SLIDE 1 -- Introduction
Gold Market Manipulation Update
By Chris Powell, Secretary/Treasurer
New Orleans Investment Conference
Thursday, November 21, 2024
Gold is the secret knowledge of the financial universe. Since the Gold Anti-Trust Action Committee was incorporated in 1999, our objective has been to break this secret open.
This turned out to be easier than we expected. Documentation was plentiful.
What has been hard has been to get mainstream financial news organizations and even the gold mining industry itself to pay attention to the exposure of the secret. A bit ironically, it has been easier to get some central banks to pay attention.
Gold price suppression has been U.S. government policy since at least the 1970s. The policy aimed to defeat any competition for the dollar as the world reserve currency. At first, the policy didn’t always work well but eventually, it became sophisticated and successful. Now it is starting to fail, in part because of exposure.
Within a few years, GATA discovered, on its own and with the help of some wonderful independent researchers, that gold price suppression policy is laid out in dozens of places, a surprising number of them public -- government publications and archives, speeches and memoirs by central bankers and other government officials, and occasional news reports.
SLIDE 2: State Department historian
Perhaps most succinct and descriptive about the policy are the minutes of a meeting at the U.S. State Department in April 1974 between Secretary of State Henry Kissinger and his Assistant Undersecretary of State for Economic and Business Affairs, Thomas O. Enders:
http://www.gata.org/node/13310
The meeting addressed the growing desire among Western European countries to revalue their gold reserves upward, thereby increasing gold's role in the international financial system and threatening the dollar's supremacy.
Secretary Kissinger asks Assistant Undersecretary Enders: "Why is it against our interest to have gold in the system?"
Enders answers him: "It's against our interest to have gold in the system because for it to remain there would result in it being evaluated periodically. Although we still have some substantial gold holdings -- about $11 billion -- a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We've been trying to get away from that into a system that we can control. ..."
Secretary Kissinger interrupts him: "But that's a balance-of-payments problem."
Enders replies: "Yes, but it's a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time, we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible -- no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it's more rational in. ..."
Secretary Kissinger interrupts again: "'More rational' is defined as being more in our interests or what?”
Enders answers: "More rational in the sense of more responsive to worldwide needs -- but also more in our interest. ..."
So there you have it. The top officials of the U.S. State Department in 1974 have just explained to you that whichever government or group of governments has the most gold has the crucial "reserve-creating instrument" -- that is, the instrument of money creation -- and can control the instrument's valuation and implicitly the valuation of every currency and financial asset in the world.
Of course, money is power and infinite money is infinite power. The interest of the United States, as it was perceived at that meeting at the State Department in April 1974, was to dominate the world by controlling the world's money creation and the valuation of all its currencies -- something that could be done only by controlling the price of gold.
Later that year a gold futures market was created in the United States for the specific purpose of injecting so much imaginary supply and volatility into the gold market that ordinary investors would be scared away from gold:
https://www.gata.org/node/
SLIDE 3: Greenspan testimony
In testimony to Congress in July 1998, Federal Reserve Chairman Alan Greenspan objected to proposals for more government regulation of the futures markets and derivatives, and he declared that central banks already had achieved sufficient control of the gold price:
https://www.federalreserve.
Greenspan said: "Central banks stand ready to lease gold in increasing quantities should the price rise."
Thus Greenspan confirmed that the purpose of gold leasing by central banks was not what they claimed -- to earn them a little money on the supposedly dead asset in their vaults -- but rather to suppress the monetary metal's price. Greenspan thus also admitted that derivatives trading was a crucial mechanism of gold price suppression.
SLIDE 4: Central Bank Incentive Program
Sure enough, CME Group, operator of the major futures exchanges in the United States, maintains what it calls its Central Bank Incentive Program, which provides discounts to governments, central banks, and international organizations for their surreptitious trading of all major futures contracts in the United States -- not just financial futures but commodity futures as well:
https://www.gata.org/node/
SLIDE 5: Peter Warburton and “Debt and Delusion”
The British economist Peter Warburton, author of “Debt and Delusion,” may have been the first to perceive and publicize that the naked shorting of gold and commodities in futures markets -- the selling of paper claims to metal and other products that didn’t exist, short-selling that suppressed prices -- was being used by central banks and their agent investment banks to protect government currencies, conceal inflation, and discourage the acquisition of hard assets as hedges against inflation.
