Commodities | Jan 30 2008
By Greg Peel
The Gold Antitrust Action Committee (GATA) is an organisation which has been nipping at the heels of the US Treasury Federal Reserve for several years now. The basis of GATA’s accusations is that these institutions, in coordination with other complicit central banks and the large gold-trading investment banks in the US, have been manipulating the price of gold for decades. Were it not for this manipulation, the gold price would now likely be in the thousands of US dollars, GATA suggests.
The means of manipulation have largely revolved around the gold leasing and gold derivatives markets. GATA believes the US Treasury has been able to effectively sell gold under the radar of the limited disclosure rules of the International Monetary Fund – global bookkeeper of central bank gold transactions – for the purpose of artificially supporting the value of the US dollar. The upshot is that while the IMF, and the world, is led to believe global central bank gold reserves total some 30,000 tons, the reality is more like 15,000 tons. Today’s gold price is a reflection of the former figure.
For a more extensive summary of GATA’s accusations, refer to “The How and Why of Gold Price Manipulation” (Sell&Buyology; 06/08/06).
Since 2001, GATA has been quietly growing a groundswell of support across the globe. The growth of its support has been accelerating in recent times, and even the IMF has been forced to address some of its shortcomings as a result. Since the credit crunch hit, gold has run to new highs. This can be attributed to the Fed’s massive liquidity injections and interest rate cuts which have undermined the value of the US dollar, but GATA would further suggest the US authorities have been unable to also continue suppressing the gold price as a result. There’s only so many greenbacks they can print. As gold has soared, so has global interest in what GATA has to say.
Hence GATA has now felt confident enough to spend US$264,000 to place a full page advertisement in the national edition of the Wall Street Journal, headed “Anybody Seen Our Gold?”. The ad will be published on Thursday of this week, January 31. To date, the respected financial press has refused to give any credence to GATA’s claims, nor thus any coverage.
“We have had two major international conferences since 2001,” noted GATA chairman William J. Murphy III when speaking to WorldNetDaily.com’s Jerome Corsi, “[but the] mainstream financial press has blackballed our story”.
“The purpose of this ad is to wake people up in the investment world as to what is going on behind the scenes in the US gold and financial markets,” Murphy explained.
Jason Hommel, of the Silver Stock Report, suggests the Wall Street Journal ad will have to be “answered” by the gold establishment Wall Street banks.
Murphy claims it is not possible to trace back central bank gold transactions, nor the degree to which the US Treasury and the Fed are involved, given the lack of public accountability and transparency built into the gold derivatives financial system worldwide. GATA has filed a Freedom of Information Act request in order to be allowed to further scrutinise the unqualified announcement made by the Bank of International Settlements that the global gold derivatives market hit a peak of US$640 billion in December 2006. There is a statement on the US Treasury’s website claiming the agency’s Exchange Stabilization Fund has not been used to manipulate gold prices, but there is no statement denying that the agency engages in gold swaps, leases and futures contracts for reasons other than to do exactly that.
Under the IMF rules, central banks do not have to disclose how much of their gold reserves are encumbered by derivatives contracts, including leases and swaps, Corsi explains. GATA claims the US authorities conduct their transactions via undisclosed lease or swap deals with the US members of the London Bullion Market Association, which include Bear Stearns, Goldman Sachs, JP Morgan Chase, Bank of America, Merrill Lynch and Morgan Stanley.
In any day-to-day gold derivative transaction, any leases, swaps or futures would need to be delivered on with physical gold. If the party with the delivery obligation has no gold, it would need to buy it in the spot market. That is of course unless that party had access to freshly printed cash. If the gold were purchased the gold price would move to reflect such demand, and in turn undermine the US dollar. Thus the accusation is that central banks have been able to manipulate the gold price via their agents by selling, but never actually buying back, physical gold. And that is what has diminished actual global gold reserves below the level suggested by the IMF.
“Gold’s recent rise toward [US]$900 per ounce shows that the price suppression scheme is faltering,” GATA claims (WorldNetDaily). “When it is widely understood how central banks have been suppressing gold, its price may rise to [US]$3,000 or [US]$5,000 an ounce or more”.
Jason Hommel is suggesting the gold price is set for at least a couple of US$25 jumps in the days following the Wall Street Journal advertisement. But then he suggests the world will forever refer to the that day as the beginning of the “GATA Rally” in gold. He notes gold launched a “parabolic” rally from US$430/oz to US$720/oz immediately following the GATA conference of 2005, which one hundred people attended.
One of those attendees was Hommel, who there met one Andrey Bykov, economic advisor to Vladimir Putin. Following the conference, Russia, for one, began buying gold.
