As momentum in the gold market turns bullish, many people wonder what has suddenly happened to change things? The simple answer is nothing. The price of gold is simply being set by political forces. Let me explain to you how I know this.

Once you crunched the numbers, it was easy to see that the low gold prices were not real and could not last. In my article, “Did COMEX Just Receive A Physical Gold Bailout From The Feds?”, for example, which was published in June 2015, I did crunch the numbers. At that time, gold was selling as low as about $1,175 per troy ounce. I carefully calculated the physical cost of the politics of gold.

Comparing new mining supplies + scrap against the then-existing actual physical demand, it was clear that a not-so-mysterious gold supplier “of last resort” was injecting physical gold into the trading system. In fact, in order to prevent widespread failures in delivery, that entity was going to have to inject at least 1,345 tons in 2015, to balance supply with demand. But, demand in both India and China went up a lot more than we expected, and supply came in almost exactly as projected.

The not-so-mysterious “gold supplier of last resort” ended up having to inject somewhere in the neighborhood of over 1,500 tons. If it hadn’t done so, we would have seen shortages and panic, or gold would have risen like a rocket. None of that happened, so the deficiency in supply must have been met. Whoever met it now operates a vault with 1,500 tons less gold in it than it had back in 2014.

As noted in the same article, there was a deficiency of supply in 2014 of about 600 tons. That gold also had to have been supplied. Similarly, in 2013, there was a big deficiency of about 1,200 tons, but that particular gap was filled mostly by dishoarding from the fast-shrinking western ETFs. In 2014/15 and continuing to now, the only entity with the motive and resources to play “gold supplier of last resort” is the US Treasury.