Goldgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
MARKET ANALYSIS (5/7/99): The gold market came under attack from the British last night in a surprise pre-dawn announcement(U.S. time) that it intended to sell off 415 tons of gold "in the medium term" -- over half of its 715 ton reserve. The gold is scheduled to be sold at auction by the Bank of England. The first tranche will total 125 tons to be sold over a ten-twelve month period beginning July 6. We have reported on the odd behavior of the British toward gold on several occasions in this report over the past few months. That odd behavior came to a head last night.
The British auctions come after at least two years of constant pressure from various bullion banks operating primarily in London on the central banks of continental Europe and the third world to sell their gold. When the European Union and European Central Bank some six or more months ago closed the door to gold sales, the British Chancellor of the Exchequer, Gordon Brown, began an extraordinary and vigorous campaign to persuade the International Monetary Fund to sell a portion of its gold holdings. He enlisted the public support of both the Canadian and U.S. administrations though stiff opposition surfaced in the U.S. Congress. When those efforts were stymied by other G-7 members at the recent meeting of the International Monetary Fund in Washington, the British resorted to selling their own reserves per the announcement last night.
This comes at a strange time with gold languishing below $300. We have said time and again that nations do not sell gold because they want to, they sell it because they have to. Beyond concerns that should be raised in the British parliament, one wonders what is really behind this sale. Clearly their stated intention to change the configuration of their reserves is not the real reason. If that were the case, they would have waited for a more propitious time -- not when the market was trying to go over the key $300 figure. Why kill a rally. Let the rally gather steam and then sell. There is another, more telling, aspect to this sale that we do not know about though I am sure various gold analysts will begin offering opinions as early as this morning.
There have been published rumors that the British owe the Russians a large amount of gold on metal being stored at the Bank of England from the days of the Romanovs -- gold the Russians have publicly proclaimed that they want back. There could also be concerns that gold loans have gone sour and British financial concerns are on the hook. Then there's the gold carry trade -- a lending scheme that could go suddenly sour if the metal were to start moving in a northerly direction. Perhaps a British bank(s) is involved in a counter-party guarantee that must be paid. This is all speculation but clearly this announcement has more to do with driving the price down for some reason that has not surfaced....yet.
Though the market has already sold off sharply, I wonder if this downside will hold in view of the growing inflationary bias in the world economy, problems in the U.S. Treasuries' market and the fact that there are so many unanswered questions surrounding this auction/sale. As Placer Dome CEO John Willson said this morning gold prices today are intimately tied to the US dollar and would get a boost if the dollar were to slip from today's highs on signs of possible weakness in the US' roaring economy. The British pound is taking a major hit this morning and my guess is that traders already understand that something odd is going on in the United Kingdom that bears careful watching. The pound is not the first currency to suffer post-gold-sale-announcement traumatic syndrome.
Beyond the political ramifications of these sales, twelve tons of gold per month is not going to break this market. If anything the buyers will line up to take advantage of the opportunity. Nor are concerns about other countries sales well grounded, the few that are in a position to sell do not have enough gold to cause any major problems and it appears at the outset that the British decided on these sales because they couldn't obtain the gold needed from other sources.
-- Andy (2000EOD@prodigy.net), May 10, 1999
yes I'm not sure what the Treasury & Blair are up to
perhaps they wish to:
diminish the importance of gold as a commodity, to boost the Euro etc
lower the price of gold
as you say pay back the Romanov gold (to whom?)
use the proceeds to pay for the cost of bombing Serbia and harbouring the refugees
selling 50% of the gold reserves of the country is a drastic move, yes the overvalued pound deserves to be hammered, it was set at the current unrealistic rate when the Euro/# exchange rate was established in Jan 99
perhaps the Euro bankers don't like their "regions" holding too much gold thus binding the country irreversibly into the Euro web
-- dick o' the dale (firstname.lastname@example.org), May 10, 1999.
Something is strange here. You simply don't sell half of the country's gold reserves on a whim in a bear market, thereby further depressing prices.
Either the British are expecting massive deflation, or there is something very odd going on behind the scenes.
-- Doug (email@example.com), May 10, 1999.
Beats me (Shrug). Maybe they have just decided they don't want the stuff anymore. Or maybe they figure gold is just going to keep dropping in price. I have to admit, I don't have a clue as to why they have decided to sell right now.
