GoldMoney

Following last week’s uncertainty over whether the Republicans and Democrats could forge a deal to prevent America defaulting on its debt payments, the impending deadline and increased urgency in negotiations appears to have encouraged significant trading in physical gold.

The purpose of this article is to explain how derivatives have distorted gold prices with particular reference to the US futures markets.

In a recent article I introduced the concept of allowing for the increased quantity of aboveground gold and the expansion of the quantity of dollar currency over time when trying to value gold.

It is seems to be universally agreed that regulation is a good thing, ensuring that people are treated fairly by unscrupulous businesses.

China has been notably relaxed about her own people acquiring gold, and the government itself appears to be absorbing all of China’s mine output. Russia is also building her official reserves from her own mine supply.

There has been considerable throughput of gold in western capital markets, with substantial buying from all round the world following the April price crash.

Both Keynesians and monetarists believe that increased government spending, or more money injected into the economy, is sometimes necessary.

Western central banks have got themselves horribly wrong-footed as a result of not adjusting their anti-gold policies to allow for the realities of Asian gold demand.

There has been a growing shift in favour of assets relative to bank deposits.

In August 2011 I wrote to the Financial Services Authority to seek confirmation that the London-based custodians of SPDR Gold Trust (GLD) and iShares Silver Trust (SLV) were being regulated as custodians, despite the fact that physical bullion is not a regulated investment.