Harry Bingham commentary for May 10, 1999

Section:

From World Net Daily
Tuesday, May 11, 1999

Trouble in the gold market?
Analysts see move to manipulate prices

By Jon E. Dougherty
c 1999 WorldNetDaily.com

Whether influenced by uncertainties stemming from Y2K
or because global financial markets took a dramatic
turn for the worst, most gold analysts agree that 1998
was a "record year" for sales. So far, in 1999, record
buying has not subsided, according to the U.S.
Treasury, and most gold brokers and retailers say there
is no sign of a buying slowdown anytime soon from the
private sector.

However, recent investor activity in the gold market
suggests there may be a move to illegally influence
prices. In fact, entire nations, such as Great Britain,
are poised to release hundreds of tons of gold into the
market over the next few years in a move some believe
is an attempt to artificially deflate gold prices and
possibly to de-emphasize gold as a valuable commodity.

Beginning July 6, the Bank of England will begin
selling over half of Britain's present gold stocks, or
415 tons, which is currently worth about $6.5 billion
(U.S.). Last week, when the bank made the announcement,
it stunned gold dealers and traders all over the world,
resulting in the price of gold falling to below $280 an
ounce -- its lowest price in recent years.

It was this announced sell-off, as well as several
previous disturbing gold market reports, that prompted
the formation of GATA -- the Gold Antitrust Action
Committee -- and a potential antitrust lawsuit aimed at
breaking up the alleged control over gold market
prices. GATA has retained noted antitrust and
securities law firm specialist, Berger & Montague of
Philadelphia, in order to assist in its investigation
into the alleged manipulation of the gold market.

Bill Murphy, chairman of GATA, told WorldNetDaily,
"I've been a trader for 25 years, and I began noticing
that the gold market was just not trading the way it
was supposed to." He said that when gold reached the
$295-300 per ounce range, "I began noticing that the
market price for gold would always stop (at a certain
level), lose, then come right back" to the previous
level -- but never higher. That didn't follow the
established rules of supply and demand, he explained.

"At about that time, we heard that (gold) producers
were going around offering credit terms in South Africa
to foreign producers in different countries at unheard-
of credit terms, if they would just 'sell forward'" --
or put supply in the marketplace. He said GATA also
received a number of reports that "officialdom" in the
U.S. were asking officials in Asia not to aggressively
buy gold. These two incidents were occurring
simultaneously, Murphy said.

The only explanation that makes sense, he said, was
that somebody is trying to keep gold prices down. Other
government and market analysts who were following the
same gold trends, said Murphy, "were told to 'tone
down' their reports," in an effort, he says, to conceal
other investment activity based on lower gold prices.

Murphy said he initially brought his concerns to other
experts -- some of whom eventually became GATA members
-- and they agreed it was possible that antitrust
violations may have materialized within the gold
market.

The GATA chairman said the essence of the issue rests
with the number of "gold loans" currently out versus
the annual output of gold from the world's combined
producers.

"Right now, we feel the total gold loans amount to
about 8,000 to 10,000 tons. But mine supply, or annual
production, is only about 2,529 tons. Consequently, we
think the speculators -- the gold-borrowing crowd --
are borrowing gold at just one percent interest rates
versus the 8 to 10 percent they'd have to take to
borrow money at a bank."

He sees "collusion" among producers and speculators to
keep the price of gold artificially depressed in order
to obtain cheap loans on money used for other
investments.

"Basically, they're getting interest-free money to
invest in Wall Street for free," he explained. "So
hedge funds like Long Term Capital Management, who got
in trouble last year for doing this same thing with the
Japanese Yen, and all of these investment people in New
York are borrowing gold and investing it. That's fine,
as long as the gold price doesn't go up."

Murphy said the advantages to doing this were obvious.

"Say these people borrow gold at $290 an ounce but end
up having to pay it back at, say, $320 an ounce, the
cheap loan suddenly becomes an expensive loan."

He told WorldNetDaily that recently the price of gold
was set to go above $290 an ounce, "which we feel has
been the borrowing price for about the past year or
so." But when he publicly questioned where the supply
of gold was going to come from, within a day the Bank
of England announced they were going to sell over half
of their gold inventory.

"That came out of nowhere," Murphy said. "Why would the
Bank of England do that -- sell early, and make it a
very public announcement -- when they could have waited
and made more money from the sale of their gold if the
price had gone up?"

The veteran trader said the activity in the gold market
followed a familiar pattern. "I've seen this kind of
activity before in other markets," he said. "It's
clearly manipulation to me."