-- Paul Davis (firstname.lastname@example.org), May 10, 1999.
As George Ure says, on his excellent Urban Survival site (www.urbansurvival.com), a rumor that the British are going to sell gold is just that: a rumor. They haven't sold anything. It seems quite likely to me that this was a move done purely to keep the price of gold down. It has been inching up recently, despite the also- increasing stock market (usually they are inverse of each other).
This move was wacky and there is some other explanation besides that of Mr. Davis that they are just tired of their gold.
-- David Palm (email@example.com), May 10, 1999.
Gold=stuff Y2K=no problem
At last, a clue as to Paul Davis' true intellect.
-- Francie (Igetit@last.com), May 10, 1999.
I guess the taxpayers have no say when their government decides to do something this wacky?
-- a (firstname.lastname@example.org), May 10, 1999.
One possible explanation is that our government is planning to join the Euro. If that's the case, as soon as we do we cede control of our gold to the Euro Central bank. Also it's generally thought that the pound sterling is too high. So: capitalize on this asset while we can, and maybe stop the pound rising any more at the same time? There are other possible reasons, but this one seems most likely to me. Especially given there's a war needs paying for right now.
The one thing that never gets mentioned, is who buys the stuff? Over to the conspiracy theorists...
-- Nigel Arnot (email@example.com), May 10, 1999.
The taxpayers have no say because the Bank of England is not owned by the British government. It's a completely private, unregulated, independent bank that has wrested from the monarchy the power to direct the economy as it pleases. This is not some crazy conspiracy theory, just plain verifiable fact. You can verify this if you want to.
-- Prometheus (firstname.lastname@example.org), May 10, 1999.
For your information . . .
Bank of England website - www.bankofengland.co.uk
This from http://www.bankofengland.co.uk/pr99036.htm
------------------------------------------ RESTRUCTURING THE UK'S RESERVE HOLDINGS: GOLD AUCTIONS HM Treasury today announced a restructuring of the UK's reserve holdings to achieve a better balance in the portfolio by increasing the proportion held in currency. This will involve a programme of auctions of gold from the Exchange Equalisation Account, which holds the UK's official reserves of foreign currency and gold, with the proceeds being invested instead in foreign currency assets and retained in the reserves.
It is intended that 125 tonnes of gold (3% of the total reserves) will be offered for sale in a series of five auctions in the financial year 1999/2000, conducted by the Bank of England on HM Treasury's behalf. The first of these auctions will take place on 6 July 1999: thereafter it is envisaged that they will be held every other calendar month, i.e. in September and November 1999 and in January and March 2000. Soon after each auction, the date and details of the next auction will be announced.
It is planned that around 25 tonnes (or 800,000 fine troy ounces) of gold will be offered at each of the five auctions, though the amount may be varied in the light of experience. The gold will take the form of London Good Delivery bars, each weighing about 400 fine troy ounces and located at the Bank of England in London. To encourage the widest possible interest, the Bank will consider bids for a minimum of 400 ounces and multiples thereof, at prices per ounce expressed in US dollars and cents. Successful bidders will be allotted gold in whole bars as near as possible in weight to the quantity of the bid accepted by the Bank.
The first auction will be conducted on a single, or uniform, price basis. Under this format, the bidding process will be competitive: bars will be allotted to the highest bidders, but all successful bidders will pay a single price that is equal to the lowest accepted bid. It is intended that subsequent auctions will also follow this single price format, but the pricing method will be subject to review in the light of experience.
In the interests of efficiency and security in the bidding process, it is the Bank's current intention that the circle of eligible bidders will comprise members of the London Bullion Market Association (LBMA), including both market makers and ordinary members, and central banks and monetary institutions holding gold accounts at the Bank of England. The auction process will thus be open to the biggest and most active UK and foreign institutions in the international bullion market, of which London is the major centre. LBMA members also represent a broad international customer base, thereby giving other interested parties access to the auctions through the eligible bidders.
The result of the auction will be announced, and successful bidders will be informed of their precise bar allocation and the payment due, as quickly as practicable after the auction has closed. Payment will be in US dollars to the Bank of England's account at the Federal Reserve Bank of New York two business days after the auction has closed. Once the Bank of England has received confirmation of receipt of cleared funds in New York, its preferred approach will be to credit the allotted gold bars to gold accounts held with the Bank of England. Physical collection from the Bank of England in London will also be possible.
