By Daniela Cambone of Kitco News
Montreal (Kitco News) -- The issue of supposed gold market and price manipulation was battled out Saturday by GATA’s Bill Murphy and CPM’s Jeffrey Christian in a much anticipated debate.

The Great Gold Debate – Gold market manipulation or general market forces – You Decide aired on a special edition of Financial Sense Newshour. Moderated by Jim Puplava, the debate aimed to settle the score on gold market manipulation.

Is the gold market and price of gold being suppressed by central banks and bullion banks, questioned Puplava. “Or is the fact we operate in a fractional reserve system and there is leverage keeping the price of gold down?” he asked in his opening remarks.

In a well-mannered debate, that got minimally heated at times, Puplava brought-up numerous examples to both sides.

“In this decade we have seen the price of gold and silver go up five-fold – the Fed can control short-term interest rates, through bond purchases… if they wanted to suppress the gold markets- could they not have done a better job,” Puplava asked Murphy.

The Gold Anti-Trust Action Committee’s (GATA) Chairman responded that this is a “managed retreat.”

“They realized around 2001, that they couldn’t sustain price at these levels; they would gradually run out of gold, so they managed price on way up. They never let price get out of control, which we think now is in the process of happening for the first time,” said Murphy.

Murphy said that GATA believes the price of gold and silver will go “bonkers” this year. “They don’t have any choice anymore … they just don’t have the gold and silver to stop it,” he said.

GATA has not found any hard evidence of market manipulation , said CPM’s CEO, Christian. In all his years of experience, Christian said he has never seen any evidence of suppressing the markets.

Christian also said that GATA repeatedly distorts evidence and people’s quotes to go in its favor.

“This goes to the core of my complaint about GATA, it regularly takes someone’s quote and distorts it to make it sound nefarious in some way.” said Christian.

Christian noted how GATA misinterpreted comments made from ex-chairman of the Federal Reserve, Alan Greenspan. Referring back to Greenspan’s testimony to congress in July 1998, Christian said Greenspan’s words were misinterpreted, leading many to think he said central banks were distorting the price of gold.

“What Greenspan actually said, and you need to take it into context, he was testifying about congressional plans to regulate OTC derivatives,” said Christian.

“Greenspan was simply saying that that if something happens in the gold market - and the price started to rise in the mid 1990s when he said this - there were other central banks out there that would probably be willing to lease increasing volumes of gold in order to take advantage of the higher price,” said Christian. “He said nothing about leasing gold in increasing quantities in order to suppress the price of gold.”

When questioned about the reserve bank of Australia’s 2003 annual report which asserted that central banks hold gold for intervention in the currency markets, Christian said in this instance, “GATA, almost speaks the truth.”

“They did say that, but central banks hold all of their monetary reserves, including gold, foreign currencies…primarily to intervene in currency markets, that is the purpose of monetary reserves. To say that this is how they are skewing the system – is similar to saying well we shouldn’t have fractional reserve currencies,” said Christian.

Puplava later focused the debate on the topic of hedging.

Murphy said that hedging is a spectacular tool for the commodities business, if it is used in a “normal way.”

“If it is done in a coordinated activity to suppress the prices, as GATA claims, it is illegal,” he said.

“The New York Post reported that the Justice department and the CFTC are looking at JP Morgan for manipulating the market, this is not hedging. We think there are going to be all kinds of scandals developing on this.” said Murphy.

--By Daniela Cambone of Kitco News, dcambone@kitco.com

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