http://news.goldseek.com/GoldSeek/1044289345.php

What becomes clear is that mr. Angell didn’t like the rise in the price of Gold at all,

he said :

“this year those who have held gold have said they've got the best deal going as the [value of the] world's gold stock has appreciated $234 billion since our February meeting. We can hold the price of gold very easily;"

“all we have to do is to cause the opportunity cost in terms of interest rates and U.S. Treasury bills to make it unprofitable to own gold.” END.

Did you read it ?

FED official Wayne Angell said :

We can hold the price of Gold very easily. END.

Fear of Inflation had caused Angell to talk about Gold and he recommends to use the interest rate as a means for suppressing the gold price.

Now what happened between the  FED meeting of July 6,7 1993 and the FED meeting on August 17, 1993 nobody knows but Mr. Angell got what he wanted, he said :

“I recognize that the price of gold has come down from $400 to $371 and that really is a factor that parallels the move that took place in the bond market; and that has worked very, very well.". END.

My point of bringing this up is not to prove any kind of manipulation scheme or anything like that, no, the reason for bringing this up is to show that government officials are watching gold like a hawk and that they won’t be amused by a sharp rise in the price of Gold. Period !

Conclusion :

The FED doesn’t like a rising price of Gold and the examples shown above simply proves the point that it’s not an absurd idea at all that official intervention in the gold market could be taken place.

3. GATA : Bunch of nuts ?

I don’t want to waste too much time on this subject, I would say just read the biographies of these gentlemen associated with GATA and judge yourself :

Frank Veneroso :

Frank Veneroso is arguably the foremost mind on gold supply and demand flows. His 1998 Gold Book Annual made the case that the consensus supply and demand view of the gold market established by GFMS Ltd. (formerly Gold Fields Mineral Services) was seriously flawed. Veneroso’s gold market model indicates that central bank loans are far greater than GFMS estimates suggest.

Frank Veneroso is currently head of Veneroso Associates, formerly partner of the hedge fund Omega Advisors where he was responsible for global investment policy formulation. Through his own firm, Mr. Veneroso has been an investment and economic adviser in investment strategy to institutions and governments around the world in the areas of money and banking, financial instability and crisis, privatization, and development and globalization of securities markets. His clients have included the World Bank, the International Finance Corporation, [and] The Organization of American States. He has advised the Governments of Bahrain, Brazil, Chile, Ecuador, Korea, Mexico, Peru, Portugal, Thailand, Venezuela and the United Arab [Emirates]. Frank graduated cum laude from Harvard and has authored many articles on the subjects of international finance. Recently, Mr. Veneroso has been “Market Strategist for the Global Policy Committee of Allianz Dresdner Asset Management and is responsible for alternative asset product development at Dresdner RCM.”

Reginald H. Howe.

In 2000, Mr. Howe filed suit against the Bank for International Settlements, Alan Greenspan, Lawrence Summers (later replaced with Paul O’Neill) five bullion banks, and William McDonough (thenpresident of the Federal Reserve Bank of New York). As it concerns the gold market, Howe alleged horizontal price-fixing by all defendants. In 2002, the presiding judge dismissed the lawsuit on two technicalities. First, he ruled that Howe was not the most appropriate plaintiff to bring a gold antitrust claim. Second, the court found that defendants Greenspan, O’Neill and McDonough enjoyed sovereign immunity protection because the alleged actions would have taken place in their capacity as government officials. Importantly, the lawsuit was not dismissed due to lack of evidence or quality of information presented.

From Mr. Howe’s biography:

Reginald H. Howe, is an author, private investor and member of Golden Sextant Advisors LLC, which provides consulting, management and investment banking services to companies and private investors with an interest in gold. From 1976 to 1984, Mr. Howe was a partner in the Boston law firm of Palmer & Dodge, where he specialized in civil litigation and was a member of the firm's investment committee. He was an associate at the same firm from 1970 to 1976. In 1983, Mr. Howe organized Golden Sextant Associates, a general partnership for investing in developing North American gold mining companies, and he served as its managing general partner until its profitable dissolution in 1987. For a few years thereafter, he continued as a sole legal practitioner and served as a registered investment adviser to private clients. Mr. Howe began his business career in 1964 as a financial analyst with the international division of The Kendall Company. He is a graduate of Harvard College, Harvard Law School and the Bologna (Italy) Center of the Johns Hopkins School for Advanced International Studies. Mr. Howe is being considered to be one of the leading authorities on gold derivatives

James Turk :

James Turk authors the Freemarket Gold and Money Report and is the founder of

GoldMoney.com, a digital payment and gold storage service. He is an authority on the U.S. gold reserve.