In the next few days, the Bank will initiate consultations with LBMA members on technical aspects of the auction process.
An Information Memorandum will be published in early June. This will set out the terms and conditions of the auction programme. At the same time, an auction announcement notice will provide full details of the first auction, including the bidding format, payment and settlement instructions, etc.
Notes for Editors
At the end of April 1999, the UK's official holdings of gold totalled 715 tonnes, or nearly 23 million fine troy ounces, with a market value of about $6.5 bn. These form part of the UK's official foreign exchange and gold reserves, which at end-April stood at nearly $37 bn including gold at its full market valuation. As indicated, the gold to be auctioned will be in London Good Delivery bars, located at the Bank of England. The initial programme of auctions will involve the sale of less than a fifth of the UK's official holdings of gold. The proceeds of the sales will be added to the foreign currency reserves.
As indicated by H M Treasury, over the medium term it is planning to reduce its gold holdings to around 300 tonnes. Detailed plans for auctions in 2000-01 and later years will be announced nearer the time, but arrangements are likely to be similar to those announced today.
The Bank of England has for many years been a supplier on demand of sovereign and half sovereign coins in wholesale amounts to bullion market members. This practice will continue.
"London Good Delivery" represents the standard measure of quality of gold bullion used in physical transactions in the London market and is the accepted standard worldwide. A London Good Delivery bar must be at least 995 parts per 1,000 pure gold, with 999.9 being the highest possible quality. The minimum weight is 350 fine ounces and the maximum is 430 fine ounces. The weight of each bar is expressed in troy ounces in multiples of 0.025, complying with the procedures established by the LBMA. Each bar must bear a serial number and the stamp, or chop, of an approved refiner as designated in the London Good Delivery List of acceptable smelters and assayers.
The London Bullion Market Association was formed in 1987 in close consultation with the Bank of England. It sets standards and processes applications to the London Good Delivery list, and represents the interests of a broadly-based membership active in bullion markets in London and worldwide. It comprises 12 market- making members and 50 ordinary members. These originate from 14 different countries, and have trading activities in considerably more, providing links to the London market for a broad international customer base of gold producers, fabricators, investors and consumers. The London bullion market currently operates under the rules set out in the London Code of Conduct originally developed jointly by the Bank of England and wholesale market associations including the LBMA, and now administered by the FSA.
-- W0lv3r1n3 (W0lv3r1n3@yahoo.com), May 10, 1999.
This thread is a good example of what I like the most about this forum and the Internet in general. Very fast information and ideas, backed up with current data. It will be a long time, if ever, before we see so many ideas and plausible explanations for this UK move, appearing in USA Today or the WSJ. Good show folks.
-- Gordon (email@example.com), May 10, 1999.
Additionally, dealing with the why's and the wherefores . . .
an opinion from the BBC city desk on . .
Gold's falling standard
Critically, for banks it now gives relatively poor returns and several have been selling off their reserves, including the Australians, Belgians, Dutch and even the Swiss.
The International Monetary Fund is to consider selling off some of its gold to help fund debt relief for poorer countries.
The significance of Switzerland is that its 2,600 tonnes of gold are the third-biggest reserve of holdings in the world, after the US and the eurozone area. How low will gold prices go?
Over the last 20 years bonds and shares have given better returns and many banks and finance institutions are now replacing gold with better yielding investments.
The Swiss reckon the cost of lost interest in holding gold rather than US Treasury bonds is equivalent to around $400 a year per household.
The value of gold has failed to keep pace with inflation, it has underperformed shares and bonds and has been expensive to store.
Banks, like everyone else, are under pressure to improve the returns on their reserves.
The European Central Bank has decided to hold only 15% of its reserves in gold, well below the 30% average of most of the countries in the eurozone.
dont mention it.
-- W0lv3r1n3 (W0lv3r1n3@yahoo.com), May 10, 1999.
I know a lot of people on this forum think I'm an idiot so now I'm going to prove it - buying 1oz gold eagles in quantity asap :)
As the saying goes - follow the money - this should give you a hint as to what to expect downstream.......
-- Andy (2000EOD@prodigy.net), May 10, 1999.
