that article, I wrote, “Greenspan’s failure to uphold the ideals he once championed does not invalidate their keen insight and validity”. I further explained why a true gold standard (versus pseudo gold standards implemented in the past) is not only linked to “economic freedom” but why “it is also inseparable from the much broader concept of freedom itself.”
In my older article, “Four Parallel Markets for Gold”, I discussed the massive fraud that existed in gold futures markets at that time that created four distinct and differently priced markets for gold: (1) paper futures markets in Asia that consistently established prices $20 to $60 an ounce higher than the futures markets in London and New York; (2) Paper futures markets in London and New York; (3) Physical bullion markets; and (4) Physical coin markets. Over the past couple of weeks, the same pattern of clear and distinct fraud in gold futures markets that I discussed in this article again manifested itself several times when gold prices rose significantly in Asian futures markets only to waterfall decline and instantly give up nearly all of the day’s gains in the New York markets.
Artificial bubbles that Central Banks deliberately engineer are never indicative of robust economic times nor are they representative of natural and free economic cycles. Quite to the contrary, they are indicative of massive malinvestment and huge distortions in price. The price of gold today remains suppressed from reaching its natural free market price and it remains distorted only to the downside whereas the prices of stocks and real estate markets in the majority of the world’s economic centers are currently distorted to the upside. Since gold and economic freedom are inseparable, no one should ever want a gold rally to pop before it reaches potential bubble status. The day we hear the gold rally popping before it reaches bubble status, this is the day we can say goodbye to any chance we have at economic freedom as well.
About the author: JS Kim is the Chief Investment Strategist for maalamalama, a niche, independent wealth consultancy company that provides innovative strategies to help Main Street prosper during the coming second phase of this global monetary crisis.