SPUTNIK–While major international events, like nuclear tests carried out by North Korea, affect gold prices and result in a situation when investors prefer to invest their money in the noble metal, economic expert Dimitri Speck believes that there are other, more important factors that play a crucial role in influencing the global financial market.
Gold prices have been subject to constant manipulations since 1993, German expert on the gold market Dimitri Speck told Sputnik Germany.
According to him, the manipulation of gold prices has been presented by the media as if it has been initiated by a couple of malicious traders just recently, but this idea is wrong.
“When the gold price manipulation started on August 5, 1993, these were central banks that initiated the process, and namely the then head of the US Central Bank Alan Greenspan. He did not want to let the gold price rise over $400,” Speck said, adding that Greenspan feared that a significant increase in gold prices might affect the “inflation thermometer.”
The expert noted that the US Fed had arranged an agreement among the central banks to keep the gold price below $400 dollars. This was done for several years by means of sales and loans.
Drivers of Gold Price Manipulation
Central banks, which often belong to the state, do not act alone, but work closely with private banking and financial institutions, Speck continued.
“With the help of price shocks, they [the institutions] shortly knock the prices down to drive other buyers out of the market. The state is the first to get benefit from all this, and this primarily concerns the United States. Well, and the dollar. These are the main beneficiaries of the gold price manipulation. Because the US dollar, as the main world currency, looks good in this case,” the analyst noted.
Explaining how the manipulation process actually takes place, Speck noted that this happens “very simply,” namely by “damaging other competitors.”
In this case, gold is the main rival to currencies based on loans, such as the US dollar and the euro.
“The positive development of the price of gold as such exacerbates the debt and other economic deficits of the United States,” he stated.
Benefits for Banking System
In his book “Secret Monetary Policy: Why Central Banks Manipulate Gold Prices,” Speck also analyzes the benefits that the banking systems themselves get as a result of financial manipulations.
The expert came to the conclusion that the US banking system is one of the main beneficiaries of the gold price manipulation process.
When the gold prices drop, the US dollar rises and its position looks better than it actually is. Banks are then capable of lowering interest rates in order to reduce inflationary expectations and calm depositors.
“They propose lower interest rates to depositors, and this in turn facilitates obtaining a loan. This is beneficial for the state — and, of course, for the banking system,” the expert said, adding however, that this approach was one of the main factors that caused the global financial crisis.