Gold Market Manipulation Update

Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
Wednesday, October 26, 2016

Since 1999 the Gold Anti-Trust Action Committee has been trying to get the financial industry, the mining industry, and mainstream financial news organizations to acknowledge that the gold market is aggressively manipulated by governments and central banks to protect their currencies and bonds against competition from a potentially superior currency and store of value. This year seems to have been the one when respectable people in the financial industry gave up disputing us.

Not that GATA still isn't disparaged. Rather, respectable people in the financial industry have gone from denying that the gold market is manipulated to dismissing complaints of gold market manipulation because, they say, "All markets are manipulated."

Of course this response is an evasion. It fails to address the specifics and purposes of the manipulation of the gold market. That is, are all markets manipulated nearly every day by the surreptitious sale by governments and central banks of massive amounts of imaginary product? Are all markets manipulated every day so the developed world can expropriate the resources of the developing world?

Respectable people in the financial industry still find such issues politically incorrect, very bad for their business. To avoid these issues, some of these respectable people even assert that central banks don't matter -- even though central banks are authorized to create infinite money and deploy it in secret on a patronage basis, making them the most powerful institutions in the world.

But the evidence of market rigging that has been exposed this year makes it easy to understand the transition from "gold isn't manipulated" to "everything is manipulated."

For example:

-- In the class-action anti-trust lawsuits brought in federal court in New York against the investment banks that operated the daily gold and silver price fixings in London, Deutsche Bank effectively confessed to manipulating the gold and silver markets, agreeing to pay $38 million in damages and to provide evidence against the other defendant banks. The judge authorized the lawsuits to proceed to the discovery and deposition stage, where production of evidence is mandatory. So now the case may get very interesting. The production of evidence may reveal more government involvement with the banks that run the gold market.

See:

http://www.gata.org/node/16380

http://www.gata.org/node/16847

-- A study published in July by a finance professor at the University of Western Australia, Dirk Baur, concluded that, as GATA long has maintained, central banks rig the gold market primarily through their leasing of gold, their creation of imaginary gold. This leasing vastly inflates what the world mistakenly understands to be its gold supply and thus suppresses the price. While gold's advocates like to say, "You can't print gold," in effect central banks print massive amounts of it, and while it is imaginary gold, people still accept it. Professor Baur's study is posted at GATA's Internet site:

http://www.gata.org/node/16611

-- In August JPMorganChase's chief of quantitative and derivatives strategy, Marko Kolanovic, issued a report asserting that the rise in stock markets after the United Kingdom's vote to withdraw from the European Union was caused by central bank intervention:

http://www.gata.org/node/16641

-- In January a review of former Secretary of State Hillary Clinton's e-mail correspondence, released by the State Department, disclosed an e-mail from her political adviser, Sidney Blumenthal, asserting that France decided to overthrow Libyan dictator Muammar Gaddafi to thwart his plan to use gold and silver to underwrite a new pan-African currency:

http://www.gata.org/node/16074

-- In March GATA consultant Robert Lambourne disclosed that the annual report of the Bank for International Settlements showed that the BIS, which had gotten out of the gold swap business, had returned to gold swapping in a big way. This signified that central banks lately have been moving gold around desperately to apply it where they believe its price most needs suppressing:

http://www.gata.org/node/16704

-- In August the Netherlands central bank refused the request of gold researcher Koos Jansen to publish its gold bar list:

http://www.gata.org/node/16705

This month Austria's central bank, which had publicized its plan to audit its gold reserve, refused Jansen's request to publish its gold bar list and the audit:

http://gata.org/node/16866

In recent years the International Monetary Fund has boasted of increasing the transparency of its gold operations, but in September gold researcher Ronan Manly reported that the IMF had refused to give him access to the records of those supposedly transparent transactions:

http://gata.org/node/16722

These refusals by the Netherlands and Austrian central banks and the IMF suggest, as the annual report of the BIS does, that central bank gold has been moved all around for price suppression purposes and is badly oversubscribed -- that the same gold bars reside on the books of many financial entities, that many people and institutions think they own the same gold.

