*****The Amazing Correlation Between US Secretaries Of The Treasury And Gold Prices*****

As I was researching Treasury/ESF Interference In gold market, I got an idea. If the Exchange Stabilization Fund (ESF) is manipulating the price of gold, then there should be a noticeable correlation between different US Secretaries Of The Treasury and gold prices. The reason for this is that some secretaries of the treasury might feel uncomfortable manipulating the price of gold via, while others might have no such moral qualms. Even among the secretaries that did choose to get Interfere in the gold market there should be noticeable difference in the behavior of gold. After all, every secretary of the treasury has his own unique way of "managing" the free markets.

Anyway, to verify the treasury's manipulation of gold prices, I made a graph showing the price of gold during the term of each secretary of the Treasury. This graph is below, and I believe I hit gold, so to speak.




Points to note:

1) The enormous effect that secretary of the treasury have on setting the trend for gold prices. I used collors to try to accentuate this point.

A) The secretaries highlighted in bright blue seem to have not interfered with the gold market (which is why gold goes parabolic under their watch)
B) The secretaries highlighted in dark blue and purple undoubtedly did interfered with the gold market.

2) The effect that secretary of the treasury have on the stability of gold prices. For example, look how smooth the swings in gold prices are during Lloyd Bentsen's term as secretary compared to Nicholas Brady's tenure.


My reaction: The correlation Between US Secretaries Of The Treasury and gold prices is simply amazing.

1) This correlation would be impossible unless US Secretaries of the Treasury are the ones directing the manipulation of gold.

2) The graph also clears the Federal Reserve of a lot (but not all) suspicions. While the Fed may help facilitate the manipulation of gold, it is obviously not the one who initiates it.



Conclusion: As far as I am concerned, the graph above is indisputable proof that the US treasury is manipulating gold prices. If anyone can come up with an innocent explanation for this amazing correlation, I would love to hear it.


UPDATE: June 24, 2009 8:24 PM

Here is the inflation adjusted version of the graph above:

This entry was posted in Background_Info, Federal_Reserve, Gold, Market_Skepticism, Treasury. Bookmark the permalink.

29 Responses to *****The Amazing Correlation Between US Secretaries Of The Treasury And Gold Prices*****

  1. Daniel says:

    Dear Eric,
    What exactly are you smoking??
    I can't see any PROOF of manipulation on that graph.

  2. Anonymous says:

    I can see some suspicious correlations. Correlation does not proof causality, though.

  3. interesting, but highly speculative...

  4. Anonymous says:

    How do you know that exactly those "blue" and "purple" secretaries manipulating gold?
    Is there are any proof of their manipulation?
    Maybe those "light blue" manipulated too?

  5. Gunther says:

    Eric,
    To give a different explanation I would put the DOW in the graph.
    In the late sixties the London Gold Pool kept the price low.
    In the early seventies the DOW was in a bear market bottoming late 1974. Erarly 1976 the DOW was back to around 950 and did not go up further. The monetary stimulus went into gold again.
    December 79 the Soviets invaded Afghanistan; that must have felt like the sky was falling, more than ten years of stagflation and now the enemy making a big and seemingly successful move.
    In the early eighties gold was up 20 times from the start (35 to 700$) and stocks were cheap and forgotten. Time to take profit. Then Paul Volcker increased interest rates to purge inflation out of the system. In June 1982 the ten year bond paid 7% after inflation.
    Then the great stock bull begun and it became obvious that the gold bull was over. Smart money was out or sold into streghth.
    To me the picture could change 1994 with gold making a “line. ” According to Dow Theory this indicates accumulation or distribution. In this case it was apparently distribution. With Robert Rubin taking office gold went down and December 1996 Greenspan spoke of irrational exuberance.
    “ [...] Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? [...] ”
    from: http://en.wikipedia.org/wiki/Irrational_exuberance
    Around that time the P/E went lower then at the top in 1929.
    From here I do not know how to explain the market in a normal way anymore.
    Before I do not see evidence for big manipulation.
    Gunther

  6. Degaz says:

    Great job on this, Eric. Gold suppression allows the fiat fallacy to continue and once the truth about the dollar goes mainstream, gold will not be available at any price.

  7. dashxdr says:

    Eric you're going off the deep end. "This clears the Fed of a lot of guilt" or something like that, you claim.

    Have you been bought off? Did someone make you an offer you can't refuse? There are no innocents here.

    I always figured once a person becomes big and influencial enough, someone gets to them and starts pressuring them to taint their message. They can take the silver or they can take the lead. Didn't you say you're getting on the order of a million hits for your articles?

    There seems to be a disturbing agenda in your articles these days.

