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.
- US Government: To artificially keep interest rates down by deceiving the bond markets about inflation, and thus the gold price. In short, lower gold price = lower inflation = higher stock market = higher reelection chances.
- US Government: To artificially strengthen the US dollar relative to other currencies. Clinton's "Strong Dollar Policy" was suppression of gold price. In short, lower gold price = higher US dollar = higher stock market.
- Some Bullion Banks: To provide cheap source of capital to earn huge income, providing gold price is kept low.
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
In previous work I drew attention to the link between the rapid growth of interest rate derivatives [IRDs] at Chase and Morgan subsequent to an unprecedented gold market preemptive selling episode in 1996. This report will further explore the likely interventional reasons behind this extreme interest rate derivatives growth. In addition, an important 1998 Federal Reserve consultant's publications that describe exact methodology needed to enforce the government's long-term interest rate policies are reviewed. Also the report shows preliminary evidence that since Summer 2003 the long interest rates appear to be under the controlling influence of those Federal Reserve policies. Finally, issues threatening the gold and interest rate interventional operations of the Federal Reserve are briefly discussed.
Investment Indicators from Peter George
Wednesday, December 3rd, 2003
Archimedes was a famous mathematician whose theorems and philosophies became world-known. In his own time he gained a reputation few other mathematicians of this period achieved. He is considered by most historians of mathematics as one of the greatest mathematicians of all time. He discovered pi.
© 2003 by The Freemarket Gold & Money Report.
One of the statistics complied by the International Monetary Fund is the quantity of gold owned by the world's central banks. That weight is reported to be 32,291 tonnes of gold. Most people accept this number at face value and without questioning its accuracy. However, central banks actually own less gold.
In reality central banks own 32,291 tonnes of gold AND gold receivables. This distinction is important. From both a legal and an accounting point of view, gold in the vault is clearly very different from gold owed to you. The reason is that gold in the vault is much less risky than someone's promise to pay you gold.
America is earth's Eldorado. She came to be such because of ambitious men and women of drive and ability that knew no such word as fail, visionaries who were willing to gamble precious years of their lives today on a dream for tomorrow.
Throughout my life, I have encountered many of these men and women in America. They are always salient standouts from the bland establishment crowd, whether their field of endeavor is academics, business, the arts, law, or science. They think for themselves. They make truth their authority, while others make authority their truth. In their eyes, life is not meant for comfort and security. It is a crucible. It is meant for the pursuit of something noble, something enduring. Truth and its exposition are the goals that transcend all else. At the risk of simplification, this is what drives all change and progress throughout history -- this drive for the truth. It moves the entrepreneurs, the rebels, the contrarians of humankind.
[Note: Presentation on Thursday, May 23, 2002, to a seminar at the Grocers Hall, London, organized by the Association of Mining Analysts and sponsored by Durban Roodepoort Deep on Prospects for Gold - A new era or more toil ahead?]
As indicated on the program, your chairman, Michael Coulson, has asked me to address: "The gold anti-trust action - the Boston court judgement and the road ahead." While I will speak to the assigned topic, my own title for this talk is Money in Court: Paving the Road to Ruin, and I will speak from the perspective of the American Constitution.
An Examination of Evidence Indicating Exchange Stabilization and Federal Reserve Gold Market Activity - Andrew HepburnSubmitted by Administrator on Tue, 2002-10-29 08:00. Section: Essays
The Gold Anti-Trust Action Committee (GATA) believes that the Exchange Stabilization Fund, under the authority of the President and Treasury Secretary has been used to surreptitiously manipulate the price of gold. The following report is an examination of pertinent evidence against the ESF, as well as information implicating the Federal Reserve in a scheme to artificially depress bullion prices. Accounting regulations devised by the International Monetary Fund are also scrutinized. The report draws mainly from government documents, previous GATA commentaries and other publicly available material. The only reasonable conclusion is that U.S. government denials of gold market activity are false.
Gold Derivatives, Gold Lending, Official Management Of The Gold Price And The Current State of the Gold Market by Frank VenerosoSubmitted by Administrator on Fri, 2002-05-17 07:00. Section: Essays
Fifth International Gold Symposium
May 17th, 2002
Gold Lending And Official Management Of The Gold Price
Let's begin with an explanation of gold banking and gold derivatives.
It is a simple, simple idea. Central banks have bars of gold in a vault. It's their own vault, it's the Bank of England's vault, it's the New York Fed's vault. It costs them money for insurance - it costs them money for storage--- and gold doesn't pay any interest. They earn interest on their bills of sovereigns, like US Treasury Bills. They would like to have a return as well on their barren gold, so they take the bars out of the vault and they lend them to a bullion bank. Now the bullion bank owes the central bank gold---physical gold---and pays interest on this loan of perhaps 1%. What do these bullion bankers do with this gold? Does it sit in their vault and cost them storage and insurance? No, they are not going to pay 1% for a gold loan from a central bank and then have a negative spread of 2% because of additional insurance and storage costs on their physical gold. They are intermediaries---they are in the business of making money on financial intermediation. So they take the physical gold and they sell it spot and get cash for it. They put that cash on deposit or purchase a Treasury Bill. Now they have a financial asset---not a real asset---on the asset side of their balance sheet that pays them interest---6% against that 1% interest cost on the gold loan to the central bank. What happened to that physical gold? Well, that physical gold was Central Bank bars and it went to a refinery and that refinery refined it, upgraded it, and poured it into different kinds of bars like kilo bars that go to jewelry factories who then make jewelry out of it. That jewelry gets sold to individuals. That's where those physical bars have wound up---adorning the women of the world.
We herewith discuss, via the kindness of Bill Murphy (www.lemetropolecafe.com) and in HSL (www.hsletter.com), the unique and weak character of the vehicles used for hedging by the majority of gold producers of 100,000 ounces per annum and up. To review for our new readers, those instruments are briefly:
- Traded in private treaty negotiations.
- Price determined not by market forces but rather by computer simulation.
- Short gold spreads mainly in one form of another.
- Far dated.
- Non transparent
- Without a clearing house function in order to guarantee the financial integrity of the instrument.
- Traded with in most cases between the gold producer and their gold bank which is usually a non guaranteed as to trade debt subsidiary of a major investment bank or commercial bank holding company.
- The Gold Banks do not as a rule publish the total nominal value of derivatives issued to all clients to which the bank is guarantor. Therefore there is no way to know the real financial integrity of even a rich gold bank.
- We know of no gold producer. hedger that has a right of offset in their client contracts with their gold bank. This is a critical point that is discussed in the body of this article.
We could write tomes on the technical nature of the construction of these instruments speaking to counter party risk among other weaknesses but that is not the purpose of this communication. Let us say that the brief review above of stand out points suffices to bring you into our conclusions.
We and our friends at GATA believe strongly in free markets. That is a gold market free of all manipulators both quasi-legal and illegal. We believe that a free market is not participated in by governments using extraordinary powers. We feel that governments must comply tightly with industry created referees rules that insure level playing fields for all interests. That being said we cannot oppose the practice of hedging by any commodity producer for whatever purpose that free agent has in the mind. The market, being a great leveler of interests, will work out the merits and the punishments of each entity's decision
Yet we have a great concern for gold itself. There is no question that a 30 billion dollar participation in hedging instruments by the gold producer can only result in a significant if not history making melt down of the hedging vehicles.
Should this melt down occur few participants in the industry will avoid the consequences which are: