(Alhambra Partners): Thus the recent gold price crash was met largely with glee and gloating among the professional economist cohort as evidence of central bank success in not only initiating “normal” financial conditions but refutation of monetary critics. For this view, gold prices in 2013 represent the same as gold prices in the 1970-80 time period.
…If this view is correct, then we should expect, as economists do, a further crash in gold prices and another Great “Moderation” in the domestic and global economy. However, as I have noted previously, there are numerous other examples of gold price volatility that have failed to result in “moderate” economic conditions and stability in the monetary arena.
Surprisingly, gold prices hit their peak $197.50 (London AM fix) on December 30, 1974, and quickly reversed. While the release of gold prohibition should have been positive for gold prices with the opening of new potential demand, there were additional factors.
As part of the de-emphasis of gold in the official policy, US Treasury Secretary William Simon announced Treasury’s intentions to auction at least 2 million ounces in 1975. The first auction on January 6, 1975, had offered 2 million ounces, but only received demand for 754,000. Not only was there additional supply coming into the market, expected demand had not materialized, keeping gold prices under pressure.
READ REST OF THE ARTICLE & SEE MORE CHARTS : Sunday Gold Fix – The Gold Crash ’75
(this article was brought to my attention by member Sinuhe)
I highly recommend this article as it shows the desperation of the IMF and Central Banks to sell gold into the market during 1975-76 to stem the huge rise of the price of gold from $35 in 1970 to $200 in 1974. Their actions did bring about a 50% decline in the price of gold, but after the price of gold bottomed in Aug. 1976 at $100, it rose to $850 just 3 years later.
The author of the article details the IMF & Central Bank interventions throughout the 1970-80 period. Nothing has changed today. Matter-a-fact, the situation is even worse as gold has been looted from allocated accounts and central banks by leasing and most of the gold is heading out of the West and into the East.
We are going to see much higher gold and silver prices when Central Bank manipulation no longer works…. the same way it didn’t work after Aug. 1976.