Is Gold Being Suppressed?
September 13, 2011
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In 2004, Japanese periodical The Nikkei Weekly printed former Fed chairman Paul Volcker's fascinating recollection of a global currency intervention led by the United States in February 1973. At the time, Volcker served as undersecretary of the Treasury for international monetary affairs. Volcker recalls:
That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.
After observing gold's surprising price action, Goldman Sachs' head gold trader Zak Dhabalia reportedly commented:
The immediate aftermath was in complete contradiction to prior recent episodes of intervention and what anyone would have expected. Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven "currencies" we saw a 50 usd collapse in minutes. The source of this flow seems hard to pin down with some speculating over whether "authorities" were concerned about the signals of an accelerating gold price and its impact on other fragile markets.
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