From Mr. Turk’s biography:

James Turk has specialized in international banking, finance and investments since graduating in 1969 from George Washington University with a B.A. degree in International Economics. He began his business career with The Chase Manhattan Bank, with whom he worked for eleven years, principally in the International Department, which included assignments in Thailand, Hong Kong and the Philippines. From 1980 to 1983, Mr. Turk was with RTB, Inc., the private investment and trading company of a prominent precious metals trader based in Greenwich, Connecticut. He moved to the Middle East in December 1983 to be appointed Manager of the Commodity Department of the Abu Dhabi Investment Authority. In this position, Mr. Turk was responsible for developing and implementing the investment strategies of that organization's portfolios of precious metals. Mr. Turk held this position until March 1987. Since then Mr. Turk has acted as Chief Executive of Greenfield Associates, a firm he established in 1985 to publish his work and to provide investment research and trading advice, principally to investment managers, hedge funds and commodity trading advisors in the United States and Europe. From 1995 to 1999 he was a Director of Lion Resource Management Ltd. of London, England, a firm which was the sub-advisor to the Midas Fund, a publicly listed mutual fund in the United States that invested in the equities of companies involved in the mining and exploration of precious metals.

James Turk is co-author of the book ‘The Coming Collapse of the Dollar”

http://www.dollarcollapse.com/

Of course you can disagree with the things these gentlemen have to say but they sure aren’t a bunch of nuts. The unwillingness of the the mainstream analysts to debate GATA is not only disturbing GATA itself , John Embry of Sprott Asset Management finds it troubling as well :

John Embry, Chief Investment Strategist, Sprott Asset Management Inc.

"I find troubling the consistent unwillingness by the mainstream gold analysts to debate or even acknowledge the gold market manipulation viewpoint in any depth. Like all manipulations, this one too will fail. When it does, the gold price will explode. Therefore, I believe it is imperative that gold investors cast their gaze beyond what has become an ignorant and stale mainstream and towards a fringe whose thinking is far more intellectual than well-known gold market commentators have long been able to muster. END.

GATA’s findings are getting endorsed by more and more industry experts as time passes by.  Frank Veneroso said in an interview with CBS Marketwatch :

"GATA has made a lot of publicity about management of the Gold market, and they are basically correct. Three years ago, this was regarded as crazy talk. Now when I am in Europe, I am shocked by the number of serious investment professionals who take this position, that the Gold market is manipulated" END.

Then in March of this year a report  published by a research foundation in Dubai endorsed GATA’s findings that Western central and commercial banks have rigged the gold market but have much less gold than they claim to have and so are vulnerable to rising demand for gold. The study recommends that the oil-producing countries of the Middle East diversify their ever-depreciating U.S. dollar holdings into gold.

The study, "The Role of Gold in the Unified Gulf Cooperation Council Currency," was written by Eckart Woertz, vice president of CFC Securities in Dubai, for the Gulf Research Center. It quotes the work of GATA's consultants, including Frank Veneroso, and predicts that the gold price suppression scheme of the Western banks will fail just as their similar scheme of the 1960s, the so-called London Gold Pool, failed when the drain on Western gold reserves became too great. Once the scheme fails, the study says, "it will be highly difficult and expensive to accumulate a gold reserve. This is especially true for central banks that have low gold reserves like those in the Gulf Cooperation Council countries.". END.

Again, you may disagree with these gentlemen but they certainly aren’t a bunch of nuts.

4. Does market action confirm GATA’s findings ?

GATA says that gold is being suppressed by means of excessive use of gold derivatives. That simply means that paper gold determines the price of gold to a high degree. When you realize that the paper gold market is about 35 times bigger than the physical gold market (120.000 tonnes vs 3500 tonnes) it ain’t difficult to understand. Since most of the gold papers are being traded on COMEX we should see a continued selling pressure on COMEX which exceeds all buying pressure from overseas, at least that should be the case if GATA is correct.

Well, that’s seems to be exactly the case. Gold writer Dimitri Speck did some outstanding research with regard to COMEX selling pressure and concludes that ever since August 1993 there is a continued selling pressure on COMEX. Now here where it gets interesting. We already saw that government isn’t amused at all by sharp rising gold prices (see 2.Managing the price of Gold : Absurd idea or not ?)

