Evidence of Alarming Government Manipulation In The Gold Market

Money Metals Exchange conducted an interview (listen to the audio) about the secretive and far-reaching gold price suppression scheme. Chris Powell of the Gold Anti-Trust Action Committee, or GATA, tells all in his exclusive interview with Money Metals. We have selected a couple of key thoughts which we present in this article, along with some valuable quotes.

We’ve seen unprecedented US government and Federal Reserve intervention in virtually all asset markets in the past decade, and all of them are pretty much out in the open…whether it be buying bonds, buying stocks, bailing out industries, and so forth. The US government even buys oil in the open market to fill the Strategic Petroleum Reserve, something we could see happening again soon given the dramatic fall in oil prices recently and the negative impact on domestic producers. But while these other interventions are freely disclosed to the public, no one in government seems willing to admit to interventions in the gold and silver markets. Why the secrecy, and why don’t the “powers that be” want to see a free gold market?

Chris Powell from GATA believes that some of the interventions are acknowledged. He thinks the interventions go far beyond what has been acknowledged so far, but gold is most sensitive to the central banks because gold is itself a currency, an international currency with no central bank behind it, something that free people can resort to whenever they are dissatisfied with government currencies. It’s a competitive currency whose valuation, in turn, sets the valuation of government currencies.

In fact, it has a huge influence on interest rates and the value of government bonds. There’s a lot of academic literature about the causal connections between the and interest rates and government bond prices, so Powell thinks central banks are most sensitive about the gold price because gold is a determinant to the value of their currencies, to the value of government bonds. That’s probably why they are most reluctant to admit those interventions. Other interventions are not as sensitive to them.

Gold price manipulation has been going on for quite some time. It isn’t just a recent phenomenon of the last couple years. Chris Powell explains that the gold standard itself was a market-rigging mechanism. It was a pretty clumsy one, but it did tie the price of gold to a particular unit of currency. When the world got away from the gold standard, the Western central banks undertook, in the 1960s, what was known as the London Gold Pool, which was a very public, candid scheme of just hoarding of Western central bank gold reserves to hold the gold price to $35 an ounce.

The London Gold Pool collapsed in March, 1968, as the gold offtake proved too much for the Western central banks that were rigging the gold price. That’s really when the Western central banks withdrew for a while and regrouped and calculated that they could much better rig the gold market through derivatives, through futures and options trading, which is really what they do now, along with swaps and leases, in a scheme that gives the world the impression that there is much more investment-grade gold available than there really is.

In order to understand the precise suppressing mechanism of gold, readers should start with the annual report of the Bank for International Settlements (BIS), which is the central bank of the central banks. The annual report of the BIS candidly acknowledges that it is the gold broker for central banks and is selling and buying not only gold, but gold futures and options and other derivatives on behalf of central banks. This is secret trading in the gold market by central banks in order to manage the price.

Chris Powell refers investors and researchers also to the secret March, 1999, report to the board of the International Monetary Fund by the IMF staff, which reported that Western central banks were opposed to disclosing their gold swaps and leases because transparency with central-bank gold operations would impair central-bank interventions in the gold market and other markets. That is, these interventions are undertaken in secret precisely to deceive the markets and to rig the gold and currency markets. This is a matter of official documentation. The secret March, 1999, IMF staff report is on GATA’s internet site (gata.org). The annual report of the Bank for National Settlements is on our internet site.

There are also recent documents. For example, the address of the Director of Market Operations of the French Central Bank, Alexandre Gautier, to the London Bullion Market Association conference in Rome in September, 2013, disclosed that central banks are trading gold through the Bank of France as their broker nearly every day, the Bank of France official said. The same official spoke to the LBMA meeting in Lima, Peru, a few weeks ago, and he said that the central banks had gotten far more aggressive in their gold trading lately.

The purpose here is to control the currency markets, to control interest rates, to control government-bond prices, and really to control all markets because a free gold market is compatible only with free markets everywhere. The gold price has a huge influence on all prices. If you rig the gold market, if you rig the gold price, you’re basically rigging all prices because prices are denominated in currencies. Gold is really the denominator of currencies, so if you rig the gold market to rig currencies, you’re rigging all markets.

The documentation of this is overwhelming. All one has to do, if one is a financial journalist, is to call up a central bank and ask a few specific questions. Can the public see the record of your gold transactions? Can the public see the record of your gold swaps and leases with other central banks and with bullion banks? Are you trading in the gold market? What is the purpose of your trading in the gold market? Is your trading in the gold market just for fun, or are there policy purposes to your secret trading in the gold market?

This is elementary journalism. Really any first-year journalism student could do it, but the mainstream financial press refuses to do it, largely because it is so sensitive to governments. Governments don’t want this done, but anybody can do it. You can get an idea of what’s going on simply by putting your own questions to your own central bank, and if they are specific enough about gold, you will be told to drop dead if you get any answer at all. But the first rule of mainstream financial journalism in the West is that no central bank can ever be questioned critically and specifically about gold and really that no central bank could ever be questioned critically and specifically about anything it does.

