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This article was inspired by a conversation in January 2010 with fellow directors of the Gold Anti-Trust Action Committee: Chairman Bill Murphy, Secretary/Treasurer Chris Powell, and Directors Adrian Douglas and Ed Steer. In speaking about the growing role of the exchange traded funds in the precious metals market, it was clear that the disclosure that the precious metals ETFs described below were providing to investors was inadequate. However, was there a material omission under securities law? I found the issues complex. Understanding the commodities markets can seem daunting to someone like myself with a securities background. Meanwhile, the securities markets and related legal and regulatory issues can be unfamiliar to those with a background in commodities. I decided to ask my attorney to help me gather the relevant information into one document to make it easier for GATA supporters and other interested parties—whether from the commodities or securities markets—to examine these issues and to better understand and price these securities.
The enormity and mystery of the gold swaps recently undertaken by the Bank for International Settlements without any announcement seem to have shaken some ordinarily respectable and respectful observers into doubt.
For example, for years GATA has been trying without success to get the attention of The Telegraph in Britain. But without any prompting on Sunday the newspaper quoted GATA's Adrian Douglas about the BIS gold swaps:
"Gold is stronger this morning, and it is stronger in non-US-dollar terms than it is in dollar terms. As we write, gold is trading E960, having traded ever-so-shortly to E935 at one point last week. The trend in both terms -- US dollars or EURs -- remains upward, and for now so long as spot gold remains above $1,180 and above E935 we shall remain bullish.
"Again, we are not gold bugs here at The Gartman Letter. We do not believe that the world is coming to an end. We do not believe that depression lies ahead. We do not believe in black helicopters, nor in the Bilderbergs, nor in other strange conspiracies that the real gold bugs of the world believe in.
"However, following the recent BIS gold swaps and try as we might to follow the logic of those swaps through to the end, we find ourselves wondering: Might GATA have been right all along? Might it be possible that some large gold dealer or bank or international entity has made itself short of gold and finds that covering that position is harder than it had thought?
"Then we shake our head and say, 'Nah, it can't be.' But can it?"
The people in GATA aren't gold bugs as much as free-market bugs. We don't believe that the world is coming to an end, nor in black helicopters. We haven't pursued the Bilderbergs or any "strange conspiracies." Rather, we have tried to pursue public policy and the evidence that what was once done openly by governments -- the suppression of the price of gold -- lately has been undertaken surreptitiously, central banking generally and the Bank for International Settlements particularly operating so surreptitiously. We have discovered and publicized many official records of this surreptitious price suppression.
To question the surreptitious actions of central banks it is not necessary to expect the end of the world, nor to become obsessed with black helicopters or the Bilderbergs, nor even to believe in returning the world financial system to a gold standard.
Rather, it is necessary only to want to know what is, in the belief that the valuation of all the capital, labor, goods, and services in the world is a matter of public interest that should be determined a little more openly and democratically than is now the case under central banking.
For many years such curiosity has earned GATA tinfoil hat after tinfoil hat. If, as it is starting to seem, Gartman wants one too, all he has to do is keeping asking -- not us but the central banks.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
By Adrian Douglas
Sunday, July 11, 2010
For 11 years the Gold Anti-Trust Action Committee has been amassing evidence that the prices of gold and silver are suppressed. The mechanisms by which this is achieved are complex and multi-faceted. Attempting to convince industry insiders and investors that such an intricate price suppression scheme is not only active but has been active for more than 15 years meets a lot of resistance.
In this article I am taking a different approach; I am going to find some common ground between what GATA says and what its critics say. I am going to define some facts about the gold market that are practically undisputed and show that those facts lead unequivocally to a conclusion that the gold price is suppressed. Given that these conclusions are based upon facts on which everyone agrees, then everyone should agree that the gold market is suppressed.
What everyone can agree upon is that through unallocated bullion accounts, gold certificates, and pooled accounts the bullion banks and gold brokers are operating a "fractional reserve" operation. This means that dealers who undertake to sell and store bullion for their customers on an "unallocated" basis can sell a lot more bullion than they actually have. Many investors will buy and sell their bullion without ever seeing it. This allows the dealers to keep in their vaults only enough bullion to meet the demands of the small percentage of investors who demand physical delivery.
... Dispatch continues below ...
Originally posted by beebs
So the supply of gold was increased without taking into account that it was old gold, not new gold. So the price of gold has been artificially low for perhaps decades.
What will happen when the market realizes this?
Thus: Gold Rush 21.
