Al-Hayat, London - "A Gold Cartel Aims at Destroying the Economies of Developing Countries."
Economic Factors or "International Conspiracy" Behind the Depressed Price of Gold"
There is a storm in the money markets caused by the distribution of a report prepared by Mr. John Embry, a senior analyst with the Royal Bank of Canada, the largest bank in Canada. The storm, which spread rapidly, south to the US, and as far as China, stemmed from the fact that Mr. Embry, in his report, supported the basic assumptions that have been promoted by a group known as GATA, short for Gold Anti-Trust Action Committee. In essence, GATA has been promoting the notion that there exists an international conspiracy to suppress the price of gold through dumping it in large quantities on world markets, and that this conspiracy is managed by a number of central and commercial banks.
Although GATA, which was founded by Mr. Bill Murphy, has a large following, it has been depicted by its opponents as a marginal group promoting conspiracy theories; until Mr. Embrey’s report that is. For, as soon as the report, which was made public by Bill Murphy, came to light, the Royal Bank of Canada claimed it was only an internal working document, and not the official position of the Bank. However, Mr. Murphy was quick to publicly point out that the report was published on one of the bank’s subsidiary’s official stationary, and was distributed to a number of its select clients. Mr. Embry, declined to comment.
So what's happening in the world of Gold? Gold has soared by 20% since January of this year, while the shares of some gold companies have more than doubled in the same period. Gold, which until recently had been ruled out by many as a hedge against inflation and political uncertainty is roaring right back. Is this the result of natural economic trends at play, or is there a much more sinister and darker side about to be exposed as some maintain?
Among those of the second opinion is Bill Murphy, Chairman of GATA, Gold Anti-Trust Action Committee. This is a group of financial advisors and gold market participants, who have waged a three-year legal battle to prove that the unusually low gold prices since 1995 were not the result of market forces, but instead the product of price rigging that included governments and big commercial banks. Al-Hayat had this interview with Mr. Murphy.
Give us an idea about GATA and its lawsuit: Who is it against, and why?
GATA was established to expose the manipulation of the gold market by a Gold Cartel consisting of: Goldman Sachs, J.P. Morgan Chase, Deutche Bank, Bank for International Settlements, the U.S. Treasury and the Federal Reserve Bank of the United States. It appears the manipulation of the gold price began in earnest under the guidance of former U.S. Treasury Secretary, Robert Rubin, who came to that position from Goldman Sachs.
The GATA type lawsuit was brought against them in Boston Federal Court by GATA supporter, Reg Howe, a former trial lawyer in Boston. Much of the evidence used in his case was uncovered by "the GATA ARMY." Judge Lindsay dismissed the case stating that in his opinion Reg did not qualify from a legal standing point of view to continue with the suit. He stated if it were a gold company bringing the suit, it might be a different story. At no time in his legal opinion did Judge Lindsay disparage Reg or dispute his claims. Reg and GATA may have lost in court, but we won in the court of public opinion.
What are the purposes of the gold price suppression scheme?
We believe there are several:
1. To keep interest rates down by deceiving the bond markets about the rate of inflation, inflation historically being gauged in large part by the price of gold. You may remember the famous comments about the bond market that were attributed to President Clinton not long after he took office. He was frustrated with having to take the advice of his economic advisers that the approval of the bond market was crucial to his administration s political success. Clinton said he resented having to make his administration one of Eisenhower Republicans. GATA thinks that the gold price suppression scheme -- the massive deception of the bond market -- was Clinton's revenge.
2. To strengthen the U.S. dollar in relation to other curencies; to suppress commodity prices generally, since commodity prices take their cues from the gold price; and, by extension, to raise living standards in the United States by expropriating the developing world, which makes its living largely from producing and exporting commodities.
3. To enrich through inside information about U.S. government policy the Wall Street investment houses that have helped implement the gold price suppression scheme and that long have staffed the Treasury Department and Federal Reserve.
But the results of the gold price suppression scheme have been far greater than all this. The results include the devastation of the economies of the developing world, particularly sub-Sarahan Africa, and the vast misallocation of capital throughout the world in the last decade. That is, with the bond market deceived about inflation, the dollar, and the strength of the U.S. economy, most economic decisions around the world for the last decade have been based on horribly mistaken premises. The U.S. stock market bubble, now bursting, is evidence of this.
Are you saying then that the recent increase in the price of Gold could be partly attributed to this lawsuit?