-- Speaking on March 31 to a financial conference at the Virginia Military Institute in Lexington, the president of the Federal Reserve Bank of New York, William Dudley, refused to answer a question from a GATA supporter in the audience, W. Ware Smith Jr., about whether the Federal Reserve is involved with gold swaps. Smith's question about gold swaps followed his question about Germany's repatriation of some of its gold from the New York Fed. I'd like to show you a one-minute excerpt from the exchange between Dudley and Smith:

https://drive.google.com/file/d/0B7bb1NsDZTmjMkIyM1VsQndneXc/view

You can't hear Smith's follow-up question, but that's when he asked Dudley if the Fed was involved with gold swaps.

Note Dudley's reply to Smith: "I can't comment on individual customer kind of transactions."

But Smith had not asked Dudley to comment on any "individual customer kind of transactions." Smith had asked only if the Fed is involved in gold swapping. And of course in his previous reply to Smith, Dudley had discussed transactions with an individual customer of the Fed, Germany's Bundesbank.

When Smith told me about his exchange with Dudley, I wrote to the publicist for the New York Fed, Eric Pajonk, seeking confirmation and posing Smith's question for myself. I asked Pajonk: Is the Fed involved with gold swaps?

The New York Fed's publicist acknowledged my e-mail and directed me to a transcript of Dudley's speech at VMI and to a YouTube video of Dudley's appearance there, from which the video excerpt I showed you was drawn. But like his boss, the New York Fed's publicist would not answer my question about gold swaps. Remarkably, the New York Fed's publicist repeatedly refused even to acknowledge my gold swaps question:

http://www.gata.org/node/16341

Now we already knew from a letter sent in 2009 to GATA's lawyer by a member of the Fed's Board of Governors, Kevin M. Warsh, that the Fed is indeed engaged in gold swaps with foreign banks and refuses to disclose the records of these swaps:

http://www.gata.org/node/7819

So why can't Dudley acknowledge the Fed's gold swap business today? Because gold swaps are for surreptitious market rigging, making the issue too sensitive. Any honesty from the Fed would lead to many more questions about the sensitive matter of market manipulation.

From the vast documentation GATA has collected of surreptitious intervention in the gold market by central banks -- documentation drawn mainly from government archives and statements by central bankers themselves, many of these documents quite current -- and from Dudley's clumsy evasion of the gold swap question, you can see how easy it has become to catch central bankers. All you have to do is corner them with specific questions about a document. Though central banking, operating largely in secret, is conspiracy, GATA's work isn't mere "conspiracy theory." GATA's work is just traditional journalism.

That's why the most urgent issue for investors in the monetary metals may not be the surreptitious intervention in the markets by governments and central banks -- intervention that constitutes the destruction of the market economy and even the destruction of democracy itself. Rather the most urgent issue for monetary metals investors may be the cowardice and even the corruption of mainstream financial news organizations, which won't report critically on central banking and expose its interventions.

Nearly every major mainstream financial news organization in the world has received from GATA a detailed summary of the documentation we have compiled -- a summary containing internet links to the original documents. This summary is posted in "The Basics" section at our Internet site, GATA.org:

http://www.gata.org/node/14839

But not one major mainstream financial news organization has pursued the issue.

My recent experiences with The Wall Street Journal and Financial Times may illustrate the nature of mainstream financial news organizations today.

In April, when GATA was publicizing New York Fed President Dudley's evasion of the gold swap question, I wrote something in GATA's daily newsletter, the GATA Dispatch, denouncing the cowardice of the mainstream financial press. I sent this commentary to many financial journalists.

I received an indignant response from a reporter for The Wall Street Journal, Katy Burne, who identified herself as the Journal's reporter covering the New York Fed. I invited her to telephone me. When we spoke Burne insisted that she often puts critical questions to officials of the New York Fed, including Dudley himself. She said she was ready to put to them questions about gold. She asked me to send her GATA's documentation.

