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Chris Powell: Gold and silver are crucial to the liberation of all markets
Remarks by Chris Powell
Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Wednesday, October 24, 2012
The first thing to understand when you're investing in the resource sector is that all major markets are now manipulated, mostly surreptitiously, by governments. There are a few reasons for this explosion of manipulation but the big ones are that the world economy has grown terribly unstable in recent years (in large part because of smaller manipulations by governments) and because an international currency war has broken out.
The gold and silver markets are the most manipulated of all because they involve currencies that compete with government currencies and because gold is a primary determinant not just of the value of currencies but also of interest rates and the value of government bonds. The gold market particularly is the key to all other markets.
This market rigging isn't farfetched or wild conspiracy theory stuff. For starters, in the United States it's the law. In 1934 the United States enacted the Gold Reserve Act specifically to create the Exchange Stabilization Fund within the Treasury Department and authorize it to trade in gold and related financial instruments. As it has been amended, the Gold Reserve Act now allows the ESF to trade not just in gold but in any financial instruments and to do so entirely in secret, exempt from answering to Congress or anyone else.
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You can confirm this at the page of the Treasury Department's Internet site describing the Exchange Stabilization Fund:
As for silver, in 1965, as he signed the legislation removing silver from United States coinage, President Johnson warned investors not to buy silver in the hope of a rising price, because, he said, the government would dishoard as much silver as necessary from its silver stockpile to keep the price down. Whether and how the government has manipulated the silver market since then is arguable, but the government's interest in manipulating the price of silver, a monetary metal, is a matter of longstanding public record.
President Johnson's statement committing the government to rigging the price of silver even after its demonetization is posted at the presidential archives section of the Internet site of the University of California at Santa Barbara:
In fact, documentation of the manipulation of the gold and silver markets is all over the place.
For many years GATA has been compiling and publishing it in the "documentation" section of our Internet site:
Indeed, more documentation of it came out just Monday this week when the German government's auditors office issued a report criticizing the German central bank, the Bundesbank, for negligence in its custodianship of Germany's national gold reserves:
The auditors report disclosed that the Bundesbank had secretly sold some of the German gold reserves vaulted at the Bank of England in London. But since the sale of Germany's gold in London apparently did not reduce the total official holdings in Germany's gold reserve, the sale was probably part of a gold swap with another central bank. That is, it probably was a transaction in which Germany sold its gold in London on behalf of that other central bank and in exchange took title to gold owned by the other central bank and vaulted elsewhere.
This would fit exactly what GATA learned when, in 2009, it sued the Federal Reserve in U.S. District Court for the District of Columbia to gain access to the Fed’s records involving gold swaps.
Last year GATA more or less won that lawsuit. While most of the Fed's records involving gold swaps were still denied to us by the court, one very telling record was ordered disclosed, the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee. And, as a result of all the questioning of Fed officials we did during the court case, we extracted a spectacular admission from a member of the Fed's Board of Governors, Kevin M. Warsh. Fed Governor Warsh admitted in writing that the Fed has secret gold swap arrangements with foreign banks.:
The only purpose of secret gold swap arrangements is secret intervention in the gold market.
Emboldened by the success of our informational lawsuit against the Fed, a few weeks ago GATA undertook an amazing new method of learning what other Western central banks are doing in the gold market, a method never attempted before by academic scholarship or mainstream financial journalism:
That is, we asked them. One by one, we put some very specific questions to a few of them.
Questioning central banks about gold has never been attempted by financial market academics, analysts, and newsletter writers, nor by mainstream financial journalists because they simply take for granted that central banks operate in secret. Central banks control the value of all capital, labor, goods, and services in the world -- that is, central banks exercise nearly absolute power -- but financial market academics, analysts, and newsletter writers and mainstream financial journalists seem to believe that central banks are somehow exempt from the ancient principle that power corrupts and absolute power corrupts absolutely.
GATA's questions were posed through the German freelance journalist Lars Schall to the Bank of England, the Bundesbank, and the Bank for International Settlements, as well as to the Fed and Treasury Department and JPMorganChase & Co., that investment bank being in effect an agency of the U.S. government.
The Fed, Treasury Department, Bank of England, and JPMorganChase refused to answer our questions about involvement in the gold market.
