-- Posted Tuesday, 30 December 2008 | Digg This Article
| Source: GoldSeek.com
Bill Murphy and Chris Powell of the Gold Anti-Trust Action Committee (GATA) gave www.silberinfo.com the following exclusive interview:
silberinfo:
Our last interview dates back to March 2005. Bill and Chris, what has changed in the meantime for GATA and the work you do?
B. Murphy:
1. We held an international gold conference on April 18th, 2008 right outside of Washington, D.C.
2. We filed freedom of information requests to the Fed and US Treasury, asking questions about gold swap operations. The Fed withheld hundreds of pages of information, redacting hundreds of pages of others. The Treasury gave a non-response. When we queried specifically about the Exchange Stabilization Fund, they responded about the Exchange STABILITY Fund. Is the US Treasury truly an Abbott and Costello operation?
C. Powell:
More evidence of central bank intervention in the markets has been disclosed, and opinion in the precious metals markets increasingly is coming around to acknowledging the intervention.
silberinfo:
What are your thoughts regarding the present financial crises with respect to gold?
B. Murphy:
It is bad and going to get worse. On January 31, 2008 GATA placed a full-page color ad in the Wall Street Journal, which you can read at:
http://www.gata.org/node/wallstreetjournal
Here are three sentences from our ad: "But to suppress the price of gold is to disable the barometer of the international financial system so that all markets may be more easily manipulated. The manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world.
"Surreptitious market manipulation by government is leading the world to disaster."
There was not one press inquiry as to what GATA knew and what we were talking about. Some day this ad will receive enormous attention.
C. Powell:
If gold had been allowed to trade in a free market, it would have warned, via its rising price, of the excessive credit in the world financial system and the debasement of the money supply and maybe gold's warnings would have been heeded.
silberinfo:
It is said that at the moment a lot of gold is demanded and bought. Still the price of gold in USD is significantly lower than in March, although the crisis has escalated since then. Is this the case because of continued market manipulations, or are other reasons playing a role here?
B. Murphy:
I receive reports EVERY day of gold coin shortages in countries around the world --from Germany, to Argentina, to Canada, to England, all of Asia, etc. Months ago the US Mint announced it was curtailing production of US gold coins.
Last week the Mexican Central bank limited sales of its Libertad silver coins. This is no accident. It is an organized effort to limit demand for gold and silver and keep this kind of money out of the hands of the people.
C. Powell:
The benchmark price of gold, the price reported on the commodities exchanges, is low, it is something less than the true price. It is the price for promises of gold delivered in the future, promises that might be defaulted upon. The true price is for metal in hand, and that price is maybe 35-40 percent higher amid worldwide scarcity of real metal.
silberinfo:
The Washington Agreement on official gold sales is running out next year. Do you think there will be a new agreement?
B. Murphy:
With the way the world the financial market scene is changing, I am not sure central banks want to be seen squandering what gold they have left. GATA believes they have well less gold than half the gold they say they have.
My guess is we are going to a new day when it comes to official sector gold -- mainly because they will be forced to view gold differently.
C. Powell:
Central banks coordinate their gold policies -- that's what the gold price suppression scheme has been about -- and there likely will be continued coordination, though perhaps in a different direction eventually.
silberinfo:
The worldwide tonnage of mined gold has been going down consistently in the last years. Do you think that this trend will go on?
B. Murphy:
There is NO way gold production will even remain even the same in the years ahead. And the way The Gold Cartel has forced down the price of late, makes it even less likely production will increase for MANY years. Substantial production increases are five years off, or more.
C. Powell:
Yes, production is likely to keep declining for a while even if the gold price rises substantially soon, since bringing new mines to production takes years and returning mothballed mines to production may take many months.
silberinfo:
Because of the financial crisis, the governments attempt to rescue the financial industry with a lot of money worldwide. Is this good or bad for the future performance of gold?
B. Murphy:
Short term a deflationary spiral has been negative for all commodities. However, common sense dictates that so much new printed money will be extremely inflationary down the road -- when the staggering new amounts and the velocity of money turnover kicks in. Right now everyone is hoarding money and conserving cash.
C. Powell:
Insofar as bad debts are forgiven or made good and the money supply is reflated, this should be good for gold.
silberinfo:
You are "at the source"; do you have new information that points to countries that are considering backing their currencies with gold?
B. Murphy:
Don't know of any.
