8. Why does the Central Banking System and the US Treasury use Derivatives to suppress Gold & Silver prices ?

in #money6 years ago (edited)

In 1971 Richard Nixon broke the Bretton Woods agreement and remove gold standard from the US Dollar. The US Dollar was connected to Oil contracts creating the Petrodollar and thus creating a global demand for dollars. But there was still a faith and confidence problem with the dollar. Countries & Investors around the world were looking to Gold for a safe haven against the inflationary US Dollar. If Gold & Silver prices were allowed to rise based on the global increasing fiat monetary supply, then the citizens would abandon their fiat money for Gold & Silver. The Central Banks & US Treasury needed to way to keep the price of Gold & Silver suppressed. Their answer was creating Commodities Contracts or Derivatives for Gold & Silver. The Derivatives Contracts can be leveraged to artificially affect the supply & demand of gold & Silver and thus the price. The London Bullion Market Exchange was established for the purpose of fixing the Gold price globally. The Central Banks, The BIS, and The US Treasury can purchase 10's of thousands of Paper Gold Contracts with no physical Gold Backing. Let's say the US Treasury buys 60,000/ 100 oz Gold Contracts, which on paper represents 6 million ounces of Gold. If they were dump all those contracts into the market within 5 minutes it would increase the supply of Gold by 6 million ounces and the price of Gold would drop dramatically. This price drop then trigger Stop/Loss margins of investors who have Long Gold Contract positions causing a cascading price drop. This is also know as the "Wash, Rinse and Repeat" cycle to punish Gold Speculators with financial losses.
The leveraged Derivative Contract is a powerful tool used by the Central Banks to control all Markets prices up or down as they wish. The Derivatives Market is now 1.4 Quadrillion in size.

Coin Marketplace

STEEM 0.19
TRX 0.15
JST 0.029
BTC 63061.76
ETH 2602.70
USDT 1.00
SBD 2.75