James Turk shares GATA''s analysis



By Stephen Wyatt
(For a news service in Australia)

With the gold price slumping to 20-year lows, the pro-
gold lobby is becoming increasingly hysterical.

Internet-spread conspiracy theories about big
business/big government plotting to drive down the gold
price have exploded.

Emotions were especially fanned earlier this month when
the Bank of England said it would sell almost 60
percent of its gold reserves. It was the timing of this
announcement that triggered some serious neurosis in
the gold bug community and even some consternation in
the gold industry itself.

It hit the gold market in the midst of a strong, and
for gold, rare rally when the price was testing $US290
an ounce.

The share prices of gold companies were also bolting
higher. Australian gold stocks hit six-month highs on
May 7.

But the bottom fell out of the market on the Bank of
England news.

"The reality is that conspiracy theorists are rarely
correct," the managing director of New Hampton
Goldfields Lts, Nick Limb, said.

"But the day the Bank of England announced that it was
going to sell gold was an amazing day. It was the most
positive day in the gold equity markets for a couple of

"When you see it" -- the sale announcement -- "done so
blatantly, you have to ask why."

And now, with the help of the Internet, the plot
promoters are busily sending out their message to all
who will listen.

One US-based group, the Gold Anti-Trust Action
Committee (GATA), retained anti-trust and securities
law firm specialists Berger & Montague to investigate
the alleged manipulation of the gold market.

GATA chairman Bill Murphy claims it has evidence that
the price and supply of gold are being controlled by a
cartel of Wall Street investment houses and bullion
banks with the possible encouragement of the Federal
Reserve and the U.S. Treasury.

"This collusion violates anti-trust laws and exposes
the perpetrators to triple damages," he said.

"It has been devastating to the entire gold community.
We believe one of the reasons that various financial
institutions are acting in concerted action to hold
down the gold price is that they are now short hundreds
of tonnes of borrowed gold and that the speculative
community is short 3,000 tonnes, or more."

Murphy also argues that gold loans have become so large
that an international "systemic risk" problem had now
been created.

If the price of gold rose unexpectedly even to a
moderate degree, GATA claims many gold borrowers would
not be able to find enough gold quickly enough without
driving the price into the stratosphere. Gold lending
and borrowing, by way of explanation, is a regular
practice in the gold market.

Speculators or gold producers borrow gold to facilitate
forward sales.

Most bullion dealers, like the manager of commodity
derivatives at Westpac in Sydney, Geoff Clear, admit to
being amused by GATA's allegations.

One well-known gold analyst, the precious metals
analyst at Mitsui Metals in London, Andy Smith, when
asked what he thought about GATA and its views, said:
"I don't think about it," implying that the theories
are so irrational that they deserve no publicity at

Gold is the only commodity that can generate such
strong emotional responses because it was, once, more
than a commodity.

Back in the 1800s it was the central medium of exchange
for international trade and for almost 300 years the
world was on a gold standard.

But no longer.

Gold's demise is a reflection of the new economy. It is
a reflection of globalization, the free float of
currencies over the past 15 years and a new world of

Some, particularly those on the far right in U.S.
politics, see it as a government plot to debase gold to
ensure the permanent dominance of paper currency. And
they distrust currency as much as they distrust

They argue that as currencies are issued by government,
they can be influenced more by government policy than a
"real" substance, like gold.

So it is but a small jump from this to the proposition
that there is a conspiracy in play to drive down the
world gold price.

And GATA provides an interesting example of this.



eGroups.com home: http://www.egroups.com/group/gata