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Published on Gold Anti-Trust Action Committee (http://gata.org)

Gold Price Manipulation - by Sid Reynolds

By Administrator
Created 2003-12-18 08:00

In order to explain the Why's and How's of the Gold Price Manipulation scheme (and why it is illegal and unfair), 6 aspects need to be discussed - namely motive, means, proof, opportunity, track record and impact.

1. MOTIVE:

Refer: http://groups.yahoo.com/group/gata/message/983 [1] http://192.168.0.104/~trevor/gata.org/www.gata.org/congress.pdf [2](page 6)

2. MEANS:
Background: The gold price suppression scheme was actually put down on paper, in public, by Harvard Professor Lawrence Summers, before becoming Treasury Secretary under Clinton. He wrote of the inverse relationship between the gold price and interest rates, and concluded that government could keep interest rates low by suppressing the gold price. Refer: www.gata.org/gibson.pdf [3]

Mechanisms: In 1999, the "Washington Agreement" was signed which severely reduced capacity of Central Banks to sell gold, so alternative methods had to be found to suppress the gold price. The 2 mechanisms are:

-Direct leasing: Where CBs lease gold to Bullion Banks (BBs) at ~1%pa, and the BBs then dump this gold on the market and then invest proceeds in bonds at ~5% - no problem unless CB's want their gold back! This is far more secretive than CB selling gold directly, because any sale appears on their books, whereas IMF has told CBs to disguise leased gold among total gold reserves and report it still as an asset (for more refer section 3, Proof #11). This problem with this scam is that it requires constant supply of physical gold held by CBs (which is running out), to offset the bullish gold fundamentals, including annual deficit (currently demand minus supply = 1400+tonnes pa!). Gold leasing is bizarre in that it is like a landlord leasing a flat, and then the tenant sells the flat, and the landlord not registering the sale at his next tax return - bizarre but legal with gold.
[NB: When will the cartel run out of physical? As much as 3 years according to analyst Frank Veneroso, but in practice much sooner due to outstanding gold fundamentals... ie declining supply, record demand, weakening $US, negative real interest rates, covering short positions, bubbles in equities & real estate]
-Swaps: Similar to gold loans, except 2 CBs actually "swap" gold with each other (eg US and Germany), then lease out gold to BBs. This is a sneakier way to lease gold, because US Fed can say they don't lease any of their gold, which is true because they actually lease Germany's gold while Germany leases out the US gold!
-Hedging or ("Forward Sales"): where a producer pre-sells un-mined gold at a fixed price to lock in profits in advance. Since the buyer wants actually physical, an equal amount of gold is "leased" from a CB and sold into the spot market by the gold producer (or "hedger"), suppressing the gold price. The hedger earns cash, but often forward sells much more gold than what they have in reserves - ie trouble!
NB: For years, the daily selling patterns of these BBs are not consistent with normal profit maximisation ie gold price usually rises in London's physical market, then drops in New York's paper market. The only explanation is to suppress the price, regardless of losses incurred. This is corporate suicide, unless backed by government.
For more on J P Morgan derivatives, refer: http://192.168.0.104/~trevor/gata.org/www.gold-eagle.com/editorials_02/chapmand061302.html [5]
For more on secret scam with BBs & US Government, refer: http://192.168.0.104/~trevor/gata.org/www.fgmr.com/manipulate.htm [6] (search "just")

Coordinator: "Exchange Stabilization Fund" (ESF) is a secret branch of US Treasury, and is not accountable to US Congress or courts. ESF reports only to US President and Treasury Secretary. Refer Proof #1, #2, #3
Co-conspirators:

NB: Certain Bullion Banks such as J P Morgan in effect trade for ESF and US Fed, and as such are privy to the confidential direction and intent of the US Fed. For more, refer: http://192.168.0.104/~trevor/gata.org/www.fgmr.com/manipulate.htm [7] (search "proxy")


3. PROOF:

#1. US Supreme Court "Under the Sherman Antitrust Act, a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se". Put simply, while gold leasing and futures is legal, it is illegal to do so for manipulation purposes.
Refer http://192.168.0.104/~trevor/gata.org/www.gata.org/howe_complaint.html [8](Sections 1, 80). So ESF illegally manipulates gold price.

#2. The US Treasury at its website denies that the ESF has conducted a gold swap in the last 10 years. In addition, a court filing on behalf of Secretary O'Neill specifically denied that the ESF had conducted gold swaps after 1978: Refer http://192.168.0.104/~trevor/gata.org/www.zealllc.com/files/HvBD0013.pdf [9] (page 3, footnote 2.)
This is contradicted during a confidential US Fed meeting, where there was admission of dealing in gold swaps.
Refer: http://groups.yahoo.com/group/gata/message/733 [10] (p69 of meeting transcript, or p72 of pdf file)
For more on admission of existence of ESF, refer http://192.168.0.104/~trevor/gata.org/www.treas.gov/offices/international-affairs/esf/index.html [11]

#3. Alan Greenspan, at a testimonial at a 1998 House Banking Committee hearing: "Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."
Refer: http://192.168.0.104/~trevor/gata.org/www.gata.org/howe_complaint.html [12] (Section 38)