"One of the reasons that various financial institutions
are acting in concerted action to hold down the gold
price is that they are now short hundreds of tons of
borrowed gold and that the speculative community in
total is short 3,000 tons, or more," Murphy said.

The evidence GATA has compiled, he said, suggests that
gold loans have become so large that an international
"systemic risk" problem has now been created.

"If the price of gold rose unexpectedly even to a
moderate degree, many gold borrowers would not be able
to find enough gold quickly enough without driving the
price into the stratosphere," Murphy said. "That is one
of the reasons that we believe certain financial
entities have been manipulating the market in collusive
fashion to make sure the gold price does not rise
sharply above $300."

Robby Noel, a U.S. gold retailer and market analyst, as
well as a daily talk show host, agreed with Murphy's
conclusions. He said that somebody seems destined to
drive down gold prices, but instead of just greed, he
sees another reason for the depressed prices.

Noel believes that since over 60 percent of all above-
ground gold is privately held, some countries -- led by
internationalists -- may want to "devalue" the
commodity and establish a monetary system based on a
more arbitrary, controllable method of wealth.

"If that were to happen, what would the gold people now
hold be worth? Almost nothing," he said.

Noel told WorldNetDaily that Michel Camdessus, head of
the IMF, recently said he "extolled the virtue of using
gold-sale proceeds to pay for debt relief for 'heavily
indebted poor countries,'" such as those in Africa.
But, Noel pointed out, that makes little sense if the
ultimate goal is to raise those nations out of poverty.

"If the sale of gold is to help pay poor Black African
countries' debt, why destroy the price of gold when the
single largest export of these counties is gold?" he
asked.

Indeed, Noel has some merit for his concerns. Research
analyst Gillian Moncur told Agence France Presse (AFP)
last week, "Gold is becoming an outdated asset." She
also said that she anticipated Britain's surprise sale
"would likely herald further official gold sales around
the world," which would, undoubtedly, further depress
gold prices.

Murphy agreed that there could be a move to devaluate
gold permanently. "He (Noel) is talking about a
monetary system based on 'fiat' money," he said. "He's
right about that. The central bankers use the gold
price as a report card, so to speak. If the price of
gold climbs dramatically, everybody is bound to start
asking, 'What's the problem here?'"

But, he added, he is more inclined to believe that some
investors are merely trying to keep the dollar as the
primary global trading currency, rather than the gold
standard. Either way, Noel added, "The relationship
between physical gold and the current prices is out of
whack. In a nutshell, there is no doubt to me there is
some sort of a scam going on here."

John Meyer, treasurer of GATA, stressed that the
information the group has so far only amounted to
"circumstantial evidence," but, he added, "there's a
lot of smoke there. And, it seems the farther into this
we get, the more smoke there is." The producers, said
Murphy, are also starting to get into the fight. He
said most of them are upset at current price trends in
gold, and see any attempt to keep prices low as a
threat to their survival.

"The producers aren't happy these days," Murphy told
WorldNetDaily. "Many of the smaller producers are going
out of business" because prices, in some cases, barely
outstrip mining costs.

Meyer said that although private individuals had
already begun contributing to GATA's legal expenses,
many gold producers were finally beginning to bankroll
the effort. Most of them, however, had requested
anonymity. GATA's legal team, Berger & Montague, is
currently engaged in researching the basis for an
antitrust lawsuit. Merrill G. Davidoff, an attorney at
the firm who is familiar with the case, said GATA had
just recently contacted Berger & Montague with their
antitrust concerns.

"We're at the point now where we're just getting into
this," he said. Davidoff could not comment about GATA's
case, but he did say they were likely to be looking for
potential plaintiffs for the lawsuit as well as
potential witnesses willing to provide information
confidentially about gold market manipulation.

"That would be a normal process for the client," he
said.

"As a law firm, however," Davidoff said, "rounding up
potential plaintiffs is just not something we do."
Merrill also declined to comment about whether or not
his firm had been in contact with any government stock
market regulatory agency.

WorldNetDaily contacted the offices of the Securities
and Exchange Commission (SEC), the Federal Trade
Commission (FTC), and the Commodities and Futures
Trading Commission (CFTC) in Washington, D.C., but they
also declined to say whether or not they had received
any complaints regarding price-fixing on the gold
market.

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Jon E. Dougherty is a senior writer and columnist for
WorldNetDaily, as well as a morning co-host of Daybreak
America.

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