Evidence of Gold Price Manipulation

Yesterday on CNBC, Bill Murphy, President of Le Metropole Café, discuss the efforts of an organization known as GATA (Gold Anti-Trust Action) to study and perhaps seek legal remedies against the control of the price of gold by some of Wall Street's major investment banks. GATA has organized in response to recent ADMISSIONS by major Wall Street investment houses and Federal Reserve officials that they have been colluding and continue to collude to control the price and supply of certain financial securities, some of which involve gold.

* The bailout by Wall Street investment houses, orchestrated by the Federal Reserve Bank of New York, of Long-Term Capital Management, whose positions in derivatives were starting to be priced in ways that would bring sweeping changes to the prices of all sorts of securities in various markets. The LTCM bailout was frankly an effort to control the price and supply of these derivatives. Under anti-trust law, any combination to control price or supply is illegal.

* The formation by some of the same Wall Street investment houses of the Counterparty Risk Management Group. To collude with competitors in business to "manage risk" is to seek to control price and supply. Again, this is frankly a violation of antitrust law. It is as if GM, Ford, and Chrysler got together to "manage the risk" of making cars, and did so by agreeing not to price cars below a certain point and not to pay workers above a certain point.

* Fed Chairman Greenspan's admission to Congress last July that government central banks were planning to lease gold into the market to suppress its price. "Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over the counter, where central banks stand ready to lease gold in increasing quantities should the price rise". Soon thereafter, the gold market plunged.

Since the investment houses and Federal Reserve officials already have admitted this much fixing of the price and supply of gold, we believe that there probably is a lot more price and supply fixing to be discovered. A lawsuit very well may discover it.

This conspiracy of the Wall Street investment houses and Federal Reserve officials has devastated an honest industry, the mining industry -- its employees, stockholders, and communities around the world. It has benefited only the market manipulators themselves.

Mr. Murphy said "We believe that financial institutions are taking advantage of this manipulation to borrow gold and dump it into the market place. This "gold carry" trade is similar to the "yen carry" trade. Money is being borrowed a very low rates (currently under 1%) - this borrowed gold is continuously being supplied (or shorted) to the market. Without this supply, the gold market would have to rise significantly to clear a very substantial supply/demand deficit. The reversal of the "yen carry" trade late last summer caused world wide financial chaos. It is our opinion that the gold loans to speculative borrowers are now greater than one year's mine supply. If the speculative gold loans, resulting from this collusion is not curtailed, the reversal of the " gold carry" trade could be much more disruptive to the financial markets than the reversal of the "yen carry" one was".

But the harm being done by this conspiracy goes far beyond the mining industry; this conspiracy harms the economy of the whole world. For it is eroding gold's traditional monetary function, its restraint on currencies, and is distorting markets everywhere. That is, everybody who is not part of the conspiracy has an interest in maintaining open and honest financial markets and dependable currencies. Thus everybody else should be on our side. If you would like to help GATA, you can contact them at
[email protected]