#4: In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999: George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K." Refer: http://192.168.0.104/~trevor/gata.org/www.gata.org/bofi.html [13]

#5. The infamous Bank of England gold sales, where the gold went to the LOWEST bidder, not the highest bidder: ".... Applicants whose bids are accepted will be allotted gold at the lowest accepted price."
Refer http://192.168.0.104/~trevor/gata.org/www.bankofengland.co.uk/markets/forex/goldinfmem.pdf [14](page 9, "4. Acceptance of Bids...")
Extraordinary! But wait, there is more:

Refer: http://192.168.0.104/~trevor/gata.org/www.gold-eagle.com/gold_digest_01/hamilton031601.html [15]

#6. After years of denials, Barrick Gold admit that they and their banker J P Morgan are involved in manipulation of the gold price, and/or they are agents of central banks. A US court judge has thrown out their dismissal appeals.
http://groups.yahoo.com/group/gata/message/1538 [16] http://groups.yahoo.com/group/gata/message/1653 [17]
Barrick then announce cessation of hedging, after extolling its virtues 1 day earlier. Many say it's due to Barrick going $16m more in debt for every $1 rise in gold price. http://groups.yahoo.com/group/gata/message/1768 [18]

#7: Why won't World Gold Council (WGC) answer letters/emails worldwide regarding Manipulation? The 2 biggest contributing gold producers to WGC are Barrick Gold and AngloGold. These 2 companies are disliked in the gold industry, because they are the biggest hedgers, and therefore provide much gold to the gold price manipulation scam. For Barrick, refer Proof #6. For AngloGold, why is Frank Arisman on the board of AngloGold when he is also an officer of JP Morgan? There has been an explosive growth in gold derivatives on Morgan's books in recent years, which has driven the gold price down. Clearly there is a huge conflict of interest there.

#8: Royal Bank of Canada admits there is gold price manipulation, then oddly 2 days later said it was a secret:
http://groups.yahoo.com/group/gata/message/1149 [19]http://groups.yahoo.com/group/gata/message/1153 [20]

#9. One heavy hedger Sons of Gwalia, Australia, has major financial problems. Refer:
http://groups.yahoo.com/group/gata/message/1439 [21]http://groups.yahoo.com/group/gata/message/1225 [22]

#10: For more proof in somewhat more detail refer: http://groups.yahoo.com/group/gata/message/955 [23]
http://groups.yahoo.com/group/gata/message/955 [24] http://www.gata.org/essays.html [25]

#11. IMF has directed CB's not to disclose how gold is leased/swapped, only total reserves (proof below).
IMF have denied this, "This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets." Refer http://www.gata.org/bofi.html [26] (search "correct").

However, numerous member countries/entities have proven the IMF has lied ie

The German Bundesbank (the secret "swapper" of gold with US) lists "Gold and Gold Receivables (loans)" as a one line item on its balance sheet. This approach is in direct conflict with Generally Accepted Accounting Principles (GAAP), and thus German banking law. So, from their published financial statements there is no way to determine how much gold Germany holds in its vaults. The refusal of the Bundesbank to provide a breakdown between physical gold and gold receivables belies any notion of market transparency.
Clearly deceptive accounting, countenanced by the IMF has allowed official sector gold to hit the market without a corresponding drawdown on the balance sheets of central banks. This has made it impossible for analysts to ascertain the exact size of official sector gold loans, swaps and deposits. The unwillingness of central banks to provide even a minimum level of transparency suggests that total gold receivables are substantially larger than the accepted industry figure of ~5,000 tonnes. Refer http://groups.yahoo.com/group/gata/message/903 [30]

4. OPPORTUNITY:
Futures: Daily, ESF tries to drop gold price with as little metal as possible, ie during paper-dominated New York trading hours, after physical-dominated London trading hours. http://192.168.0.104/~trevor/gata.org/www.fgmr.com/manipulate.htm [31] (search "London")
Leasing: This is ESF's Achilles' Heel because physical gold is continually required and it is running out quickly. When it does run out, some analysts say it will also trigger the end of the Futures scam eg "The prices for the futures will wildly escalate in rapid fashion until bankruptcy (or bailout by government) of all who are short."

5. TRACK RECORD:
The US government has a poor track record when it comes to honesty and transparency. More recently:

Refer: http://192.168.0.104/~trevor/gata.org/www.independent-media.tv/item.cfm?fmedia_id=979&fcategory_desc=Under%20Reported [35]
• For more examples, refer http://192.168.0.104/~trevor/gata.org/www.gold-eagle.com/gold_digest_03/taylor110103.html [37]

6. IMPACT:

• English citizens should be outraged that their gold was blatantly sold for as low as price as possible.

By Sid Reynolds, sidr@optusnet.com.au [38]. Feel free to distribute this concise 3-page Word Document to anyone!
Disclaimer: I am not a gold guru. I rely entirely on statements by experts. I have merely pooled them together.


Source URL:
http://gata.org/node/4246