By Michelle Smith -
GATA, formally known as the Gold Anti-Trust Action Committee, insists that a gold cartel is suppressing metal prices and aims to expose the group’s secret activities.
Gold Investing News (GIN) contacted Chris Powell, treasurer, secretary and director of GATA, and had an extensive discussion about what is going on in the gold market.
GIN: Can you outline how the gold manipulation scheme works?GATA, formally known as the Gold Anti-Trust Action Committee, insists that a gold cartel is suppressing metal prices and aims to expose the group’s secret activities.Gold Investing News (GIN) contacted Chris Powell, treasurer, secretary and director of GATA, and had an extensive discussion about what is going on in the gold market.
CP: Sure. Central banks that want to support their currencies and support the US dollar in particular want to control interest rates and government bond prices so they intervene in the gold market by selling their gold outright, by leasing it into the market through bullion banks and the BIS, and by swapping it to other central banks that will be doing these sales or leases. They also sell gold options and futures contracts through the BIS. They do a lot of shorting of gold to control the price.
GIN: Who is involved in this manipulation scheme?
CP: I think all the major western central banks are, if not participating, then at least aware of it and cooperating. I think all of the western central banks who were identified openly as being part of the London gold pool in the 1960s are certainly cooperating with it. Though I think the major ones lately have been the US, Bank of England and the Bundesbank. But I think any central bank that has been identified as having swapped or leased gold is a participant.
GIN: So, you’d say that the gold cartel is composed of central banks?
CP: It is a central bank scheme but they operate very often through agents like bullion banks. JP Morgan Chase and HSBC. The Bank for International Settlements (BIS) in Basel, Switzerland conducts much of the gold trading for the western central banks. So certainly the BIS is an agent as much as the bullion banks are.
GIN: Who does gold manipulation affect? Is the negative impact just limited to gold investors?
CP: Oh no. It’s the destruction of all free markets. It’s the destruction of transparency in government. Certainly gold investors and mining companies and developing countries that rely on the production of commodities for their livelihood are terribly harmed.
But from my standpoint as an American citizen and a journalist who wants transparent government I think the greatest casualties are free markets and accountability in government. This scheme is a matter of rigging markets surreptitiously and when you rig markets you don’t have free markets anymore. And when you lose free markets you lose your competitive economy as well as your democracy when such major government action is undertaken in secret.
GIN: Is gold manipulation done mostly through leases, swaps and selling gold?
CP: Not only gold, but futures and options as well. They are hugely capitalized operations so they have very deep pockets. The can probably sell gold futures and options to an extent that no buyer can compete with them. And most buyers will be driven out the market by the amount of imaginary gold that central banks can sell because they have the ability to create money in infinite amounts.
GIN: How do the bullion banks and the futures market factor in?
CP: Because central banks trade through them, they are acting as agents. Whenever there is any crisis in the financial markets, where do the Fed and the Treasury go to try to put together a bailout? They start with JP Morgan Chase.
The use of New York investment banks by the US government, particularly JP Morgan Chase, that’s public record. I’m sure if you asked for access to all the communications between the Federal Reserve and the US Treasury and JP Morgan Chase you would get a lot of interesting information if it was made available to you.
But again, these are questions that are best put to central banks. I am only a derivative source of information. I can’t speak for the Fed and the Treasury and the Bank of England. I can show you the exchanges we’ve had with them. I can show you what has come out as a result of our suing the Fed. But we are not the possessors of the original information here. We are not the original sources.
I have always marveled that we should be questioned at GATA before any questions are put to the central banks about their policy in the gold market. I think if you pose questions [to the central banks] that are specific enough that you will find pretty quickly that the door is slammed in your face.
GIN: You said the motive for gold manipulation is to control interest rates and bond rates?
CP: If you read the academic paper which is on GATA’s internet site called Gibson’s Paradox and the Gold Standard, that paper analyzed the historical relationship between gold and real interest rates. If you read it I think you will indeed find there is a historic relationship. And indeed gold is pretty much by definition a determinant of currency value and interest rates and by extension government bond prices.
Gold is a terribly important determinant of the value of other financial instruments. We have collected a lot of State Department memorandums, CIA memos and documents throughout history about the importance the US government put on controlling the gold price. Many central bankers have made statements signifying that the gold price is of great concern. Governments have always sought to control the gold price and that’s what the Gold Standard was really about.
GIN: If gold market price control has pretty much always existed, does the tactic remain the same? Or does the gold cartel switch up how they control the price from time to time?
CP: Well they certainly change their mechanisms. Back in the 1960s the western central banks were controlling the gold price in a forthright but very costly fashion. That is, they were dishoarding a lot of metal out of their reserves and they lost a lot of it. And as they were down to the last tonnage they decided they couldn’t do it that way anymore.
They’ve come up with a much more efficient and powerful way of controlling the gold market insofar as they’ve created a vast imaginary supply of what we call paper gold. That is certificates claiming ownership to gold. Central banks realized that they could basically underwrite the paper gold market run by bullion banks by advancing gold to bullion banks as necessary to avert a short squeeze in gold when bullion banks sold more gold than they could deliver.
GIN: Can you help our audience better understand Bill Murphy’s [of GATA] comment about central banks realizing in 2001 that there was too much gold at too low of a price? He said central banks then embarked on a management scheme that has been ongoing now for 12 years... Read more>>Gold Investing News
