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Barclays case doesn't prove gold is always manipulated; that proof is elsewhere

Section: Daily Dispatches

11:18a ET Saturday, May 24, 2014

Dear Friend of GATA and Gold:

Commodity market analyst Dan Norcini yesterday ridiculed what he described as assertions that the British Financial Conduct Authority's fining Barclays Bank for an incident of gold market manipulation "is proof positive that every single big move lower in gold is the result of evil, nefarious forces suppressing the price of gold on behalf of the government":

Norcini didn't identify the parties making such assertions but GATA is not among them.

For the Barclays case establishes only that one investment bank manipulated the gold market at least once and that the mechanism of the daily London gold fixing facilitates such manipulation. The Barclays case does not establish that every big move lower in gold is a government operation.

... Dispatch continues below ...


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No, that every big move lower in gold is a government operation is established or suggested by quite different evidence and documentation, evidence collected not by the U.K.'s Financial Conduct Authority but by GATA:

Indeed, as your secretary/treasurer complained yesterday, while the Barclays case is welcome for establishing that the gold market has indeed been manipulated, something long denied by many market analysts, the case actually may distract from the infinitely greater manipulation of the gold market by Western central banks, manipulation that will continue long after Barclays pays its fine, purports to implement stricter ethics regulations, and tries to reclaim some integrity:

Norcini aims his scorn at what he calls the "GIAMATT crowd," which presumably stands for "gold is always manipulated all the time." But while GATA does not have access to central bank daily gold trading data, "all the time" still seems to us to be a fair characterization insofar as central banks continue to lease gold, gold leasing having been acknowledged by many central bankers as a mechanism for suppressing the gold price, and insofar as central banks trade gold and gold derivatives secretly "nearly every day," as a French central banker told the London Bullion Market Association last year --

-- and as is shown by the annual reports of the Bank for International Settlements:

Just a week ago the Swiss National Bank told your secretary/treasurer that it had stopped leasing gold in 2011 but refused to answer or even acknowledge the question of whether the bank continues to trade in gold or gold derivatives:

Since central banks are constantly trading gold and gold derivatives, how can this ever be assumed not to be done for policy purposes, and how can those policy purposes not be construed as manipulative? Central banks hardly need to "earn" money through gold trading; after all, they effortlessly create money electronically.

Norcini's commentary surmises far more than GATA does.

Norcini argues that governments now are worried about deflation and thus worried about a falling gold price, not a rising one. Yet if governments wanted a rising gold price, it would be as effortless for them to increase the gold price as it is for them to create money; they could just create some more money and use it to buy the monetary metal, or they could call in their leased gold and force the borrowers into the gold market to recover it.

And while, as Norcini suggests, governments lately have expressed concern about deflation, they also have expressed conern about the solvency of the big investment banks that often operate as government agents in the currency, bond, equity, and gold markets. If those banks are long currencies, bonds, and equities and short gold, a rising gold price would quickly destroy them.

These circumstances may illuminate the challenge facing Western central banks: how to devalue their currencies and debt without destroying the financial system. These concerns remain consistent with a policy of gold price suppression.

Norcini also argues that central banks don't need to suppress the gold price at the moment because the U.S. dollar is steady. But then the dollar's steadiness may be largely a function of continued gold price suppression.

Yes, as Norcini argues, not every move in gold may be entirely the consequence of central bank intervention. But as long as central banks are so heavily involved in the gold market, it will require blindness not to suspect them in any major move.

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

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