By David Levenstein

Gold prices have failed to hold above the key resistance level of $1400 an ounce even though the fundamental driving forces behind the precious metal have not changed and as the global monetary system remains as precarious as ever.

While some investors may think they are getting wealthier because they see the value of their equity portfolio increase, others are seeing the value of their hard earned cash gradually erode due to the low interest rate environment. And, while mainstream media particularly in the USA claim that the economy is recovering due to the recent stock market rally, this rise in prices is due to an economic stimulus programme engineered by the US Federal Reserve and has nothing to do with a vibrant economy.

If you believe that there is not going to be any repercussion from central banks unprecedented money printing and that governments will be able to sustain their current record high levels of debt when interest rates rise, then you have nothing to worry about. However, if you believe as I do, that these monetary policies will result in further currency devaluation, rising commodity prices, steep inflation which may end in hyperinflation and then a complete collapse of the current global monetary system, then you had better prepare yourself now.

It is obvious that the policies of central bankers have been a total failure when it comes to stimulating economic growth. The scenario they have created seems to be playing out in an almost textbook manner. And, if history does repeat itself, then this nominal rise in asset prices will be followed by a period of rising inflation. The ensuing increase in interest rates will prevent governments from being able to pay the interest on their debt which will lead to a total loss of confidence in their respective currencies.

Meanwhile, Western governments continue their insidious actions to rob their citizens of their hard earned wealth and individual liberties. These bankrupt Western governments will blame the war on terror, or the war on drugs, and will impose new taxes, and capital controls on their citizens as they try to inflate their way to higher tax revenue. They will also continue to interfere and manipulate the markets

Only recently, Bloomberg reported that traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates to set the value of trillions of dollars of investments.

Evidently, employees have been front-running client orders and rigging WM/Reuters rate by pushing through trades before and during the 60-second windows when the benchmarks are set.

According to certain traders, dealers colluded with counterparts to boost chances of moving the rates. This happened daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, two traders said.

The currency market, estimated at around $4.7 million a day is the largest market in the world as well as one of the least regulated.

While hundreds of firms participate in the foreign-exchange market, four banks dominate, with a combined share of more than 50%, according to a May survey by Euromoney Institutional Investor Plc. Deutsche Bank is No. 1, with a 15.2% share, followed by New York-based Citigroup with 14.9%, Barclays Plc., with 10.2% and UBS AG with 10.1%.

The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, after three lenders were fined about $2.5 billion for rigging the London Interbank offered rate, or Libor. Regulators also are investigating benchmarks for the crude-oil and swaps markets.

Singapore’s monetary authority has ordered, 20 banks at which 133 traders tried to manipulate the Singapore interbank offered rate, swap offered rates and currency benchmarks to set aside as much as S$12 billion ($9.6 billion) at zero interest pending steps to improve internal controls.

Nineteen firms were asked to post reserves ranging from S$100 million to S$1.2 billion — depending on the severity of the attempts by their traders to manipulate rates — for a year and will earn zero interest on that money.

As governments together with their financial leaders try to manipulate the currency markets, financial markets and stock markets, they also attempt to suppress the prices of gold and silver. Owning gold and silver is taking money out of the system, something which governments despise and something that every single individual should do.

In his speech at the Open for Growth conference at Lancaster House in central London on Saturday, UK prime-minister, David Cameron pledged to tackle tax evasion and transparency at the upcoming G8 summit on Monday. Cameron claims that trade, tax and transparency are vital factors in the global effort to eradicate poverty.

During their meeting in Northern Ireland which began on Monday, one topic clamping down on tax havens, launching EU-US trade talks and progress towards a Syrian peace conference. British Prime Minister David Cameron has put clamping down on tax avoidance top of the agenda for this G8 summit. Cameron is seeking an agreement on clamping down on corporation tax loopholes, and creating an international registry of company ownership to stop companies hiding profits in shell companies registered in tax havens.

Emma Seery from aid agency Oxfam said: “We don’t even know the scale of how much developing countries are losing because there are so many secretive deals and tax havens are secretive places, but we know that just because of companies are dodging their taxes, developing countries lose $160 billion every year.”

While so called tax havens receive more bad publicity once again, nothing is said about the billions of tax payers’ money that governments have squandered in hopeless aid programmes as well as financial assistance to corrupt governments, not to mention the cost of financing all these so called aid agencies.

Over the last 50 years, developed countries have dished out more than $2.5 trillion of tax payers’ money in foreign aid and yet there is still an overwhelming amount of poverty. Approximately $568 billion was spent on aid programs in Sub-Saharan Africa from 1960 to 2003, yet, corruption and poverty remain its defining features. The region remains poverty stricken while corrupt government officials become very wealthy. Add to this the cost of on-going wars as well as the cost to finance ever expanding governments. Suddenly, a few offshore bank accounts look insignificant to the amount of money governments have wasted. Furthermore, industrialised nations are under no obligation whatsoever to provide any aid to developing countries; contrary to what many politicians in Africa may like believe.

The African Union estimates corruption costs the continent $150 billion annually, far outstripping global development spending. The World Bank reckons over a quarter of its entire lending portfolio has been tainted by graft. Yet aid agencies funded by tax payers’ money continue to pour hundreds of millions into this bottomless pit every year.

Personally, I think leaders such as David Cameron, together with the Secretary-General of the OECD, Angel Gurría, should focus their energies on clamping down on global government corruption instead of trying to invent ways to extract more taxes from legal companies and hard-working individuals who have legitimate offshore bank accounts. And, they should be held accountable, for squandering tax payers’ money by funding these corrupt governments. They should receive a prison sentence for all the hundreds of millions of tax payers’ money that simply disappears into the bank accounts of corrupt politicians.

Unfortunately, while governments continue to waste tax payers’ money, they also continue to bully their citizens with their tax authorities. Also, they expect individuals to tolerate their actions as they invade your privacy, devalue currencies, manipulate markets, and destroy the value of your savings and pensions.

As an individual you cannot change the system, but you can take certain steps to prevent yourself from being totally wiped out by these insidious actions. One way is to make sure you own physical gold and silver.

TECHNICAL ANALYSIS

As gold prices fail to break above the key resistance (R) of $1400/oz., I expect to see more consolidation before prices move upwards.

About the author

David Levenstein is a leading expert on investing in precious metals . Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.

For more information go to: www.lakeshoretrading.co.za

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.