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Investigation of Gold Price Manipulation Launched by GATA; Berger & Montague Retained as Counsel
RYE, N.H., April 20 /PRNewswire/ -- Noted antitrust and securities law firm specialist, Berger & Montague of Philadelphia, has been retained by the Gold Anti-Trust Action Committee (GATA) in order to assist in its investigation into the alleged manipulation of the gold market. The law firm is best known for its successes in recovering billions of dollars in damages in the Drexel Burnham/Michael Milken junk bond case, The Exxon Valdez case, and recent tobacco and Holocaust cases, and many others.
Bill Murphy, GATA Chairman stated that the organization now has evidence that the price and supply of gold are being controlled by a cartel of Wall Street investment houses and bullion banks with the possible encouragement of the Federal Reserve and the U.S. Treasury. ``This collusion,'' said Murphy, violates anti-trust laws and exposes the perpetrators to triple damages. ``It has been devastating to the entire gold community.''
The major federal antitrust laws are the Sherman and Clayton Acts, but there are others, and many other states have their own such anti-trust laws. Whenever two or more parties cooperate in limiting prices or supplies of a product or service, the free market is defeated and antitrust law may be broken.
``For the first time, the gold industry is speaking out on the record and in specifics regarding what they have suspected for years,'' said Murphy. He cited Friday's published report quoting Chris Thompson, Chairman of South African-based Gold Fields Limited, one the largest producers of gold in the world. Thompson accused ``New York-based bullion dealers'' of spreading unfounded and persistent rumors about its forward sales program in order to ``talk the gold price down.''
Speaking here today, Murphy stated, ``In some cases the gold market manipulators are quite open about their activities, though most are conducted in secret. They don't think that the law applies to them, or that anyone would be so bold as to try to hold them accountable under the law.'' Murphy went on to say, ``We believe one of the reasons that various financial institutions are acting in concerted action to hold down the gold price is that they are now short hundreds of tons of borrowed gold and that the speculative community in toto is short 3,000 tons, or more.''
Yearly worldwide gold mine supply in 1998 was only 2,529 tons. Essentially, many of these institutions are borrowing gold at 1-percent interest, selling the gold into the market, and using the proceeds to invest elsewhere. This ``gold carry trade'' is similar to the ``yen carry trade'' that caused such problems internationally last year.``
Such gold loans are cheap only if the price of gold holds steady or declines. Even a modest rise in the price of gold would make such a loan terribly costly, as principal repayment would become onerous. The evidence GATA has compiled suggests that gold loans have become so large that an international ``systemic risk'' problem has now been created.
For if the price of gold rose unexpectedly even to a moderate degree, many gold borrowers would not be able to find enough gold quickly enough without driving the price into the stratosphere. That is one of the reasons that we believe certain financial entities have been manipulating the market in collusive fashion to make sure the gold price does not rise sharply above $300.
The antitrust lawsuit GATA plans is now in the investigative and research stage, and GATA is seeking help from the gold community: financial contributions in support of the lawsuit; potential plaintiffs for the lawsuit; and potential witnesses willing to provide information confidentially about gold market manipulation.
GATA also hopes gold company shareholders all over the world will contribute and support its efforts. Chairman Bill Murphy stated: ``The supply demand numbers tell us that if the excessive gold borrowings were just normalized the equilibrium price of gold today would be between $400 and $500.''
GATA is incorporated in Delaware and has applied for tax-exempt status under the U.S. Internal Revenue Code. The organization is actively involved in alerting members of Congress to this situation including offering its views on the proposed IMF gold sales.
GATA has already scheduled meetings in Washington with Jim Saxton, Chairman of the Joint Economic Committees, among others. Contributions to GATA may be sent in care of John D. Meyer, Treasurer, at Box 885 Great Barrington, MA. 01230.