Uproar over RBC gold conspiracy report; Globe & Mail comments about it

Section:

12:58a ET Tuesday, June 25, 2002

Dear Friend of GATA and Gold:

The lead story at TheMiningWeb.com is
headlined, "Uproar over RBC gold conspiracy
report." The summary on TheMiningWeb.com's
home page says: "Royal Bank of Canada has
repudiated a report issued under its name
that repeated claims of a conspiracy to
suppress the price of gold. Knives are out
for GATA boss Bill Murphy, with opponents
dredging up old futures trading violations
against him."

You can find the story here:

http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B285256BE20077EF
48?OpenDocument

Or if that link is too long for you, just go
to the home page:

http://www.theminingweb.com/

Meanwhile, the Toronto Globe & Mail has new
commentary on the controversy, which was
posted on the newspaper's Internet site
Monday afternoon and well may appear in its
print edition today. I'll append that text.

Some of us are a little puzzled by all the
fuss. If, as Royal Bank says, the bank's gold
conspiracy report is no more than a
memorandum for internal use signifying only
the views of one bank employee, practically
meaningless; if, as the Globe & Mail's
commentary speculates, GATA is just a bunch
of conspiracy nut cases cast off from "The X-
Files"; and if the gold market is actually
entirely normal ... why should anyone be
upset at all?

Why? Probably because as GATA's contentions
seep into the mainstream press around the
world, there is growing danger that an
enterprising journalist or two will pose a
few inconvenient questions to government
officials, and one thing will lead to
another, and before you know it, a free
market in gold might break out somewhere.

The funny -- and, so far, tragic -- thing
is that the conspiracy GATA has been talking
about is quite an open one, a matter of
public policy and public record.

The European central banks gathered in
Washington and announced their plans to
regulate the gold price by regulating their
own gold leasing.

Fed Chairman Alan Greenspan testified to two
congressional committees about this central
bank regulation of the gold price. Greenspan
said: "Central banks stand ready to lease gold
in increasing quantities should the price
rise."

And GATA has issued dozens of reports,
archived on the Internet, compiling the hard
evidence of collusion against the gold price.

The question is not at all whether there is
a conspiracy to control the gold price; the
only questions are just how far this
conspiracy extends, exactly which mechanisms
are used to implement it, and the propriety
of all it.

Of course it is more difficult, and dangerous,
to address these questions than to call GATA a
bunch of "conspiracy nuts."

No matter. Our skins are thicker than that,
and now the leading mutual fund manager in
Canada, whose fund's performance lately is
the envy of the investment world, has
proclaimed himself a fellow nut case.

Welcome to Chumley's Rest, Mr. Embry. Allow
me to introduce you to a very dear friend of
mine. No, not the big rabbit -- Bill Murphy!

As they say in the reruns, "The truth is out
there." GATA promises new episodes soon.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

A gold-plated conspiracy theory

By Mathew Ingram
Toronto Globe & Mail
Online Edition, Posted at 4:52 PM EST
Monday, June 24, 2002
http://theglobeandmail.com

Imagine the excitement last week at the
headquarters of GATA -- the Gold Anti-Trust
Action Committee -- when noted Royal Bank
mutual fund manager John Embry issued a
report referring to a price-manipulation
conspiracy in the global gold market. For
GATA, which has been preaching that message
for years now, it was probably a bit like the
U.S. government admitting that yes, there was
a top-level CIA plot to assassinate former
President John F. Kennedy, and the whole
lone-gunman theory was just a crock.

Gold conspiracy theorists might not like
being compared with the Kennedy crowd -- which
is so synonymous with loopy theories that a
group of geeky true believers on "The X-Files"
were known as "the lone gunmen" -- but GATA is
seen in a similar light by traditional gold
watchers. The Embry report is "tremendous
credibility," GATA chairman Bill Murphy said.
"Most of the gold world thought we were
idiots. It turns out we're right."

The Royal Bank seemed less than impressed at
being allied with the gold conspiracy camp,
however. Mark Arthur, head of Royal Bank
Investment Management, said Mr. Embry's
report was done for internal use and "in no
way reflects the views of Royal Bank." He
described it as "a collection of various
arguments for gold stocks" that was part of a
larger discussion. But it was clear that GATA
members saw it as an endorsement by RBC.

Mr. Embry is not a crank -- he is one of
Canada's leading fund managers. In his
report, he lists several reasons why gold
prices could rise, including "increasing
evidence of unsustainable gold price
manipulation." He refers to gold sales by New
York's Federal Reserve Bank, the timing of
gains in the government's Exchange
Stabilization Fund, and a statistical
analysis that shows "high probability of
price suppression."

As jubilant members pointed out in e-mails,
the report was a vote of confidence in the
group, which makes many of the same points.
For the past few years, Dallas-based GATA has
been engaged in a crusade of sorts to prove
that various central banks and the world's
major gold traders -- or "bullion banks" --
have been manipulating the price of gold in
order to keep it low. Bullion banks lend to
short-sellers (who profit if the price falls)
and also engage in hedging trades with
various gold producers.

GATA launched a lawsuit last year against the
Bank of International Settlements -- the
central bank of central banks -- as well as
Fed chairman Alan Greenspan and a number of
commercial banks, alleging that they engaged
in a conspiracy to manipulate gold prices.
Why would a global conspiracy want to keep
the gold price low? A couple of reasons, GATA
says. For one thing, banks such as J.P.
Morgan and Goldman Sachs make a nice return
lending their gold and investing the proceeds
in other financial instruments, and they
generate better returns if the price of gold
is low.

GATA also says the U.S. and other governments
are concerned that the world's banks have
sold so much gold in the past that a run on
bullion could trigger a global financial
meltdown. According to the group, world gold
demand exceeds supply by 1,500 tonnes, and if
there were no price manipulation, bullion
would be $800 (U.S.) an ounce instead of
$350. GATA also says the "notional value" of
the gold contracts held by U.S. banks is $87
billion, or greater than that country's
entire gold reserves of 8,140 tonnes. The
World Gold Council, of course, disputes most
of these figures.

The driving force behind GATA is Chairman
William J. Murphy III -- a former wide
receiver for the Boston Patriots football
team who later became a futures trader. Other
executives with the group include Chris
Powell, managing editor of a daily newspaper
in Connecticut, and Reginald Howe, a graduate
of Harvard Law School who runs a private
investment fund. Proponents of its price-
manipulation theories have included such
market luminaries as John Willson, the former
CEO of major gold producer Placer Dome.

Part of what makes GATA's arguments
attractive is that the gold market is
notoriously shadowy and complex -- even more
so than other commodities. Fans of the price-
manipulation theory like to point out that
the U.S. Treasury and various central banks
were involved in price-rigging in the late
1960s through the London Gold Pool. After the
rigging program ended, the price of gold soon
soared to a high of $800 an ounce.

So if there's a global effort to manipulate
the price of gold in order to keep it low,
why has gold been climbing higher for the
past few months? Simple, the conspiracy
theorists say: the plot is finally coming
apart at the seams, and as it unravels it
will push the gold price even higher. The
only problem with this argument, as more than
one observer has noted, is that it relies on
the logical fallacy of circular reasoning, in
which a lack of evidence is seen as further
proof of a vast conspiracy -- since a
conspiracy would naturally suppress any
evidence of its existence.

How come FBI special agents Mulder and Scully
never got into this one while the X-Files was
still on?

----------------------------

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----------------------------

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