C. Powell:
No firm evidence of this. But any countries considering an alternative to the dollar as a reserve currency will automatically consider incorporating gold in some way.
silberinfo:
The new worldwide trend to nationalize and to establish public interests in companies is heading to socialism. Could you imagine that the COMEX could be the next potential victim?
B. Murphy:
The Comex is a farce and is a tool used by the US Government. The rules are made for the shorts, the big banks in this case. Something very dramatic is likely to occur in the future, like a default of some kind -- as the real world market detaches further from the Comex prices.
C. Powell:
In my view the Comex already long has been an agency of the U.S. government, insofar as it is the main mechanism of suppressing prices with the help of largely unregulated derivatives.
silberinfo:
Looking at the production of the U.S. Mint in the past, it occurs that they have been producing and selling a lot more gold coins, as it is the case now. Could it be that the mint holds back gold on purpose, maybe following an order?
B. Murphy:
As mentioned earlier, there is no doubt in my mind there is a coordinated effort, not only by the US (it emanated here of course), but all countries to limit the amount of gold and silver that ends up in the hands of citizens.
C. Powell:
In many years over the last few decades the U.S. Mint has produced far more coins than it has produced so far this year, so minting capacity is not the problem. If the U.S. Treasury really holds the 8,200 tonnes of gold reserves it claims, and if the gold price is really declining as the futures markets say, obtaining the gold should not be a problem either. So I have to conclude that gold is actually quite scarce now and that the U.S. government (and other governments) want to reduce the public's access to it, lest more money flow out of government currencies and out of other markets.
silberinfo:
It is reported that a lot of people in India are reluctant to buy gold right now, because the price looks very high to them. Is this just a temporary phenomenon in your opinion?
B. Murphy:
Gold demand in India has been inhibited by a very weak rupee and a weak stock market. The Indians have been the most significant buyers of gold over the years and likely to be that way for years to come. They are the major buyers on significant price breaks like we have now.
C. Powell:
India is exquisitely sensitive to the gold price and probably knows better than most when gold is expensive and when it is cheap. But looking ahead some years, I think gold's price today will be considered a fantastic bargain.
silberinfo:
What do you think about the most recent developments regarding the opening of the Chinese gold market for private investors? Will China become a "Hot Spot" in the future with regards to the gold trade and the demand for gold?
B. Murphy:
Contrary to the US Government, it appears the Chinese Government wants to get more gold in the hands of their people. If they know what we know, then they know the price of gold is going to soar in the years ahead. The more gold they have in their country, the better. Gold ownership is no threat to their currency.
C. Powell:
It will depend on whether the Chinese market becomes a free-trading and largely physical market or a largely paper market subject to manipulation by those with access to infinite government money.
silberinfo:
The mining stocks have been crushed since March. What are the reasons, and do you think that the markdowns are justified?
B. Murphy:
The collapse in the mining shares is historic. Most of the gains made from the bottom of 2000 have been erased over the past few months. It is my opinion gold and silver will be the go-to investments in 2009 and the run higher in the gold/silver shares will be unprecedented. Returns of 1,000 percent and more from these current depressed levels will be common.
C. Powell:
The stock market has been taking its cues from the Comex rather than the physical market. But if miners can't learn to get around the Comex and reach the retail market more directly, they may never make money and their low share prices may be deserved.
silberinfo:
What do you think about the increasing costs for mining companies and their effects on the realization of new projects (e.g. NovaGold)? Doesn't this speak for physical gold and against investments in mining stocks? Would you still suggest to invest in both?
B. Murphy:
What is ignored for the time being is how much the drop in the price of oil and other commodities is benefiting the bottom lines of the gold producers. Right now, nothing matters in this bloodbath, but it will when the prices of gold and silver begin to soar again.
C. Powell:
Yes, until the gold price rises substantially, gold itself will be a better buy than mining companies. But eventually scarcity will drive the gold price high enough to make mining profitable again. The key question, as with every other investment, is exactly when. I wish I knew.
silberinfo:
Since our last interview a lot has been going on in the hedge books of many gold producers. The majors, particularly Barrick Gold unwound their forward sales. Does this surprise you?
B. Murphy:
No, their hedging programs were a disaster. Most of them kicked in with gold right above and below $300 -- put into effect by the bullion banks like Goldman Sachs and Chase Bank to enhance their gold price suppression scheme. Those still short hedges ought to be covering as fast as they can on this price dip.
C. Powell:
No. While this year has been terrible for gold, the gold price is still far above the price at which the hedges were incurred.
silberinfo:
What do you think of the danger that mining companies get nationalized in a crisis?