In 2001 Warburton published a long essay titled “The Debasement of World Currency: It Is Inflation But Not As We Know It”:
https://www.gata.org/node/8303
The objective of Western central banks, Warburton wrote, was to deny the world what he called a “stable numeraire,” a dependable measure of financial values, particularly a dependable measure of the devaluation of government currencies. That is, central banking’s objective had become to achieve inflation without political risk. This was accomplished by creating a vast supply of imaginary gold and silver and other commodities, not just through the futures markets but also through gold swaps and leases by central banks.
This worked as long as most buyers of the monetary metals never demanded delivery but just held on to their paper claims against imaginary gold and silver.
SLIDE 6: Secret IMF staff report
The International Monetary Fund, compiler of official central bank gold reserve data, cooperated with gold price suppression policy by allowing central banks to falsify their gold reserve totals -- to count their gold in the vault and their gold out on loan in the same line item on their gold reserve reports.
The secret March 1999 report of the IMF staff to the IMF board, shown here, said this falsification was necessary to prevent markets from learning how much official gold was impaired by leases and swaps -- that is, it was necessary to prevent markets from learning how much official gold was already being used for price suppression:
https://www.gata.org/node/
In these circumstances, Warburton wrote, investors could find a hedge against inflation only in some physical asset that was not attached to a futures market. He suggested farmland and supplies of clean water.
A wonderful aphorism soon arose from Warburton’s essay. That is: “The futures markets are not manipulated. The futures markets are the manipulation.”
* * *
What I have said so far here has been an outline of gold price suppression policy and its mechanisms. But silver prices also long have been subjected to largely surreptitious intervention by the U.S. government.
SLIDE 7: President Johnson signs the Coinage Act of 1965
Indeed, President Lyndon B. Johnson promised to rig the silver market when he signed the Coinage Act of 1965. The act removed silver from new mass-circulation coins minted by the U.S. government.
Signing the act into law, Johnson proclaimed: "If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content":
https://www.gata.org/node/
It's not known how long the U.S. government's strategic silver inventory lasted after 1965 and how much was used for executing the price-suppression policy Johnson proclaimed. But eventually collectors and investors did exactly what the president warned would bring them no profit. They removed silver coins from circulation and hoarded them as inflation made them worth far more than their face values.
JPMorganChase Bank long has been a primary dealer in U.S. government securities and has been a particularly close agent of the U.S. Treasury Department. So when the exchange-traded fund SLV was launched in 2006 and JPMorganChase became custodian of the fund's silver, fair suspicion arose about government involvement with the bank and the ETF. (The bank now is also a custodian of the metal of the major gold ETF, GLD, prompting more suspicion.)
After SLV was founded, complaints that JPMorganChase was manipulating the silver market grew loud enough that the bank felt obliged to answer them publicly.
SLIDE 8: JPM’s Blythe Masters on CNBC
First the bank's CEO, Jamie Dimon, said the bank had no interest of its own in the monetary metals and traded them only for clients. Then in 2012 the head of the bank's commodity desk, Blythe Masters, went on CNBC to emphasize this denial particularly in regard to silver.
Masters said: "There's been a tremendous amount of speculation, particularly in the blogosphere, on this topic. … It represents a misunderstanding of the nature of our business. ... Our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk-management objectives. ... We have offsetting positions. We have no stake in whether prices rise or decline":
https://www.gata.org/node/
https://youtu.be/gc9Me4qFZYo?
But since CNBC is a mainstream financial news organization, its reporter failed to put the critical follow-up question to Masters. That is, do JPMorganChase's clients trading silver and other monetary or precious metals include governments, particularly the U.S. government, directly or indirectly?
