Here's what we know. Gold has always been an indicator of other weak economic elements, and people turn to gold when faith in the stock market, interest rates, and the dollar becomes shaky. Given the current instability of each of these elements and more, it should be the case (and was for months leading up to the flash crash) that the price of gold remains high. Yet, prices somehow tumbled. Murphy and Bennett insinuate that the cause was a deliberate act on the part of the Federal Reserve and a network of central banks to drive down the price of gold, thereby increasing confidence in the dollar and other fiat money.
Another indicator that all is not right with the gold market? The price of gold has fallen, even though demand has increased. Anyone who's passed an economics class knows this doesn't exactly follow the laws of supply and demand.
If the Federal Reserve and central banks are at fault here, it begs the question: why don't they have faith in the economy and their own fiscal policies? Quantitative easing and low interest rates were supposed to restore the economy; if they feel the tactics won't play out successfully, are there larger systemic problems that have put the Fed and other banks on edge?
Unfortunately, the outcome here is that small investors are doing just what government likely hoped they'd do (take gold's plunging price as a sign of economic stability and refrain from buying gold), while some of the biggest hedge funds in the business are wising up and purchasing gold, because they know what's really happening. As Murphy advises, we all should follow suit, as this is really the best time to buy gold. When the scandal breaks (and Murphy argues it eventually will), gold prices will skyrocket and investors that buy today will capitalize on the payout.
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About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett firstname.lastname@example.org