You are here

How do we know central banks rig the gold market, and what can we do about it?

Section: Daily Dispatches

By Wistar Holt
Sunday, August 14, 2005

In July 1897 the small steamship Excelsior docked in San Francisco
with well-worn but enthusiastic miners returning from the Klondike
region, 1,500 miles to the north. As they disembarked carrying large
quantities of gold, word spread like wildfire. When another
steamship, the Portland, arrived a couple of days later in Seattle
with 68 miners carrying nearly 32,000 ounces of gold, the
word "Klondike" grabbed the headlines. Within days thousands left
their homes to head north and a gold rush was born.

Another gold rush began on August 7, 2005, as a hundred gold
proponents ascended into the Klondike town of Dawson City, Yukon
Territory, Canada, for Gold Rush 21. What these people sought was
not gold but the truth -- truth about the central banks; truth about
bullion banks; truth about liquidated, leased, and physical gold;
and truth about derivatives, the U.S. dollar, and gold and silver
price suppression. Representing 14 countries, some of these
delegates sought answers and evidence, while the veterans among them
strived for exposure for their message.

Fueling the gold rush of 1897-98 were the nation's dire economic
conditions, as bread lines were common and opportunities scarce. The
grounds of Gold Rush 21 were fertilized by questionable U.S.
government reports on weapons of mass destruction in Iraq,
underreported inflation, "hedonic" economic statistics, and a
Federal Reserve chairman who claims that asset bubbles cannot be
identified before it is too late.

The purpose of the Gold Anti-Trust Action Committee in calling this
conference was to disclose to the financial world that the precious
metals have been manipulated and suppressed for years. This
suppression of their prices allows asset bubbles to occur, causing
consequences for all markets, so it is important that something be
done about it.

Much of the evidence of this manipulation was initially supported
with a discussion of GATA's original findings in 1999, including
the extensive research of market analyst Frank Venerosa, who
concluded that more than half the supposed 30,000 tons of central
bank gold holdings had surreptitiously been sold or leased out.

Further evidence of manipulation was documented in the unraveling of
traditional relationships between gold, oil, and the CRB (commodity
price) index. The inexplicable fact that gold never seems to be able
to rise more than $6-7 per day while double-digit declines occur
periodically lends suspicion. The frequent rout of the price of gold
for no apparent reason upon the opening of the Comex paper
derivative gold market is also peculiar. Additionally, it was
pointed out that European central banks appear to target a certain
gold price -- $440 per ounce -- to limit gold's upward momentum.

From a macro standpoint, the rationale for the suppression of gold
and silver was discussed. Central banks and bullion banks have a
vested interest in keeping gold as low as possible. To the central
banks, gold is a barometer, a lightning rod, or as one top
international money manager describes it, "the canary in a coal
mine." If or when gold takes off to the upside, the fear is that
investors will begin to worry about the general health of the
financial system.

Since there has been such enormous liquidity created in our system,
asset bubbles have developed in stocks, bonds, real estate, and
credit. A rise in gold may cause investors to worry and retrench,
whereby these assets may deflate as the technology bubble did in
2000. This could do enormous damage to the U.S. and global economies.

On the other hand, the bullion banks are interested in maintaining a
low gold price for other reasons. Collectively they are massively
short millions of ounces of gold, going back to the early 1990s.
While prospering enormously for many years from the carry trade in
which they shorted gold and invested the proceeds in higher interest-
bearing instruments, they are extremely vulnerable, because of their
short positions, to large losses should gold rise much higher. In
addition, since gold competes with traditional asset classes like
stocks and bonds, bullion banks stand to lose a lot of revenue
should investors become concerned and reduce their exposure to those
assets.

There was much discussion at Gold Rush 21 about the vulnerability of
the U.S. dollar. The worsening trade, current account, and budget
deficits, as well as rising debt levels, are expected to wreak havoc
on the U.S. economy and its fiat currency. The days of the dollar as
the world reserve currency are unwinding. This vulnerability, as
pointed out by many speakers, is why gold and silver are so
important today. The metals provide intrinsic value independent of
governments because they are no one's liability.

Speakers made proposals to restore economic stability, reaching out
to individuals as well as governments. These suggestions ranged from
protecting oneself via a high degree of ownership in the metals
(and/or mining stocks), to having governments introduce precious
metal coinage along with their fiat money, to a far-reaching cry for
an international gold standard that would provide stability to all
global currency values.

Notably absent from Gold Rush 21 were most major mining companies,
many of which I had personally invited. Giving credit to Agnico-
Eagle Mines Ltd. as well as several junior miners who supported the
conference and GATA, I am convinced that management of most of these
absent companies privately believes that the precious metal markets
are indeed manipulated. But I suspect that they fear retaliation
from both governments and the bullion banks.

