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Gold Lust Re-Emerges

By Ron Robins, Founder & Analyst, Investing for the Soul; blog Enlightened
Economics; twitter

First published May 22, 2010, in his weekly economics and finance column at
alrroya.com

Why the emerging lust for gold? Concerns of excessive debt and potential inflation
are mostly influencing gold’s rise. But other factors are in play too. These include
ancient and new cultural and spiritual attitudes towards the metal, as well as
apparently failing manipulation schemes.

Cultural and spiritual reasons for gold’s rise


In China, which is fast becoming the world’s largest gold market, gold historically
and culturally stands for good luck. The very symbol of Chinese culture, the golden
dragon, represents happiness, procreation, and immortality. In India, which likely
still has the world’s biggest private hoards of gold, the Vedic tradition associates the
metal with purity of life, immortality, truth, magnificence—and has long been
revered as money and the store of wealth. In ancient Persia, Egypt, and throughout
the Middle East, gold is often referred to in divine terms and considered the only true
money.

In recent years, a possibly rapidly growing (though of unknown magnitude) new


source of gold buying has arisen. Respected sociologist Paul Ray has identified a
group he labels ‘Cultural Creatives’ (CCs). These CCs form the backbone of most
New Age movements and other spiritual groups, many of whom buy gold for
purported spiritual benefits. According to Dr. Ray, CCs probably number around 25-
30 per cent of adults in most developed countries and are likely to form majorities in
those countries in the next ten to twenty years.

Alleged failing gold market manipulation increases gold price


A major factor influencing the gold market is alleged gold market manipulation. Gold
market manipulation has existed since the earliest of times. Its deep cultural and
historical significance has been the bane of kings, emperors and modern day central
bankers. Monetary systems based on gold tended to be restrictive, therefore
inhibiting the ability of kings and governments to finance wars, etc. By contrast,
paper (fiat) currency systems are able to create credit and debt at will, hence all
modern societies have chosen paper-based currencies and attempted to reduce and
suppress the role of gold.

The attempt to control the role of gold in the modern world has, according to the
Gold Anti Trust Action Committee (GATA), been onerous. GATA claims the U.S.
Treasury, The Federal Reserve and other governments and central banks have
collaborated to suppress its price. GATA has extraordinary documentary evidence of
this. One instance of how gold suppression has been working is a quote from the
former head of the U.S. Federal reserve, Alan Greenspan. In testimony to the
Committee on Banking and Financial Services, U.S. House of Representatives, on
July 24, 1998, he said that “… central banks stand ready to lease gold in increasing
quantities should the price rise.” Evidence by James Turk, Dimitri Speck, Eric
deCarbonnel, and others suggests that they have done that and more over the past
decade.
Also, backing up GATA’s claim, Michael Gray wrote in the New York Post, May 9,
2010, ”Federal agents have launched parallel criminal and civil probes of JPMorgan
Chase and its trading activity in the precious metals market.” JPMorgan Chase has
very close ties with the U.S. Treasury and Federal Reserve. Considering the fact that
a major New York daily has published this story, it has received remarkably little
attention. Why the media silence? I believe it exhibits an ingrained cultural bias to
keep a lid on gold suppression so as to minimize the increasing loss of confidence in
major currencies.

However, as is obvious from the rising gold price, if price suppression had been
working it does not seem to be functioning too well at present. Central banks may
have lost too much gold in loaning and selling into the gold markets to keep its price
down. Also, they are now realizing it may well be the best asset to hold. Incidentally,
nobody knows for sure how much gold the U.S. government has as the last public
audit of its gold reserves was in 1971.

Gold as currency
In the time of the Prophet Muhammad the gold dinar was the currency of exchange.
In Europe, the Greeks, Romans, Venetians, Dutch, Spanish and British, all found gold
to be the ideal currency. As a currency, gold has the advantage of having a value in
and of itself. It is also durable, divisible, convenient, relatively rare, and cannot be
‘manufactured.’

In recent years, the Gulf Cooperation Council proposed a common currency, which
some key supporters want backed by gold. Throughout the Muslim world a cultural
monetary renaissance is occurring as a return to the ancient gold dinar as a principle
form of currency is debated. The Emirates Palace, Abu Dhabi's top hotel, has even
introduced an ATM offering gold bars. Internationally, the proposed revised Special
Drawing Rights of the International Monetary Fund may also have a commodity
component that includes gold.

The re-emergence of gold as the alternative currency is gaining momentum. This


appears to be not only because of the current monetary debacle affecting paper
currencies, but also due to purchasing of the metal by those re-discovering its
cultural underpinnings, by those valuing its purported spiritual properties, and the
increasing failure of central banks in suppressing its price. As the lust for gold gains
momentum, it again reveals itself as the ancient metal of kings.

Copyright alrroya.com

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