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Australia's national newspaper cites GATA and BIS' confession to suppressing gold
Golden Opportunity for Conspiracy: The New Gold Rush
Gold prices don't always conform to expectations, leaving room for some wild theories, Robin Bromby reports
By Robin Bromby
The Australian, Sydney
Wednesday, August 23, 2006
As if a seemingly insoluble situation in Lebanon, Iran on the verge of nuclear capability, oil at more than $US70 a barrel, and inflation barking at our doors wouldn't be enough to keep propelling the gold price.
And don't get us started on whether paper currencies have any real value or, with the U.S. Federal Reserve and other central bankers resorting to the printing press to keep the economic party going, the only true currency and ultimate repository of value is gold.
Then, as icing on this cake mix, comes the news of a plot by British-born Muslims to blow up airliners in the mid-Atlantic.
What does gold do? It goes DOWN, that's what, by $US16 an ounce.
Now the obvious explanation for that day's gold price was that oil went down and the U.S. dollar strengthened.
After all, that is the way the long-established inverse relationship between the yellow metal and the greenback is supposed to work.
But there are those who have their suspicions about the gold price and the degree to which it is manipulated, not just by hedge funds but by central banks.
Among the theories: Fort Knox is empty, the Americans having secretly disposed of all their gold. Otherwise, why does the U.S. government resist calls for a gold audit?
Another one: The European central banks, apart from the official sales we all know about, have also lent out most of the rest of their gold.
The conspiracy crowd latched on to a disclosure in 2001 that the Bank of Portugal had lent or swapped 70 percent of that country's gold reserves.
The nub of the conspiracy theory is that the central banks simply don't have the gold they claim to own.
In the 1990s they sold or leased out the gold, creating massive short positions. The counterparties have sold that gold and the central banks have no show of ever getting it back.
Best to keep the gold price low, then, and make out that gold is nothing more than a barbaric relic, with no intrinsic worth.
The problem for this theory is that the gold price did get over the $US700/oz mark this year, and there are respected analysts who believe it could make the $US1,000-plus level.
Why did the all-powerful anti-gold cartel, which also includes some of the world's biggest financial houses, allow that to happen?
The wild ups and downs this year could be explained by the activities, not of the central banks, but of the hedge funds.
After all, they are generally accepted as being the cause of much of the overheating, and corrections, in metals such as copper and nickel.
So, yes, there is manipulation, but nothing that we are not used to.
Interest rates are often aimed at influencing the markets (remember "irrational exuberance"'), and big traders do it to make money by influencing the market (remember George Soros making a pile betting against the Bank of England).
So you can use the tracking of the gold price to argue either way: The anti-gold cartel works to beat down any gains gold makes, or it's just the big hedge funds working gold to get profits in both price directions.
But, for all that, the moves have been pretty dramatic.
Gold on February 2, $US516.88/oz; on May 12, $714.80/oz; on June 14, $559.75/oz (that's a month on month drop of $US155); on July 14, $US664.15 (that's a retrace month on month of $US104/oz).
By July 24 the gold price had turned around and shed $US49/oz.
Sure, things changed in the world economy, in the Middle East, with the price of oil -- but not that much.
Last year at Basel in Switzerland the soon-to-be head of the Reserve Bank of Australia, Glenn Stevens, was among the many central bankers attending a three-day conference hosted by the Bank of International Settlements (BIS), the banker to the central banks.
William White, a senior BIS official, included in his opening remarks on the first morning of the conference some rather telling words about central bank co-operation.
One of the things central banks could do, he pointed out, was to get together for "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful."
Was this a smoking gun?
The commentators at goldensextant.com ("dedicated to the fight for sound constitutional money") thought so when the minutes of the conference were released recently by the BIS. They pointed to the constitution of the International Monetary Fund, which specifically rules out managing or fixing the gold price.
Moreover, the BIS is the banker to all those central banks that keep cranking out more and more paper money; that the crowd in Basel can't afford to have people thinking that gold is the only real basis of money is the view at The Golden Sextant.
The BIS was the target back in 2000 by the Gold Anti-Trust Action Committee, set up by a financial commentator and a Connecticut newspaper editor.
GATA was born in 1999 and raised enough money from the gold conspiracy believers that it took the BIS to court in Boston to try to prise open the details of the suspected collusion.
That case failed, but the fight goes on.
Gold's recent price rises have done nothing to dent the conviction of the gold conspiracy adherents.