The Bank for International Settlements, headquartered in Basel, Switzerland, also refused to answer but did acknowledge that it trades secretly in the gold market on behalf of its member central banks. Of course the BIS refused to explain the purposes of that trading, but then in 2006 GATA obtained and published a speech delivered in 2005 by the head of the monetary and economic department of the BIS, William White, who said that a primary purpose of international central bank cooperation is to influence asset prices, especially the price of gold:
Lars Schall's account of his attempt to question the central banks and JPMorganChase & Co., including their evasions, has been published today at GATA's Internet site here:
Evasive as it was with Schall, the BIS remains a wonderful source of documentation of central bank manipulation of the gold market.
In April this year the Internet site Zero Hedge disclosed that a trader for the BIS, Mikael Charoze, identified himself in his Internet biography as the BIS' "foreign exchange and gold senior dealer" handling "management of liquidity for big amounts," including "interventions," and adding that he "holds and manages proprietary positions on all currencies including gold." A few days after Zero Hedge called attention to his biography, Charoze removed the references to interventions and gold:
In February this year one of GATA's European researchers discovered and we published the PowerPoint presentation made in 2008 by the BIS to prospective central bank members at a meeting at BIS headquarters in Switzerland. The presentation advertised the BIS' services to its members. Among the BIS services advertised were interventions in the foreign exchange and gold markets:
The complete presentation is here:
GATA's dispatch about it from February is here:
This week our researcher discovered that, two years later, in 2010, the BIS made a virtually identical presentation about its services, a presentation made to oil industry executives meeting in East Timor. But the BIS' 2010 presentation removed the reference to foreign exchange and gold market interventions. That's because the 2010 presentation was for outsiders and the public isn't supposed to know about market interventions by central banks. The modified page of the 2010 presentation is here:
Also this year GATA obtained official confirmations of gold price suppression from two former Western central bankers.
In April our friend the Dutch economist Jaco Schipper discovered the memoirs of the late Netherlands central bank president Jelle Zijlstra, who for some years was also president of the Bank for International Settlements. Zijlstra, who sat at the pinnacle of Western central banking and thus is pretty good authority, wrote that the gold price is suppressed by Western central banks at the instigation of the United States:
And in January this year our journalist friend Lars Schall reached former Fed Chairman Paul Volcker to ask him about a passage in Volcker’s memoirs, which, strangely, seem to have been published only in Japan. Recounting a currency revaluation in 1973, Volcker says in those memoirs that he regrets that intervention against the price of gold was not undertaken by central banks. Corresponding about this with Schall in April, Volcker confirmed his reflection about intervention against gold and said such intervention is necessary to "counter exchange rate instability at a critical point":
I'm sorry if all this manipulation of markets by government is getting pretty obvious to you -- it certainly is to me -- but in fact in polite company in the financial markets it is still either denied or ignored because it is too politically incorrect and explosive to acknowledge. For if you acknowledge this stuff, you realize that we don't have any markets at all anymore, just command economies in disguise.
If you're going to get into or stay into gold and silver you have to know what you're up against -- which is to say you’re up against all the money and power in the world.
This is how GATA sees things:
The great disparagement about gold is that even with its huge rise in price over the last decade it has not kept up with inflation. Somehow the obvious question is never asked: Why hasn't gold kept up with inflation?
GATA's research has concluded that gold has not kept up with inflation because, first, Western central banks did a lot of dishoarding and leasing of their gold reserves in the 1990s and, second, because Western central banks and their agents the bullion banks have created a vast imaginary supply of "paper gold."
This vast imaginary supply is essentially a monstrous naked short position in gold.
That is, much gold has been sold that doesn't exist because the Western central banks and their bullion bank agents have created a fractional-reserve gold banking system, a system that has worked because most big buyers of gold have not taken possession of their purchases but rather have left them on deposit with the bullion bank sellers. Since most buyers don't take delivery of their gold, the bullion banks know that they can sell more gold than they have, confident that Western central banks will rescue them in the emergency of a short squeeze.
Such a rescue was promised by Fed Chairman Alan Greenspan in his testimony to Congress in July 1998 when he said central banks "stand ready to lease gold in increasing quantities should the price rise":
That's what the Western central bank gold leasing and supposed gold sales of the last decade were about -- covering a short position that could not be covered from ordinary mine production.
