Gold is the most maligned asset, if you listen to the Fed, the ECB, and other central banks. This was driven home again in a variety of ways, including what transpired before the Swiss gold referendum and Mario Draghi’s “all assets but gold” declaration. So I asked a man who knows, Fabrice Drouin Ristori, Founder and CEO of Goldbroker.com, why the heck central banks react toward gold in that bizarre manner.
WOLF: On November 30, the Swiss voted down the proposal presented in the “gold referendum.” Was there anything peculiar about the process?
FABRICE: The Swiss National Bank and most Swiss media campaigned for the NO side, which is quite unexpected in a democratic process. There are two lessons to be learned from this referendum: One, this campaign clearly shows that gold is the banking and financial system’s enemy #1 in Western countries, since a return to a gold standard would limit their money creating capacity, thus their power. And two, people in Western countries have lost awareness of what a monetary system based on true money is. The Swiss have now joined this category despite their long experience with the gold standard.
WOLF: Following the ECB’s decision to delay any QE till next year, Mario Draghi said that in terms of asset purchases, the ECB had discussed “all assets but gold.” Why would the ECB consider buying all assets – including “old bicycles,” as German politician Frank Schäffler had said so poignantly in July 2012 – but not gold?
FABRICE: The central bankers’ discourse is systematically anti-gold. Draghi’s announcement just confirms the fact that the ECB along with other Western central banks consider gold as their main enemy. In a gold-standard environment, they would lose the capacity of printing money, and they don’t want to give up this power.
Over the last few months, it has gotten quite difficult to purchase physical gold in large quantities, as proven by the backwardation phenomenon, when the Gold Forward Offer Rate is negative [GOFO is the interest rate at which participants are willing to lend gold on a swap against US dollars]. If the ECB were to buy physical gold in the markets it would create havoc on spot prices. And a rising gold price brings investors and economic agents to seriously question the stability of paper currencies. They might even abandon paper currencies in favor of tangible assets. To avoid that whole chain reaction, the ECB refuses to buy gold as part of its QE program.
WOLF: There have been a slew of countries trying to repatriate some of their gold, among them Venezuela, Germany, and the Netherlands. Seems easy enough, but some of these countries have a hard time repatriating their gold. What’s the deal?
FABRICE: Gold has been stored mainly in the United States and London in order to protect the gold reserves during times of conflicts – the Cold War, for example – and/or to improve the liquidity of their gold reserves by moving them closer to the large trading centers.
That certainly made sense at the time, but we are now seeing a reverse movement of repatriation as there are some doubts as to the real existence of those gold reserves in the two main storage locales, London and New York. There is a high probability that gold reserves from several countries have been leased to bullion banks and then sold on the markets in order to control the gold price and thus maintain the illusion of value of paper currencies such as the dollar, the euro, etc.
When central bankers, often under pressure from their own government, decide to repatriate their physical gold, one can logically assume that they have some doubts about all of their gold still being there, especially in a context where no real audits of gold reserves are being performed.
Physical gold is making a comeback in the international monetary system. Several governments and monetary authorities are aware of this and are worried about the existence of their gold reserves. I believe we are seeing the end of a game of musical chairs that will bring us a lot of bad surprises.
WOLF: With the Bank of Japan out to demolish the yen, successfully so far, Japanese households might someday get scared, dump their yen, and become big gold buyers. Is that something that would worry the BOJ since it has been telling the Japanese to pull their money out of the banks and put it in the stock market in order to drive up stocks?
FABRICE: All major central banks are worried about this movement toward physical gold. We see it through media pressure, for example, leading up to the Swiss gold referendum; we see it in announcements by central banks, such as Mario Draghi’s “all assets but gold” declaration; we see it in outright market manipulation. Everything is done to bash gold so that no link can be established between the loss of purchasing power of paper currencies and the performance of gold.
Gold terrifies the pundits and powerbrokers of the current international monetary system. They’re terrified of gold’s eventual return at the core of the future international monetary system. And this is why they openly bash it.
They are trying, like in Japan, to influence individual decisions. But when the loss of faith in paper currencies manifests itself all over the world, I don’t see how investors would want to follow the advice of those who have contributed to the destruction of the purchasing power of these currencies through infinite money creation, such as QE and other methods.
WOLF: On a more personal note, you’re an entrepreneur. We here in San Francisco appreciate that. But why did you go that route?
FABRICE: I founded Goldbroker.com in 2011 to organize in one location a solution that lets investors own physical gold and silver directly in their name, without any intermediaries, and store it outside the banking system, which I think is crucial for a number of reasons. This way, each investor can become his or her own central bank. If I may, I would like to invite your readers to check out our solution at Goldbroker.com.
Fabrice Drouin Ristori is the Founder and CEO of Goldbroker.com.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
You tell ’em, Murdo! Go with your gut. Am pleased to see you making such progress, Seeker. A bird in the hand is worth 2 Black Swans in the bush.
The purchase of physical gold can be very risky because a substantial size investment can be worthless as a result of fraud.