If you follow reporting about central banks, you’ll find that there simply are no serious, critical, specific questions put to the central banks about what they are doing in secret. That’s really my real objection here. Central banks control the valuation of all capital, labor, goods, and services in the world, and yet they do it in secret. They do it even though they are not elected by anybody. They’re appointed officials. They effectively control everything important in the world, and yet they do it in secret and without any accountability at all.

There is one particular document on the GATA site, among the many documents that provide evidence, which shows that the CME Group gives special preferences to central banks who trade in the futures markets. A few months ago, the founder of Nanex, a market data research firm in Illinois. Its founder is Eric Scott Hunsader. He discovered some documents on the internet site of the US Commodity Futures Trading Commission and the US Securities and Exchange Commission. They were filings by CME Group, which is the operator of the major US futures exchanges. They showed that CME Group has been offering volume discounts for trading to central banks for trading all futures contracts offered on CME Group exchanges, and not just futures contracts for government bonds, but for all financial instruments for the monetary metals, gold and silver, and even for agricultural futures contracts.

The SEC document that Hunsader discovered is the 10-K statement filed by CME Group, which is the basic general corporate filing every public corporation has to make with the US government. The 10-K statement for 2014 for CME Group, on page 9, has a paragraph identifying the CME Group’s customers. Among the customers that CME Group lists for trading futures on its exchanges are governments and central banks. Now, the governments and central banks are secretly trading the full range of financial and commodity futures contracts in the United States. This has never been reported in the mainstream financial press.

The CME Group’s letter to the CFTC justified this discount trading program for central banks as a matter of adding liquidity to the futures markets. It is laughable, but liquidity is in the case of an ocean because central banks are empowered to create infinite money. Nobody can trade against the central bank in a futures market. A central bank trading in the futures market can take that market anywhere it wants to. It has infinite money. It can out-trade anybody, and yet the CME Group defended this secret trading by central banks as a matter of adding liquidity to the market. Actually, it was a mechanism for destroying every market.

Now, the CME Group’s filing with the CFTC doesn’t prove that any particular central bank is trading any particular market on any particular day, but it does say that there is this general discount program for central banks trading all major futures markets in the United States. This means there are no markets anymore. There are only central bank interventions, and I think it’s an enormous news story. These documents have been sent to most of the major mainstream financial news organizations in the United States and Europe, GATA has done that.

Chris Powell says: “I was emailing yesterday with another news organization, who was really resisting getting into the issue, and their business editor was telling me that they simply assumed that there was nothing out of the ordinary going on here, but they hadn’t even asked. So we keep clamoring about this, but I would ask anyone who has seen a mainstream financial news organization do any reporting at all about the secret trading in the US futures markets being done by central banks through the CME Group’s volume discount program to let me know because I’ve missed it.”

Some people may think that what these governments and central banks are doing is somehow in the best interests of the people. The greater good is being served perhaps. Basically, why should people care about what’s going on here? Powell believes that, in the developing world, people should care about it because it’s basically a commodity price suppression scheme that is exploiting the developing countries, the countries that are dependent on natural-resource exports for their revenue. All countries develop by selling their natural resources. That’s how the United States established itself back in colonial times. In early times the United States exported fish and lumber and pelts and raw materials, and then became a developed industrial country, and it got out of that business. Now, the developing world is in the natural-resource business, and the West, operating through the gold price suppression scheme and the commodity price suppression scheme, generally is suppressing the price that the developing world gets for its resources and its labor. But even people in the developed world are harmed because this scheme is largely a market-destruction scheme. If you believe, as GATA does, that free, transparent markets are the great engines of not only democracy and liberty, but economic progress, then anything that destroys markets and makes them less transparent is an impediment to human progress. So the great majority of people around the world have an interest in what GATA does.

 

About GATA: The internet site is gata.org. The basics on GATA’s research starts with a little line on the left side of the page, the headline “The Basics.” Readers can go into that and get a summary of the gold price suppression scheme and links to really all the important, really important documents. There’s another section on the left side of the page called “Documentation,” which is a much more extensive collection of documentation of the gold price suppression scheme. GATA is a 501c3 organization under the US Internal Revenue code, which means it is a non-profit, non-stock, tax-exempt corporation. GATA operates entirely on donations from people who are interested in reasserting the free markets. People can contribute to us by check or by Bitcoin or by credit card over the internet in the “How to Help” section of GATA’s internet site. If anybody’s inclined to help GATA, please go to gata.org and go to the “How to Help” section on the left side of the page, and where people can see how to send a check or make a credit-card contribution.

 

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 35,000 customers. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. Gleason has hosted a weekly precious metals podcast since 2010, a program listened to by thousands each week.

 

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