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Is the COMEX just a farce?
silberinfo: Our last interview dates back to March 2005. Bill and Chris, what has changed in the meantime for GATA and the work you do? B. Murphy: 1. We held an international gold conference on April 18th, 2008 right outside of Washington, D.C. 2. We filed freedom of information requests to the Fed and US Treasury, asking questions about gold swap operations. The Fed withheld hundreds of pages of information, redacting hundreds of pages of others. The Treasury gave a non-response. When we queried specifically about the Exchange Stabilization Fund, they responded about the Exchange STABILITY Fund. Is the US Treasury truly an Abbott and Costello operation? C. Powell: More evidence of central bank intervention in the markets has been disclosed, and opinion in the precious metals markets increasingly is coming around to acknowledging the intervention. silberinfo: What are your thoughts regarding the present financial crises with respect to gold? B. Murphy: It is bad and going to get worse. On January 31, 2008 GATA placed a full-page color ad in the Wall Street Journal, which you can read at: http://www.gata.org/node/wallstreetjournal Here are three sentences from our ad:
There was not one press inquiry as to what GATA knew and what we were talking about. Some day this ad will receive enormous attention. C. Powell: If gold had been allowed to trade in a free market, it would have warned, via its rising price, of the excessive credit in the world financial system and the debasement of the money supply and maybe gold's warnings would have been heeded. silberinfo: It is said that at the moment a lot of gold is demanded and bought. Still the price of gold in USD is significantly lower than in March, although the crisis has escalated since then. Is this the case because of continued market manipulations, or are other reasons playing a role here? Last week the Mexican Central bank limited sales of its Libertad silver coins. This is no accident. It is an organized effort to keep to limit demand for gold and silver and keep this kind of money out of the hands of the people. C. Powell: The benchmark price of gold, the price reported on the commodities exchanges, is low, it is something less than the true price. It is the price for promises of gold delivered in the future, promises that might be defaulted upon. The true price is for metal in hand, and that price is maybe 35-40 percent higher amid worldwide scarcity of real metal. silberinfo: The Washington Agreement on official gold sales is running out next year. Do you think there will be a new agreement? B. Murphy: With the way the world the financial market scene is changing, I am not sure central banks want to be seen squandering what gold they have left. GATA believes they have well less gold than half the gold they say they have. My guess is we are going to a new day when it comes to official sector gold -- mainly because they will be forced to view gold differently. C. Powell: Central banks coordinate their gold policies -- that's what the gold price suppression scheme has been about -- and there likely will be continued coordination, though perhaps in a different direction eventually. silberinfo: The worldwide tonnage of mined gold has been going down consistently in the last years. Do you think that this trend will go on? B. Murphy: There is NO way gold production will even remain even the same in the years ahead. And the way The Gold Cartel has forced down the price of late, makes it even less likely production will increase for MANY years. Substantial production increases are five years off, or more. C. Powell: Yes, production is likely to keep declining for a while even if the gold price rises substantially soon, since bringing new mines to production takes years and returning mothballed mines to production may take many months. silberinfo: Because of the financial crisis, the governments attempt to rescue the financial industry with a lot of money worldwide. Is this good or bad for the future performance of gold? B. Murphy: Short term a deflationary spiral has been negative for all commodities. However, common sense dictates that so much new printed money will be extremely inflationary down the road -- when the staggering new amounts and the velocity of money turnover kicks in. Right now everyone is hoarding money and conserving cash. C. Powell: Insofar as bad debts are forgiven or made good and the money supply is reflated, this should be good for gold. silberinfo: You are "at the source"; do you have new information that points to countries that are considering to back their currencies with gold? B. Murphy: Don't know of any. C. Powell: No firm evidence of this. But any countries considering an alternative to the dollar as a reserve currency will automatically consider incorporating gold in some way. silberinfo: The new worldwide trend to nationalize and to establish public interests in companies is heading to socialism. Could you imagine that the COMEX could be the next potential victim? B. Murphy: The Comex is a farce and is a tool used by the US Government. The rules are made for the shorts, the big banks in this case. Something very dramatic is likely to occur in the future, like a default of some kind -- as the real world market detaches further from the Comex prices. C. Powell: In my view the Comex already long has been an agency of the U.S. government, insofar as it is the main mechanism of suppressing prices with the help of largely unregulated derivatives. silberinfo: Looking at the production of the U.S. Mint in the past, it occurs that they have been producing and selling a lot more gold