Gold Cartel's clever move to suppress gold price
Bill Murphy
 Gold demand has been outpacing gold mine and scrap supply by more than 1,000 tonnes per year for the past decade … probably much more in some cases. The difference has been met by official bank selling and clandestine central bank lending … meaning bullion banks like JP Morgan Chase have been borrowing gold from central banks at extremely low interest rates and selling it into the physical market, using the proceeds for their internal operations, etc. As a result, the central banks have less than half of the 30,000 tonnes of gold they say they have, probably a lot less than half.
The unloading of central bank gold was not a fluke, but a coordinated effort, by a United States government-led Gold Cartel, to suppress the price of gold. This "scheme" was set in motion by Robert Rubin, as part of his role as Treasury Secretary, and was the essence of his "Strong Dollar Policy." In a brilliant maneuver at the time Rubin, as CEO of Goldman Sachs’ London operations, began borrowing gold from central banks in the late 1980’s for next to nothing interest rates (say 1%, compared to the prevailing rates of 8% to 12%) as CEO of Goldman Sachs’ London operations, and eventually carried those dealings forward to new heights as US Treasury Secretary.
Presidents Clinton, Bush and Obama all have influenced bullion banks and other central banks to mobilize gold to suit their own agendas. One of them has been to keep US interest rates unnaturally and artificially low. This is not conjecture on GATA’s part. Gibson's Paradox was the observation that the rate of interest and the general level of prices were observed to be correlated. The term was first used by John Maynard Keynes in his 1930 work A Treatise on Money. In 1988 Lawrence Summers co-authored a paper in the Journal of Political Economy titled "Gibson’s Paradox and the Gold Standard." In essence he said there was a relationship between gold and interest rates … or, keep the price of gold down and US interest rates would also be kept down. Summers followed Rubin as Treasury Secretary and followed in his footsteps regarding US gold and his "Strong Dollar" policy.
The "conspiracy" to hold down the price of gold could not have been more obvious as long as ten years ago.
The US Strong Dollar Policy did not stop at US shores. On May 7, 1999 Britain’s Gordon Brown, Chancellor of the Exchequer, announced in advance that England would sell 415 tonnes of its gold to the lowest bidders in the coming years in an auction format. This bizarre announcement stopped a rallying gold price in its tracks (for a couple of years) and was the SINGLE event over time which most attracted GATA’s brightest consultants and staunchest supporters. The "conspiracy" to hold down the price of gold could not have been more obvious as long as ten years ago. From my MIDAS commentary on May 6, 1999 the day BEFORE this critical gold sale announcement:
Deutsche Bank, Chase, Swiss Bank and Goldman Sachs were all there selling gold during today's session and, when they had to, even throwing the kitchen sink at the bulls attack. Deutsche Bank has been especially aggressive and noticeable in their selling the past few days. We got word late this afternoon that their bullion desk is calling their clients saying that the gold market is stopping at $290.
Some day there will be books written about the surreptitious gold price manipulation scheme and what occurred during the decade following the BOE gold sale announcement (part of which might allude to how Gordon Brown sold his soul and country’s gold on the cheap to gain favor of the rich and powerful in his quest to become Prime Minister). However, the above was written only to set the framework for gold’s coming price explosion (SILVER’s too).
Fast forward 10 ½ years and the EXPLOSIVE gold scenario. This mention of gold demand and supply is not intended as in-depth analysis. Instead, it’s to focus on the major features which represent The Tipping Point in terms of reasons for MUCH higher gold prices which are right around the corner…
Demand
*Central banks have been sellers for the past decade+. However, they have now become net buyers, led by China and Russia, both top global gold producers. Thus, it is in their special interest to accumulate gold instead of depreciating dollars.
Russia has been following GATA for more than half this past decade as articulated by Oleg V. Mozhaiskov, the deputy chairman of the Bank of Russia, that country's central bank, who stunned the attendees at the prestigious London Bullion Market Association in Moscow in June 2004 by mentioning the Gold Anti-Trust Action Committee, the only words he spoke in English. He stated:
They believe that with the assistance of a number of major financial institutions (they mention in particular the Bank for International Settlements, J.P. Morgan Chase, Citigroup, Deutsche Bank, and others), some senior officials have been manipulating the market since 1994. As a result, the price dropped below US$300 an ounce at a time when it should, if it had kept pace with inflation, have reached US$740-760."
It was no fluke that a year later in August 2005 Andrey Bykov, a key economic consultant to President Putin of Russia, attended our Gold Rush 21 conference in the Yukon’s Dawson City…
Andrey told me it was the finest conference he had ever attended. A steady, quiet price of gold exploded two days later, running up to $730 in the ensuing months.
On August 20, 2009 Russia revealed an increase in their gold holdings in July of 600,000 ounces, which now stand at 18l.3 million ounces.
As far as China goes, the GATA camp was first to reveal their gold accumulating activity which began in 2003. From my commentaries way back when…
September 19, 2003 - Gold $381.10 up $4.80 - Silver $5.25 up 2 cents
*The orders are emanating out of New Zealand and Australia. My source believes it is Asian money and most likely CHINESE!
December 23, 2003 - Gold $410.65 up 55 cents - Silver $5.71 up 2 cents
…As Cafe members have been made aware, the Eastern gold buyers have additional competition due to the enormous physical market buying by THE STALKER ("gold buying group"). Without getting into many details, I want to stress THE STALKER is real. My source’s good friend has attended a meeting with this "gold buying group," or his agent. I say "or" because THE STALKER is very secretive and does not want to be known publicly, even to the sellers from whom he is buying.
Both my source and I strongly believe the gold buying is of Chinese origin…
January 15, 2004 - Gold $408.30 down $13.10 - Silver $6.19 down 21 cents
…Good news! Just got off the phone with my STALKER source. There was an unscheduled phone conference this afternoon with THE STALKER’S US buyers. They have a NEW order for $800 million to $1.2 billion to be completed between now and March. 72 tonnes of new gold buying is nothing to sneeze at! The orders are still coming out of Australia and my source continues to believe they are for mainland China…
January 28, 2004 - Gold $414.60 up $4.90 - Silver $6.60 up 7 cents
While most conference presenters stressed the weak dollar as the most important gold factor, I stressed it was the surging physical market.
In that regard, I learned this morning THE STALKER (probably China) just completed the last bit of its $6.8 billion order. NOW, THE STALKER is working on its additional 800 million to $1.2 billion dollar gold order (brought to your attention recently). I might know more on this on Friday.
February 24, 2004 - Gold $403.90 up $5.70 - Silver $6.59 up 13 cents
We have confirmed the buyer is from the Far East, in all probability Chinese, and they still have $1.5 billion of gold to buy. We also know why they are buying. This is a big picture trade, not a short-term speculation. The gold they are accumulating is going into deep storage and not coming back into the market on rallies. The reason is these "Chinese" fear a complete debacle in fiat currencies in the next couple of years…
Bill Murphy is the Chairman, Gold Anti-Trust Action Committee (GATA)
www.commodityonline.com
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