World Gold Newsgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
This is from the email alert issued by GATA - Gold Anti Trust Association. The New York bank that is short 1000 metric tons of gold is said to be Goldman Sachs - Robert Rubin's alma mater.
Two links worth a read if you are interested in gold are;
CONSPIRACY THEORISTS PAN NET FOR GOLD
By Kirstie Hamilton City Editor Sunday London Times May 15, 1999
The gold market is seething with Internet-inspired rumours of a huge conspiracy in which some of the world's biggest financial institutions are alleged to be suppressing the price of gold.
Everyone from major European and American investment banks through to the Bank of England and America's Federal Reserve have roles to play in the story, which at its most dramatic stretches the credulity of even the most dedicated conspiracy theorist.
But milder versions are being taken seriously by some of the gold business's establishment figures, including the chairman of South Africa's second-largest gold producer and the heads of two European gold producers.
Those allegedly involved in the plot throw up their hands in despair at the tales being given any credence. "This is complete baloney," said the representative of one bank alleged to be part of the conspiracy.
The stories, which have been building over recent months, have exploded since the Treasury announced earlier this month that it will sell half of Britain's gold reserves in a series of auctions.
Bill Murphy, an American Internet commentator, has even set himself up as chairman of the Gold Anti-Trust Committee, a pressure group calling for an investigation into the price-fixing allegations. The group has hired Berger & Montague, a Philadelphia law firm that specialises in anti-trust cases.
"We are conducting an investigation into what we believe is going on, which is manipulation of the gold market," Murphy said. He has also been to Congress to explain what he believes is happening.
The Treasury's decision to announce its sale programme was the stuff of nightmares for producers hoping the gold price might finally be starting to recover. It sent the price tumbling by $8 to $280 an ounce.
Analysts and commentators have begun to create elaborate theories about why the gold price has stubbornly refused to rise despite a rise in underlying demand. Central to these is the suggestion that a number of big banks have huge short positions in gold, either on their own account or on behalf of clients. Short positions are created by selling gold into the market in the expectation of being able to buy back later at a lower price. While the gold price remains low, the banks profit from their short positions.
Should the price suddenly rise, their gains quickly become losses. At its extreme, the theory suggests that the big investment banks may have been able to persuade central banks around the world to help them keep the price of gold down.
"There are parts of this conspiracy theory that I am sure are not true," said Chris Thompson, chairman of Gold Fields, one of South Africa's biggest gold companies. But he said that there was a large amount of circumstantial evidence that investment banks were involved in a plot.
Internet gold commentators have suggested one American bank's exposure to the gold market could be up to 1,000 tonnes -- more gold than is stored at Fort Knox. Insiders at the bank concerned deny the position approaches those levels, but officially the bank declines to comment.
"The behaviour of the gold price has been very odd over the last six months," said Peter Hambro, a member of the Hambro banking family and owner of a gold mine in the south of France. "In spite of reports of substantial demand for physical gold and major economic and political uncertainties, such as the war in Kosovo, the gold price has not responded in the way one might expect. "Parallel to that we have seen insistent reports from Internet commentators of big market operations by a few investment banks. Circumstances support the theory that there is a cap being put on the price."
Chris von Christierson, chairman of Rio Narcea, which mines gold in Spain, is also concerned. "I have never been a believer in conspiracies, but every time the gold price is about to break out, it gets hit again," he said.
But some analysts dismiss the conspiracy option, maintaining that the gold price is likely to remain under pressure while central banks continue to offload supplies of what they see as a poor-performing investment.
The Treasury's gold sales announcement has attracted criticism from a number of quarters, particularly for the manner in which it was done. By flagging the sales ahead of time, some critics have suggested, the Bank and the Treasury have further depressed the price.
Even a former Bank executive has joined the chorus of disapproval. Terry Smeeton, former head of foreign exchange at the Bank, said the gold sales would damage the gold market, and that he would not have undertaken them had he still been at the Bank.
The Bank defended the sale decision, and insisted that it had agreed with the Treasury on the policy. "This is exactly the way the gold sales were done in the Seventies by the IMF," said a spokesman. "We think markets work best where they have full information."
The conspiracists hope that publicity will help to uncover any plot to suppress the gold price. The worst- case scenario, of course, is not so much of a giant conspiracy but something far more miserable. Without a conspiracy the gold producers might have to face the unthinkable: has gold lost its shine forever?
THEY'RE TOO INCOMPETENT TO BE CONSPIRATORS
By JOHN DIZARD New York Post
THERE'S something very comforting about conspiracy theories. Yes, if they're true, the world is run by evil, all-knowing geniuses to whom human life is worthless, but at least you have order and certainty. Events have an explanation, though one the conspirators would prefer to keep hidden.
In my experience, unfortunately, much more can be explained by incompetence and unwillingness to admit error. The world isn't run by geniuses, evil or otherwise; it's run by hacks and timeservers who were appointed, elected, or hired for reasons everyone has forgotten.
This matters because there's been a lot of conspiracy talk going around the gold market in the past two weeks. The focus is the May 7th announcement that the Bank of England would sell off most of its gold reserves over the next three years. The amount of the sale, 415 tonnes, was significant - but not as significant as it would be if it were anyone other than the Bank, which is supposed to know everything about the gold market.
