Really, why does the Justice Department even need an Anti-Trust Division?


Buried Treasure

By Josephine Mason
Metal Bulletin
September 12, 2004

Bill Murphy is fired up. He's been fired up for a
good five years now -- ever since he claims to have
unearthed evidence that the price of gold was being
suppressed by a gold "cartel," operated by global
financial institutions, including the U.S. Federal
Reserve and the International Monetary Fund.

But his latest assault came on September 3,
immediately after UBS precious metal analyst John
Reade speculated that central banks might reduce
their gold sales over the next five years under the
new Central Bank Gold Agreement to half the 500
tonnes they agreed.

Murphy reacted to the news in his usual explosive
manner, telling his followers that a reduction in
gold sales is yet further evidence that the central
banks are running out of gold reserves.

"The Gold Anti-Trust Action Committee has
predicted that the Gold Cartel is going to hit the
wall and won't have enough of their surreptitious
gold to go around any more to keep the price down
much longer," he said. "The UBS report ... is a
first sign that day is very close at hand: that The
Gold Cartel is in deep trouble and it has created
rumblings in the central bank world."

He described it as a "very big deal" that could push
the gold price up some $60 or more from current
levels of around $400 per oz in a matter of weeks.

And that is still a long way from where the gold
price should be, according to Murphy. He reckons
that once the Gold Cartel and its "nefarious"
activities are revealed, the yellow metal will shoot
toward $1,000 per ounce, given that all the
fundamentals -- greenback weakness, massive U.S.
twin deficits, and turmoil in Iraq -- are in place for
such a rally. Some of his more fervent followers even
consider $4,000 per ounce more realistic.

"The price of gold should already be north of $600,"
he tells MB. "I expect it to go well above $1,000 per

And Murphy lays the blame squarely at the door of
global central banks, including the U.S. Federal Reserve
and the European central banks.

He concludes his commentary with: "Once the psyche
really turns in the investment world on the central bank
issue, look out above!"

Murphy is fanatical about gold. "I get worked up. It's
part of my nature," Murphy says from his home in
Dallas, Texas.

Murphy, who has been crowned "King of the Gold
Bugs" by some in the industry, has been a staunch
advocate of gold for some 30 years.

After graduating from the School of Hotel
Administration at Cornell University in 1968, Murphy
played professional American football for the Boston
Patriots. He then began his career in commodity
trading as a Merrill Lynch trainee before working for
brokers Shearson Hayden Stone and Drexel Burnham.

He formed his own introducing broker firm in the
mid-1980s and in 1998 he turned his back on Wall
Street and launched his gold-focused website,

But Murphy and fellow gold bug Chris Powell, a
Connecticut newspaper editor, first came into the
public eye when they founded the GATA in 1999, a
crusade aimed at exposing the illegal price-fixing
"cartel" that, Murphy claims, has been controlling
the price of gold since the 1990s.

Running the LeMetropole website is now Murphy's
full-time job. The aim of the venture was to create a
virtual caf for gold investors similar to the French
cafes of the early 20th century, where intellectuals
and artists met to discuss the pressing issues of the

And if his membership numbers are anything to go
by -- he has a paying membership base of around
3,500 people -- he seems to have been successful in
creating a lively community of fellow gold bugs.

Members of the caf receive daily economic and
financial reports from five financial commentators:
Murphy calls them his "economic dream team."
They are then given the opportunity to discuss the
issues in forums on the Internet.

"The Minds of LeMetropole" are indeed prolific
writers, posting missives to their following that
never miss an opportunity to rail against the
alleged conspirators, naming the bullion banks
the "Goon Squad."

Above all, the postings recommend investors buy
the precious metal so that they can benefit from
the spike in prices that Murphy believes is inevitable
once the alleged manipulation is exposed.

He himself has invested every penny he has in gold
and silver shares and some bullion, which is worth
around $2 million

Murphy works in his spare time to promote and
raise funds for GATA aimed at publicising his
conspiracy theory. Originally, the movement
wanted to bring down the establishment through a
lawsuit and funds went towards those costs.
According to Murphy, GATA has received a
staggering $480,000 in donations from individuals
and gold corporations since its launch in 1999.

"The South African gold producers have been
especially helpful," Murphy says. "Years ago a
number sent us between $10,000 and $70,000. I
would guess around 40 companies in total have
made contributions to GATA."

Staunch GATA supporter Reg Howe filed the
suit in 2000 against the Fed, several banks, Federal
Reserve Chairman Alan Greenspan and then-Treasury
Secretary Lawrence Summers for their alleged
manipulation of the gold market.

Howe, who was described by one industry analyst as
"ferocious," had his day in court but the case was
thrown out on a series of technicalities.

There has been no sign of another lawsuit from Howe
since then, and Murphy has dedicated his time to
spreading the word of GATA at gold industry
conferences and through his commentaries.

He is, according to people who have seen him speak
at his own conferences, a charismatic performer,
exuding an almost-religious fervour in his belief in
gold as a vital asset in any investor's portfolio and
in his conspiracy theory.

"He's all: 'The day is nigh: buy gold before it's too
late,'" says one observer who saw him speak at a
GATA conference. "He's like a preacher and the
audiences have a messianic vision. He can really
pull a crowd in."

But it is an emotive issue and one that generally
provokes ridicule and derision from the gold
industry. Analysts variously describe GATA and its
members as "loons," "crazy," and "raving mad."

When asked for his opinion on Murphy, one
high-profile London gold analyst even quips:
"What? Printable thoughts?"

"If you believe it, then the moon's made of
cheese," he adds.

