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Chris Powell: Gold market manipulation update, October 2021
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Remarks by Chris Powell
Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
Wednesday, October 19, 2021
What a year it has been since we last gathered -- at least electronically -- at this wonderful conference. And what a heroic job Brien Lundin and his crew have done to restore the conference against huge obstacles.
The world's money supply has exploded. So stock and commodity prices are soaring. Rising food and fuel prices are devastating living standards around the world as wages fail to keep up. Real interest rates have been deeply negative for many months. Government debt, especially U.S. government debt, has risen by trillions of dollars instead of mere billions.
And yet monetary metals prices in the last 12 months have fallen -- yes, fallen –- gold by 7% and silver by 3.5% -- perhaps the only major assets with prices that have fallen.
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The prices of the companies that mine the monetary metals have fallen too – one major index of gold mining companies, the XAU, by 9%:
The always oblivious World Gold Council keeps calling gold a great diversifier of investment portfolios. Yes, gold lately has been great for investors who need capital losses to offset the capital gains they have achieved by investing in nearly anything else.
The monetary metals are in what you might call an anomalous or counterintuitive situation, perhaps the most anomalous and counterintuitive situation they have ever faced. But anomalies are nothing new for the monetary metals.
GATA's friend, the late South African gold broker and advocate Peter George, put it squarely in August 2005 on the eve of GATA's Gold Rush 21 conference in Dawson City, Yukon Territory, Canada. "In the last 10 years," George said, "the central banks have effectively shown that when there's a real crisis, gold actually goes down, and it's so blatant it's a joke."
The last year has been full of hints that explain these anomalies.
For example, on the night of Sunday, August 8, when trading ordinarily is thin, about $4 billion in gold futures contracts were dumped on the market in just a few hours, with no financial or geopolitical news to explain them. The dumping came out of the blue.
The dumping hardly arose from the simultaneous decisions of thousands of retail gold investors around the world to sell in the belief that the most enduring and reliable form of money suddenly had lost its utility.
The dumping did not arise from the sudden unanimity of the world's major gold mining companies to hedge their production years out.
No, the dumping was the work of some entity or several entities that had easy access to billions of dollars and wanted the gold price down hard and fast.
Even the World Gold Council's chief market strategist, John Reade, was compelled to wonder aloud about what the hell was going on. Reade wrote: "Could the selloff have been a 'fat finger' or something malicious? Either are possible."
Reade did not elaborate on what might have constituted "malicious." But whatever the source of the attack, it was more like a "fat sledgehammer" than a "fat finger."
The attack was a spectacular event in the financial markets. But Reade's timid comment was as close as any analyst connected with the financial establishment came to the cause of the gold market's anomalous event of the year.
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For more than 20 years GATA has identified some of the entities connected to these anomalies in the gold market, spelling out their motives and opportunities. They include Western central banks whose own archives and memoirs detail their longstanding war against gold, a war against mankind's right to a form of money independent of government. The documentation of this war is too extensive for me to cover here today but a comprehensive summary can be found in "The Basics" section of GATA's internet site:
At the center of the implementation of gold price suppression policy is the Bank for International Settlements in Basel, Switzerland -- the central bank of the central banks, the primary broker for central banks in the gold market, providing camouflage for their interventions.
Only one person outside central banking and bullion banking pays close attention to the BIS -- GATA consultant Robert Lambourne. Every month Bob sorts through the BIS' statement of accounts, calculates the bank's gold position, and reports it via GATA. Bob has reported that the gold position of the BIS -- its gold swaps and leases -- has remained near record high levels most of this year:
Bob reported a few minutes ago that the BIS' September statement was posted this morning. It may contain some clues. He'll analyze the statement in commentary shortly.
The BIS is owned and operated by its central bank members, so in whatever it does with gold, the BIS is implementing central bank policy. But exactly which central banks are intervening in the gold market, and for what purpose? The BIS refuses to explain. It refers such inquiries to central banks generally, which, of course, also typically refuse to explain their gold transactions with the BIS:
But gold has equally visible enemies in high finance outside of central banking and they were on display in the last year.
Most notably, of course, in September a year ago JPMorganChase & Co. confessed that its traders had rigged the gold, silver, and U.S. Treasuries futures market. The bank agreed to pay fines totaling $920 million:
In January this year Deutsche Bank agreed to pay a fine of $125 million to the U.S. government to avoid prosecution for bribing government officials and manipulating the monetary metals markets with "spoofing":
In June this year two Deutsche Bank traders were sentenced to prison terms in the United States for participating in that manipulation:
In August this year two traders for Merrill Lynch were convicted in federal court in Chicago for "spoof"-rigging the gold and silver futures markets.
Their internet chat logs showed them bragging about how easy it is to rig the gold and silver futures markets.
In May, Ronan Manly, the brilliant researcher for Bullion Star in Singapore, caught the London Bullion Market Association grossly exaggerating its members' silver vault holdings in London. The LBMA, Manly reported, had just admitted that it had overstated the silver in its members' London vaults by 3,300 tonnes:
Of course such an exaggeration of silver inventory was sure to relieve concerns about a silver shortage and thus reduce upward pressure on the metal's price.
