Does the Government Influence Gold Prices?

manipulation, precious metals, gold, silver, congress, fed, federal reserve, marketsQ: Are gold prices influenced by governmental actions?

A: The price of precious metals is directly impacted by the actions of two groups: Congress and the Federal Reserve. Right now, Congress is spending money like it’s going out of style, and the Federal Reserve is printing money through multi-trillion-dollar stimulus programs. The price of gold and silver is a direct reflection of how much currency is being printed and how much money the federal government is spending. Thus, the question of what gold and silver are going to do over the next few years is fairly simple to answer – the actions of the US government will inevitably drive prices up.

If one dollar is worth three eggs today, but the amount of dollars in circulation increases to three times that amount in the next few years, that same dollar will eventually buy only a single egg. The egg hasn’t changed. It’s still an egg. But the paper currency has less purchasing power—66% less.

Likewise, gold and silver don’t change, regardless of how many dollars get printed. What’s happening is that the dollar is decreasing in value. Those dollars are being printed out of thin air, just as they have been since the U.S. abandoned the gold standard. In fact, since 2008 alone, the Federal Reserve has printed several trillion dollars out of thin air.

The government can’t keep pumping cash into the system indefinitely; eventually the overdose of cash will shut down the system entirely. In the meantime, these stimulus programs cause precious metals to rise in value slowly but surely. The inevitable crash is going to create a lot of chaos, but ultimately, gold and silver will benefit from the crash, because they are real money.