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No, gold market manipulation didn't end in 2008

Section: Daily Dispatches

5:11p ET Tuesday, November 28, 2023

Dear Friend of GATA and Gold:

Gold advocate John Rubino writes this month that the gold market used to be manipulated by Wall Street traders "spoofing" the futures market, by commercial fabricators trying to trick hedge funds and other speculators in the futures market, and by Western central banks lending gold to bullion banks so they would sell it into the market to depress the price and thereby defend government currencies against competition from the monetary metal.

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Only the latter manipulation has long-term impact, Rubino writes, and it ended in 2008 when other central banks turned from net sellers of gold to net buyers. If there is any manipulation left in the gold market, Rubino contends, it is now manipulation up:

Rubino's assertions leave much room for argument.

First, while particular "spoof" trades indeed may have impact for only a day or two, repeated "spoof" trades over a long period may largely set the entire tone of a market, demoralizing traders on the wrong side of the "spoofs." The U.S. Justice Department would not have managed to fine JPMorganChase $920 million in 2020 for "spoofing" the gold and silver futures markets if that "spoofing" had only momentary impact.

The same with any trickery attempted by commercial fabricators in the gold market. One day's trickery may work only for that day or the next, but the trickery of day after day for six months well might work much longer.

Second, while gold does seem to have regained adherents in central banking during the last decade and a half, even central banks may prefer to buy low and sell high. If, as suggested by some observers, like the U.S. economists Paul Brodsky and Lee Quaintance, for some years now central bank policy has been to acquire and redistribute gold among themselves in anticipation of devaluation of government currencies and debt and upward revaluation of the monetary metal --

-- central banks wouldn't want to overpay. They would want to control the timing of the revaluation, not share it with mere citizens of Planet Earth, and central banks often justify themselves as being necessary to maintain order in the foreign exchange markets, where gold can be a most inconvenient participant.

Since there is no comprehensive public record of all central bank trades in the gold market in recent decades, Rubino's conclusion that market manipulation by the official sector ended in 2008 is just speculation.

What is fact is that surreptitious intervention in the gold market by central banks has continued from 2008 to the present day, as documented by GATA consultant Robert Lambourne's calculation of the monthly volumes of gold swaps undertaken by the Bank for International Settlements, the central bank of all the major central banks and their gold broker.

Using the monthly statements of account from the BIS, Lambourne has shown that while the BIS' gold swaps have trended largely down since 2020, reaching zero in December 2022, since then they have trended up again. The monthly levels of swaps are charted on the fourth page of the PDF illustration here:

Insofar as it is generally acknowledged that "paper gold," unbacked gold derivatives being traded in the gold market, vastly outweighs the actual metal available in the market by as much as 100 to 1, the likelihood of a downward manipulation in gold would seem far greater than the likelihood of an upward manipulation.

So how does the gradually rising gold price of the last quarter century square with the price suppression policy of Western central banks? It's really not so hard to understand. With a paper-to-real ratio of 92 to 1, a huge naked short position in the market, gold probably would have risen much faster if central banks were not striving to restrain it.

The economist, author, and Defense Department adviser James G. Rickards has explained it many times. He says Western central banks don't mind a rising gold price so much; they just don't want gold to rise so fast that it attracts much notice and starts making problems for their own currencies.

That's why the biggest offense in central bank policy here isn't gold price suppression but the general destruction of free markets and the cheating of market participants.

Yes, GATA's purpose has been to press the issue of gold price suppression until markets are free and transparent. But we wouldn't mind winning that struggle and turning to easier work -- like proving the existence of UFOs, Bigfoot, or the Loch Ness Monster. Then our adversaries would be weaker and we'd get far more notice and respect from mainstream news organizations.

But even if UFOs, Bigfoot, and the Loch Ness Monster were proven to be as real as gold market manipulation, what difference would it make if the world remained subject to the tyranny of modern central banking?

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

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