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A citizen confronts the U.S. Treasury Department on behalf of gold

Section: Daily Dispatches

By Gillian O'Connor
Financial Times
Monday, May 7, 2001

The London Business School has debunked the popular myth of an
international conspiracy to suppress the price of gold.

Fans of gold, notably the US-based Gold Anti-Trust Action Committee
(GATA), believe that at least part of the once-precious metal's price
weakness can be attributed to a conspiracy between the Bank for
International Settlements, top officials at the US Treasury
Department, the Federal Reserve Bank, and five investment houses.

In December 2000, GATA backed a lawsuit filed in Boston accusing the
BIS and its alleged co-conspirators of co-ordinating quot;the sale and
leasing of gold and the sale of gold derivatives to keep the price of
gold low and thereby disguise inflation weakness in the US dollar, as
well as prevent losses on gold short positions held by certain
banks.quot; Alan Greenspan, chairman of the Federal Reserve, was among
those accused.

The World Gold Council, a lobby group founded and funded by some of
the big gold miners, has sponsored a two-part study into the gold
derivatives market.

In the second part of this study, Anthony Neuberger, Associate
Professor of Finance at the London Business School, concludes that
the likely impact of derivatives on the price of gold is quot;much too
small to explain all the real decline in the gold price seen over the
last decadequot;.

The aggregate value of banks' gold derivative contracts is several
times larger than the quantity of gold lent by central banks to the

Conspiracy theorists have cited this as evidence of massive
speculative activity in the market.

But Professor Neuberger pointed out that this multiplier effect is
typical of derivative markets.

He added that he had found no evidence of the US government wanting
to bail out US banks, nor any sign that the banks' positions were
large enough to cause problems.