Central banks don't need Barrick much if they secretly spend and repurchase their gold


11:28a ET Saturday, September 27, 2014

Dear Friend of GATA and Gold:

Our friend D.K. writes:

"Former Goldman Sachs partner John Thornton is now running Barrick Gold. I'm wondering if Thornton has given the big bullion banks direct supply contracts for enough of Barrick's gold output so that they can have it refined into bars and shipped to wherever they need it. It's the only thing that makes sense to me that would be enabling the bullion banks to deliver physical gold right now."

Your secretary/treasurer has no idea whether Barrick is working any particular deals with bullion banks at the moment, but the company must have some arrangements with them, if only because the company is carrying a hedge position.

... Dispatch continues below ...


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Further, during the Blanchard & Co. antitrust litigation in U.S. District Court in New Orleans in 2003, Barrick claimed to be the gold market agent not of the bullion banks but of the central banks:


But here's a different possibility: That it's not Barrick but the Federal Reserve that is providing all the metal the bullion banks need for maintaining the central bank gold price suppression scheme, using the foreign official reserves held in custody by the United States and secret gold swap arrangements the Fed has with allied central banks, swaps confirmed by the Fed during GATA's freedom-of-information litigation against it in 2009:


While Venezuela got most of its gold back from the Bank of England and other depositories in 2011, Germany's Bundesbank has yet to recover much of its foreign-vaulted gold, and most countries vaulting their gold in the U.S. haven't asked for anything to be returned. If all that needs to be done is to pretend that the foreign gold is still safely in the New York Fed's vault in Manhattan, its shipment elsewhere will never be a problem.

The price-suppression system of the London Gold Pool collapsed in March 1968 because the metal available to it was depleting so fast that the exhaustion of the gold reserves of the participating central banks was in sight:


I suspect that only something like that will end the current round of price suppression.

The central banks suppressing the gold price drained their official reserves for price suppression before, so why wouldn't they do it again? After all, if the central banks want to recover their reserves, they can always create infinite money with which to repurchase the gold and start the price suppression scheme all over again at a higher level.

Indeed, the Bank for International Settlements says it trades gold and gold derivatives for its members all the time:


The BIS even advertises its gold market intervention services to prospective central bank members:


The French central bank also says it trades gold for its own account and for the accounts of other central banks nearly every day:


This trading needn't be and certainly isn't all selling; a central bank couldn't be repurchasing after having knocked the price way down with huge paper sales. After all, with infinite money -- which central banks have the power to create -- one can control any market, at least until the commodity being traded runs out.

There's a reason why the United States does not charge any fee to foreign governments for vaulting their gold over here, and that reason is almost certainly so the United States can control that gold -- which means using it secretly as necessary.

If, as Barrick itself asserted back in 2003, it remains merely an agent of the central banks, they have accessible in their own vaults far more gold than the mining company can scratch out of the ground over many years, and if they never have to account honestly for it, as the secret March 1999 report of the International Monetary Fund says they don't --


-- there is no obstacle to their using it for market rigging. Nothing prevents the Federal Reserve from putting into play all the foreign official gold reserves vaulted in New York.

As the old joke goes, if all the gold of a Western central bank was depleted through market rigging, the central bank would double the guard to keep up appearances. It would be more than enough to convince the Financial Times that everything was still all right.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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