  8. Anonymous says:

    Excellent work. Very interesting. Suggestion: Maybe you should add an inflation-adjusted chart to neutralize any possible distortion due to inflation.

  9. Anonymous says:

    Eric: Don't forget the sources. We all believe what we want to believe, and when people are scared, they don't want to believe scary things.

    @ everyone saying he's on crack: making such a graph is a trivial matter. Seeing the changeover causing peaks and troughs in pricing is damn suspicious and if this man has shown us anything its that he's going to follow this post up with some in-depth investigating.

    Encourage the man, even if he's wrong he's at least creating an interesting yarn. : - )

  10. stibot says:

    Do you check Silver Bear Cafe blog? It is worth reading.

    There is a speculation about USD, possibly Euro devaluation coming based on some informations on kind that US embassies worldwide are being advised to purchase massive amounts of local currencies.

    Another article suggests the same time frame for dollar collapse as Eric does: The U.S. and the U.K. Will Both Default on Their Debt by the End of Summer
    LEAP/E2020
    .

  11. Numonic says:

    Yeah stibot i read that US UK summer default article. It's on point, prepare for higher treasury bond yields due to these defaults and prepare for higher consumer prices due to companies being forced to raise prices to make money for the rising borrowing costs or close down.

  12. Anonymous says:

    Regardless, the Fed controls the currency, which is Constitutionally unviable.

  13. michaeld says:

    Very good article.

    In my opinion, it is all a matter of market timing. It does not matter if it is gold, oil, or Microsoft, if you have access to good market timing signals, they will help you get in and out at a profit.

    No guarantees in this business, but if they are right most of the time, you can still make $s.

    There are may web sites providing them out there (search Google). Just find one that works and use it! Check out http://invetrics.com as an example.

    Its Dow Jones timing signals are up 43% as of 6/23/09 while the Dow is up just 29% off its March lows.

    Following a market timing system works!

  14. Anonymous says:

    You should adjust your chart for inflation to show the true gold price. 1980s high should be around $2000+ in 2008 USD

  15. Anonymous says:

    How about track Gold vs. US Secretaries of Treasury who came from Goldman Sachs?

  16. Numonic says:

    You know why inflationists loose debates to deflationists because inflationists although not wrong about prices rising misunderstand how the rise in prices will occur. The error in most inflationists and deflationists thinking is that the only way prices can rise is for massive amounts of money to be coming out of banks in the form of loans. this is one way prices can rise but there is another way that works to the other extreme, and that is extremely tight credit markets. An extremely tight credit market would cause mass defaults, bond yield rates to rise and companies to raise prices to keep shelves stacked and the doors open, otherwise the massive deleveraging will eat up all their supply and force them to close down. The deleveraging beast has a hunger for one thing and one thing only and that is prices. The delveraging beast has a stomach that can hold up to $1 quadrillion worth of things and the worst part is that it is hungry and is eating and wants to get full. The problem is all we keep feeding this deleveraging beast is printed dollars from the printing press and cheap gas, cheap food and cheap everything else. If prices don't start rising to fill this deleveraging beasts stomach, this deleveraging beast will eat up everything we have in the world. This means massive companies will shut down, massive projects will be shut down, and there will be a massive shortage of things leading to massive starvation. While the printing press is doing a job of keeping the deleveraging beast fed, the printing presses can only feed the beast a certain amount of dollars at a time and the deleveraging beasts wants to eat at a faster rate than the printing press is feeding it. Problem is the printing press is moving at top speed and it's still not fast enough to satisfy the beasts hunger. So the deleveraging beast is eating up stores for their price, businesses for their price and anything that has a price on it. Until the govt. creates a larger price than $100 for what it's feeding this deleveraging beast or companies start raising prices of goods and services large enough to satisfy the delveraging beast which has a $1 quadrillion hungry stomach, this beast will continue eating up everything in site with a price on it. Now we can choose to starve this beast and starve ourselves in the process by refusing to raise prices and allowing the deleveraging beast to eat up $1 quadrillion worth of things on earth(which is many times more than the total price of all the goods on earth) or we can choose to satisfy this deleveraging beast by raising prices to satisfy this beast's hunger for $1 quadrillion worth of things and at the same time stop the deleveraging beast from devouring all our goods. Now this will be at the cost of the currency but ask yourself, what would you rather do starve to death or destroy the value of this currency? There are other better currencies that won't allow beasts of this magnitude to grow out of it. Those currencies could be physical gold, silver, platinum or palladium, basically precious metals. These metals are rare and because they are rare, they won't allow themselves to be overleveraged if even leveraged at all. These metals will expose the benefits of hoarding and the harm of credit/third party banking.

