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Central banks are steadily losing their cover in the gold market

Section: Daily Dispatches

10:55p ET Thursday, December 15, 2011

Dear Friend of GATA and Gold:

Thanks to the latest commentaries by Brady Willett of Fall Street, Tom Szabo of Metal Augmentor, and Jim Willie of the Golden Jackass, more people are realizing the potential for market manipulation through central bank gold leasing, of which there lately have been strong indications.

In "Did Ron Paul Slay the Gold Bull?" Willett remarks that favorable lease rates "allow powerful interests to more readily manipulate gold":

In "Charlatan Exposed: Negative Gold Lease Rates," Szabo writes: "The gold forward rate has increased during both the late September and current selloffs in gold, which probably means that gold is being leased by central banks in order to provide liquidity for the banking system. ... The gold bugs are essentially right that the gold price is falling this time because paper gold is flooding the market."

... Dispatch continues below ...


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Szabo seems to concur with GATA's interpretation of the London Bullion Market Association as a fractional-reserve gold banking system generating a lot of imaginary gold for price-suppression purposes. He writes: "Other than the use of unallocated gold for swap, collateral, or trading purposes, the only other reason why an owner of gold would seek to 'deposit' physical gold with an LBMA member in an unallocated bullion account would be to avoid storage fees associated with allocated gold. It is not known to what extent the LBMA unallocated account is used by customers to avoid storage fees, but a significant amount of gold, perhaps several thousand tonnes, has been converted to paper form as a consequence of the bullion banks' business. The theoretical result is that the paper gold will have to be converted back to physical metal in the future when the customer requests a withdrawal. We say 'theoretical' because the gold market may not be able to handle mass withdrawal requests from unallocated account holders should a future monetary crisis make all counterparty risk untenable. In fact, mass withdrawal requests would probably lead to a default in those LBMA unallocated accounts that are not backed by physical metal. At the present time, that would be most if not all of them."

Szabo's commentary is posted at Metal Augmentor here:

And in "Pathogenesis of Central Bank Ruin," Willie writes: "The gold market has gone into the Twilight Zone. The ruin of the European banking system, dragged down by toxic sovereign debt, has made the big European banks desperate. They are tapping into the virtually unlimited dollar swap facility, using borrowed money to lease gold. The Powerz have made the lease rate negative in order to attract borrowers."

Willie's commentary is posted at GoldSeek here:

And at 24hGold here:

All this points to constant surreptitious intervention by central banks and their agents in the gold market, and as the Bank of England said this week, while the public and the markets may be given some access to records of that intervention on a historical basis, they must not be allowed any knowledge of that intervention contemporaneously -- must not be allowed to know exactly how central banks are intervening today. (See

No, contemporaneous information about the surreptitious central bank intervention in the markets is the preserve of the investment banks that serve as the central banks' agents and are rewarded with the right to trade on inside information.

This is all as obvious as sunrise and sunset, and GATA is as tired of belaboring it as many of you may be to hear it. But it remains so important because it cannot yet be reported or even asked about by the mainstream financial media, even as its only utility is in its surreptitiousness.

That surreptitiousness could be exploded tomorrow, changing the world. Maybe it was already exploded tonight by Willett, Szabo, and Willie. Or maybe exploding it will take many more years. After all, those who would explode it are up against all the money and power in the world, or nearly so. But as Lee Strasberg's Hyman Roth coughed out in one of "The Godfather" movies, "This is the business we've chosen." We will have to press on in the morning.

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

* * *

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