Dumping Physical Gold

Dumping physical gold is the simplest and most obvious strategy for lowering the value of gold in dollars. Sell gold if you are a central bank. That was done for a long time, beginning with the London Gold Pool in the 1960s, when members of the Bretton Woods system, including West Germany, the United States, and the United Kingdom, alternated dumping gold on the London bullion market to lower its price.

After Nixon abandoned the gold standard, such endeavors persisted in the 1970s. That decade saw gold start at $35 per ounce. It increased to approximately $42 per ounce after Nixon closed the gold window. It had reached $800 per ounce by January 1980. The United States of America secretly and frantically attempted to drive down gold price from $42 an ounce to $800 an ounce by selling gold. In my book The Death of Money, chapters 9 and 11 go into great detail about this endeavor.)

The United States sold approximately 1,000 tons of gold between 1974 and 1980 and persuaded the IMF to sell 700 tons. As a result, the United States and the IMF dumped 1,700 tons of physical gold or roughly 5% of all official gold in the world. This attempt at manipulation failed. Despite the sale of physical gold, the dollar price of gold skyrocketed to $800 per ounce by January 1980. Therefore, in the end, the United States simply gave up and allowed the gold price to move in the direction it was going.

I have declassified private, classified correspondence from the middle of the 1970s between the chancellor of West Germany and the then-president of the United States, Gerald Ford, describing this physical gold manipulation. The infamous "Brown's Bottom" occurred in 1999, when Gordon Brown, the then-chancellor of the British exchequer, dumped approximately two-thirds of the UK's gold on the market at close to the lowest price in thirty-five years. More manipulation continued into the late 1990s. In the early 2000s, Switzerland was also a major gold seller. So, major financial powers dumped physical gold for a long time to manipulate the price. The issue is that you will eventually run out of gold.

There is not much left in the UK. While Switzerland has some, it has significantly less than it used to. The United States of America decided not to sell any more gold, but it was happy for other countries to sell it. People realized it wasn't working and stopped the physical dumping eventually. The manipulators lacked gold, and there were eager buyers. They had no choice but to manipulate the paper.