  17. Numonic says:

    I was originally going to write about how Mike "Mish" Shedlock is so wrong about Treasury Bond Yields remaining low. He seems to believe that every other bonds yields will rise as thos bonds default and that it is an impossibility for Treasury Bonds to default. This is rediculous because Treasury Bonds return the same currency as all those other bonds that are defaulting. Why would all those other bonds default but the Treasury Bond won't? Why, because the govt. has direct access to the currency with the printing press. This is foolishness, the Treasury Bonds are just as in trouble as any other bond/debt/stock/fund or anything that promises to deliver the currency. The Fed and Govt. does not have control of Treasury Yields, and they proved that when yields started accelerating higher some short time ago and is continuing to move higher. The silliness is that Mish's explanation for the rise in Treasury yields was that maybe the decline in the economy was decreasing in speed. Mike "Mish" Shedlock the person who keeps telling us how bad the economy is see's yields move up on the treasury and instead of equating the yields moving up in treasuries as a sign of defaults and a worsening economy like he does when he talks of corporate or municipal or other bond yields rising, instead he says that the rise in Treasury Yields is maybe due to the economy declining in a lesser speed. This guy is full of it. He is right about how the economy is in the $hitter and will get worse but he contradicts himself and refuses to accept that Treasury Bond yields can rise without a recovering economy. When corporate/municipal bond yields rise, he says it's a sign of a worsening economy, when treasury bond yield's rise he says it HAS to be a sign of a recovering economy. BS.

  18. Numonic says:

    Regaurdless of what you would choose, i believe enough people of the world have enough sense to choose to feed themselves rather than starve so i expect prices to rise to satisfy the deleveraging beast so that we can get on with feeding ourselves.

  19. stibot says:

    Numonic, i believe regular readers of Eric's blog are already aware of all of that..

    But did you checked what is emerging? There are also another links, eg. Obama's Financial Reforms A Stealth Scheme for Global Monetary Control, Obama Regulatory Reforms to Establish Banking Dictatorship.

    That is something what i was concerned before. All those thieves and crooks (responsible for the mess) which should be already jailed seem to be receiving authority to build new order to continue their thefts.

  20. Ron says:

    "The real truth .. is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson - and I am not wholly excepting the administration of W[oodrow]. W[ilson]. The country is going through a repetition of Jackson's fight with the Bank of the United States - only on a far bigger and broader basis."-On November 21, 1933 -President Franklin Roosevelt

  21. Numonic says:

    Stibot do not fear but celebrate. Another false thinking is that govt. is gaining more power, the truth is they are loosing power. Do you know when the govt. had total power, it was at the beginning of the boom. When the govt. was able to keep credit moving without having to print massive amounts of dollars, that's when it had total control. It's tool of control was credit. Now that credit is ending, their loss of control is being exposed. All these regulations and what not is the govt. trying to act as if it is in control. As if we wouldn't have credit tightening without govt. legislature, as if companies wouldn't start making fuel efficient cars without govt. legislature(when those fuel efficient cars will be all the rave when this collapse in credit/price fixing pushes gas to astronomical prices), as if taxes on the rich would not happen without legislation(when it's the rise in prices from the collapse in credit/price fixing that will pull money from those who can afford non-neccesities). When Treasury yields rise, the govt. will try to act as if it isn't doing everything in it's power to keep it down and failing. Price fixing/fascism is being reduced from a worldwide scale down to a smaller scale where it's becoming more visible to the naked eye. The govt. isn't gaining control, it's loosing it and pretending as if it's in control so we think we're moving from a free market capitalist system to fascism when the truth is credit/price fixing is not free market capitalism, FDIC is not free market capitalism, all the past bailouts of the past recessions we've had is not free market capitalism. Don't get mad that the govt. has control, they had way more control before than they do now and they are continuing to loose it now. Celebrate the end of Fascism.

  22. Numonic says:

    Also the spot gold/silver price is not driven by supply/demand, like most things in this credit based world, the price is determined by credit. A lack of credit will cause spot gold/silver prices to rise NOT drop. So a dropping stock market and credit will make it hard to stop defaults in the gold/silver spot market and those defaults are the reason for the rise in price of spot gold/silver, not the demand for spot gold/silver. Spot gold and silver is rising because money is moving out of spot gold/silver NOT in to it. It was in a reverse naked short bubble and the bubble has burst and this bubble burst unlike the burst in housing causes the price of spot gold/silver to rise not fall. So if you believe this deleveraging will continue and accelerate you should believe that spot gold/silver price will rise as there will be less free credit/cash to stop the defaults in the spot gold/silver market.

