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LBMA defense of London gold fixing distracts from central bank involvement
10:03p ET Saturday, April 19, 2014
Dear Friend of GATA and Gold:
The March edition of the London Bullion Market Association's magazine, The Alchemist -- presumably named for the ability of LBMA members to turn gold into paper -- carries a long defense of the daily London gold price fixings against complaints that they are likely manipulated by their participating bullion banks.
The defense, written by Peter Fertig, director of QCR Quantitative Commodity Research Ltd., maintains that there are plausible explanations for the aspects of the fixings that have been called suspicious by Professor Rosa Abrantes-Metz of New York University's Stern School of Business. Plausible explanations or not, Fertig declines to explain the necessity of the peculiarly closed and elite mechanism of the London fixes, a mechanism not used and indeed not allowed in any other commodity or currency market.
Fertig acknowledges only briefly that peculiarities in London gold fix prices may have something to do with central banks. "During the period under investigation," Fertig writes, "many central banks had been sellers of gold."
... Dispatch continues below ...
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Indeed, probably every bullion bank participating in the London gold fixes is used by various central banks as cover for surreptitious intervention in the gold and currency markets. At least that is the powerful implication of the secret March 1999 report of the staff of the International Monetary Fund, which found that Western central banks are determined to conceal their gold swaps and leases to facilitate their surreptitious interventions:
http://www.gata.org/node/12016
How much more useful Fertig's research would be if it examined whether the bullion banks in the London fixes get gold or pledges of gold from central banks and function in effect as the agents of central banks in the gold market. But like everyone else connected with the London gold fix, and like all mainstream financial news organizations themselves, Fertig can't put a single critical question to central banks about their participation in the gold market. The first rule of mainstream analysis of the gold market is never to question the market's primary participants. This turns all such analysis into mere distraction, which usually seems to be the objective.
At least Barrick Gold, once the big hedger among gold miners, admitted a decade ago that it had become an agent of central banks when it borrowed their gold and sold it into the market:
Those who advocate free and transparent markets in the monetary metals and limited government rather than totalitarian government may hope that the class-action lawsuits starting to be brought against the London gold-fixing banks eventually will compel them to claim the same immunity Barrick claimed when it was sued for gold market rigging. That is, a claim of immunity as the agent of central banks, a claim that will put responsibility for gold market manipulation where it most belongs.
Fertig's essay is titled "Has There Been a Decade of London PM Gold Fixing Manipulation?" and it's posted in PDF format at the LBMA's Internet site here:
http://www.lbma.org.uk/assets/blog/alchemist_articles/Alch73Fertig.pdf
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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