I lean towards the side that thinks that the central and money center banks (not faceless multinationals) are suppressing the price of gold via fractionally-reserved lending of physical gold. What would convince me that this is not the case would be a comprehensive audit of the Federal Reserve's books and gold holdings.

You?

But seriously, there are lots of things that are hard to prove wrong, but that's hardly a good reason to believe them. In your case, what motive would the Fed have? Has an employee of the Fed (or any other central bank) ever blown the whistle on this massive international conspiracy? If there's no good reason to think something, there really isn't much good reason to spend time proving it wrong.

The Federal Reserve is also intimately bound up in fractionally reserved expansion of the paper currency, so it is reasonable to assume that they might use the same basic technique with gold. And that, in fact, is the historical origin of banking, in the modern, leveraged sense: gold assayers began loaning out gold on a fractionally reserved basis, allowing them to collect interest beyond their core assets. Worked great until people ran on them.

So I assert that it is less irrational to believe that there is a possibility that central banks engage in manipulation of gold prices than it is to believe that there is a dinosaur living in the subway under manhattan.

YMMV.

Also, to believe this you have to postulate that:

1) Employees of the Fed are personally concerned about gold destroying the dollar.

2) They are willing to do something illegal (or at least unauthorized) to protect the dollar.

3) So they came up with a complicated, elaborate plan to manipulate the price of gold down that perfectly plays into the narrative of gold bugs (note the nefarious fractional reserve lending).

It's not impossible!

2) People involved in the banking system, by definition, are willing to fractionally reserve something

3) Nothing particularly complicated, same fence that fractionally reserved frauds have been running for a thousand years.

_shrug_

To be clear I'm not saying this is what happened, just that there doesn't have to be an ongoing conspiracy among hundreds of people and institutions for the gold to be gone and nobody wanting to say anything.

I'm not sure I understand you fully. What is this portion of your comment analogous to?

What would you do then? Would you actually say "Well, I guess my belief was wrong and I was misled by the people who promoted it to me", or would you find a way to move the goalpost and say that you'll continue believing until some other complex and politically-hard-to-manage thing happens? And then another, and then another?

So, let's get that audit going...

Gold as a raw material is useful to a degree, just as diamonds are, but artificial scarcity [1] [2] and wild speculation create a mess of distortions.

[1] http://www.theatlantic.com/magazine/archive/1982/02/have-you...

[2] http://archive.wired.com/wired/archive/11.09/diamond_pr.html

We're not going to shift to a 'usefulness' based mindset, and we should avoid shifting to the mindset that an object is equal to the sum of it's parts. Supply and Demand are king.

The US did not have a Gold-backed dollar in practice. From 1933 onward, Executive Order 6102 was in effect, making it illegal for any individual to own more than 5 ounces of gold.

The majority of people living today have never lived in a time period where you could practically exchange dollars to gold. That's the true conspiracy. The Gold-standard arguably never even existed in the first place. (At least, from 1933 onwards)

I've been following the Gold bug sphere in 2006, 2007 and there's absolutely nothing new about these conspiracy theories. They have been pushing them ever since, and you haven't even scratched at Bilderberger/Illuminati/Jews/Take your influential minority.

Banks still hold gold, they do so while ignoring other precious substances. Maybe it is a barbarous relic.

But some of the vaults this stuff is held in... they've got much less of it than was believed. Where is it? Why is no one concerned? Why are there no plain and verifiable answers forthcoming?

Not sure about the narrative you describe, but it's a clear fact that it's harder and harder to buy gold anonymously, without declaring to the State where you stash it. Makes it practical the day they come to get it back and give you worthless paper instead.

The Depression proves that the gold standard doesn't work. There was no stability; there was deflation.

Since the concept behind the gold standard means "gold always..." - a universal quantifier, one needs only show a counterexample to blow it out of the water.

Not really. The government went off the gold standard in 1914 when it began printing whatever dollars it needed. A legally fixed exchange rate, however, continued. This led to an increasing disconnect between the dollar and gold, by 1929 gold was worth about twice as many dollars as the legal exchange rate.

This is what lead to the banking collapse, as everyone suddenly realized this and rushed to exchange their dollars for gold at the official exchange rate. The runs persisted until the government suspended exchanging gold for dollars.

We see the same thing happen in modern times every time a government decides to peg its currency to a foreign currency, and then inflate it.

http://www.nber.org/papers/w16350

The hypothesis is that France "hoarded gold" - kept more gold reserves than it printed currency. This led to a paucity of gold. Those nations that played by the rules could issue less currency than was needed. This led to deflation.

Bimetalism, the attempt to peg the value of silver in relation to gold, has quite an illuminating history of failure.

You mean the same bankers, economist and politicians of the bail out to big banking institutions?

You mean the same bankers, economist and politicians of the too big to fail?

the same bankers, economist and politicians that have brutally increased their wealth in the crisis while the people income has gone deep down?

You need to insult people that disagree with you, calling them "bugs".