Three years ago, when the price of gold was much higher, stories emerged about the counterfeiting of gold bars.
In one story a 10-ounce gold bar costing nearly $18,000 turned out to be a counterfeit. The bar was filled with tungsten, which weighs nearly the same as gold but costs just over a dollar an ounce. The bar had been bought by one reputable merchant in Manhattan’s jewelry district from another reputable merchant.
What makes the counterfeiting so devious and profitable is that the counterfeiter purchases a real gold bar with legitimate serial numbers and papers, then hollows it out, sells the gold, fills the hollowed out bar with tungsten, and then closes the bar.
That is a sophisticated operation designed to fool professionals. What chance does an amateur have in this game??
The response of MTB, the Swiss manufacturer of the gold bars, was that customers should only buy from a reputable merchant. But that makes no sense because the counterfeiting operation was designed to deceive reputable merchants.
Actually, deceiving dealers is harder than it might sound. As I understand it, the bar frauds in New York worked only because the victims knew and trusted the guy who stuck them. As a result, they didn’t test the bars until afterward. I have been told and believe that ultrasound testers will detect salted bars, and the larger dealers usually have them.
The puzzler now is coins. Until recently, it was believed that it was impossible to successfully make a counterfeit gold coin with tungsten. That’s because tungsten is the hardest metal known to man. No one could imagine counterfeiters being able to stamp crisp artwork, lettering and reeding into it. The logic was that if the tungsten was too hard, and the gold layer too thin to stamp, then coins should be safe. Now, that may no longer be true. It now appears that someone has found a way. But, as with bars, an ultrasound detector will spot the fakes. In any case, the Krugerrand and American Eagle can be spotted with a simple and rather old fashioned ring test. But, as long as you avoid flea market dealers, there should be little problem.
Regarding Central Bank (et. al.) fear of gold. I contend that it is mostly about the very real role it would play in feeding a hyperinflation. If/when people lose faith in the currency, gold represents the most logical and practical path for flight out of paper. And of course, it’s historical monetary role simply magnifies the psychological and sociological effects.
The ONLY question is, when the inevitable realization of the value of gold surfaces, how draconian will be tptb’s attempt at squelching the public’s desire for it.
I was in Switzerland for 7 days including the 11/30 voting day. What surprised me was that Swiss were not talking about the “gold referendum” at all in the office on Thrs and Fri before the voting day. That may be because most of the people in the office are not Swiss citizen. Anyway asked an old Swiss pal about it and he thought “gold referendum” was non-sense initiated by “crazy people”.
Well there ya go – CBs of the world in collusion with TBTF banksters have done a hell of a job brainwashing the people.
As for me been buying mostly American Eagle gold coins since March this year 1 at a time till Oct and Nov where I bought in larger qty as I just don’t believe GLD has enough physical gold on hand like many of the CBs.
Central Bankers are terrified of gold because they cannot print it.
Either the gold exists in the stated quantities in the bank vaults or it does not. That simple equation doesn’t give central bankers very much wiggle room to successfully pull off their lies, deceptions or flimflams.
Conclusion: prepare to move to Asia and learn to speak Chinese
I am glad I know at least 2000 characters.
“Gold has been stored mainly in the United States and London in order to protect the gold reserves during times of conflicts.” There is not one country on earth at present willing to act in good faith with its citizens by putting real money- a store of value- in their hands. But the return to such a standard is as simple as making the so-called
“security thread” out of gold, or silver, instead of Mylar(which would obviate any need to protectively ship reserves overseas.) That the Swiss, who were the last to abandon the gold standard were the first to make rumblings about restoring its place speaks to the common man’s revulsion with the tangled web of deceit inherent with fiat, and central banking in general. China, which, unlike the U.S., seems to be making real strides dealing with financial crime (despite having inflicted paper money on the world in the first place), may well take the lead in restoring honest money.
Wolf. Looks as if you screen these comments carefully. A negative comment posted earlier today by another blogger was deleted. It had to do with not trusting third parties.
(To me at least) it sounded like an unsubstantiated but severe accusation against a named individual. Maybe I was a little too aggressive. Do you think?
Maybe it was me asking why I should trust someone (anyone) to hold my gold for me. But I didn’t mean to be agressive, just realistic.
Thanks for clarifying. Your basic premise – “why I should trust someone (anyone)…” – is excellent.
In past golden ages gold and silver were money because the high vibratory rate of gold purifies the owner. Gold purifies and heals what it comes into contact with. Paper money becomes dirty vibrationally and adds to the moral decline of society. Money is an exchange of energy.
Stevie, you’re kidding, right? Vibrational energies and healing? Can you refer us to the double blind scientific study that backs up your claim? Which piece of equipment can I use to measure the amplitude and frequency of these vibrations?
Stevie-
Thanks for that comment. Giving up the real vibration of gold & silver is the slide of the civilization. Now, for the first time in history, we have a chance via the internet to inform enough people to engage their wills to require tender of real value without scam and deceit. We finally have a conscious choice to dump the Banksters game.