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Thomas Pascoe: Gold price manipulation more scandalous than LIBOR
The Price of Gold Has Been Manipulated. This Is More Scandalous than LIBOR
By Thomas Pascoe
The Telegraph, London
Wednesday, July 11, 2012
http://blogs.telegraph.co.uk/finance/thomaspascoe/100018574/the-price-of...
The new media and the 24-hour news cycle have a great deal to answer for, not least encouraging a political class which would otherwise be happily engaged expensing duck houses into the belief that it should demonstrate perpetual action on our behalf -- hence the endless stream of badly drafted legislation from the corridors of Whitehall.
It does, however, reveal things that would otherwise be ignored. The issue of manipulation in the gold market which I wrote about last week is a case in point. The ball of half-truths and downright lies which have surrounded the issue for a long time is beginning to unspool in an issue Internet activists kept alive long before it was acknowledged by the mainstream media.
People ask why the issue is important at a time of naked market manipulation of the Libor rate. The answer is simple: The Libor manipulation scandal can be seen as the thin end of the wedge in terms of government market manipulation.
... Dispatch continues below ...
Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters
From a Company Press Release
November 22, 2011
VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.
"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."
Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.
For the company's complete press release, please visit:
http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf
Although Libor manipulation affects the interest rates we pay on all number of credit products, gold market manipulation is more serious still.
The price of gold is traditionally a proxy for the value of money. A soaring bullion price is indicative of a lack of faith in fiat currency.
Our financial system is predicated on the notion that money stands as a proxy for the factors of production -- capital, labour, land, and enterprise.
In short, the abundance of money in the economy should be related to the abundance of those factors. The harder we work, for instance, the more we create. There is more labour in the economy, therefore a rise in the money supply is legitimate in order to mirror this. There is nothing wrong with printing money per se so long as the printing reflects an expansion in the real economy.
Twentieth- and 21st-century economics appears to have done away with this. Money is now created ex nihilo to feed both the top and bottom ends of society.
Money printing or Quantitative Easing is mainly of benefit to two parties. Firstly, the Government, which is able to borrow more and borrow cheaper than it otherwise would have done. This is because QE money is used to buy bonds, forcing down yields.
The Government uses this money to finance both existing debt and an expansive welfare state which bribes large portions of the population to accept a life of hellish boredom and dribbling docility in exchange for L70 a week in dole money. Such payments are not a genuine transfer of the fruits of existing production within an economy; they are borrowed. They help governments electorally at the cost of the vigour of society.
At the top end, Quantitative Easing money goes directly to banks, which are able to sell their government bonds at a profit. In theory they may use this to even up their balance sheet. In reality they frequently use it as stake money at riskier tables.
In both cases, paper money has been stripped of meaning. It is no longer a reflection of production nor any of its components. It now simply exists of its own right -- but it can survive as a measure only for so long as the government keeps such printing in small enough doses that the de-leveraging does not become apparent to workers.
As with everything in economics, there is a correctional market mechanism for this scenario -- the flight to commodities, particularly precious metals like gold. Gold holds its value when paper money loses value, because it is beyond the gift of the government to simply will gold into being and give it to friends in high places or voters in low ones.
If gold has been manipulated downwards and if that process continues, then all recourse to a store of value (other than land and property) has been taken from the individual.
The value of our money is falling thanks to Quantitative Easing. Fixing in the gold market takes away one of the key hedges for those with cash assets but no property.
The true fall in the value of money is probably better seen through the rise in house prices since the 1980s -- a much better reflection of the market mechanism thanks to the suppliers being so large and because of the lack of a two-way interplay between house prices on the street and derivative products for traders.
In any case, it would appear that the Libor scandal at Barclays has acted to draw out more market figures willing to claim openly that organised price fixing has occurred in gold.
Ned Naylor-Leyland, investment director at Cheviot, a British investment firm, had the following to say on CNBC the other day:
http://www.cnbc.com/id/48119741
In the aftermath of the Libor scandal, the Bank of England complained that it had received no forewarning from the marketplace.
Gold price manipulation may well be the next big scandal to break -- if it does, this time nobody can say that they were not warned.
Finally, a mea culpa: The tonnage figure quoted in my original article (http://blogs.telegraph.co.uk/finance/thomaspascoe/100018367/revealed-why...) certainly undershot the true extent of the short position held by the US bank in question. It was very difficult to get accurate tonnage figures from anyone I spoke to for the article, and I took a pithy aside relating to a "couple of tonnes" rather too literally in a desire to include some. The true extent would have been far greater as many of you pointed out in the discussion board below the article.
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Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life
Company Press Release
VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.
The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.
The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:
Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day
Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."
For the complete press release, please visit:
http://prophecyplat.com/news_2012_june18_prophecy_platinum_announces_res...
