It is a good week for emails.
This showed up in my inbox this morning:
“Due to a recent illness my time has been spent sleeping or watching TV. This morning the show was “America’s Book of Secrets – The Gold Conspiracy” on History2 Channel. It was more frightening to me than a vampire movie I saw as a child. Granted, I pay more attention to gold and silver prices than I do politics, my bad. But to think there are three government officials that are able to manipulate the prices of gold boggles my mind. Please, say it ain’t so.”
How should I answer such a question? In fact, why am I being asked? I might be part of the conspiracy to manipulate gold’s price.
I suppose I am not important enough for such a statement of culpability to be plausible.
We are living in an age where the creation of doubt generates great ratings on television.
I have not seen the program, but I expect the production values are excellent and it is very entertaining.
The government machinery to manipulate the price of gold is rusted and unused since the Reagan administration put the Treasury on a “hands off” approach to market pricing.
Before then, the government used to sell gold from time to time to depress its price, or in its words to calm disorderly markets.
Some allege that this is still going on, but I have not seen convincing proof.
Some also allege there is no gold at Fort Knox, because the government has used all it had in trying to manipulate markets.
These allegations have been made before.
When Dwight Eisenhower was President, it was investigated and the Fort Knox gold was found to be safe.
In 1974 because Dr. Peter David Beter alleged the gold was missing, the Fort Knox vaults were opened to public scrutiny.
David Ganz wrote of his Fort Knox visit in various Numismatic News columns. One published in 2009 reported that on “Sept. 23, 1974, it (Fort Knox) was invaded by 120 members of a press contingent that I was part of, and a dozen members of Congress and representatives of the Mint and Treasury Department.”
Yet the allegation lives on.
I expect another President someday will look into it and find the gold to be there, but that will not hurt the allegation. It will go on and on.
Even if a webcam were put in each of the vaults, the allegation would be the gold bars are not real or the cameras are recording something at some other location.
If you are a gold investor, it is better to believe in facts you can confirm.
It is the stated policy of the Federal Reserve to achieve an annual inflation rate of 2 percent year in and year out forever. Obviously, if you remember the 1970s, we have had inflation considerably higher than that.
If you also believe that gold is an inflation hedge, then it is reasonable to hold some as even 2 percent inflation doubles prices in 36 years.
Thirty-six years ago was a gold peak price of $850. Double that is $1,700.
Prices measured by the Consumer Price Index posted on the Federal Reserve website have more than doubled. In fact, they have almost tripled, up by 2.87 times since 1980.
That would put gold at $2,439.50.
Does that mean gold is undervalued?
It might seem so.
However, if you use the same statistical measurements going back to 1913, the Federal Reserve says prices are up 23.89 times.
Gold was $20.67 in 1913.
Multiply that by the increase in prices and you get $493.99 an ounce.
Which price is correct? $2,439.50 or $493.99?
These sorts of price calculations and questions about them will forever fuel allegations that something is not quite right.
Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."
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