Gold writer Dimitri Speck described in detail the FED transcript of July 6,7 1993 wherein FED official Wayne Angel talked about gold in lengths and his dislike of higher gold prices. Speck continues by quoting from the next FED meeting on August 17 1993 whereby FED official Wayne Angel said :

 “I recognize that the price of gold has come down from $400 to $371 and that really is a factor that parallels the move that took place in the bond market; and that has worked very, very well.". END.

Speck continues by charting these events, see chart below :

http://news.goldseek.com/GoldSeek/1044289345.php

Now Speck concludes that ever since Aug 5 1993 the New York gold market behaved far from normal, in other words, overseas gains are eliminated during COMEX trading sessions. The chart below says it all :

This chart proves beyond any doubt that the New York gold traders do whatever they can to countermove any sharp rise in the price of gold. Look at the 1999 gold-spike caused by the Washington agreement. It should be obvious that this spike wasn’t caused by the New York boys, no, in contrary, they did whatever they could in order to get the gold price down. And this is exactly what GATA wants you to know, paper gold being used to get the price of gold down. Now let’s repeat again item 55 from Reg Howe’s lawsuit ‘Howe vs BIS et all’ with regard to the Washington Agreement gold spike.

Howe vs BIS et all item 55 :

This effort [by the Federal Reserve, Bank of England and BIS to turn back the gold price] was later described by Edward A. J. George, Governor of the Bank of England and a director of the BIS, to Nicholas J. Morrell, Chief Executive of Lonmin Plc:

We looked into the abyss if the gold price rose further. A further rise

would have taken down one or several trading houses, which might have

taken down all the rest in their wake. Therefore at any price, at any cost,

the central banks had to quell the gold price, manage it. It was very

difficult to get the gold price under control but we have now succeeded.

The U.S. Fed was very active in getting the gold price down. So was

the U.K. END.

Now GATA and Speck conclude that COMEX gold trades lower most of the time as overseas. Indeed this has been the case in 94% of all COMEX sessions since August 1993. Now any statistician will admit that a free market doesn’t trade this way. Any item which is being traded freely 24 hrs/day should show equal gains/losses over time in East and West. It’s clear, COMEX sessions are characterized by extreme aggressive gold selling every now and then. The chart below is a perfect example of aggressive gold selling during a COMEX session.

Why these drastic down moves only happens during COMEX trading hours ?

The next chart shows painfully clear that the trend is down most of the time indeed on COMEX.

Remember, 94% of all COMEX sessions end up lower than overseas. This is NOT a characteristic of a free traded market and many statisticians do endorse this statement.

Now some people argue that COMEX is just much more volatile as the overseas markets since COMEX is the biggest paper gold market. Sure, but then you should expect some wild upswings to the upside as well but strange enough that just NEVER happens on COMEX. GATA reported over and over again that gold NEVER exceeds an $6 up-move on COMEX and when it does (happened only a couple of times in last three years) it will be taken down immediately the very next day. Again, this is not a characteristic of a typical free traded market.

Now if there’s such an interest in holding the price of gold down, who are the sellers ? Well, the sellers are the commercials (bullion banks, JPMorgan, Goldman Sachs, City Bank etc..). And why are they selling ? Again that’s hard to figure out since the gold market is not-transparent. Maybe some of them operate for government, maybe they are trying to protect their short positions in gold, maybe they’re just selling for their clients, no-one knows and no-one will unless someone could enforce a look into their bookkeeping.

Now some people argue that the commercials are just clever gold traders and they are right most of the time. So if they are going short they just see what is ahead of us and again they are right most of the time.

I just don’t agree with this kind of reasoning. Why ? Simple, because I don’t think that all other big banks (besides the 5 big bullion banks) have stupid gold analysts who can’t see what the bullion bankers gold analysts are seeing. So if the bullion banks are adding shorts rapidly it must be because their gold analysts are predicting a down-move in gold right ? Now I wonder why all other banks don’t see that as well. Let me give you an example here.

Example :

Quarterly increase in gold-derivatives :

JPM     : +10.2%

CITY   : +43.4%

All other 372 US Banks together : +1.19%

Now here we see a sudden increase in gold derivatives with two major bullion banks only while all other US banks reported hardly any increase at all. Now GATA wonders why drastic down moves in Gold always coincide with drastic build ups in gold derivatives with a few major bullion banks.

