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The Manipulation Of The Gold Market

Section: Essays

The key to understanding the manipulation of the gold market, this enormous scandal and fraud, is that it can be compared to a murder trial. In the United States a murderer can be put to death if he is found guilty beyond a reasonable doubt. Many times murder defendants are convicted based solely on "circumstantial" evidence because a reasonable person could reach no conclusion other than guilty.

For seven years GATA has discovered one piece of evidence after another supporting our long-held contention that the gold market is managed by certain central banks and their agents, the bullion banks. It is a price-fixing case involving some very powerful people and institutions … in fact it is a Gold Cartel. The U.S. attorney handling the Samsung conspiracy conviction said in an interview this fall that the United States had experienced an "epidemic" of price-fixing cases in the late 1990s. All GATA has done is uncovered one of them, the grandest of all.

For one to appreciate how this can go on and on and not be brought to the attention of the public, one need only to reflect on Enron and Refco. Before its initial public offering of stock, Refco was audited by the most highly regarded firms on Wall Street and nothing wrong was discovered. Yet look at what was really transpiring behind the scenes. Now the company is bankrupt and under criminal investigation.

That said, GATA does have its "smoking gun." It has to do with derivatives and central bank gold. The mainstream gold world says the central banks have nearly 32,000 tonnes of gold in their vaults (minus a small amount that has been sold in recent years or is on loan to gold producers for their hedging operations). GATA says the central banks have less than half of that -- the difference being what was clandestinely fed into the market to suppress the gold price over the last 10 years. The work of three respected GATA consultants -- Reg Howe, Frank Veneroso, and James Turk -- each using different methodologies, supports GATA's contention of vastly diminished central bank gold supply.

Veneroso made a presentation at GATA's African Gold Summit in Durban, South Africa, on May 10, 2001, laying out why the central bank gold loans are far higher than generally believed. This presentation, "Facts, Evidence and Logical Inference ... A Presentation On Gold Supply/Demand, Gold Derivatives and Gold Loans," may be reviewed at:

Howe and Turk have done the same at their Internet sites: and
Meanwhile the International Monetary Fund has instructed central banks to lie about their gold reserves -- to count gold loans and swaps as gold in their vaults. So as not to be so audacious without backup to validate our more than dramatic claim, let me explain. Canadian GATA supporter Andrew Hepburn posed the following question to the IMF in October 2001:

Why does the IMF insist that members record swapped gold as an asset when a legal change in ownership has occurred?


The IMF responded:

"This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets. (See Data Template on International Reserves and Foreign Currency Liquidity, Operational Guidelines, para. 72,"

(For more on this, see The IMF link mentioned above is no longer operating. It was in 2001 as noted in the GATA dispatch.)

Yet a footnote on the Internet site of the central bank of the Philippines contradicts the IMF's claim and reveals it to be bogus:

"Beginning January 2000, in compliance with the requirements of the IMF's reserves and foreign currency liquidity template under the Special Data Dissemination Standard (SDDS), gold swaps undertaken by the BSP with non-central banks shall be treated as collateralized loans. Thus, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap."


The European Central Bank and other central banks corroborated exactly what the central bank of the Philippines declares about counting gold loans the same as gold in the vault.

The "smoking gun" part of this has to do with the gold derivatives on the books of the Bank for International Settlements in Switzerland. The gold establishment says the gold derivatives on those books have been associated with gold producer hedges. Yet in the last four years gold producers have reduced their hedges by more than 2,000 tonnes of gold, or more than 50 percent of their hedging at its peak. Consider this excerpt from a Reuters report from November 8, 2005:

"LONDON -- .... The Hedge Book report produced by Haliburton Mineral Services and industry consultants Virtual Metals said the so-called hedge impact of the global book fell by 1.0 million ounces to 52.8 million ounces. ... The global hedge impact in the July-September quarter was just more than half its level in the same quarter of 2001 when it peaked at 102.8 million ounces."

Meanwhile, gold derivatives have gone up during that period of time, not down. While these are complicated and technical, Howe updated GATA's evaluation of the BIS gold derivatives in a report he posted at in June, "Gold Derivatives: Skewing the World":

"On May 20, 2005, the Bank for International Settlements released its regular semi-annual report on the over-the-counter derivatives of major banks and dealers in the G-10 countries for the period ending December 31, 2004. The total notional value of all gold derivatives rose from $318 billion at mid-year 2004 to $369 billion at year-end. As subsequently detailed in table 22A of the June issue of the BIS Quarterly Review, released June 13, 2005, forwards and swaps increased slightly from $129 to $132 billion while options rose dramatically from $189 to $237 billion."

Howe's report can be found here:

The only explanation for the dichotomy between the reduced hedges and the increased gold derivatives on the books of the BIS is undisclosed lending of gold and writing of central bank call options associated with the price suppression scheme.

There is one other anecdotal point to make proving how right GATA has been all along and what it means for gold investors in the years to come. For years GATA has claimed that the key to the eventual surge in the price of gold was the rising physical demand for gold amid the diminishing supply of central bank gold used to suppress the price. The gold establishment has associated the rise in the price of gold over the years with the weakening of the U.S. dollar. GATA has claimed otherwise.

We said the Gold Cartel was using the action of the dollar for price-rigging purposes. GATA has said over and over that the price of gold could rise hundreds of dollars per ounce and the dollar do nothing relative to other currencies. We said it would happen when the gold cartel began to lose control of its price manipulation scheme.

Well. ...

The euro came into existence on January 1, 1999, at $1.17. The price of gold that day was $284. As this is written in mid November 2005, the euro approached $1.17 again while gold has rocketed $194 per ounce since the beginning of 1999.

Here's more that helps to prove GATA's case about the gold market. At the beginning of 2005 gold was $420 and the euro was $1.30. In mid November the euro was trading at $1.17. But the price of gold was $478. The argument that gold is tied to the dollar has gone the way of the Dodo bird. Of course, should the dollar crash, which it should, this can only help the gold price.

The price of gold is headed to well beyond $2,000 per ounce. GATA knows why.

Now you do too.


Bill Murphy is chairman of the Gold Anti-Trust Action Committee and proprietor of, an Internet site devoted to financial commentary with emphasis on the precious metals. He can be reached at