SLIDE 9: Bloomberg News report, “From Profits to Pay…”
The answer to that question was provided inadvertently 10 years later and was barely noticed by mainstream financial news organizations. It happened during the trial of the JPMorganChase traders charged with and convicted of "spoofing" the monetary metals futures markets. In the very last paragraph of its July 31, 2022, report about the trial --
https://www.bloomberg.com/
-- Bloomberg News reported:
"Another set of important clients were central banks, which trade gold for their reserves and are among the biggest players in the bullion market. At least 10 central banks held their metal in vaults run by JPMorgan in 2010, according to documents disclosed in court."
JPMorganChase was not just trading gold for central banks; it was vaulting gold for them too. It’s not hard to imagine that the bank was trading silver for governments and central banks as well -- or at least for the government that in 1965 had threatened to rig the silver market.
* * *
Why in recent years have the major bullion banks all been selling gold and silver, apparently in collusion, something that ordinarily would violate anti-trust law, without being sanctioned by the U.S. Commodity Futures Trading Commission?
The most likely explanation is that their positions are actually U.S. government positions and they are acting as the government's brokers, providing camouflage for government intervention.
SLIDE 10: ESF page from Treasury Department
That would make what seems like collusion among bullion banks perfectly legal, since the Gold Reserve Act of 1934 authorizes the U.S. government, through the Treasury Department's Exchange Stabilization Fund, to intervene surreptitiously in any market in the world.
CME Group's Central Bank Incentive Program facilitates this surreptitious intervention in the commodity futures markets.
The CFTC refuses to answer, for GATA and even for members of Congress, whether it has jurisdiction over manipulative trading undertaken by or at the behest of the U.S. government. Perhaps more than anything else, the CFTC's refusal to answer this simple jurisdictional question confirms price-suppression policy.
* * *
So why have gold prices been rising for a year and a half and silver prices rising for most of the last six months?
It’s because central banks are no longer united on gold price suppression policy.
Two years ago their association, the Bank for International Settlements in Basel, Switzerland, declared gold to be a so-called Tier 1 asset, equivalent to U.S. treasuries and cash, an asset for which regulated banks need not hold any collateral. This classification of gold as a Tier 1 asset has spurred the trend away from the dollar and toward gold as a central bank and commercial bank reserve.
This trend was accelerated by the seizure of Russian assets by the United States and NATO countries when Russia invaded Ukraine to keep NATO out. The weaponizing of the dollar gave governments and central banks a powerful incentive to get out of the dollar and U.S. debt and to buy gold -- the real stuff, to stop settling for paper claims on metal purportedly vaulted outside their borders, and to take delivery of it from the London and U.S. markets and the U.S. and British governments.
That is, other countries decided to stop making themselves hostages to U.S. imperialism.
SLIDE 11: Goldman Sachs
Central banks already had been switching from gold sellers and lenders to gold buyers out of concern about the worsening deficit spending by the U.S. government, which was sending inflation up:
https://www.goldmansachs.com/
SLIDE 12: Business Insider report on PBOC suspending gold purchases
But central banks remain deceptive about gold. While some have been announcing their acquisitions, others have been concealing them.
For the last six months the People’s Bank of China has made news by not reporting gold acquisitions in its monthly reports:
https://www.businessinsider.
But China’s not reporting gold acquisitions doesn’t mean that it didn’t actually acquire gold. A few years ago both China and Saudi Arabia were caught failing to report gold acquisitions to the IMF for long periods.
Geopolitical analyst Jim Rickards says the Chinese government has far more gold than it reports officially, keeping gold in accounts other than those of the central bank, as Saudi Arabia had done.
This year gold researcher Jan Nieuwenhuijs found customs export data indicating that China and Saudi Arabia continue to buy gold they aren’t reporting:
https://www.gata.org/node/
https://www.gata.org/node/
All this confirms what the secret IMF staff report from March 1999 showed: that official data on gold reserves is not reliable. Indeed, the true location and disposition of central bank gold reserves are government secrets far more sensitive than the true location and disposition of nuclear weapons. For nuclear weapons can only destroy the world, but as that meeting at the State Department in April 1974 showed, gold can control the world.