  23. Gunther says:

    Numonic,
    can you provide an example and name of a trader/company defaulting in the gold/silver market?
    If that happened it escaped my attention.
    Gunther

  24. Numonic says:

    I can't say exactly where the defaults are taking place but I believe they are taking place on the inside and amoungst the manipulators. I'm sure that this massive overleveraging was not just sales to normal investors. I'm sure that the manipulators play the game of selling to each other and so when the defaults do happen you probably won't hear about them because the ones getting defaulted on are most likely the manipulators. I'm sure they'd rather have the defaults be amoungst them than on a normal investor where the story can get out and cause a panic to the rest of the investors who are still in the market.

    But here's how to understand why gold and silver prices in the spot market will rise. In the spot market the supply of gold and silver is measured as the supply of debt for that gold and silver. If we are headed for massive defaults on debt, this enormous debt will be destroyed just as massive debt is being destroyed all over the economy. So all that over leveraged debt is going to end and the debt will shrink. Now since the supply of gold and silver is measured as the supply of debt for it, the more debt that is removed(defaulted) the less supply of gold and silver will be registered in the market. Their plan backfires. Because credit WAS so easy to create with a paper currency, the plan was to flood the market with credit to make it look like the market was being flooded with physical gold and silver and this is how they manipulated the price down but now that credit is contracting due to an over stretched Federal Reserve Note( which most thought impossible being that the currency is paper and seemingly so easy to produce) the manipulation will come to an end. That enormous skyscraper of debt in the gold and silver market will be evaporating and as the supply of the debt is removed, the market registers it as if the physical supply of gold and silver is being removed because the supply of gold and silver in the spot market is measured by the amount of debt. See how their original plan backfires? If there is allot of debt for gold, then the market registers it as if there is allot of physical gold but if the debt for gold decreases, the market will register it as if the physical gold supply is decreasing. And if gold is near $1000 now without any real visible traces of defaults like you said and we all know how over levereaged gold and silver is in the spot market, the spot price of gold and silver has a long way up to go. Spot gold and silver will reach astronomical prices. But WARNING! do not put your money in these paper markets because as I said, the rise in price will be due to massive defaults, so if you put your money in it you will not get your money back (the bond/trust you hold will be illiquid) but everyone that bases their price of physical gold and silver on the spot price will raise their prices just as much and you win holding the physical metal, even if you can not trade the metal for cash because of the massive shortage of cash, the metal is liquid as it's intrinsic value is high due to it's industrial properties(gold and silver) that makes infrastructure easier to help rebuild a collapsed poor economy. Gold and Silver is for the poor, don't let anyone else tell you otherwise.

  25. Numonic says:

    Debt deflation means extremely high gold and silver prices as i just explained and this is why the govt. fears debt deflation so much. Debt deflation is the destruction of the paper currency because debt deflation removes debt(promises) and brings things to their intrinsic value. Because debt is destroyed, meaning credit is destroyed meaning promises are broken. Meaning one $1 bill will be worth the same as one $100 bill because the reason a $100 is worth more than a $1 is based on credit, it's based on a promise, it's based on the promise that a $100 bill will be able to get 100 $1 bills in exchange. If a $100 can not be exchanged for smaller currency, the $100 bill becomes worthless because anytime you use the $100 bill you'll have to spend it all at once. This is anotehr problem they have. They have to print massive amounts of large($100) bills to stop these defaults but they must also print enough small($1, $5, $10, $20, $50) bills to keep value in those large bills. But they can't stop these defaults with those small bills, infact they need larger bills than $100 bills. Either way they are screwed, if they create too many large bills and not enough small bills, those large bills loose value and if they try to stop defaults with the small bills they will fail and the debt is too large for the small bills to cushion the crash. When debt defaults, promises are broken and this hurts other promises including the promise that a $100 is worth 100 $1 bills. The currency is destroyed in debt deflation.

  26. Anonymous says:

    The chart of the gold price as presented by Eric offers fascinating insight. Thanks Eric!

    Paul Volcker stated in his memoirs that it was a mistake to let the gold price spike in 1980. He meant of course that secretaries Blumenthal and Miller of the US Treasury did not control the price of gold in the late 1970's and that let to the gold price spiking in 1980. The following generations of secretaries of the US Treasury succeeded during the next 20 years to bring the price of gold (inflation adjusted) to less than 15% of the spike price in 1980. That was a solid accomplishment which became known as "the strong Dollar policy" - a notion coined by Robert Rubin.