coins, as it is the case now. Could it be that the mint holds back gold on purpose, maybe following an order? B. Murphy: As mentioned earlier, there is no doubt in my mind there is a coordinated effort, not only by the US (it emanated here of course), but all countries to limit the amount of gold and silver that ends up in the hands of citizens. C. Powell: In many years over the last few decades the U.S.Mint has produced far more coins than it has produced so far this year, so minting capacity is not the problem. If the U.S. Treasury really holds the 8,200 tonnes of gold reserves it claims, and if the gold price is really declining as the futures markets say, obtaining the gold should not be a problem either. So I have to conclude that gold is actually quite scarce now and that the U.S. government (and other governments) want to reduce the public's access to it, lest more money flow out of government currencies and out of other markets. silberinfo: It is reported that a lot of people in India are reluctant to buy gold right now, because the price looks very high to them. Is this just a temporary phenomenon in your opinion? B. Murphy: Gold demand in India has been inhibited by a very weak rupee and a weak stock market. The Indians have been the most significant buyers of gold over the years and likely to be that way for years to come. They are the major buyers on significant price breaks like we have now. C. Powell: India is exquisitely sensitive to the gold price and probably knows better than most when gold is expensive and when it is cheap. But looking ahead some years, I think gold's price today will be considered a fantastic bargain. silberinfo: What do you think about the most recent developments regarding the opening of the Chinese gold market for private investors? Will China become a "Hot Spot" in the future with regards to the gold trade and the demand for gold? C. Powell: It will depend on whether the Chinese market becomes a free-trading and largely physical market or a largely paper market subject to manipulation by those with access to infinite government money. B. Murphy: The collapse in the mining shares is historic. Most of the gains made from the bottom of 2000 have been erased over the past few months. It is my opinion gold and silver will be the go-toinvestments in 2009 and the run higher in the gold/silver shares will be unprecedented. Returns of 1,000 percent and more from these current depressed levels will be common. C. Powell: The stock market has been taking its cues from the Comex rather than the physical market. But if miners can't learn to get around the Comex and reach the retail market more directly, they may never make money and their low share prices may be deserved. silberinfo: What do you think about the increasing costs for mining companies and their effects on the realization of new projects (e.g. Novagold)? Doesn't this speak for physical gold and against investments in mining stocks? Would you still suggest to invest in both? C. Powell: Yes, until the gold price rises substantially, gold itself will be a better buy than mining companies. But eventually scarcity will drive the gold price high enough to make mining profitable again. The key question, as with every other investment, is exactly when. I wish I knew. silberinfo: Since our last interview a lot has been going on in the hedge books of many gold producers. The majors, particularly Barrick Gold unwound their forward sales. Does this surprise you? B. Murphy: No, their hedging programs were a disaster. Most of them kicked in with gold right above and below $300 -- put into effect by the bullion banks like Goldman Sachs and Chase Bank to enhance their gold price suppression scheme. Those still short hedges ought to be covering as fast as they can on this price dip. C. Powell: No. While this year has been terrible for gold, the gold price is still far above the price at which the hedges were incurred. silberinfo: What do you think of the danger that mining companies get nationalized in a crisis? B. Murphy: That can always happen and probably when the prices of gold and silver go bonkers, while other market sectors are struggling and revenue from those sectors dwindles. C. Powell: This is always a threat but less of a threat in jurisdictions where the rule of law is well-established, and of course a lot of financial companies already have been nationalized to some extent. Lately it has been far riskier to own banking company shares. |
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(Editor's Note: It is becoming increasingly difficult to find a safe, legitimate place to invest one's money. The stock markets are rigged. The government will not allow you to short stocks in your retirement accounts, essentially assuring themselves the opportunity to steal it whenever they want to through blatant market manipulation. And now (well for some of us for a long time now) we find that the futures markets are operated by the same classless group of miscreant criminals that populate the executive branch, the legislative branch and the judicial branch of government, as well as the entire banking and insurance industries and all of Wall Street. The pharmaceutical industry is not far behind. The bond market faces an eminent meltdown, and property values are dropping like a stone (due the the artificial lift they got during the real estate bubble. That leaves physical possession of gold and silver. They are both dirt cheap right now. Protect yourself. No one else is going to do it for you. Our friends at Siberinfo, a German precious metals web site, interview Bill murphy and Chris Powell, both executives of the Gold Anti-Trust Action Committee. - JSB)