February 11, 1999

I will paint a rather interesting and intriguing picture - which is totally documented. Indubitably, the poignant picture will tell an arresting story, which may be open to several interpretations. If you have the time and are so inclined, you might share your view of what you "see" in this picture.

For many years Robert Rubin was the president of GOLDMAN SACHS, one of the leading investment bankers and brokerage houses of the world. However, during president Clinton's first-term administration, Mr. Rubin was nominated Secretary of the US Treasury. During all of this time Mr. Alan Greenspan was Chairman of the Federal Reserve Bank in Washington D.C. (although a couple years ago he was re-appointed to the same position, also by president Clinton - after many months of covert and mysterious deliberations).

Now let us backtrack to mid-1993. From that date through March 1994 GOLDMAN SACHS published FIVE bullish reports on precious metals (four on gold and one on silver). The very positive gold reports carried the title, "GOLD BULLION AND GOLD STOCK OUTLOOK." The silver report was called "SILVER MARKET OUTLOOK."

In order that all may verify the accuracy of the picture I am painting, here are the exact dates and titles of these bullish precious metals reports. Incidentally, the reports averaged about 70 to 90 pages each. Exhaustive studies with tables, graphs, charts - all surrounded with oodles of bullish supporting rhetoric.

Below are the report titles and sub-titles - which echo GOLDMAN SACHS bullish opinions crowding the voluminous reports on Gold and Silver.

July 27, 1993


  • Maintaining a positive gold price outlook
  • Supply/Demand model
  • Market still remains in deficit even before investment demand
  • Market pullbacks offer opportunities
  • Pent-up Chinese demand could boost market boost market deficit in 1994 and beyond

October 14, 1993


  • Narrow trading range physical market for gold likely to be punctuated by intermittent speculative rallies
  • Lifting of sanctions on south African investment
  • Recently upgraded LAC and PDG to MO from MP rating
  • Upgraded Amax from MU to MP; turnaround potential possible following share distribution in mid-November

December 31, 1993


  • Raised 1994 and 1995 average gold price to $375 and $400/oz from $363, and $375
  • A pullback to retest the $360-$370 level is quite possible this spring if speculative interest in gold cools
  • Gold stock to gold ratio appears to be trading at near peak value
  • Prefer to accumulate share son gold market pullbacks
  • Rate ABX, HM, LAC, PDG, as moderate Outperformers

March 15, 1994


  • Spot gold price rise fueled by political concerns and technical buying
  • Near to intermediate term, gold market likely to consolidate in $380 to $395/oz range
  • Chinese purchases and intermittent speculative interest likely to push gold prices to test the $420/oz level during 1994
  • Continue to rate ABX, HM, and PDG shares moderate performers; Upgraded AU, NEM, and NGC to moderate outperformers


  • Raised our 1994 silver price forecast to $5.50 from $5.25/oz
  • Large inventory drawdowns during 1993 attracted speculative interest in silver
  • Multiyear market deficits are projected during 1994-1996 period

Just about this time, the reports abruptly STOPPED. Consequently, GOLDMAN SACHS' conspicuous silence was interpreted as bearish for precious metals. Since that period and to the present, GOLDMAN SACHS has maintained a strongly bearish stance toward gold. It is imperative to recall that Mr. Robert Rubin, ex-president of GOLDMAN SACHS, was now Secretary of the US Treasury, rubbing elbows with Fed Chairman Alan Greenspan.

For the remainder of 1994 gold maintained a flat posture just below $400/oz. Then in 1995 it began a relentless, irresistible and protracted downtrend until reaching its nadir in December 1997 at about $278. Since then the yellow metal has languished, trading in a tight range between $285 and $300.

Subsequently, it was Fed Chairman Greenspan who said he would control the gold market if he had to. He spelled it out on July 30, 1998 in little-noticed testimony before the House Banking Committee. The Fed Chairman was trying to downplay the risk that some derivative contracts might produce a squeeze on short sellers."

He explained that there was no danger that the supply of oil to fulfill derivative contracts could be restricted. Then, he added, "Nor can private counterparts 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." Mr. Greenspan said "CENTRAL BANKS," bankS, like in the plural. Without one iota of doubt he was referring to a collusion of Central Banks acting in concert with the specific objective of CONTROLLING THE PRICE OF GOLD, so it could not rise. ",,, ready to lease gold in increasing quantities should the price rise."

What 'picture' do you see in the above events (which are well documented)? Is your interpretation of these events different than mine? In light of the above, what ONE sentence best describes the possible Federal Reserve Bank's influence upon the price of gold?

What words leap to mind: collusion, collaboration, manipulation, concert, machination, maneuver, manipulation, connivance, conspiracy, trickery, deception, orchestration, tampering, manipulation? …Manipulation?

Share your opinion with the rest of us.


The Red Baron

11 February 1999


The melting point of gold is 1337.33 K (1064.18 °C, 1947.52 °F).
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