It’s been a couple of weeks since our last entry here. Please forgive the lapse. For the past couple of months we’ve been packing to move, which culminated in two weeks of actually moving. So, while the dust still lingers in the air, we are back at the desk, pouring over the news in an attempt to offer insights and information regarding the precious metals’ markets.
One theme that continues to dominate the precious metals’ sector regards conspiracy allegations. For many years GATA, along with a few who refuse to buy into central banker explanations (cover ups?), has attempt to expose the efforts of the FED, Treasury, central banks and bullion “fix” makers of controlling spot prices for personal gain, to the extent of making trades that never really happened and even trading in paper assets that represent metals that never actually existed.
At one time these allegations were mocked as merely conspiracy theories; you know, the kind that are attributed to nuts wearing tin hats and digging bunkers in the mountains or deep in the desert. However, as each tick on the financial scandal list gets checked, it has become increasingly apparent that manipulation has taken place. The MF Global revealed a trading conspiracy of such depth and insidiousness that any idea that gold manipulation, at least in the form of allocating the same ounces to multiple clients, was indeed fact rather than fringe conjured fiction. Zero Hedge helped us understand the facts last December.
In the face of rising concerns regarding manipulation and, specifically, U.S. sovereign gold, many have called for the auditing of all gold supposedly held in locations such as Fort Knox and vaults beneath the Federal Reserve Bank of New York. As bureaucrats are so apt at doing, there has recently been a quasi-capitulation in which “some” of the gold in the Manhattan vaults has been audited. However, as readers will soon see, the news is anything but transparent in regards to specific allegations.
According to the LA Times, U.S. sovereign gold stashed in the FED Manhattan vault is being audited by – now get this – “about half a dozen employees of the Mint, the Treasury inspector general’s office and the New York Fed.” Ever get the idea that the fox was guarding the henhouse? Furthermore, “It was monitored by employees of the Government Accountability Office, Congress’ investigative arm.”
Setting the obvious issues with who’s auditing the gold aside, there’s also the issue of the focus of the audit. It’s only in regard to the 34,021 gold bars that belong to the U.S. government. The separation of the government from the people is a discussion for another day. But what’s obvious about this investigation is that it targets nothing that has to do with the problem of paper trading or manipulation.
So if we assume that the investigation is legitimate, what does it tell us? It simply divulges that there is U.S. sovereign gold in the FED vault according to records. And it checks the bars for gold consistency, in case any tampering or misrepresentation of purity is involved. But what if banks are trading openly on the market without gold really changing hands? What if gold ounces in investment vaults is being allocated to more than one investor at a time? What if paper that represents gold, but for which no actual gold exists, is being sold to customers? None of these issues are being addressed in this audit.
Even as I was contemplating these questions and considering the CFTC investigation into silver bullion manipulation, a disturbing announcement popped up on my screen. Apparently the CFTC may be dropping their investigation. Again, we find incredible denial in the face of facts. Can possibly be that the MF Global scandal was the last of the financials to be ripping off investors? Of course not. Can it be that all the paper silver being traded is actually represented by physical silver? Of course not. But if this investigation is halted, that’s basically what the CFTC is claiming.
I shot Ed Steer a note about this, asking what he knew. He didn’t divulge much, but did affirm that it was actually announced in the Financial Times yesterday. Hopefully we’ll have more information on it tomorrow. However the Silver Doctors have already cleared the smoke a bit for us. Having asked Commissioner Bart Chilton for clarification, here’s the response they received:
“The Financial Times report related to silver is not only premature, but inaccurate in several respects.
Whenever the CFTC does take an action or actions related to our silver investigation, I am hopeful that we will do so in a fulsome and transparent manner. That will certainly be my desire in anything we do.
I continue to believe, consistent with my previous statements to which you referred, and based upon information from the public, that there have been devious efforts related to moving the price of silver. Incidentally, I also believe there have been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns.”
So, while we are certainly discouraged that more hasn’t been done in regard to bring clarity to the bullion market manipulation accusations, it seems apparent that the investigation into such allegations continues. The sooner the truth is divulged, the better. But, as we have repeatedly witnessed, these things often don’t come to light until the whole thing blows up. Then it’s too late. But then, if we’re positioned accordingly, metals should explode.
For your prosperity,
J. Keith Johnson
The Gold Informant