In 1998 Alan Greenspan warned, in congressional testimony that “Central Banks stand ready to lease gold in increasing quantities should the price rise.” Mr. Greenspan’s libertarian background made him more attuned to the role of gold than the present monetary authorities. A case can easily be made that gold’s rise is a reflection of the dollar’s fall. That might have been cause for alarm in the past, but little evidence exists that it’s a great concern of recent administrations or current Fed governors. It’s more like, “Gold went up, so what?”
However, should that change, and it might if dollar dumping becomes a problem, the U.S. could quite easily impact the gold price. Central Banks around the world hold approximately 20% of the above ground gold supply. The U.S. owns a big chunk of that. Any mention of selling off a piece of the national patrimony would damage the gold price. (It’s surprising that our loony leftists haven’t been stumping to sell our gold to fund welfare programs.) Quite simply, governments have the wherewithal to suppress gold if they wish.
It’s a different story with silver. No government owns a significant quantity of silver. No entity can throw a big amount of silver on the market and capsize the price. Furthermore, with a near shortage situation in silver not even a government is stupid enough to short a bunch. Gold could be shut down while silver remains free. I suspect there will be a price conflagration ahead in silver. It’s comforting to know that no government stockpile exists to douse the flames.