Gold market rigging can keep working only as long as it remains largely a…
by Chris Powell of the Gold Anti-Trust Action Committee (GATA)
Illustrations for this presentation can be found here: NOIC-Slides-10-12-2022.pdf
Remarks by Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
Wednesday, October 12, 2022
What a year has passed since we last gathered here.
The money supply in the United States and throughout the world exploded and inflation soared here and abroad.
The gold price in U.S. dollars went down.
Central banks steadily announced their purchases of gold and turned from net sellers to net buyers.
The gold price in U.S. dollars went down.
War in Ukraine pitted the United States and its NATO allies against Russia and upended the energy and food markets.
The price of gold in U.S. dollars went down again.
Russia began threatening to use nuclear weapons in that war.
The price of gold in U.S. dollars continued to fall.
A month ago the world began sinking into economic recession and still the gold price in U.S. dollars went down — until about a week ago, when it began to stabilize.
Many experts have explanations for the counterintuitiveness of the U.S. dollar gold price. We will hear from some of them at this conference. But for more than a decade the dollar gold price has been no stranger to counterintuitiveness. Fortunately during that time the experts have construed nearly everything as a reason for gold to go down.
Well, nearly everything. That is, very few experts have said gold priced in U.S. dollars has gone down because of largely surreptitious government intervention.
Exposing that intervention and complaining about how it has destroyed not just the gold market but all markets everywhere has been the work of the Gold Anti-Trust Action Committee since 1998. We have amassed a huge amount of documentation, displayed at our internet site, GATA.org.
For example, and most contemporary, consider something else that has gone down steadily this year: the gold swaps and loans reported in the monthly statements of account of the Bank for International Settlements, the central bank of the central banks, the broker that gives central banks cover for gold and other transactions they don’t want disclosed.
To potential central bank members, the BIS actually advertises its camouflaging services. Here is a page from a PowerPoint presentation by BIS officials to central bankers at a conference at BIS headquarters in Basel, Switzerland, in 2008.
You can see that interventions in the gold and currency markets are considered major services of the BIS to its members.
In a speech at a BIS conference in 2005, William R. White, then the head of the Monetary and Economic Department of the BIS, said that one of the main purposes of international central bank cooperation was “the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.”
That is, rigging the gold and currency markets long has been a primary purpose of the BIS on behalf of its members, who included all the major central banks.
White’s speech is still posted at the BIS internet site, and at GATA’s:
So the BIS’ meddling with the gold price on behalf of its central bank members is a matter of record. Unfortunately it seems that nobody outside GATA dares to look at the record.
GATA’s consultant on the BIS, Robert Lambourne, examines the BIS’ monthly statements of account very closely. Those statements are formulated carefully to obscure fluctuations in the bank’s gold interventions, represented by gold swaps and leases. But Lambourne does the necessary calculations and has discovered a sharp decline in BIS gold swaps and leases this year. This is the trend of BIS gold interventions since January.
The annual report of the BIS, published in June for the year ending in March, confirmed the accuracy of Lambourne’s calculations of bank’s gold swaps. Lambourne had estimated 360 tonnes for March. The BIS reported 358.
This decline in the gold swaps at the BIS seems to correspond with the implementation in Europe and the United Kingdom of the “Basel III” rules requiring bullion banks to hold full collateral for their gold trading, rules that the London Bullion Market Association and World Gold Council warned would wreck the gold market — or at least wreck the part of the gold market most supported by the LBMA and the gold council — that is, the dominance of gold derivatives, “paper gold,” over physical gold.
“Paper gold” has been the main mechanism of gold price suppression in recent years — the creation of vast amounts of imaginary gold, unbacked gold claims and credits at bullion banks, substituting for the possession by investors of real metal. These claims and credits are backstopped as necessary by central bank lending and swapping of official gold reserves.
That is why central banks long have refused to disclose their gold lending.
As was acknowledged by the secret March 1999 report of the staff of the International Monetary Fund, candor in official gold reserve reporting would explode the “paper gold” system.
The decline in the BIS swaps and leases implies that the bank this year has been winding down the paper gold business of its member central banks.
It’s a fair suspicion but try asking the BIS what it does in the gold market, for whom, and why. If you get an answer, please let me know, for you’ll be the first one outside of central banking to get an answer.
Since we last met here other crucial questions about U.S. government intervention in the gold market have continued to be refused answers.
In 2021 U.S. Representative Alex X. Mooney, R-West Virginia, wrote to Treasury Secretary Janet Yellen to ask a few questions about the disposition of the U.S. gold reserve. A deputy of Yellen’s replied, refusing to answer most of the questions, including why Treasury gold is stored at the Federal Reserve Bank of New York.
The U.S. Commodity Futures Trading Commission continued to refuse to answer a question posed by both Mooney and GATA. That is, does the CFTC have jurisdiction over manipulative trading in the futures markets that is undertaken by or at the behest of the U.S. government?
This is a simple question about the commission’s jurisdiction. That the commission refuses to answer might give even Kitco News a hint about what really has been going on in the gold market — if Kitco News ever was open to hints.
But in 2001 at a hearing in U.S. District Court in Boston on GATA consultant Reginald Howe’s lawsuit against the U.S. Treasury Department, Federal Reserve, and several bullion banks, an assistant U.S. attorney declared that the U.S. government is fully authorized by the laws establishing the Federal Reserve and the Treasury Department’s Exchange Stabilization Fund to rig the gold market exactly as Howe’s lawsuit complained:
What else has happened in the last year to indicate both open and surreptitious involvement in the gold market by central banks?