IMF gold sales: Real wealth moves east
On April 17th, U.S. Secretary of Treasury Rubin endorsed the idea of selling a small amount of International Monetary Fund gold to raise funds to help poor nations. Rubin endorsed the sales while other members of the Group of Seven were adamantly opposed to the idea.
Among the strongest opponents were Germany and Italy. This had little impact on gold for several reasons: 1) The proposal to sell IMF gold is an old one, and rumors of it have been in the market for months. 2) The amount of gold sold will likely be small enough not to have a significant effect. 3) Many gold analysts and central bank insiders believe these sales would be direct from the IMF to central banks, and would not entail huge amounts of bullion thrown on the open market.
At any rate, I believe the decision of whether or not to sell the small quantity of IMF gold has been delayed at least until the fall. German finance minister Theo Waigle, who strongly opposed the gold sales, said "It does not have to be resolved immediately." He added that the IMF had sufficient funding until 1999.
Interestingly, the Japanese central bank first expressed caution in regard IMF gold sales. Then there were rumors that Japan would vote for IMF gold sales and use it as an opportunity along with other Asian nations. to add gold to their foreign currency and old reserves.
You know that it has been my position since 1993 that a huge transfer of gold to the Far East is a natural result of real money gold) following the creation of real wealth in Asia. The mature economies of the west, including Europe and North America, will have relatively slow growth compared to the extraordinarily high growth rates in China and other parts of Asia.
-- Andy (2000EOD@prodigy.net), May 10, 1999.
It is a fact that Asian central banks would be more comfortable with a higher percentage of gold in their reserves. After all, the vast amount of reserves held by Asian countries are held in U.S. dollars. If the United States and European countries can hold a large amount of their reserves in gold (the United States holds over 260 mil lion ounces), the Asian central bankers' logical reaction has to be, "Why should the West have most of the real money when Asia is creating most of the new wealth?"
Asian central bank reserves are huge. For example: China, $75.38 billion, Hong Kong, $55.43 billion, Japan, $183.15 billion, Singapore, $67.76 billion and Taiwan, $90.31 billion. If you throw in the reserves of India, Indonesia, Malaysia, the Philippines, South Korea and Thailand, the total is a staggering $602.17 billion.
To understand how this huge currency total relates to world gold reserves, keep in mind that even the largest gold reserve in the world, that of the United States, is worth "only" $101.4 billion dollars at cur- rent gold prices.
European nations hold about 28 per cent of their reserves in gold, and it's well known that Asian central banks hold a much lower percentage. If Asian nations as a group decided to increase their gold holdings by only 15 percent of total reserves, they would have to purchase $90.3 billion worth of gold 230.4 million ounces, or 7,201 tons.
That's more than three times annual world mine production.
Remember, the IMF is proposing to sell only a small fraction of its holdings, and that over a period of years. So even a relatively small participation by Asian central banks as buyers of IMF gold would make such a sale a non-event.
Actually, the transfer of gold from the West to the growing economic giants of the East is very positive for gold. The most natural gold flow is from weak hands to strong hands!
The most desirable monetary reserves: gold or fiat currency?
Whether or not to hold your liquid assets in foreign paper currencies or gold is a choice not only central banks, but individuals, must make on a daily basis. For thousands of years, gold has held its value while countless government currencies have become literally worthless. As Alan Greenspan, Chairman of the Federal Reserve system, has pointed out, central banks that do not hold gold do so at their own peril. What Greenspan means is that gold is the ultimate money, the only money that is not someone else's obligation.
Today's gold bulls need not fear central bank gold sales. As we've explained many times in these pages, the central banks have tried before, unsuccessfully, to control the price of gold. Every previous effort not only failed, but caused the price of gold to soar in reaction. (Remember the collapse of the London gold pool in the 1960s?)
In other words, any time central banks artificially control a market for a long time, that market tends to move dramatically in the opposite direction intended by their controls and manipulations. I believe that if
it hadn't been for huge central bank sales and massive forward selling by gold producers, then the price of gold would be at $500.
Built in currency depreciation
Of all the people in the world, central bankers understand the built in mechanism that inevitably leads to fiat currency depreciation.
They know very well that gold is a far better currency than their managed units of account. For one thing, exploration, labor, financing and production are all real costs associated with getting an ounce of gold out of the ground and newly mined gold production actually dropped last year. In comparison, paper money is created out of thin air!