Governments frequently are asked to approve mining projects while
bullion banks are often solicited to finance them. Thus,
unfortunately, many of these companies probably feel a need to
maintain a low profile.

Nevertheless, GATA will continue to seek their moral and financial
support, since this battle is very much their own. Specifically, a
DVD of the conference will be delivered to all major mining
companies and followed up on.

To stress the point further, on August 4, just prior to my departure
for Gold Rush 21, I e-mailed the following letter to an executive at
Hecla Mining:

* * *

Dear Vicki:

Seeing your stock down 32 cents today (7 percent), more than
negating the industry-led rally yesterday, makes me disgusted.
Perhaps your problem is not really attributed to labor problems in
Mexico or cost overruns in Venezuela. Rather, in my opinion, it is
related to the suppression of the price of silver (and gold). This
is why GATA has launched Gold Rush 21. Yet your company's
management and many others in the industry have chosen to ignore the
obvious.

* * *

The optimism among gold supporters at Gold Rush 21 was high. Many
feel that before year's end gold will break out to multi-year
highs of $500 per ounce. Longer-term targets over the next couple of
years are significantly higher. The feeling was that fundamentals
such as the escalating price of oil and other commodities, as well
as weakness in the U.S. economy and the dollar, will continue to
strengthen the physical gold market. Strong demand in international
markets such as India, China, Turkey, Russia, and the Middle East
will continue.

Foreign markets may continue to provide the greatest opportunity for
GATA to help investors realize how cheap gold is. At the same time,
certain bullion banks may be forced to limit their losses, cover
their shorts, and cease their suppressive activity. In addition, as
the dollar continues to weaken, certain central banks may convert
their large dollar holdings into gold in order to protect their
reserves. This would make it harder for the suppression activity to
continue.

Perhaps ironic or not, gold rallied nearly $10 per ounce on
Thursday, August 11, the day after the conference ended. It was the
largest increase in a single day since I initiated my gold equity
positions in January 2001. Is it possible that GATA's Gold Rush
21 has already made a difference? Time will tell.

But when I heard conference attendee Andrey Bykov, an adviser to
Russian President Vladimir Putin, say, "This is the finest
conference I have ever been to," it seemed that the message about
gold was getting out. After all, Russia is one of the major gold
producers and its central bank has been adding to its gold reserves.

Let there be no mistake: It will take time for gold to reach its
appropriate value. It will require patience on the part of the
investment community as we continue to battle the oppressive forces.
Four and half years ago I considered gold to be the absolute best
investment opportunity of my (then) 21-year asset management career.
Today nothing has changed. The fundamentals are even more
compelling. Those with patience will be well rewarded.

-------------

Wistar Holt is partner in Holt & Shapard Capital Management LLC in
St. Louis, Mo., and a member of GATA's Board of Directors. He
attended Gold Rush 21.

----------------------------------------------------

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

To unsubscribe, send an e-mail to:

gata-unsubscribe@yahoogroups.com

----------------------------------------------------

RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS

Free sites:

http://www.jsmineset.com

http://www.cbs.marketwatch.com

http://www.mineweb.com/

http://www.gold-eagle.com/

http://www.kitco.com/

http://www.usagold.com/

http://www.usagold.com/amk/usagoldmarketupdate.html

http://www.GoldSeek.com/

http://www.GoldReview.com/

http://www.capitalupdates.com/

http://www.DailyReckoning.com

http://www.goldenbar.com/

http://www.silver-investor.com

http://www.thebulliondesk.com/

http://www.sharelynx.com/

http://www.mininglife.com/

http://www.financialsense.com

http://www.goldensextant.com

http://www.goldismoney.info/index.html

http://www.howestreet.com

http://www.depression2.tv

http://www.moneyfiles.org/

http://www.howestreet.com

http://www.minersmanual.com/minernews.html

http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html

http://www.goldcolony.com

http://www.miningstocks.com

http://www.mineralstox.com

http://www.freemarketnews.com

http://www.321gold.com

http://www.SilverSeek.com

http://www.investmentrarities.com

http://www.kereport.com
(Korelin Business Report -- audio)

http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)

http://www.resourceinvestor.com

http://www.miningmx.com

http://www.prudentbear.com

http://www.dollarcollapse.com

http://www.kitcocasey.com

http://000999.forumactif.com/

http://www.golddrivers.com/

http://www.goldpennystocks.com/

Subscription sites:

http://www.lemetropolecafe.com/

http://www.goldinsider.com/

http://www.hsletter.com

http://www.interventionalanalysis.com

http://www.investmentindicators.com/

Eagle Ranch discussion site:

http://os2eagle.net/checksum.htm

Ted Butler silver commentary archive:

http://www.investmentrarities.com/

----------------------------------------------------

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com

Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net

Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com

Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com

The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066

----------------------------------------------------

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

http://www.gata.org/creditcard.html

By GoldMoney:

http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.

Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.