Last December the investigative journalists Pam and Russ Martens of Wall Street on Parade revealed that what had been called "stimulus" legislation in Congress actually appropriated hundreds of billions of dollars for use by the U.S. Treasury Department's Exchange Stabilization Fund, which since 1934 has been fully authorized to intervene secretly in and manipulate not just any market in the United States but any market in the world:
Those hundreds of billions of dollars would not have been appropriated for the ESF if the agency had nothing to do with them. And if the ESF wasn't doing questionable and even disreputable things – like selling gold and silver futures surreptitiously, directly or through intermediaries -- the law would not, as it does, exempt the agency from accountability to Congress and the public.
For the ESF is, as the Martenses wrote, a giant slush fund for the treasury secretary and the president.
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For a while this year there was a bit of hope for gold and silver investors -- the prospect of implementation of the so-called "Basel 3" international banking regulations recommended by the Bank for International Settlements. These recommendations are generally construed as pushing big banks out of the gold derivatives business by making them hold large offsetting cash positions that would make the business prohibitively expensive:
The London Bullion Market Association and the World Gold Council panicked in public about the "Basel 3" regulations, publishing an appeal to the Bank of England's Prudential Regulation Authority to block or postpone the regulations:
Not surprisingly, the Bank of England consented to modify the regulations in the LBMA's favor:
Still, some gold market analysts, including GoldMoney's Alasdair Macleod and London metals trader Andrew Maguire, maintain that the new regulations will continue to push bullion banks away from using derivatives to suppress gold prices.
I'm not sure that the "Basel 3" rules necessarily will have much effect on gold price suppression. If the bullion banks find that continued use of derivatives is becoming too expensive in keeping gold down, any governments for which they are trading can always subsidize any losses. Or governments can establish gold-trading broker intermediaries that are outside jurisdictions implementing "Basel 3" rules. Or governments can start trading gold directly and openly again as they did in the era of the London Gold Pool in the 1960s, or they can sell gold through the International Monetary Fund as they have done occasionally in the decades since, in the name of helping poor countries, many of whom mine gold.
For many years gold investors have hoped that gold price suppression would be ended by the steady accumulation of gold by the governments of Russia and China. Both governments are fully aware of Western gold price suppression policy and its purposes and aware of the vulnerability of the U.S. dollar and other Western currencies to any free market in gold. Any government with a sizeable foreign exchange reserve -- not just Russia and China but even South Korea -- might easily blow up the markets by selling U.S. Treasuries and buying gold.
That this has not yet happened despite worsening geopolitical tensions around the world suggests that all major central banks are still cooperating in gold price suppression through the BIS. This also suggests that if gold is to be revalued outside the pressure of the "paper gold" created by the derivatives system, it will come as a result of central bank cooperation, as hypothesized years ago by the U.S. economists Paul Brodsky and Lee Quaintance and the Scottish economist Peter Millar:
International gold and currency revaluations do happen every half century or so, and with worldwide debt having built up to seemingly unsustainable levels, such a revaluation would be a primary mechanism of inflating debt away.
Such a revaluation of gold might be hastened if the monetary metals mining industry was ever mobilized to help expose gold price suppression policy and urge gold investors to avoid gold derivatives. But the industry and its supposed representative, the World Gold Council, remain, perhaps understandably, too scared of their governments and their banks to confront the issue.
Unfortunately that leaves things to little GATA -- not just gold price suppression but restoration of free and transparent markets in everything, since all market prices take their cues from the price of the basic risk-free assets, of which gold is one or would be one if governments ever stopped messing with its price.
In its 22 years GATA has, I think, done an excellent job documenting the methods, purposes, and history of gold price suppression, work done by no one else except the author and fund manager Jim Rickards. But we have failed utterly in mobilizing the gold mining industry. We remain stuck trying to show the industry's worthies how they and their investors are being subverted.
GATA has provided its documentation to many financial news organizations around the world and nearly all of them are as scared of the issue as the gold mining industry is.
Of course many gold mining companies may know the score and simply lack the courage to act on it. Maybe that's where gold investors can help the most -- by pressing the mining companies in which they have invested.
Three proofs of gold price suppression policy are readily accessible to gold mining companies and their investors. All they have to do is pose three questions to government agencies.
1) Ask the Bank for International Settlements to explain exactly what it is doing in the gold market and for whom with its gold swaps, leases, and other transactions. Of course GATA asked the BIS years ago and the bank replied that it would NOT explain.
2) Ask the Bank of England, the primary custodian of gold reserves connected to the London market, if it has leased or closed leases on gold in the last year. Of course GATA put that question to the bank some months ago and was told that no information on the point is "available" -- that is, disclosable.
3) Ask the U.S. Commodity Futures Trading Commission if the commission has jurisdiction over market manipulation by entities trading for or at the behest of the U.S. government, or if manipulative trading in the government's name is perfectly legal. Of course GATA put that question to the CFTC a long time ago, and U.S. Rep. Alex X. Mooney, R-West Virginia, has put that question to the CFTC a couple of times in the last two years. The commission refuses to answer.
These refusals to answer are effectively confirmations of gold price suppression by governments.
So no one really has to rely on GATA to establish gold price suppression. People can establish it for themselves by posing those three simple questions.
Please consider raising the issue with other speakers at this conference. If they took it up they could help too.
I'll be glad to provide more information. Just e-mail me at CPowell@GATA.org.
Thanks much for your kind attention. If we have any time left I'd be glad to respond to questions or comments.
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Toast to a free gold market
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