Here's a head scratcher: as everyone knows from elementary chemistry courses, gold is the most inert metal in the world - it does not rust, nor corrode. Yet this is precisely what Russian commercial precious metal trading company, International Reserve Payment System, discovered on thousands of (allegedly) 999 gold coins "St George" (pictured insert) issued by the Central Russian Bank. The serendipitous discovery occurred after various clients of the company had requested that their gold be stored not in a safe, but in a far more secure place: "buried under an oak tree." As the website of IRPS president German Sterligoff notes: once buried, "the coins began to oxidize under the influence of moisture." And hence the headscratcher: nowhere in history (that we know of) does 999, and even 925 gold, oxidize, rust, stain, spot or form patinas, under any conditions. Furthermore, as IRPS discovered, Sberbank of Russia released an internal memorandum ordering the purchase of the defective coins with the spotted appearance. Sterligoff concludes: "It should be noted that the weight and density of the rusty coins coincide with the characteristics of gold that would be expected after after conventional testing methods would reveal. We think that the experts will be interesting to determine the nature of this phenomenon." So just how "real" is 999 gold after all, either in Russia or anywhere else?
GATA board member Adrian Douglas, editor of the Market Force Analysis letter (www.MarketForceAnalysis.com...), examines the ratio between the supply of gold and the U.S. dollar and concludes that the dollar's gold backing has fallen to a mere 2.3 percent and that the real dollar value of gold now approaches $53,000 per ounce. Douglas' new study is headlined "Proof of Gold Price Suppression: Gold and the U.S. Dollar," and you can find it in PDF format with a chart at GATA's Internet site here:
Let’s call POG (Price of Gold) the average market price for all gold, that is to say
paper gold and real physical gold which is the price quoted as the “gold price”
each day. If there is, let’s say, only one ounce of physical gold backing each 45
ounces of “gold” that are sold in the market through the selling of unallocated
gold then the price will be suppressed. Forty five ounces will cost $54,000 at
POG=$1200/oz. But if this is made up of 44 ounces of worthless paper promises
for gold and one real physical ounce then the effective price paid for the real
ounce is $54,000/oz. If the investor never takes delivery he doesn’t realize his
investment is backed by just one ounce not 45 ounces.
The FT[Financial Times] tries to palm off the biggest gold swap in history as just a matter of the BIS earning a little return on $14 billion.
The FT says it has learned that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge U.S. dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits the banks were taking from the Basel-based institution.
And GATA has learned that the moon is made of Swiss cheese.
The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks.
If you want to believe the Financial Times, the 346 tonnes of gold swaps recently undertaken surreptitiously by the Bank for International Settlements were a matter of the BIS' requiring three of the world's biggest banks to pledge gold as collateral against U.S. dollar deposits placed with them by the BIS so the BIS could earn a little interest. According to the FT, the banks also needed to raise cash and so were glad to obtain it by collateralizing the BIS' deposits with gold.
The FT's latest account of the transaction, published Thursday and appended here, is surely the account the BIS would like the world to settle for as curiosity about the swaps is increasing and raising concerns about the grotesque unaccountability of central banks. And as the mouthpiece of the financial establishment, the FT surely was only too happly to convey this unofficial official story. But it's a doubtful story and raises questions of its own.
The FT story doesn't address what is to become of the collateralized gold just transferred to the BIS, but the section of the BIS' annual report cited at the link above shows that the BIS is constantly trading gold and gold futures and options, just as the journalist Edward Jay Epstein reported in his long profile of the BIS published in Harper's magazine in November 1983. (See www.gata.org...) So odds are that the gold purchased from or supposedly kept at those commercial banks by gold investors is now being used by the international banking system to suppress gold's price against the interest of the investors who think they own it.
As far as the speech itself, it confirms something I mentioned several weeks ago. Banana Ben absolutely wants to do a massive QE2 program. The only thing holding him back is gold is near an all time high. What he wants is gold much lower and stocks much lower to give him cover. Gold has not cooperated so he is in a bind. He cannot print a massive amount of money with gold here and stocks at 1055 because what happens if gold soars and stocks sell-off in the days that follow such an announcement? What if the response in the treasury market is not as desired? He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there. The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that. The most powerful institution in the world is fighting for its survival. Never forget that.
In previous times on my BNN appearances, GATA was given a build up. This time, I was not given any pre-mention as a lead up, nor mentioned on their roster of speakers before I appeared. The executive producer told me he was going to say hello. He never showed up. The normal host of this segment Marty Cej took the day off. They told me I would be on for 10 minutes and only gave me 5 1/2 minutes.
I really wanted to get into silver and explain how silver was apart of the gold price suppression scheme and has been kept artificially cheap because of J P Morgan's derivatives operartion ... and that with big players buying up the physical market, there will likely be a short squeeze in the months ahead. Most likely that will lead to defaults and market chaos. Never got the chance.
Originally posted by beebs
Are you suggesting that perhaps someone has been killed?
Here is a Good Griefer. Just received an email from our booker who got me scheduled to be on BNN (Business News Network) in Toronto next Friday for a 15 minutes appearance…
They cancelled this, said GATA is to controversial for them. I think it is ridiculous.
Pam - Lack Of Free Press In Canada