Here's the conspiracy thesis: The major gold-dealing houses, in particular Goldman Sachs, have huge short positions in gold. That is, they would profit from a decline in the gold price. Goldman, the story goes, has close, high-level contacts in both the British and U.S. governments, and is using these contacts to ensure the gold price is kept weak. The story continues that Goldman is net short about 1,000 metric tonnes of gold, which is between $8 billion to $9 billion. But I don't believe it.
Just before the Bank of England announcement, the chart freaks, or, if you prefer, technical analysts, were pointing with excitement to a "breakout" of the gold price and the prices of gold shares. Gold has been in a slump for years - decades, really - and the goldbugs hoped that the "basing pattern," the politically correct goldbug term, had finally been broken. But, instead of a breakout, the gold longs were at the receiving end of multiple cruise missile impacts. The closing price went from $289 May 6 to $282 May 7.
That was the end of the technical rally.
The Bank didn't even blame the ensuing price crash on out-of-date maps. The damage was as thorough as anything done to any embassies in Belgrade; gold didn't even rally on Friday's high inflation news. It closed at $275.60.
"The European central bankers are absolutely furious," says one of my friends among the gold dealers. "The decline in the gold price cost them $5 billion in losses on their balance sheets. It cost the poor countries who will get the money from IMF sales $120 million. They wanted to sell gold themselves, but the Bank of England got out ahead of them."
There are really two questions here: Why did the British Government decide to dump the "precious" metal, and why did they decide to announce the sale, rather than proceeding quietly and announcing it after the fact?
The decision to sell wasn't the Bank of England's. Prime Minister Tony Blair and his Chancellor of the Exchequer Gordon Brown have the power to dispose of the country's reserve assets.
"Brown hates gold," says a well-informed Brit friend of mine. "He thinks of it as the preserve of right wingers and capitalists in top hats."
The conspiracy theorists note that Gavyn Davies, a Goldman economist, is a close adviser to the government.
The timing of the sales, and the public announcement ahead of the fact, was probably left up to the Bank of England, here acting as the agent for Blair and Brown.
"They no longer have the expertise they did when Terry Smeeton was in charge of gold reserves and regulation," says another gold-market friend of mine. The people who took his place just decided that they could avoid responsibility by announcing the sales, calling it "transparency," and blaming any decline on market forces.
For now, that's the explanation I buy. It fits in with my incompetence-not-conspiracy world view. But you can count on an antitrust suit making the opposite case.
-- Bill P (email@example.com), May 16, 1999
There sure is a lot of doubletalk going on in these reports. And there sure is circumstantial evidence that the price is being manipulated. One way to get to the bottom of part of this debate is to just confirm the short position of Goldman Sachs. They either *are* holding a huge short position or they're not. Anyone have any insider contacts that can leak the truth about Goldman? Isn't Goldman tied in very tightly to the British banking systems?
-- Gordon (firstname.lastname@example.org), May 16, 1999.
Thanks Bill, very interesting articles, awaiting developments, plans to buy more gold and silver :)
-- Andy (2000EOD@prodigy.net), May 16, 1999.
Rubin worked for Goldmans Sacks, maybe he knows? Funny he retires shortly after. Going back to the old job?
-- Lower (Gold@lows.com), May 17, 1999.
Isn't this British gold dump roughly contiguous in time with the Goldman, Sachs IPO? This, from Will the Swiss Really Sell?, dated 1997, is fairly interesting.As an investment over the past decade, gold has sucked. This, combined with the (as often as not) semi-literate blatherings of gold standard proponents, has managed to give gold a bad name.
The low point was reached on October 24, 1997, when at the New York Commodity Exchange (COMEX) gold futures plunged to a level last seen 12 years ago.
At issue was a report to the Swiss National Bank recommending changes in the monetary constitution, including a revaluation of Swiss gold reserves. The Swiss franc is virtually the last remaining currency with gold backing. The Swiss central bank has traditionally valued its 2,600 tons of gold at 4,595 francs per kilogram, compared with a market price of close to 17,000 francs. The revaluation would bring Swiss gold reserves closer to their market value of 44 billion francs from the 11.9 billion francs currently audited.
The recommended changes would allow the Swiss National Bank to allocate 1,400 metric tons of its 2,600 tons of gold reserves for purposes other than stabilizing the Swiss franc. Does that mean some of the gold would be sold on the open market?
Now, combined among them, central banks have about a 17-year supply of gold in their vaults. So if the hold-out Swiss begin selling their gold, the rest of the world is sure to follow. No telling how low the price of gold could go. That was the fear expressed by gold traders as they pushed gold for December delivery down $16.10 per oz., a price drop of 4.9%, to $308.30. The last time gold traded this cheaply was in February 1985.
However, all the knee-jerk reaction is a little premature. The Swiss finance ministry's proposals for the revision of the country's monetary constitution must be submitted to Parliament. After the vote there, there will also have to be a popular referendum. And this won't take place until Spring 1999.
The rest of this long article is fairly technical, maybe someone here can interpret it...?
If I understand what I have read elsewhere, Switzerland recently had a referendum on sales of its gold reserves, which was approved, and the government intends to sell 1,300 metric tons beginning next year. The proceeds are said to be largely dedicated to funding liabilities from court decisions favoring Holocaust survivors' accounts in Swiss banks.
-- Tom Carey (email@example.com), May 17, 1999.