Now what did we see so far :

• Heavy selling pressure on COMEX
• COMEX trades 94% of all sessions below overseas.
• Enormous increase in gold derivatives of a few big US bullion banks.

GATA concludes :

New York Gold trades 94% of the time lower than Asia due to continuous suppressing/selling by a few big US bullion banks. This suppression becomes transparent due to enormous increases in gold derivatives of these US bullion banks. END.

Now many people argue that if GATA thinks they are right they should sue the manipulators. Well that’s exactly what GATA did.

In December 2001 GATA filed a lawsuit (Howe vs. Bank for International Settlements et al) in  which it accused the BIS,FED,US Treasury and some Bullion Banks of Gold market manipulation, Although this case ended up being dismissed (just on two technicalities), many people concluded that enough evidence was presented here to prove the price-fixing claims.

Unfortunately for the price manipulators Blanchard and Co. filed a similar suit in US District court in New Orleans against Barrick Gold and JPMorgan. This time however, the Judge denied to dismiss the Lawsuit so this case will enter the discovery stage. What does it tell you ? It tells you that Blanchard must have some valid points otherwise this case would have been dismissed.

What is this case all about ?

Blanchard wants the court to force Barrick and J.P. Morgan, as well as other bullion banks, to stop borrowing gold from central banks and selling it into the market -- a practice the dealer says depresses the price and has hurt other investors. The case is scheduled to go on trial by summer. Needless to say what it will do to GATA’s credibility if Blanchard will be successful. Will they be successful ? Hard to say but one thing is clear, you must be absolutely crazy to sue the most powerful bank in the world unless you are EXTREMELY CONFIDENT about yourself. Needless to say that Blanchard is EXTREMELY CONFIDENT about themselves !  Investors stay tuned.

Conclusion :

Gold suppression can’t be proven but investors who’ll study all  circumstantial evidence brought forward by GATA over the last 6 years must admit that they have a point. John Embry of Sprott Asset Mangement once said :

Everyone with a IQ higher than a grapefruit must admit that they have a point.

And that’s exactly what I want investors to know. I don’t ask you to agree with GATA or to disagree but just listen to what they have to say. Again, I think it’s important to know what GATA has to say because if they turn out to be right it could have enormous consequences for the gold market. The longer an item being suppressed the more volatile the upswing will be. Again it goes far beyond the scope of this article to go in detail of all circumstantial evidence brought forward by GATA but I would urge readers who want to know more to read Sprott Asset’s Management excellent report ‘ Not Free Not Fair, - the Long Term Manipulation of the Gold Market) http://www.sprott.com/pdf/not_free_not_fair.pdf

Highlights :

• GATA estimates that half of all central bank gold (15.000 tonnes) is gone
• These figures don’t show up in GFMS reports
• GFMS only reports the reported gold loans by CB’s
• CB’s don’t have to report the amount of gold being loaned/swapped therefore they won’t show up in official gold loan statistics. Therefore the actual gold loans MUST be higher as officially reported.
• Veneroso’s gold loan numbers are consistent with gold loan book positions by one-quarter to one-third of all bullion bankers in the period 1998-1999
• A growing amount of Industry experts do endorse GATA’s claims eg :
  • John Embry
  • Frank Veneroso
  • Ferdinand Lips
  • James Turk
  • Reg Howe

• Gold suppression can’t be proven but market behavior suggests gold is being suppressed.
• NY selling pressure is clearly visible.
• A free traded market won’t show 94% of all COMEX sessions closing lower than overseas since 1993.
• When investors find out that half of all central bank’s gold is gone a rush on gold could emerge which could  cause a sharp increase in the price of gold.
• Blanchard & Co sued JPMorgan & Barrick Gold for suppressing gold and trial is scheduled this summer.
• Efforts from JPMorgan and Barrick to convince the judge to dismiss this case have failed. That simply means that Blanchard & Co must have valid points.
• GATA will host a legendary gold conference ‘GOLD RUSH 21’ on August 8 and 9 in Dawson City, Yukon Canada where they will present all their findings with regard to the gold suppression. Joining GATA are guest speakers such as : John Embry, James Turk, Hugo Salinas Price, Peter George and Ferdinand Lips.  More info on www.goldrush21.com

Eric Hommelberg

The Gold Drivers Report

Email : ehommelberg@golddrivers.com

Web-site : www.golddrivers.com

May 15, 2005