As Gold Rallies, a Fringe Claims Victory
By Gordon Pitts
The Globe and Mail, Toronto
Friday, December 16, 2005
Bill Murphy believes the forces of darkness are finally on the run.
The U.S. gold bug is claiming victory over the central bankers, the political heavies, and the conspiracy of silence that has kept his message of gold market manipulation out of the U.S. media.
"We're characterized as these helicopter loonies -- and that's crazy," says Mr. Murphy, 59, shouting into the telephone yesterday as he prepared to board a plane.
The source of his exaltation is gold at more than $500 (U.S.) an ounce, and, despite recent softness, being up 17 per cent this year.
In the view of Mr. Murphy and his followers, this is powerful evidence that the "gold cartel," which has denied the yellow stuff its rightful place as a reserve currency, has lost control of its once-rigged market.
It means gold should top $1,000 within two years on its way to between $3,000 and $5,000, the Dallas-based Mr. Murphy proclaimed.
The propagation of conspiracy theories around the manipulation of precious metals has a long and rather dubious history.
But over the past decade, Mr. Murphy, a former pro football receiver and Wall Street futures trader, has lent an intellectual patina to the cause by assembling a loyal core of consultants and academics around his Gold Anti-Trust Action Committee, or GATA.
Mr. Murphy argues the current gold surge began with a GATA meeting of about 100 true believers in the summer in, appropriately enough, Dawson City, centre of the 1898 Klondike gold rush.
The Dawson City meeting was attended by a key Russian official, lending credibility to the cause, he said. Russia, along with China and Saudi Arabia, have led the upsurge in demand for gold that has overwhelmed the U.S.-based cartel, he observed.
At the heart of his worldview is that the U.S. Federal Reserve Board for years leased out large amounts of gold in paper certificates to suppress the price, thus bolstering the U.S. dollar as a reserve currency. The masterminds were Alan Greenspan, outgoing Fed chairman, and major U.S. financial institutions, GATA alleged.
The theory is that the U.S. Gold Reserve in Fort Knox does not have enough bullion on hand to meet its paper obligations. With the price rising and supply squeezed, the need to cover short positions with real gold will create a giant price increase -- and a potential crisis.
Evidence that the tide is turning, Mr. Murphy said, can be seen in the relative strength of the U.S. dollar against major currencies at the same time gold is climbing. Hence, proof that gold and the greenback are not joined at the hip, Mr. Murphy said.
GATA has some high-powered allies, including Eric Sprott, the Toronto investment manager, and his precious metals guru John Embry, both of whom attended the Dawson City meeting, Mr. Murphy said.
In his commentaries, Mr. Sprott has lent credibility to Mr. Murphy's views by citing them as possible theories behind market moves.
Mr. Murphy is "a tenacious, very tough guy," said Nick Barisheff, president of Bullion Management Group Inc., a Toronto-area fund company that invests in gold. Asked if the conspiracy view was accurate, he said: "It's something we will never know. It's like the assassination of Kennedy."
It sounds unpatriotic for an American to endorse gold at the expense of the dollar, but Mr. Murphy argues that the alleged market fixers were un-American in their manipulation.
"I think it is going to lead to a disaster," he cautioned. "What it did was take away the barometer from the little guy in America, which was wrong. In 1776 America became our country because we railed against the inequities of what the big boys were doing in England. This is what America is all about."
It's not the first time Mr. Murphy has cast himself as a patriot -- he was a Boston Patriot back in the American Football League of the 1960s. He had taken hotel management at Cornell University, where he played football.
After catching on with the Pats, he caught about 20 passes in his only season before he blew his knee out. He moved into futures trading on Wall Street.
His moment of decision came with the collapse of Long-Term Capital Management in 1998, when powerful financial institutions bailed out the U.S. hedge fund, preventing financial chaos.
Mr. Murphy expected the gold price would soar as institutions scrambled to cover the hedge fund's large short position. Instead, some major banks were selling every time gold rallied, and the collusion theory gained a convert.
Mr. Murphy said that, since he founded GATA, he has been effectively silenced in mainstream U.S. TV and newspapers. "The media have not allowed our story to be told. We are taking on the richest and most powerful people in the world."
But he has kept expounding his theories, shrugging off jeers from the sidelines. That wouldn't surprise Mike Holovak, his former coach with the Patriots. He once told The Wall Street Journal that Mr. Murphy "wasn't big in muscles and he wasn't particularly fast. But he always managed to get open and catch the passes. He took some awful licks but always came back."
Four Other Gold Bugs
The Globe and Mail, Toronto
Friday, December 16, 2005
There is a lot of variation within the species. As Omar El Akkad reports, gold bugs range from conservative investors who've made millions from smart bets to end-of-the-world pessimists convinced paper money is a flimsy fiat doomed to collapsed.
A superstar in the world of gold bugs, Mr. Casey is the founder of Casey Research and editor of a gold-oriented investment newsletter. On the Casey Research website, Mr. Casey is described as a best-selling author and "super-successful speculator" who has a track record of investments that returned more than 100 percent in one or two years. Though his investments picks include other commodities, his focus is gold and he has an ardent gold bug's disdain for paper money, which he believes is worthless if not backed by gold.
The economic historian has strong opinions on everything from nuclear warfare to the Y2K scare to government policies of all kinds. For years, Mr North's newsletters have been home to some of the most pessimistic opinions on all of the above. Even among other gold bugs, Mr. North's ideas veer toward the extreme: He previously recommended buying gold in anticipation of a nuclear war between the U.S. and the Soviet Union. However, he views gold as one of the few life rafts in the event of economic collapse.
The former banker is a self-described gold bug who left the banking world to put his money -- and others' -- where his mouth is. He is the founder of GoldMoney.com, a website that lets users make payments denominated in gold. Mr. Turk also shares the common gold bug belief in imminent doom for paper money. His book, "The Coming Collapse of the Dollar and How to Profit From it," was published last year.
One of the most powerful gold bugs on the planet, Mr. Doyle is the chairman and CEO of coin and bullion dealer Blanchard & Co. In 2002 Blanchard filed an antitrust lawsuit against Barrick Gold Corp. and U.S. bank J.P.Morgan Chase & Co. claiming the two made about $2 billion (US) in short-selling profits by suppressing the price of gold. J.P. Morgan eventually settled, but Barrick shot back with a libel suit.