GATA has been collecting evidence of the manipulation of the gold price for 3 /12 years. No one in the gold industry has every challenged the specifics of that evidence in all that time. We do know that the GATA story is spreading throughout the investment world and that is accelerating investment demand for gold. As to the gold price run-up and the lawsuit, the gold price did shoot up right after the judge issued his ruling. It also shot up when Reg and I gave presentations at the GATA African Gold Summit in Durban, South African on May 10, 2001 and when we spoke at the Association of Mining Analyst seminar in London on May 23 of this year. Five sub-Saharan gold producing countries attended our summit to expose the gold fraud to Africans as did the South African Reserve Bank, the leading South African gold producers, the National Union of Mineworkers, Cosatu (largest trade union), the Ministry of Mines, SA Chamber of Commerce, and press including the South African Broadcasting Company.
What are the other major factors contributing to the increase in the price of gold?
1. Low interest rates make gold a very compelling investment,
2. Gold producing are buying back their forward sales (hedges)
3. Terrorist concerns and Middle East tensions
4. Concerns that the dollar will tank
5. A huge supply/demand deficit - Mine supply is 2500 tonnes per year and going down. Demand exceeds supply by about 1700 tonnes per year. The central banks have lent/swapped out 13,000 to 15,000 tonnes of their gold. It is actually sold and they cannot get it back. In essence, they have trapped themselves.
Gold and Middle East: Do you keep tab on the movement of Gold in the Middle East, and the Arab World in particular. Where does the ME stand in its gold holdings? Is this good or bad for those Middle Eastern countries?
Back in my futures industry days, I dealt with a good number of Arabs including a distinguished Kuwaiti, Talib Al Nakib who lived in Geneva, Switzerland. These days I only hear things hear and there about Arab going buying. I do know that it has been aggressive this year. A bullion dealer friend of mine had his best day ever a few weeks ago, selling 6 tonnes of gold to an Arab group in one day alone.
Some are calling for a re-pricing of gold and using it as the actual basis for money. How feasible is this?
In time gold will be used more and more as money. Already, the Moslems in Malaysia have the Dinar and the Russians have the Chevronet as gold coin money.
What in your opinion should the actual price of gold be?
My price target for gold is $800 to $1,000. Gold should explode when it takes out $330 and go ballistic when it takes out $355, or so. There is going to be gold derivative banking crisis because of the reckless gold suppression activities over the years at certain bullion banks. Gold will melt-up like Enron melted down. Many of the same banks are involved with both scandals (Citibank and J.P. Morgan Chase).
Lebanon, whose currency used to be 100% backed by gold before its civil war, has been under tremendous pressure to sell or lend its gold. Given Lebanon s debt and devaluation of the currency (1 $US = 2.75 LL before the war, to 1 $US = 1500 LL now,) there is talk now about using this gold as a security for an upcoming Eurobond issue. What is your best advice for Lebanon on this matter?
The Russians, Chinese, Arabs, savvy hedge funds and the Japanese public have been buying up cheap gold while the foolish western central bankers have been dumping it, in some cases to perpetuate the gold fraud. The English Exchequer is already being vilified for dumping half of England s gold at average price of around $280. His decision has cost the English citizenry big time, already. Lebanon should not make that mistake. They should not lend it out either. They might not be able to get it back.
Dubai is promoting itself as the City of Gold. What do you think of that idea? Will it succeed?
Yes, it will. Arabs have always loved to trade gold, throughout the centuries this has been so. The dollar is going to lose its luster in the years to come. Gold will regain its luster.
If the price of gold goes as high up as you predict, with the value of the $US ultimately plummeting, what kind of impact will that have on the US foreign policy in general, and on its Middle East policy in particular?
The Bush and Clinton Administration have been very foolish. They have opened up our country to the possibility to financial blackmail by foreign powers because of their gold rigging activities. I met with two of President Bush’s boyhood friends in Austin, Texas at the Texas Capitol Building. One of them, a State Senator, sent that message along with other GATA findings to the President on his private fax the next day. They believed GATA to be correct and did not want him to be blindsided. His economic advisor, Lawrence Lindsay, sent me a letter the same day after receiving the fax. GATA wants to help America, not hurt it. A GATA delegation met with the Speaker of the House, Dennis Hastert, on May 10, 2000. We gave him our Gold Derivative Banking Crisis document and strongly suggested he do what he could to end the gold rigging.
Sub-saharan Africa is going to be very upset when the gold price soars and the gold price rigging is discovered. Gold should have been well above $600 per ounce these past years. The Economist called Africa "the hopeless continent." If not for the gold fraud, Africa could have been the "natural resource boom continent." There would have been money freed up to begin to deal with Africa's terrible disease problems, etc.
Should that happen, what do you estimate the impact will be on the economies of Saudi Arabia, Egypt, Iraq, Israel, Syria and Lebanon?
Hard to say. The U.S. stock market is in deep trouble. It could go in crash mode at any time. That cannot be good for any other nation’s economies.