Bob Moriarty: Manipulation? Or simply deleveraging?

11:25p ET Sunday, September 7, 2008

Dear Friend of GATA and Gold:

Bob Moriarty, president of 321Gold.com, asserts in commentary posted tonight -- "Manipulation? Or Simply Deleveraging?" -- that there is no manipulation in the gold market, even as he adds that all markets are manipulated and that any manipulation in the gold market is "no big deal." He seems to mean that at least the recent plunge in the gold price was accomplished without market manipulation, that it resulted entirely from the failure of a hedge fund overleveraged in "anti-dollar" positions, and that market manipulations generally are "meaningless."

Could manipulation and hedge fund overleveraging both figure in gold's decline? Could central banks want to intervene in markets enough to trip up those who are betting against their currencies and bonds?

Seemingly all-knowing, Moriarty rejects the possibility, even as it is getting harder to find many other market observers who would not admit the long historical record of currency intervention by central banks. But then some people are so wrapped up in their own models and ideologies that they could not acknowledge extraneous influences in the gold market if, say, former Federal Reserve Chairman Alan Greenspan confessed to one. And of course Greenspan did:

http://www.gata.org/node/6242

Maybe the heart of Moriarty's misapprehension is his belief that "all shorts have to be covered." He writes: "If the Fed is short 10 trillion contracts of gold, you should get on your knees and thank Bernanke. Because if they shorted 10 trillion contracts, they have to cover 10 trillion contracts and that's going to drive the price of gold from here to Jupiter."

But all shorts in gold do not have to be covered, or, so far, have not had to be covered, on account of the massive dishoarding of central bank gold reserves, through leases and outright sales, over the last 20 years or so, dishoarding that also is a matter of public record, as with the Washington Agreement of the Western European central banks:

http://www.reserveasset.gold.org/central_bank_agreements/cbga1/

That is, what if the central banks, with their dishoarding, their sales and leasing, have been enabling the vast shorting of gold and don't want their gold back, lest short-covering in gold weaken central bank currencies and government bonds? Is that not at least the implication of the steady decline in Western central bank gold reserves?

Of course Moriarty is not alone in refusing to acknowledge evidence that gets in the way of his model and ideology. But to assert that market manipulations are "meaningless" just hours after the announcement of the biggest market manipulation in history, the U.S. government's seizure of the Fannie Mae and Freddie Mac mortgage agencies, an operation acknowledged -- no, proclaimed -- by the government as a market manipulation. ... Well, maybe it is enough to say that Moriarty has taken devotion to one's model and ideology to a new level.

Nevertheless, gold's friends will enjoy Moriarty's market call. He predicts that gold and silver "are going to rocket. Right now, this month." May this go from Moriarty's keyboard to the Great Market Manipulator's ear.

You can find Moriarty's commentary at 321Gold here:

http://www.321gold.com/editorials/moriarty/moriarty090708.html

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

* * *

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at http://www.gata.org/.