You don’t have to look to obscure charts to know that gold price manipulation is happening, says Jon Herring in Investor’s Daily Edge.

Alan Greenspan gave the game away before Congress when he said, “central banks stand ready to lease gold in increasing quantities should the price rise.” He was telling Congress that the leasing of central bank gold was to suppress the price of gold, not to earn money on a dead asset, as officially stated.

This manipulation, plus reported shortages in physical gold, means the yellow metal represents extreme value right now.

This from Jon:

At the highest level, the manipulation of the metals market is meant to conceal the mismanagement of the U.S. dollar so that it might retain its function as the world’s reserve currency.

Richard Russell of the Dow Theory Letters summed it up well when he wrote:

Rising gold is a red flag – if gold rises too rapidly, it attracts attention, it makes headlines, and then people ask questions. Rising gold might even give the whole plot away. You see, the fiat currency thesis is basically a fraud. It depends on a certain amount of systematic inflation (about 2 percent a year) in order to survive. Next question — why do central bankers want the fiat money system to survive? Simple, it’s their livelihood. It’s what they live on. It’s their ticket to power.

You might ask why the bullion banks would play their part.

The answer is virtually risk-free profits. The central banks lease the gold in their vaults at extremely low interest rates, often less than one percent. In addition to facilitating hedges for miners and jewelers, the bullion banks sell the gold they’ve leased at a very low interest rate and then invest those proceeds primarily in government bonds at a much higher rate. This is essentially a short sale, since they are selling something they have borrowed and the increasing supply on the market pressures gold to the downside.

The central bank makes a little something on their gold holdings. The bullion bank earns a spread. And the government bond market is supported, helping to strengthen the dollar. It all works out well… as long as the price of gold is flat or falling.

Now, can you see why the central banks and the bullion banks have a vested interest in suppressing the price of gold?

But this is not the extent of the issue…

For years, the central banks have been lying about their gold reserves by counting gold that they have loaned out or swapped as gold in the vault. GATA suggests that Western central banks have roughly 15,000 tons in their vaults, compared to the 30,000 tons they have on record. The difference is the amount of gold that has been clandestinely fed into the market to suppress price of gold and support the dollar.

Where is this heading?

This was all relatively opaque and easily hidden until recently. What we have seen in the past year, however, is a significant disconnect between the paper markets for metals and the physical markets.

If you were simply watching the futures markets and the spot price, you might assume that demand for precious metals has fallen through the floor, especially considering that gold has experienced the largest correction in the last 25 years. But that’s not the case at all.

Bullion dealers and mints worldwide have reported shortages of metal, exceedingly long delivery times, and more buying than they have witnessed in decades. Not exactly the backdrop you would expect, given such a significant correction.

I won’t go into all the reasons why gold will likely prove to be an extreme value under $850 an ounce and silver below $15, but if shortages already exist with this relatively low level of investor interest in the metals… then just imagine what will happen when the rush for lifeboats really begins.

There are a lot of ways to invest in precious metals… mining stocks, ETFs, exploration companies, futures. But your first resort and the foundation of your portfolio should be possession of the physical metal. Gold and silver that you can hold, touch and feel. Money that depends on no one else’s obligation… not a government, a bank or a brokerage firm.

Buyers in India are already paying a premium over the spot market price for gold. As are buyers of gold and silver bullion coins on auction sites like Ebay.

I expect as the manipulation in the paper market becomes more apparent in the years ahead, the spot price of gold and silver will soar. So will the shortages of physical metal.  If/when this happens, the premium people are willing to pay to get their hands on the real thing will jump sharply.

Source: Why You Need Gold You Can Hold… NOW!