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Bill Murphy, Chairman, Gold Anti-Trust Action Committee (GATA) argues that a Gold Cartel has been suppressing and manipulating the price of gold all these yeras. The Gold Cartel consists of the US Government, i..
09 Dec 2008
By Bill Murphy
The Gold Anti-Trust Action Committee’s basic assertion for the past 9 ½ years is that there is a Gold Cartel out there suppressing the price of gold. It consists of the US Government, including the Fed and Treasury, various other central banks, and bullion banks like Goldman Sachs and JP Morgan Chase.

The motives of “the cabal” are to give support to the dollar, keep US interest rates lower than they should be, and to tone down the widely watched US barometer of US financial market health, that being the gold price. After all, whenever the price of gold soars, it congers up talk of too much inflation, a sinking dollar, or a crisis of some sort … all negative for Wall Street and the incumbent administration.

Therefore, “Shoot the Messenger” is The Gold Cartel’s key mission.

The suppression of the price of gold was the essence of Robert Rubin’s Strong Dollar Policy. What else did the US do to effect that policy? Talk? Jawbone?

It seems to have all started with Robert Rubin…

Before he was CEO of Goldman Sachs and then US Treasury Secretary, Robert Rubin worked in London for Goldman Sachs. One of his duties was to oversee their gold trading operations. We know this because the CEO of Kirkland Lake Gold, Brian Hinchcliffe, a staunch GATA supporter, worked in London back then for Goldman Sachs and reported directly to Robert Rubin.
This was many years ago and interest rates in the US were very high, say from 6 to 12%. Rubin had Goldman Sachs borrow gold from the central banks to fund their basic operations. They could do so at about a 1 % interest rate. This was like FREE money, as long as the price of gold did not rise to any sustained degree for any length of time.

Soon other major financial institutions realized what GS was doing and copied them. Rubin continued these operations as the Goldman Sachs CEO and then took it to a new level as US Secretary Treasurer. That is how the gold price suppression became the lynchpin of his widely acclaimed “Strong Dollar Policy.” GATA’s Reg Howe caught on to this notion in a paper titled, “Gibson’s Paradox and The Gold Standard,” co-authored by Lawrence Summers in 1988. Summers, a professor at Harvard at the time, succeeded Rubin as US Treasury Secretary. The bottom line of Summer’s analysis is that “gold prices in a free market should move inversely to real interest rates.” Control gold and it will help to control interest rates.

Bullion banks such as Goldman and Morgan became The Gold Cartel’s hit men, trading the gold market from the short side and bombing the market in coordinated anti-trust fashion at the beck and call of our government, making a great deal of money in the process … as you have all witnessed the past couple of months.

In a brilliant piece a few weeks ago Ted Butler reported 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) of gold in July, and, astonishingly the same 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase. Gold then declined more than $150 per ounce once Secretary Paulson gave the order, just as he did in May 2006 when a similar order was given, according to a US Senator from the state of Washington. Both times, various bullion banks made vast amounts of money quickly as the US government facilitated their short positions by feeding considerable clandestine central bank gold into the physical market.

It was the concerted, concentrated action of certain BULLION BANKS, which tipped off GATA what was going on nearly a decade ago now.

It was this clandestine feeding of central bank gold into the marketplace which clued GATA into the gold price suppression scheme. Three GATA consultants, Reg Howe, Frank Veneroso and James Turk, using independent, sophisticated methodologies, came to the same conclusion years ago … that the central banks have far less gold than the 30,000 tonnes of gold they say they have. The GATA camp research shows they have less than half that amount in their vaults, the difference being the amount that has been fed into the physical market to suppress the price. Since demand for physical gold exceeds mine and scrap supply by well over than 1,000 tonnes per year, this central bank gold is vital to prevent the price from exploding.

GATA is not alone in recognizing the central banks are not accounting for their gold properly. GATA revealed an IMF paper which corroborates GATA’s claims that much of the central bank gold has been double counted and that the central banks are not properly accounting for the gold no longer in their possession.

TREATMENT OF GOLD SWAPS AND GOLD DEPOSITS (LOANS)

“14. Regarding the statistical treatment of gold swaps, its treatment should be consistent with that of other reverse transactions, as presented in paragraph 7 above. Thus, swapped gold should be excluded from both reserve assets and IIP (demonetization). This is a logical consequence, and overstating of reserve assets can be avoided. On the other hand, this results in a decrease in the financial assets of the monetary authorities.”

Gold swaps and gold leasing are at the heart of the gold price suppression scheme. For example, the US cannot sell its 8,133.5 tonnes of gold without an Act of Congress, but they could lease or swap it. In 2006 the President of the Bundesbank made an astonishing statement for a central banker: “We have been asked to negotiate with other central banks’ about potential swap deals involving gold.”

Is this stuff hush hush? I guess so. in January 1995, the Federal Reserve’s general counsel, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee’s minutes, that the U.S. Treasury Department’s Exchange Stabilization Fund had undertaken “gold swaps.” When the GATA camp had Kentucky Senator Jim Bunning inquire Alan Greenspan what that was all about, Mattingly came back and said the Fed testimony was GARBLED … Right…

Recently GATA filed Freedom of Information Act requests to the Fed and Treasury about US gold swaps. The Fed redacted 300 pages of information and refused to send another 400 pages. Now, think about it … if the US gold is, and has been, just sitting in our vaults, without a true independent audit since the Eisenhower Administration, what is their to withhold?

As for GATA’s request to the Treasury about any Exchange Stabilization Fund activity into the gold market, they answered in the negative by referring to the Exchange STABILITY Fund. Can they be that lame?

Is the gold price manipulated? You don’t need to read through GATA’s countless evidence to appreciate what is going on. It is on the public record…

beginning with Alan Greenspan’s testimony before Congress in 1998:

“Central banks stand ready to lease gold in increasing quantities should the price rise” … which is just what they have done!

The Reserve Bank of Australia confessed to the gold price suppression scheme in its annual report for 2003. “Foreign currency reserve assets and gold,” the RBA’s report said, “are held primarily to support intervention in the foreign exchange market.

Maybe the most brazen admission of the Western central bank scheme to suppress the gold price was made by the head of the monetary and economic department of the Bank for International Settlements, William S. White, in a speech to a BIS conference in Basel, Switzerland, in June 2005. There are five main purposes of central bank cooperation, White announced, and one of them is “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.”

Barrick Gold, then the largest gold-mining company in the world, confessed to the gold price suppression scheme in U.S. District Court in New Orleans on February 28, 2003. On that date Barrick filed a motion to dismiss Blanchard & Co.’s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market.

Barrick’s motion said that in borrowing gold from central banks and selling it, the company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit.

Is the gold price manipulated today? Former Federal Reserve Chairman Paul Volcker wrote the following in his memoirs:

“Joint intervention in gold sales to prevent a steep rise in the price of gold (in the 1970s), however, was not undertaken. That was a mistake.” …
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