Recently I forwarded a complaint to the Commodity Futures Trading Commission (enforcement1@cftc.gov) about alleged hedging improprieties by Barrick (http://www.gold-eagle.com/gold_digest_99/butler062899.html).
I received the following e-mail response today from the Acting Director of CFTC:
This is in response to your e-mail. We appreciate your concerns about activity in the gold market and appreciate that you took the time to advise us of those concerns.
The Division of Economic Analysis of the Commodity Futures Trading
Commission (CFTC) monitors trading activity in commodity markets in order to detect and prevent market manipulation and other forms of market abuse. Although our surveillance is primarily focused on futures market trading activity, we also are aware of activity in the underlying physical market. The Commodity Exchange Act makes it unlawful to manipulate or attempt to manipulate the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market. In order to prove a manipulation, it must be shown that a trader intentionally caused
the price of a commodity to become artificial, or, in other words,
intentionally moved the price of a commodity away from a level reflecting the legitimate forces of supply and demand.
The Division is not aware of any evidence to conclude that the gold market's price is being manipulated. We do not agree that leasing activity in the gold market or forward sales by mining companies or by central banks is evidence of manipulation. While these activities may have an effect on gold prices, they are among many factors that affect prices, and there is no reason to believe that they are being engaged in by any individual, entity or conspiring group of individuals and/or entities for the purpose of causing an artificial price.
The weakness in gold prices appears to us to be primarily caused by several factors: the large stock of gold in relation to industrial production and consumption, the lack of investor interest in holding gold, and actual and potential sales of gold by central banks. The international gold market recently has declined on the announced sales of large quantities of gold reserves by the Bank of England and possible sales by the International Monetary Fund and the Central Bank of Switzerland. The first auction of 25 tons of gold by the Bank of England was completed on July 6.
Thank you for advising us of your concerns.
Sincerely,
John Mielke
Acting Director
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Interesting response, don't you think? Well researched, well articulated. The government guys have their stories straight.
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