    This happy turn of events ended with the election of GW Bush as US president in 2000. Instead of choosing Goldman Sachs executives as secretaries of the US Treasury, Bush made the disastrous decision to pick Paul O'Neill and John Snow as secretaries of the US Treasury. These two gentlemen were not really financially sophisticated and for that reason they repeated the mistake of Blumenthal and Miller in the late 1970's by not manipulating the gold price agressively. As the result, gold rose from $260 in 2001 to almost $1000 in 2007. Fortunately, Hank Paulson who took over the US Treasury from Joh Snow did understand the importance of containment of gold. So does Geithner - our present secretary of the US Treasury. These two guys do understand the importance of gold. As a result, the price of gold stabilized since 2007 just below $1000.

    If Eric's analysis is correct, the gold price will not rise above $1000 for a very long time (at least a decade). The US Treasury must make that happen in order to secure the creditworhtness of the US and to maintain the status of the US Dollar as a reserve currency.

    Most people expect gold to continue to go up in terms of the US Dollar. Almost nobody expects the price of gold to stay below $1000 for the next few years. Yet that is what is most likely to happen in the next decade.

  27. Numonic says:

    "The US Treasury must make that happen in order to secure the creditworhtness of the US and to maintain the status of the US Dollar as a reserve currency."

    Of course the US Treasury must make that happen, that doesn't mean they have the power to make that happen. Just because gold goes over $1000/oz doesn't mean that their aren't massive attempt to stop it from going there. It's called failure and the US Treasury is not immune.

  28. Numonic says:

    Stibot, i have to come back and disagree with you when you say that regular readers of Eric's blogs already know what i am talking about. It's so frustrating to see how these inflationists like Marc Faber, Gerald Celente, Jim Rojers, Michael Pento and Peter Schiff misunderstand why prices of things will rise. And I always get questions about my replies and i never EVER see anyone mentioning "Rising borrowing costs being transfered to consumer prices". It was so frustrating watching Marc Faber on the Happy Hour on FOX Business News today trying to explain why there will be hyperinflation. Each of the hosts kept on asking over and over about how there is this enormous destruction of debt and that all this new printing is doing is replacing the money that is evaporating and asked him if this is going on how can prices rise if those new printed dollars are not being loaned out and circulating in the economy. The man could not answer the question, he just when on with the same old inflationist cliches about deficits. I'm beginning to think that some of these mainstream inflationists are just being put on TV and Radio by the govt. to make inflationists look crazy and stupid. I mean is it really that hard to understand that companies need money and one way they are trying to get it is by cutting costs through firing employees and that the only other way to get it is by raising prices. It almost frustrates me to the point of thinking maybe i should do my own blog. No one else is talking about this stuff so maybe i should do my own blog. Deflationists are making a fool out of these mainstream inflationists who contradict themselves by talking about all the debt destruction that is going on and at the same time talking about the printed money having a good chance of being loaned out. Deflationists come back with the question, "but how can that money be loaned out when the banks need it because of the debt destruction going on" and the inflationists just go on their normal cliches about deficits and issuing too much new treasuries and the stupid irrelevant question of "who will buy these treasuries?".

  29. Numonic says:

    AAAAAAAAH! It's Frustrating! I can't believe these inflationists are so dumb! Why can't anyone say anything about companies having to raise prices to afford the RISING BORROWING COSTS they have to pay to stay in business? Why?! Why do these hyper/inflationists never talking about the rising borrowing costs?! Why must they assume that rising prices can only happen from an ease of credit?! AAAH! Forget it, what will be will be. When these same inflationists see that prices on things will be rising while at the same time credit getting tighter and more and more banks failing, maybe then they'll understand that easy credit is not the only cause for rising prices and will finally consider that companies need to raise prices to pay the rising borrowing costs (which are due to the massive debt destruction) to stay in business. Most of these inflationists, if not all of them think that if we allowed failure we'd see prices of things decline. TOTALLY ignoring rising borrowing costs and what companies will do to pay those rising borrowing costs(raise prices) when cutting employees fail(which it is as the rise in unemployment isn't stopping the deleveraging/debt destruction). But soon they'll see and so will the deflationists who also believe the FALSE IDEA that massive defaults = lower prices on things. What these printing press opponents are doing is something that should have been done when we went off the gold standard, not now, it's too late to have the same effect now, the debt is too large, the fall would crush the dollar. This isn't 1970, we are a debtor nation now. They don't understand that destruction of debt is death to the currency.
    they also have too much faith that the govt. will be able to print enough to sop up all this debt, infact the way some speak about our exploding monetary base, it seems some of these inflationists feel that we already have enough money to begin loans. As if those "excess reserves" are free to be loaned out, as if banks aren't insolvent right now. Aah! forget it! They will all be surprised.

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