Mark Leibovit: Is gold manipulated?

11a PT Sunday, June 6, 2010

Dear Friend of GATA and Gold:

Market analyst Mark Leibovit's has followed GATA's work closely for some time and his VR Gold Letter for June 7 cites it extensively. Leibovit's comments on GATA are appended. His letter has been repeatedly cited for excellence by Timer Digest. You can find information about subscribing to it here:

http://vrgoldletter.com/GoldLetter/Index.html

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

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Is Gold Manipulated?

By Mark Leibovit
VR Gold Letter
June 7, 2010

http://vrgoldletter.com

Bill Murphy of the Gold Anti-Trust Action Committee (GATA) is a leading advocate that there is government intervention in the gold and silver market. For years GATA has thought that trading in the gold market has been unnatural, that the powers that be (Wall Street banks and central banks) were keeping the price of gold down. Many point to the Bank of England's sale in 1999 right at the bottom of the gold market as an attempt to suppress the gold price.

Though it is possible that central banks sold gold in the late 1990s not to suppress it but because they are stupid, there is still other evidence to deal with. Governments don't like it when gold goes up in price. Gold is a reflection of anxiety and fear in the economy and stock market.

Just look at where we are today. Ten years ago the Nasdaq was at 5,000 and the economy was booming. We had a surplus, unemployment was under 5 percent, and the euro was trading below par to the dollar. Gold was below $300 an ounce.

Now the Nasdaq is half of what it was 10 years before, we have a $1.5 trillion U.S. deficit, unemployment is pushing 10 percent, and the euro -- despite its short-term weakness -- is trading at 1.19 and dropping. The result: Gold trades at $1,200 an ounce.

The reason that governments don't like it is that gold is a reflection of weakness in the system. When gold is going up, people think something is going wrong, and if something is going wrong it means governments don't have control. Governments thrive on control.

So do governments want gold to go down? Probably.

The big news recently was that Andrew Maguire, a 40-year veteran of the trading pits in London, came out and said that the governments were setting prices. According to the New York Post, he stated that "there is no silver lining to the activities of JPMorgan Chase and HSBC in the precious metals market here and in London. The banks, which do the Federal Reserve's bidding in the metals markets, have long been the government's lead actors in keeping down the prices of gold and silver."

Maguire was scheduled to testify before the Commodity Futures Trading Commission, which is looking into the activities of large banks in the metals market, but he was knocked off the list at the last moment. So he went public.

Maguire later told the newspaper how the banks can generate a profit either way the market moves: "JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the U.S. dollar. JPMorgan is insulated from potential losses (on their short positions) by the Fed and/or the U.S. taxpayer."

In the gold pits, Maguire sees HSBC betting against the precious metal's price without having any skin in the game in the form of a naked short. "HSBC conducts an ongoing manipulative concentrated naked short position in gold. Silver is much easier to manipulate due to its much smaller (market) size," Maguire told the Post.

Now those are some really strong words, especially coming from a trader in the pits. But I do not think it changes anything. If governments continue to print money, spend money, and run record deficits, gold will go higher no matter what type of manipulation governments might attempt.

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