Martin Armstrong Gets the Last Word


12:10 a.m. Sunday, May 16, 1999

Dear Friends of GATA and Gold:

GATA hit the business page of the Sunday London
Times today, and some of the quotations about us
were favorable. This is a very encouraging development:
GATA's first break in one of the world's major
newspapers. The article follows.

Secretary, Gold Anti-Trust Action Committee

* * *


By Kirstie Hamilton
City Editor
Sunday London Times
May 15, 1999

The gold market is seething with Internet-inspired
rumours of a huge conspiracy in which some of the
world's biggest financial institutions are alleged to
be suppressing the price of gold.

Everyone from major European and American investment
banks through to the Bank of England and America's
Federal Reserve have roles to play in the story, which
at its most dramatic stretches the credulity of even
the most dedicated conspiracy theorist.

But milder versions are being taken seriously by some
of the gold business's establishment figures, including
the chairman of South Africa's second-largest gold
producer and the heads of two European gold producers.

Those allegedly involved in the plot throw up their
hands in despair at the tales being given any credence.
"This is complete baloney," said the representative of
one bank alleged to be part of the conspiracy.

The stories, which have been building over recent
months, have exploded since the Treasury announced
earlier this month that it will sell half of Britain's
gold reserves in a series of auctions.

Bill Murphy, an American Internet commentator, has even
set himself up as chairman of the Gold Anti-Trust
Committee, a pressure group calling for an
investigation into the price-fixing allegations. The
group has hired Berger & Montague, a Philadelphia law
firm that specialises in anti-trust cases.

"We are conducting an investigation into what we
believe is going on, which is manipulation of the gold
market," Murphy said. He has also been to Congress to
explain what he believes is happening.

The Treasury's decision to announce its sale programme
was the stuff of nightmares for producers hoping the
gold price might finally be starting to recover. It
sent the price tumbling by $8 to $280 an ounce.

Analysts and commentators have begun to create
elaborate theories about why the gold price has
stubbornly refused to rise despite a rise in underlying
demand. Central to these is the suggestion that a
number of big banks have huge short positions in gold,
either on their own account or on behalf of clients.
Short positions are created by selling gold into the
market in the expectation of being able to buy back
later at a lower price. While the gold price remains
low, the banks profit from their short positions.

Should the price suddenly rise, their gains quickly
become losses. At its extreme, the theory suggests that
the big investment banks may have been able to persuade
central banks around the world to help them keep the
price of gold down.

"There are parts of this conspiracy theory that I am
sure are not true," said Chris Thompson, chairman of
Gold Fields, one of South Africa's biggest gold
companies. But he said that there was a large amount of
circumstantial evidence that investment banks were
involved in a plot.

Internet gold commentators have suggested one American
bank's exposure to the gold market could be up to 1,000
tonnes -- more gold than is stored at Fort Knox.
Insiders at the bank concerned deny the position
approaches those levels, but officially the bank
declines to comment.

"The behaviour of the gold price has been very odd over
the last six months," said Peter Hambro, a member of
the Hambro banking family and owner of a gold mine in
the south of France. "In spite of reports of
substantial demand for physical gold and major economic
and political uncertainties, such as the war in Kosovo,
the gold price has not responded in the way one might
expect. "Parallel to that we have seen insistent
reports from Internet commentators of big market
operations by a few investment banks. Circumstances
support the theory that there is a cap being put on the

Chris von Christierson, chairman of Rio Narcea, which
mines gold in Spain, is also concerned. "I have never
been a believer in conspiracies, but every time the
gold price is about to break out, it gets hit again,"
he said.

But some analysts dismiss the conspiracy option,
maintaining that the gold price is likely to remain
under pressure while central banks continue to offload
supplies of what they see as a poor-performing

The Treasury's gold sales announcement has attracted
criticism from a number of quarters, particularly for
the manner in which it was done. By flagging the sales
ahead of time, some critics have suggested, the Bank
and the Treasury have further depressed the price.

Even a former Bank executive has joined the chorus of
disapproval. Terry Smeeton, former head of foreign
exchange at the Bank, said the gold sales would damage
the gold market, and that he would not have undertaken
them had he still been at the Bank.

The Bank defended the sale decision, and insisted that
it had agreed with the Treasury on the policy. "This is
exactly the way the gold sales were done in the
Seventies by the IMF," said a spokesman. "We think
markets work best where they have full information."

The conspiracists hope that publicity will help to
uncover any plot to suppress the gold price. The worst-
case scenario, of course, is not so much of a giant
conspiracy but something far more miserable. Without a
conspiracy the gold producers might have to face the
unthinkable: has gold lost its shine forever?