Obviously, whether it's so-called "modest" currency depreciation of two to three percent per year or the type of hyperinfiations that we've seen in Latin America, gold is by far the better money. But the scales are tipping more solidly in gold's favor, because gold production is destined to remain relatively flat, while the global trend is solidly in favor of monetary reflation.
Consolidated Cold Fields estimates that annual gold production will increase at about one percent per year between now and the year 2000. Compare that increase with the percentage change in money sup ply (M2) from a year earlier in the following countries: China, 29.5 percent; Hong Kong, 16.7 percent; Indonesia, 27.7 per cent; Malaysia, 24.0 percent; Philippines, 26.3 percent; and Thailand, 18.6 percent. Even the so-called hard currency nations are opening the money supply flood gates. Japan has recently been increasing its M3 at a 26 percent rate, while even Germany is at 11 percent.
-- Andy (2000EOD@prodigy.net), May 10, 1999.
These extraordinarily high monetary growth rates will eventually lead to higher inflation worldwide. But we are already seeing high consumer price increases in Asia:
China, 9.0 percent (and much higher in the booming coastal regions); India, 10.3 percent; Indonesia, 9.2 percent; Philippines, 11.1 percent; and Thailand, 7.3 percent Keep in mind that these already- high numbers are actually the lows. Higher inflation rates are on the way, as the money supply growth rates listed above will eventually have their effect.
The result will be even more powerful m China, which is about to lower interest rates and loosen the reins on an economy that has been slowed in recent years by the government's austerity program. Lower rates will do two things: 1) Encourage even higher inflation, and 2) Increase private gold demand by lowering the opportunity cost of holding the metal instead of interest-bearing accounts.
Who's afraid of the central banks?
Central banks have a love/hate relationship with gold. On one hand, gold is the ultimate money, a monetary reserve of the last resort. On the other hand, an increasing percentage of the gold in the world is held by private individuals as protection against currency depreciation promulgated by the central banks. So, gold is viewed by many world central banks as 1) a necessary evil to hold in their reserves, and 2) the ultimate money to fear because it gives power back to the people.
Gold Newsletter was one of the first newsletters to point out the probability that central banks were involved in a campaign to cap the price of gold at $400 an ounce. More and more gold analysts are coming to the same conclusion, and there is much evidence that this is the case.
Perhaps the strongest evidence is the fact that the world commodities are soaring in price, an event that is usually associated with strong gold prices, yet gold is not participating in this commodity bull market. The CRB index has made a series of new highs, with spot oil prices as high as $25. Copper and many food prices are soaring, yet gold does nothing.
The obvious conclusion is that central banks are intervening in the gold market -- just as they intervene in the currency markets -- to "create orderly markets" or, more precisely, to underpin weak paper currencies. I've recently given a lot of thought to this whole issue, and I can tell you that I am confident that the power of the global currency and gold traders are stronger than all the central bankers put together. Reality will prevail this time as it has every time governments try to artificially control world money values.
Should you be afraid of the power of central banks? Will central banks destroy the bull market that emerged in 1993?
The answer to both questions is no. As we've explained in past issues, it's likely that central banks at some point will tire of keeping the price under $400, then temporarily withdraw from the gold market before reentering at a higher; more easily controlled point around $420-$430. From that point on, central bankers would love to see the gold price go up in a "stable," organized fashion. But while the bankers might wish for gold price to go up in a slow, stair- step fashion, it is highly likely that their plans will eventually be laid to waste by the all-powerful open market.
As Marc Faber points out in the Far East Economic Review, the world is awash in paper. "what has happened in the world over the last twenty or thirty years is that the credit markets and financial markets have grown disproportionately to the real economy. In 1970, the global bond market was $776 billion. Today, there is over $18 trillion. The total foreign exchange transactions per day now amount to over a trillion dollars. In other words, world annual GDP is turned over in roughly 15 days, through the foreign exchange market."
It's my opinion that these staggering paper currency numbers will eventually overwhelm the gold market in spite of and exactly because of central bank policies. In other words, central banks will eventually be punished by soaring gold prices, and I believe it's only a matter of time before several Asian central banks break ranks and enter the gold market in a very powerful way.
The only real lifeboat, as always, is gold.
-- Andy (2000EOD@prodigy.net), May 10, 1999.
