Gold and silver have always been subject to claims that major institutions have been manipulating prices. In some cases, such price manipulation has even been proven, opening the door for further suspicion from investors around the world. It seems that as the years go on, more and more investors hop on board with these theories, with Eric Sprott, CEO of Sprott Asset Management, being one of the latest heavy-hitters to weigh in [for more precious metals news and analysis subscribe to our free newsletter].
“In my mind the tell on inflation would be gold and silver going up. That would be the most logical place to see it manifested. So if you are the central planners and you are trying to get away with printing money, it would be in your playbook to keep the price of silver and gold controlled, and that’s what I think we are seeing” said Sprott in a recent interview. He went on to comment that there has been a jump in physical demand, yet little change in the underlying prices of these metals, suggesting that central banks are behind the supplies.
Sprott falls in line with a number of others who feel that some central banks do not hold nearly the amount of gold or silver that they claim to, and when this information becomes public prices will go haywire [see also 50 Ways To Invest In Gold].
Are You Buying or Selling?
With a number of big name investors fearing price manipulation in these two famed precious metals, retail buyers will need to decide if they are buying or selling their theories. One thing to note is that owning anything other than the physical bullion is at a much higher risk should information ever come out about a lack of gold behind some of our biggest central banks. Popular assets like the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV) are two good examples. But if it is simply that banks are keeping prices low, the latter two funds still have a great chance to outperform should something like this ever come to the public.
The next, and possibly more important question, is whether or not you are buying or selling gold in the current environment. Markets have been on a tear this year, but many feel as though the fundamentals for such a rise simply are not there. Still, as markets continue to chug along, gold prices have been feeling the pressure, dropping more than 6% in the first seven weeks of the year. The “risk-on” sentiment has led to a surge in equity inflows, putting the pressure on everyone’s favorite precious metal [see also Investing In Gold: The Definitive Guide].
If markets were to turn south, expect to see gold stop its slide and stride for some gains. But if markets continue their current route, with both the S&P 500 and Dow Jones inches away from all-time-highs, don’t expect to turn it around anytime soon.
Disclosure: No positions at time of writing.