B. Murphy:
That can always happen and probably when the prices of gold and silver go bonkers, while other market sectors are struggling and revenue from those sectors dwindles.
C. Powell:
This is always a threat but less of a threat in jurisdictions where the rule of law is well-established, and of course a lot of financial companies already have been nationalized to some extent. Lately it has been far riskier to own banking company shares.
silberinfo:
The collapse of big U.S. banks has pointed out how dangerous it can be to invest in gold certificates. Nevertheless this market is still going on very well. What is in your opinion the reason for the continued popularity of "Paper Gold"? What conclusions to you take?
B. Murphy:
People are lazy to some degree. It is so much easier to buy the paper gold. However, as concerns grow about paper instruments of all kinds, there is likely to be a more dramatic shift to ownership of the physical. My favorite is James Turk's GoldMoney.com.
C. Powell:
People just don't understand that the gold may not be there. We'll keep trying to alert them.
silberinfo:
A lot of investors accumulated big losses because of the share price markdowns. How does the optimal structure of a portfolio look like in your view? How much gold should one own as a percentage, and in which form should that be?
B. Murphy:
Most all of my money is in gold, silver and the shares, so I am prejudiced. Right now the quality gold/silver shares are the buy of a lifetime. Investors should own as much of both as they think prudent for their own well-being.
C. Powell:
I'm a paranoid schizophrenic, not an investment adviser, so my ideal investment portfolio would be 100 percent gold and silver, stored safely on some other planet.
silberinfo:
Many of our readers are besides gold mainly interested in silver. Why does the price of silver lag behind the price of gold so significantly these days? Is the potential for silver exhausted already, as many analysts have written recently? They wrote, that silver will be demanded less in an economic downturn, but is produced more as a byproduct of the increased copper and zinc production.
B. Murphy:
The silver price slide was orchestrated (public knowledge) by two large banks. It is totally manipulated. That said, the shorts have to be acquiring physical silver some place -- probably the ETFs, in order to supply it to the physical market. Meanwhile, the premiums on silver coins, IF you can find them, have gone through the roof.
C. Powell:
There's evidence from the Comex that silver is even more manipulated than gold, insofar as the short position is more concentrated. Since silver is produced largely as a byproduct of other mining, declining production of related metals is likely to reduce silver production, increasing scarcity ... and price.
silberinfo:
The premium on the spot price of physical silver in Europe has reached more than 50% in Europe. What could be the reasons for this development?
B. Murphy:
As mentioned above, there is an organized effort to curtail gold and silver supply, in the form of coins and bars, from getting into the hands of ordinary citizens.
C. Powell:
The Comex price is not real -- that's all.
silberinfo:
Considering loss of trust into the financial system and the connected worldwide run for gold, do you think that the possession of physical gold will be banned again?
B. Murphy:
Instead of banning gold ownership, they are making it less available, hence the extraordinary premiums. I can't imagine the US banning gold ownership. So few Americans own it. People would say, "HUH?" The rest of the world would then laugh at us and buy all they could. That would be the death knell of the dollar.
C. Powell:
Maybe in some countries but not in all. Since gold is not a major part of any country's monetary stock anymore, there's not much rationale for any country to outlaw its private possession.
silberinfo:
For several thousands of years gold has been in the hands of governments and religious aggregations, that controlled the price in one way or the other. Admittedly in this time gold usually was equal to money; still a critic could say that GATA is just a group of old people that are interested in a higher gold price for personal reasons and that forgot about the welfare of the other nations. Why exactly does GATA advocate a really free gold market without direct or indirect interventions from governments or central banks?
B. Murphy:
Who’s old? Not too old to remember GATA initially gained a great deal of attention in 2000 by focusing on the idle miners in South Africa, who were unemployed because of the gold price suppression scheme. Each miner supports 10 to 12 others in his family. Presidents Bush and Clinton are the worst of hypocrites when they mouth off about their caring for the AIDS/severe economic problems in southern Africa. Had they let the price of gold trade freely, SA would be in BOOM TIMES now and there would have been a lot more money to address the very serious problems.
C. Powell:
The private possession of gold and a free market in gold are simply essential to individual liberty and limited government. GATA doesn't worship the golden calf; that's idolatry. We seek to defend liberty and restrain government.
silberinfo:
Bill and Chris, thank you very much for your time and this interview. We wish you and GATA all the best for your future.
Bill and Chris: Thank you.
www.silberinfo.com ; www.gata.org
-- Posted Tuesday, 30 December 2008 | Digg This Article | Source: GoldSeek.com
