In the July edition of the Market Overview, we showed that the gold market is one of the most complicated markets in the world. Its complexity and uniqueness (gold neither derives its economic value from its yield nor from consumption or being used as an input in production) make people differ in their opinions about it. Many gold investors believe that the market for gold is systematically manipulated. There are many variations of this theory: some say that the precious metals are under the thumb of central bankers, while others blame big banks and their use of derivatives (‘naked’ shorts) and high-frequency trading for the declines in the price of gold. There are also worries about the discrepancy between paper gold and physical gold, the fairness of London trading, declining inventories at Comex and leasing of gold by central banks.

In this edition of the Market Overview, we will try to examine these views so investors have a better understanding of the gold market and its true drivers. Our analysis should, as always, enable investors to draw important investment conclusions.