Something strange is indeed taking place regarding gold worldwide. Please read the following and post a follow-up.
Source: http://www.worldnetdaily.com/bluesky_dougherty/19990511_xnjdo_trouble_ go.shtml
Trouble in the gold market? Analysts see move to manipulate prices
By Jon E. Dougherty ) 1999 WorldNetDaily.com
Whether influenced by uncertainties stemming from Y2K or because global financial markets took a dramatic turn for the worst, most gold analysts agree that 1998 was a "record year" for sales. So far, in 1999, record buying has not subsided, according to the U.S. Treasury, and most gold brokers and retailers say there is no sign of a buying slowdown anytime soon from the private sector. However, recent investor activity in the gold market suggests there may be a move to illegally influence prices. In fact, entire nations, such as Great Britain, are poised to release hundreds of tons of gold into the market over the next few years in a move some believe is an attempt to artificially deflate gold prices and possibly to de- emphasize gold as a valuable commodity.
Beginning July 6, the Bank of England will begin selling over half of Britain's present gold stocks, or 415 tons, which is currently worth about $6.5 billion (U.S.). Last week, when the bank made the announcement, it stunned gold dealers and traders all over the world, resulting in the price of gold falling to below $280 an ounce -- its lowest price in recent years.
It was this announced sell-off, as well as several previous disturbing gold market reports, that prompted the formation of GATA -- the Gold Antitrust Action Committee -- and a potential antitrust lawsuit aimed at breaking up the alleged control over gold market prices. GATA has retained noted antitrust and securities law firm specialist, Berger & Montague of Philadelphia, in order to assist in its investigation into the alleged manipulation of the gold market.
Bill Murphy, chairman of GATA, told WorldNetDaily, "I've been a trader for 25 years, and I began noticing that the gold market was just not trading the way it was supposed to." He said that when gold reached the $295-300 per ounce range, "I began noticing that the market price for gold would always stop (at a certain level), lose, then come right back" to the previous level -- but never higher. That didn't follow the established rules of supply and demand, he explained.
"At about that time, we heard that (gold) producers were going around offering credit terms in South Africa to foreign producers in different countries at unheard-of credit terms, if they would just 'sell forward'" -- or put supply in the marketplace. He said GATA also received a number of reports that "officialdom" in the U.S. were asking officials in Asia not to aggressively buy gold. These two incidents were occurring simultaneously, Murphy said.
The only explanation that makes sense, he said, was that somebody is trying to keep gold prices down. Other government and market analysts who were following the same gold trends, said Murphy, "were told to 'tone down' their reports," in an effort, he says, to conceal other investment activity based on lower gold prices.
Murphy said he initially brought his concerns to other experts -- some of whom eventually became GATA members -- and they agreed it was possible that antitrust violations may have materialized within the gold market.
The GATA chairman said the essence of the issue rests with the number of "gold loans" currently out versus the annual output of gold from the world's combined producers.
"Right now, we feel the total gold loans amount to about 8,000 to 10,000 tons. But mine supply, or annual production, is only about 2,529 tons. Consequently, we think the speculators -- the gold- borrowing crowd -- are borrowing gold at just one percent interest rates versus the 8 to 10 percent they'd have to take to borrow money at a bank."
He sees "collusion" among producers and speculators to keep the price of gold artificially depressed in order to obtain cheap loans on money used for other investments.
"Basically, they're getting interest-free money to invest in Wall Street for free," he explained. "So hedge funds like Long Term Capital Management, who got in trouble last year for doing this same thing with the Japanese Yen, and all of these investment people in New York are borrowing gold and investing it. That's fine, as long as the gold price doesn't go up."
Murphy said the advantages to doing this were obvious.
"Say these people borrow gold at $290 an ounce but end up having to pay it back at, say, $320 an ounce, the cheap loan suddenly becomes an expensive loan."
He told WorldNetDaily that recently the price of gold was set to go above $290 an ounce, "which we feel has been the borrowing price for about the past year or so." But when he publicly questioned where the supply of gold was going to come from, within a day the Bank of England announced they were going to sell over half of their gold inventory.
"That came out of nowhere," Murphy said. "Why would the Bank of England do that -- sell early, and make it a very public announcement -- when they could have waited and made more money from the sale of their gold if the price had gone up?"