Ask yourself: If Western central banks were, as they said, constantly selling gold from 2000 to 2010, how could the price have gone up steadily, pretty much at a 45-degree angle, throughout that decade? The gold price rose steadily during that time because those Western central bank gold sales almost certainly were not really sales at all but cash settlements of leased gold that could not be recovered without exploding the price.
That is, the gold in those supposed Western central bank sales had actually hit the market many years earlier and was not hitting the market when the sales were announced. Upon the announcement of the sales the gold was actually just being written off and surrendered as the Western central banks staged a controlled retreat with the gold price.
This still leaves this huge naked short position in gold in the bullion banking system and in the futures markets around the world, a naked short position that is starting to get squeezed as Eastern and developing-world central banks figure out the gold price suppression scheme and strive to hedge their U.S. dollar reserves.
We know from the U.S. State Department cables obtained and published by Wikileaks last year that the government of China knows all about the Western gold price suppression scheme because government-operated news organizations in China have repeatedly reported about it and translations of those reports were sent to the U.S. State Department in Washington from the U.S. embassy in Beijing. You can read those reports and U.S. embassy cables at GATA's Internet site here:
That is, China knows all about the gold price suppression scheme, which may be why China is accumulating gold so furiously at a discount. And the U.S. government knows that China knows.
GATA is betting that we can expose to the markets this naked short position in gold, bust the fractional-reserve gold banking system, and achieve a free and transparent market in gold and thereby help liberate all markets everywhere.
As you can see from their clumsy evasions of our questions, Western central banks are still betting that they can conceal all this market rigging forever, gold being the secret knowledge of the financial universe, since the control of gold enables the control of the value of all capital, labor, goods, and services in the world.
This Western central bank scheme is essentially totalitarian.
The Western central banks can be beaten at it -- they are being beaten slowly and steadily -- but it's a struggle every day.
It's GATA's struggle and we would welcome your support. A few weeks ago we made new informational requests of the Federal Reserve, Treasury Department, and State Department seeking access to all their records about gold, including international agreements to which the United States is a party. Of course the Fed and Treasury and State departments have not answered us, so we're now entitled to sue them again for access to their records. We have to raise some money for that. But GATA is recognized by the U.S. Internal Revenue Service as a tax-exempt educational and civil rights organization, so at least contributions to us are tax-deductible in the United States. If you're inclined to help, please visit our Internet site here:
This is a fascinating and, unfortunately, still mysterious field. Every investor should pursue it, and you can read the material we've collected at our Internet site:
Thanks so much for your kind attention today.
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Prophecy Platinum Intercepts Best Pt+Pd+Au Grades Yet
at Wellgreen Project in Yukon Territory: 5.36 g/t
Company Press Release
Tuesday, September 11, 2012
VANCOUVER, British Columbia -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) announces more results of its 2012 drill program on the company's fully-owned Wellgreen platinum group metals, nickel, and copper project in southwestern Yukon Territory, Canada. Four surface holes and four underground holes all intercepted significant mineralized widths, ranging from 28.5 meters (WS12-201) and up to 459.5 metres (WS12-193). Highlights include WU12-540, which returned 8.9 metres of 5.36 grams per tonne platinum, palladium, and gold; 1.73 percent copper; and 1.01 percent nickel within 304.5 meters of 0.66 g/t platinum-palladium-gold, 0.20 percent copper, and 0.27 percent nickel.
The surface drill program started in June and has completed 16 holes (assays pending for 12 holes) with two rigs now on site. The surface program continues to progress at a steady pace.
Prophecy Chairman John Lee commented: “Wellgreen is a very large nickel, copper, and platinum group metals project with near-surface high-grade zones. High-grade intercepts will be incorporated into resource modeling and mine planning in the pre-feasibility study. We expect further positive drill results from Wellgreen shortly.”
Wellgreen features a low 2.59-to-1 strip ratio, is situated at an altitude of 1,300 meters, and is only 15 kilometers from the two-lane paved Alaska Highway. Those factors significantly minimize the project's indirect costs.
For the complete company statement with full tabulation of the drilling results, please visit: