As noted yesterday, we’re continuing our discussion of manipulation. And, while I will post a few more articles on HFTs below, today we’re focused on precious metals.
There’s no doubt that the greatest ally in the effort to expose and halt precious metals manipulation is the Gold Anti-Trust Action Committee (GATA). For over a decade they’ve worked diligently to bring light to the efforts of bankers and other influences in the industry to control the precious metals’ market. And the staunchest spokesman for GATA is Chris Powell.
We’re going to turn to Chris’ most recent discussion on banks and gold in a moment. But first we’ll take a look at what Marshall Auerback had to say for Pinetree Capital Ltd last month.
His question is very valid, “Do the central banks really own as much gold as they claim?” He discusses the change of gold’s classification from Tier 3 to Tier 1, which we have reported on before. And he notes how this shift in sentiment toward gold on a banking level may be encouraging.
However, he questions whether or not the reported increase in gold holdings over the past decade is truly represented by physical gold held in bank vaults. Note Marshall’s comments carefully:
One must remember that central banks routinely take hedge positions against their underlying reserve assets. They never, ever report the derivative overlay. Hence, if a European national central bank with 2000 tonnes of gold in its vault sells forward against that position, basically thereby eliminating it, it doesn’t report the corresponding forward position.
Consequently, it may be that the official institutions do not have net/net the gold they purport to hold on their balance sheets.. Now, in the old days this just didn’t matter. The fraud in the reporting of reserve positions could go on and no one would notice or care. But in light of the BIS proposals (also backed by the Fed, the OCC, and the FDIC), now the gold at these higher prices is regarded as an important asset.
Imagine the luxury of selling your home today to someone who wouldn’t take possession for several years. Now imagine being able to take out a loan against it at the same time. Do you think that the banks would allow you to use it for collateral for one minute? Of course not. And yet this is exactly what Marshall is saying banks do with their gold.
It gets better though; because world banks are notorious for selling gold to each other without actually delivering. Brussels may sell to London today. New York might buy from London tomorrow. Brussels may then buy from New York. All these transactions affect prices without any real gold exchanging hands. Of course, the extent of this is beyond our ability to verify, but claims that such shenanigans occur in order to control prices are rampant.
As Chris power ponders the challenges involved in exposing manipulation, he poses an interesting question. There are those who accuse banks of supporting gold’s price. Others accuse them of suppressing it. Some think that the east supports it while the west suppresses it. And the theories run from highly likely to almost impossible. But, when it comes down to it, Chris hits this nail squarely on the head at the end of this article.
Powerful as central banks are, the basis of their power is only this refusal to question, to undertake the most ordinary journalism. The only thing that sustains them is the failure of journalism — the failure of The Wall Street Journal, the Financial Times, The New York Times, the London Telegraph, the Associated Press, Reuters, Bloomberg News, and so forth — to demand of them:
Exactly what are you doing in the markets, and why?
And this 27 min video of Chris being interviewed is very helpful as well.
Perhaps one day the truth will be unveiled. If so, we expect a serious upward response as current manipulative activities cease. Until then, every dip is a buying opportunity.
For your prosperity,
J. Keith Johnson
The Gold Informant
As promised, here are some more articles about HFTs and manipulation.