With irrepressible anger and incredulity that the
mainstream does not agree with his theory, the
former football pro stands his ground with grim

"They have no backbone, no great leader," Murphy
says of his critics. "They're afraid of the central bank
governors and banks. They're doing business with
banks" involved in the alleged conspiracy.

After the failed lawsuit, GATA hit the headlines
again this summer after well-known Canadian
market strategist John Embry of Sprott Asset
Management issued a 71-page report that said
there is a core of truth to the claims that gold is
being "managed" by central banks and financial

Embry is a long-time supporter of GATA and the
report largely draws on GATA data, but his
endorsement is viewed as the new jewel in the
movement's crown.

With his usual fighting talk, Murphy told Metal
Bulletin after the report was published in August:
"Things are finally starting to happen. The battle
is still on."

GATA disciples are mostly members of the public
without ties to the investment community. One
critic said his followers come from "deeply
conservative middle America that does not trust
paper or the government."

Unsurprisingly, Murphy is shouting about the
report from the rooftops.

"To believe that central banks and bullion banks
have worked together for years to keep the gold
price down no longer puts you on the fringe in the
investment world," he subsequently told his
followers. "The Sprott study reflects the growing
conviction among mainstream investment
professionals that the banks have been playing
with the gold market to mask their recklessness
with the world economy."

He and his team of researchers have gathered
evidence to prove that central banks have acted
in concert as part of a government-sanctioned plot
with certain investment banks to manipulate the
price of gold.

Central banks are thought to have intervened in
the gold market in the late 1990s to prevent a
meltdown among bullion banks as the gold price
ran up.

Central banks strategically timed announcements
of large sales of gold to coincide with a rally in the
gold price with the specific aim of supporting the
value of the dollar. A strong gold price might
encourage foreign investors with dollar-denominated
assets to sell in favour of gold.

GATA cites the Bank of England's well-publicised
announcement of a sale of 415 tonnes of gold in
early 1999 as evidence that the central banks
deliberately manipulated the gold price that was
on the brink of a rally. Gold lost $30 in value on the
news to $260 per ounce.

It is widely understood that uncoordinated central
bank gold sales unnerved the market and pressured
prices. And it was for this very reason the original
Central Bank Gold Agreement, also known as the
Washington Agreement, was signed in September

The industry considers the agreement as having
been fundamental in stabilising the price of gold
when equities were a more attractive investment
vehicle during the dot-com boom.

"The agreement provided sufficient certainty as
to the volumes and timing of sales, thereby helping
to minimise their impact on the price," UK-based
precious metals consultancy GFMS said in its
April Gold Survey.

The tone of the latest pact, first announced in
March, was similar. "Gold will remain an important
element of global monetary reserves," the banks
said jointly.

The World Gold Council also welcomed the new
terms. "We believe this reaffirms the confidence of
the central banks in the future of gold as a reserve
asset," it said.

But GATA dismisses these proclamations as a cover
up because the signatories are involved in the "cartel."

GATA follower James Turk responded to the central
bank statement with a commentary on March 15
entitled "Eight reasons to ignore the new central bank
gold agreement."

Central banks "operate in secret, and any pretence of
openness is just a sham," he wrote.

But the GATA conspiracy is more complicated than
just the timing of these gold sales.

Murphy also believes that the central banks have never
actually sold the gold but have instead been involved in
"carry trades" whereby they lend gold reserves at a low
interest rate to the bullion banks, which have in turn
sold or lent the metal out at a higher rate.

As the theory goes, the Gold Cartel has had to continue
selling gold reserves, despite running low, to suppress
the gold price and prevent the chaos that would ensue
should the loans be called in with a strengthening
gold price.

And the central bank reserves are now dangerously
close to running out, with GATA estimating stocks at
only 16,000 tonnes.

According to consensus estimates calculated by GFMS,
central banks hold significantly more -- around 32,000
tonnes of gold -- and have lent out only 4,000 tonnes,
the bulk of which has been used for hedging purposes.

Market participants concede that "carry trades" were
probably carried out but not on the size and scale of the
GATA claims.

"In 1998-99, there was some of it going on," says one
London analyst. "But there was several hundred tonnes
of gold in activity, not several thousand tonnes."

GATA's detractors also say GATA is very selective in
its use of statistics and twists facts to fit its theory.
In fact, some have long since given up even debating the
allegations with Murphy and his clan. Analysts say
attempts to discuss the issue simply degenerate into
mudslinging and personal snipes.

"The government agencies have said there is no
conspiracy," one seasoned industry analyst observes.
"The U.S. Federal Reserve gives reasonably detailed
information on U.S. gold holdings and locations. But
GATA alleges that these people are lying."

"How do you have a debate" about that, he asks.

Another London-based analyst voices concerns that
Murphy and his clan could actually damage the
precious metal's reputation as a long-term valuable
investment tool.

"We chuckle at them, but they've done damage,"
the analyst says "People think: 'If this is the quality
of the investors [in gold], then gold must be pretty

However marginal Murphy may be, he is not going
to be deterred until his theories are proved right.

"We are waiting for the right opportunity to move
next," Murphy says. "For the moment, we are doing
what we can to get the press and gold companies to
read the Sprott Report on gold."

In the meantime, he has a busy schedule. He will be
speaking in Toronto in early October and has a GATA
luncheon planned for the middle of November at the
New Orleans Investment Conference.

Undoubtedly, all this will be handled with gusto and
dedication to his cause. After recovering from one
particularly heated conversation with Metal Bulletin,
he says: "I am much calmer today. Disgusted at the
bad guys as usual, but calmer."


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