Is gold price manipulation becoming a respectable topic?

1:30a ET Saturday, July 10, 2010

Dear Friend of GATA and Gold:

If Friday's edition of The Gartman Letter, perhaps the leading daily commodity market letter, is any indication, either GATA is getting respectable or, perhaps more likely, central banking is quickly losing what remains of its respect.

Of course for years The Gartman Letter's editor, Dennis Gartman, has been sneering at GATA particularly and gold bugs generally. But Friday he wrote that "every once in a while the folks at GATA do make some sense" and he proceeded to quote at length from a recent GATA Dispatch. (See http://www.gata.org/node/8795.)

... Dispatch continues below ...

"Gold is a bit weaker, but in U.S. dollar terms remains at or near $1,200/oz. Much is still being made of the announcement of the Bank for International Settlements' 'swap' of gold for cash reported earlier this week, with the conspiratorialists having a field day. But every once in a while the folks at GATA do make some sense, and their insights into what has gone on in this instance are worth our time.

"GATA's Chris Powell reports that while 'news reports describe the BIS gold swaps as a means for central banks to 'raise cash,' central banks are able to create money out of nothing; they don't have to sell or lend anything to create money, or at least not to create their own money. They might have to sell or lend something to obtain the currency of some other nation.

"'For example, other nations might have to sell or lend gold to obtain U.S. dollars. But the U.S. Federal Reserve lately has made all sorts of currency swap arrangements with other central banks so that they all can have plenty of dollars to use for market intervention. Other central banks have been able to obtain plenty of dollars just by creating more of their own currency and exchanging it with the Fed. In effect all the major Western central banks now are able to create dollars at will.

"'So why did any central bank have to lend or pawn its gold to get dollars? Was there some agreement among central banks, or some insistence by the United States, that more gold had to be put into the market to defend currencies, government bonds, and low interest rates, to augment the quiet gold sales recently undertaken in London every month by the International Monetary Fund? The IMF too is supposedly selling gold to 'raise cash,' even as it is part of the central banking system that can 'raise cash' just by creating it.

"'Have the Western central banks more or less re-established the price-suppressing London Gold Pool of the 1960s, only this time surreptitiously? Given the BIS' traditional interest in 'the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful,' the BIS-arranged gold swaps must be suspected as part of a scheme to manipulate the gold market. In any case why is the mystery, the lack of official explanation of these transactions, accepted as the natural order of things?"

Over at GATA Chairman Bill Murphy's proprietary Internet site of market commentary, LeMetropoleCafe.com, a daily gold market analyst remarks of Gartman's favorable reference to GATA: "While this is a graceful concession in what has not always been an amiable controversy, this development is important analytically. The Gartman Letter evidently feels that it is no longer dangerous among its substantial institutional following to comment sympathetically on the gold price manipulation concept."

So if gold price suppression now can be discussed seriously at The Gartman Letter and respectable financial institutions, maybe its end is nigh and GATA can prepare to move on to other challenges, like proving the existence of UFOs or the Abominable Snowman. The latter is frequently sighted over at Kitco.

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

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