I agreed to do so but I cautioned her that I already had provided the documentation to two other reporters for the Journal at their request -- Kate Kelly in 2010 and Greg Zuckerman in 2011 -- and that the newspaper had done nothing with it. As I sent Burne the documentation, I told her I'd be delighted to provide more information, and since April I have updated her many times by e-mail.

But as usual the Journal has done nothing with the information. Mainstream financial news organizations continue to prohibit critical questions to central bankers, especially about gold, the control of gold being the secret knowledge of the financial universe.

Of course Burne may have tried briefly to pursue the gold issue with New York Fed President Dudley, only to be instructed against it by her superiors, or even by Dudley himself. Either way, I suspect that she is no longer so indignant about my criticism of her newspaper.

Two weeks ago an editor for the Financial Times, Dan McCrum, wrote a column asserting that there is no explanation for movements in the gold price except what he called "fashion":

http://www.gata.org/node/16826

McCrum's column was so outrageously mistaken and lazy that I wrote to him that there is indeed another explanation for movements in the gold price: surreptitious intervention by central banks. I sent him the summary of GATA's documentation and urged him to review it.

McCrum cordially replied: "Many thanks for your e-mail. Unfortunately, I feel it would be counter to the spirit of the column were I to write more on the subject of gold."

But what if the "spirit of the column" was wrong? What if the column failed to acknowledge and examine the evidence? What if the column misinformed readers? McCrum's column wasn't journalism; it was just propaganda and disinformation.

Ironically, we know from the State Department cables obtained by Wikileaks in 2011 that the government-controlled press in China has been full of reports about gold price suppression by Western governments. Those Chinese press reports were translated by the U.S. embassy in Beijing and cabled back to Washington. That is, China knows all about gold price suppression and the U.S. government knows that China knows:

http://www.gata.org/node/10380

http://www.gata.org/node/10416

This failure of Western journalism especially bothers me because I am one year short of 50 years in the newspaper business. I know that governments too often operate in secret and sometimes, facilitated by secrecy, will deceive and even do awful things. I know that, as it also is a human enterprise, journalism is imperfect too. But if journalism won't even try to hold government to account, what will?

As much as it disappoints me as an investor in the monetary metals, I can understand the mining industry's cowardice. As it is a natural resource business and the most capital-intensive business, the mining industry is almost entirely dependent on government and the biggest investment banks, which in turn are essentially government agencies themselves.

In contrast, journalism's calling is higher, and in the West its rights are far greater.

As for GATA's calling, we increasingly are regarded as bad for the monetary metals business. Ross Norman, CEO of the venerable London bullion brokerage firm Sharps Pixley, made this point about GATA in a cordial exchange with me the other day. GATA's complaints about manipulation of the monetary metals markets, Norman wrote, are discouraging investment.

Yes, as GATA Chairman Bill Murphy has noted, the more GATA has established that governments and central banks are rigging the monetary metals markets, the less popular GATA has become with people selling monetary metals products. While some people still dismiss GATA as a mere touter of the monetary metals, the organization warns investors of what they are up against even as we explain the potential consequences of the enormous naked short position in gold represented by the "paper gold" and gold derivatives that are underwritten by central banks. The logic of GATA's work is that the monetary metals are grossly undervalued, undervalued by hundreds of percent.

But if, as GATA has concluded, surreptitious intervention by governments and central banks, and not mere "fashion," is the primary determinant of the gold price, and if the objective of that intervention is generally suppressive, would we help gold and free markets more by remaining silent about the intervention? Given their surreptitiousness and unaccountability in the gold market, central banks themselves plainly have concluded that exposure would demolish their policy, maybe even demolish central banking itself, and help gold.

In this respect GATA agrees with central banks.

So GATA persists, figuring that if we can't easily make friends in the monetary metals industry, then we can aim for something else, fulfillment of the old maxim of the English common law, which, ennobled into Latin, goes: Fiat justitia et ruant coeli.

"Let justice be done though the heavens fall."

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 -- Published: Thursday, 27 October 2016 | E-Mail  | Print  | Source: GoldSeek.com

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