* * *
The BRICs nations increasingly show interest in moving away from the U.S. dollar and U.S. domination. While last month’s BRICs conference in Kazan, Russia, did not produce the gold-backed trading currency that had been speculated about, it did approve a trading regime that Jim Rickards says is likely to induce its members to park their trade surpluses in gold, thus underpinning gold demand.
SLIDE 13: Russia in talks with BRICs
As a consequence of that conference, Russia proposed that the BRICs group create its own monetary metals exchange:
https://www.reuters.com/
Such an exchange would probably give some physical competition to the paper-hangers in London and New York.
In May 2012 the U.S. economists Paul Brodsky and Lee Quaintance advised gold bugs to stop complaining about gold price suppression. Brodsky and Quaintance hypothesized that the major central banks were cooperating in gold price suppression so they could acquire gold inexpensively and then redistribute it among themselves so they all would be adequately hedged against an inevitable devaluation of the dollar and other currencies, whereupon they would push the gold price way up and come out ahead:
https://www.gata.org/node/
These days there is much speculation about such a “big reset” of the world financial system, and gold researcher Niewenhuijs discovered last year that central banks already have established gold revaluation accounts for themselves, from which their gold can be revalued upward as necessary as a bookkeeping maneuver to restore their solvency:
https://www.gata.org/node/
SLIDE 14: Federal Reserve accounting manual
In August financial letter writer Luke Gromen reported that the United States also has a gold revaluation account, as described in the Federal Reserve’s Financial Accounting Manual:
https://www.gata.org/node/
Gold revaluation isn’t some nutty idea. Of course, it’s what President Franklin D. Roosevelt did in 1934 immediately upon passage of the Gold Reserve Act. He revalued gold upward by nearly 70%, from $20.67 to $35 per ounce, so the government could sharply increase the money supply issued against the U.S. gold reserve in the middle of a depression.
In 2008 a former member of the Federal Reserve’s Board of Governors, Lyle Gramley, interviewed by Business News Network in Canada, responded to criticism that the Fed’s accounts were starting to look like a hedge fund’s. Gramley replied that the Fed could easily restore its solvency by an upward revaluation of the gold certificates it holds from the Treasury Department:
https://www.gata.org/node/6989
Gold revaluation is just a matter of accounting. Anyone with a stash of gold and a calculator can do it. But done by central banks, gold revaluation, a powerful form of money creation, would dramatically change all financial values in the world.
In any case central banks are not yet done with their intervention in the gold market. Such intervention continues every business day, painstakingly documented by GATA’s consultant about the Bank for International Settlements, Robert Lambourne. Lambourne examines the monthly statements of account issued by the BIS, from which he can calculate the tonnage of gold swaps the BIS has arranged and is carrying on behalf of its member central banks.
Lambourne seems to be the only analyst in the world to pursue this data, and while the BIS refuses to answer questions about it -- exactly for whom the swaps are undertaken and for what purposes -- the bank’s annual reports always confirm that Lambourne’s calculations of swap tonnage are correct.
SLIDE 15: BIS gold swaps chart
This chart shows that the BIS’ gold swaps have been declining steadily since 2021, even to zero at the end of 2022, and in recent months have been hanging around 100 tonnes.
These swaps almost certainly represent a sort of game of musical chairs central banks play with each other and bullion banks, moving gold or claims on gold around as necessary to prevent the gold market from blowing up somewhere from lack of supply.
That is, with almost every month the BIS statement of account shows that central banks are still fiddling with the gold market in ways they don’t want the world to know about. Some central banks -- or at least one of them -- is still trying to rig the gold market, while other central banks are beginning to realize that gold is the only mechanism for protecting or restoring their national sovereignty.
If you’re getting the impression that gold might be the only mechanism for protecting or restoring your own sovereignty, you have come to the right conference.
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