— In March, as Russia began to be assaulted by Western financial sanctions in response to its invasion of Ukraine, the Bank of Russia briefly put a floor under the Russian domestic gold price, signifying that the bank considered the metal to be money and a strategic resource:
— In July the Russian government announced plans to create a gold exchange in Moscow using what it called a “‘Moscow World Standard” for gold to compete with the London Bullion Market Association. Indeed, according to Russian news reports, the goal of the Moscow World Standard exchange is to “‘break the monopoly” of the LBMA and facilitate the development of the gold industry outside the LBMA’s reach. Russia knows that gold is a world reserve currency, a competitor to the U.S. dollar. That is, gold is international money.
— In January Pam and Russ Martens of WallStreetOnParade.com, quoting a new book about the Federal Reserve, “The Lords of Easy Money: How the Federal Reserve Broke the American Economy” by Christopher Leonard, reported that the Federal Reserve Bank of New York’s trading room in New York City isn’t the bank’s only trading room. That is, the New York Fed also has a trading room in Chicago near the Chicago Mercantile Exchange. The Chicago Mercantile Exchange operates most commodity futures trading in the United States.
Of course no respectable financial journalist or market analyst ever asks the New York Fed what it is trading in either trading room, or why:
In June Wall Street on Parade reported that JPMorgan and Citibank hold 90% of all gold and other monetary metals derivatives held by U.S. banks. As far as I can tell, no respectable financial journalist or market analyst has wondered aloud why such a concentrated position in a sensitive financial market would be allowed if it was not actually a U.S. government position, with the two banks functioning as the government’s brokers.
But then as far as I can tell no respectable financial journalist or market analyst has ever explored the implications of the Central Bank Incentive Program offered by CME Group, the futures exchange operator. With the Central Bank Incentive Program, governments and central banks can receive volume trading discounts for secretly trading all major futures contracts in the United States – not just financial futures — provided that those governments and central banks use brokers approved by CME Group.
In July, after covering the trial of the JPMorgan gold and silver traders who were charged with spoofing the monetary metals markets and manipulating prices, Bloomberg News reported that documents submitted as evidence showed that while the bank’s traders were spoofing the monetary metals markets, the bank was vaulting and probably trading gold for at least 10 central banks. That is, JPMorgan, which in 2020 was fined $920 million for manipulating the gold and silver markets, was simultaneously working for at least 10 central banks. Were the JPMorgan traders ever front-running central bank transactions? We don’t know, but central banks wouldn’t be vaulting gold with JPMorgan if they weren’t also surreptitiously intervening in the gold market with JPMorgan providing cover as their broker:
In the last year banks that have been fined millions of dollars or paid millions in civil lawsuit settlements for gold and silver market rigging include not just JPMorgan but Barclays, Scotiabank, and Societe Generale, as well as the London Gold Market Fixing Ltd.
I would need another hour to detail these market-rigging cases. But strangely they never come up in expert analysis of the gold and silver markets and the often counterintuitive direction of prices.
My points are simple.
First — All the recent evidence fits perfectly with all the older documentation of U.S. government policy and Western government assistance in suppressing the price of gold, the former world reserve currency, to sustain the current world reserve currency, the U.S. dollar:
Second — Gold price suppression is no “‘conspiracy theory” but longstanding government policy. That is, gold price suppression is “‘conspiracy fact.” Indeed, whenever government operates in secret to develop and implement a course of action, as it often does, government is conspiracy itself.
Third — There can be no meaningful analysis of the monetary metals and their markets without accounting for government intervention.
And fourth — The biggest advantages enjoyed by government’s monetary metals price suppression policy are the indifference and cowardice of financial news organizations and the monetary metals mining industry itself.
Government intervention against the monetary metals may diminish as the supply of real metal becomes tighter, or the intervention may change direction. That is, governments may decide to push monetary metals prices upward to devalue their currencies and debts and to reliquefy themselves, as they have done occasionally throughout history.
Such speculation has been offered by the U.S. economists Paul Brodsky and Lee Quaintance —
— and by the Scottish economist Peter Millar:
In any case, gold is the secret knowledge of the financial universe, a powerful mechanism for controlling the currency markets, a powerful weapon of imperialism, and an equally powerful defense against imperialism.
The U.S. government knows this very well. If you doubt it, read the transcript of the conversation between Secretary of State Henry Kissinger and Assistant Undersecretary of State Thomas O. Enders at the State Department on April 25, 1974. The transcript is posted at the internet site of the State Department historian —
— and at GATA’s own internet site:
Kissinger and Enders discuss what they consider the U.S. policy imperative of preventing the western European countries from bringing gold back into the international financial system. Enders explains that the Europeans collectively have more gold reserves than the United States and that gold is “‘the reserve-creating instrument,” the instrument of creating money through gold revaluation. Enders says that whoever controls the most gold can revalue it from time to time to create money and thereby change all financial valuations in the world.
Kissinger agrees that the Europeans must be prevented from remonetizing gold, adding that if the Europeans don’t back down, “We’ll bust them.”
Yes, the meeting in Kissinger’s office was conspiracy — conspiracy fact. The conspiracy continues.
But gold market rigging can keep working only as long as it remains largely a secret for fooling other governments and investors into accepting gold derivatives, “paper gold.” I hope this conference can help bust the secret open.
For more history and documentation of gold price suppression policy and information about GATA, please visit our internet site, GATA.org. I’ll be glad to try to answer questions e-mailed to me at CPowell@GATA.org.
Thanks for your kind attention.
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Toast to a free gold market
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