There’s this notion put forth by the majority in the precious metals community that the Fed and Central Banks control the market price of gold. I have even heard that some analysts believe the Fed could push the gold price any where they saw fit…. even to zero. While I agree that the Central Banks do play a role in gold market intervention, they most certainly CANNOT push the price of gold anywhere they want. This is an absolute falsity…. and I have the data to prove it.
To understand how the market determines the price of gold, we must first dismiss the economic principle of SUPPLY & DEMAND. While supply and demand forces are factors in the short-term price movement of gold, they do not really factor all that much over the longer term.
Here is a chart showing the relationship of the gold and oil price since the 1940’s:
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