The veteran trader said the activity in the gold market followed a familiar pattern. "I've seen this kind of activity before in other markets," he said. "It's clearly manipulation to me."
"One of the reasons that various financial institutions are acting in concerted action to hold down the gold price is that they are now short hundreds of tons of borrowed gold and that the speculative community in total is short 3,000 tons, or more," Murphy said.
The evidence GATA has compiled, he said, suggests that gold loans have become so large that an international "systemic risk" problem has now been created.
"If the price of gold rose unexpectedly even to a moderate degree, many gold borrowers would not be able to find enough gold quickly enough without driving the price into the stratosphere," Murphy said. "That is one of the reasons that we believe certain financial entities have been manipulating the market in collusive fashion to make sure the gold price does not rise sharply above $300."
Robby Noel, a U.S. gold retailer and market analyst, as well as a daily talk show host, agreed with Murphy's conclusions. He said that somebody seems destined to drive down gold prices, but instead of just greed, he sees another reason for the depressed prices.
Noel believes that since over 60 percent of all above-ground gold is privately held, some countries -- led by internationalists -- may want to "devalue" the commodity and establish a monetary system based on a more arbitrary, controllable method of wealth.
"If that were to happen, what would the gold people now hold be worth? Almost nothing," he said.
Noel told WorldNetDaily that Michel Camdessus, head of the IMF, recently said he "extolled the virtue of using gold-sale proceeds to pay for debt relief for 'heavily indebted poor countries,'" such as those in Africa. But, Noel pointed out, that makes little sense if the ultimate goal is to raise those nations out of poverty.
"If the sale of gold is to help pay poor Black African countries' debt, why destroy the price of gold when the single largest export of these counties is gold?" he asked.
Indeed, Noel has some merit for his concerns. Research analyst Gillian Moncur told Agence France Presse (AFP) last week, "Gold is becoming an outdated asset." She also said that she anticipated Britain's surprise sale "would likely herald further official gold sales around the world," which would, undoubtedly, further depress gold prices.
Murphy agreed that there could be a move to devaluate gold permanently. "He (Noel) is talking about a monetary system based on 'fiat' money," he said. "He's right about that. The central bankers use the gold price as a report card, so to speak. If the price of gold climbs dramatically, everybody is bound to start asking, 'What's the problem here?'"
But, he added, he is more inclined to believe that some investors are merely trying to keep the dollar as the primary global trading currency, rather than the gold standard. Either way, Noel added, "The relationship between physical gold and the current prices is out of whack. In a nutshell, there is no doubt to me there is some sort of a scam going on here."
John Meyer, treasurer of GATA, stressed that the information the group has so far only amounted to "circumstantial evidence," but, he added, "there's a lot of smoke there. And, it seems the farther into this we get, the more smoke there is." The producers, said Murphy, are also starting to get into the fight. He said most of them are upset at current price trends in gold, and see any attempt to keep prices low as a threat to their survival.
"The producers aren't happy these days," Murphy told WorldNetDaily. "Many of the smaller producers are going out of business" because prices, in some cases, barely outstrip mining costs.
Meyer said that although private individuals had already begun contributing to GATA's legal expenses, many gold producers were finally beginning to bankroll the effort. Most of them, however, had requested anonymity. GATA's legal team, Berger & Montague, is currently engaged in researching the basis for an antitrust lawsuit. Merrill G. Davidoff, an attorney at the firm who is familiar with the case, said GATA had just recently contacted Berger & Montague with their antitrust concerns.
"We're at the point now where we're just getting into this," he said. Davidoff could not comment about GATA's case, but he did say they were likely to be looking for potential plaintiffs for the lawsuit as well as potential witnesses willing to provide information confidentially about gold market manipulation.
"That would be a normal process for the client," he said.
"As a law firm, however," Davidoff said, "rounding up potential plaintiffs is just not something we do." Merrill also declined to comment about whether or not his firm had been in contact with any government stock market regulatory agency.
WorldNetDaily contacted the offices of the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Commodities and Futures Trading Commission (CFTC) in Washington, D.C., but they also declined to say whether or not they had received any complaints regarding price-fixing on the gold market.
Jon E. Dougherty is a senior writer and columnist for WorldNetDaily, as well as a morning co-host of Daybreak America.
-- Rick (firstname.lastname@example.org), May 11, 1999.