For you weekend reading enjoyment :-)
1:45p EST Thursday, March 30, 2000
Dear Friend of GATA and Gold:
Wednesday's conference of the Committee for Monetary
Research and Education, held in New York, was a great
success for GATA, since our chairman, Bill Murphy, was
a featured speaker and since his topic, "The Gold
Market Mystery," caused a doubling of the conference's
usual attendance to more than 150 people and prompted
the most questions from the audience, which included a
number of financial journalists.
We were blessed by the attendance of many of GATA's
friends from around the country, some of whom traveled
long distances. We are especially thankful to Frank
Veneroso, who spoke to the conference after Bill did
and who, after describing the supply and demand
situation in gold, announced that he has concluded that
GATA is right that something is seriously wrong in the
gold market and that a huge official but undisclosed
seller is at work.
The text of Bill's remarks at the conference follows.
Please post it as seems useful.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
The Gold Market Mystery
Remarks by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
to the annual meeting of the
Committee for Monetary Research and Education
The Union Club, New York
March 29, 2000
It's nice to be back in New York, as I lived right
around the corner for 15 years. Now I am off in Texas,
where telling tall tales is more acceptable.
You should all be aware that my beloved grandmother,
Mimi Murphy, was the aunt of the celebrated mystery
fiction author, Mary Higgins Clark. Mimi was no slouch
herself, as she was the most talented pianist I ever
had the pleasure of listening to. She was so good that
she played in theaters when silent movies were the rage
and was invited to play the piano in Russia for the
czar right before the communists took over. All of this
and she never took a piano lesson in her life.
I was not blessed with any great talent such as that,
but I think I WAS BLESSED with her FEEL, and that is
what I came here from Dallas to share with you.
My topic today is the gold market mystery. (It fits
right in with the family background, does it not?)
At the end of 1998 the gold price finished the year out
around $289 as is did the end of 1999. Today the price
of gold is down to $275. No matter what economic events
occur in the world, the gold price does not rise and
when it does, it comes back to below the $290 level.
Let us note the following:
* The price of oil tripled this past year.
* Commodity prices are gradually going into new recent
high ground.
* Interest rates rose sharply and the Fed is tightening
due to inflation concerns.
* The World Gold Council reports record gold demand.
* At the same time, mine supply is flat.
* There is no financial crisis dumping of gold as there
was in 1998 when prices were this low. Korea alone
dumped 250 tonnes of gold then.
* Some major producers such as Anglogold and Placer
Dome are not rolling over their forward sales, they are
delivering into them, reducing supply hitting the
market.
* The hedge funds and specs are not going short and
putting on the gold carry trade like they did in 1998
and 1999.
* In September 15 European central banks in the
Washington Agreement announced that they were
curtailing their gold lending and limited their gold
sales to 400 tonnes per year. That number includes the
publicized sales of the Dutch, English and Swiss.
All this yet the gold price does not rise, not even to
a modestly higher new level like $330 per ounce. No,
$290 is some sort of Maginot Line that gold is not
allowed to breach to the upside for any length of time.
What is going on here?
The Gold Anti-Trust Action Committee strongly believes
that the gold market has been manipulated the past
couple of years -- at minimum -- by certain bullion
banks, mostly headquartered in New York, and a certain
facet of U.S. officialdom.
We believe there has been a conspiracy to hold down the
price of gold. In the past I shied away from the word
"conspiracy," preferring the word "manipulation." But
the more our camp gets into what has occurred, the more
appropriate it is to use the "conspiracy" word, as it
best defines orchestrated collusion and the confined
state of the gold market.
The motives for the orchestration of a low gold price
were simple:
One reason was money -- the "in the know" bullion
dealer crowd borrowed gold at 1 percent gold lease
rates and invested those funds in all kinds of
investments, thereby making a fortune. The culprits may
also include the U.S. Treasury Department's Exchange
Stabilization Fund, which may have been writing calls
on the U.S gold or using derivatives to sell forward.
I would like to quote Anna J. Schwartz, a research
associate at the National Bureau of Economic Research,
who wrote a paper on August 26, 1998, entitled "Time to
Terminate the ESF and the IMF":
"The ESF was conceived to operate in secrecy 'under the
exclusive control of the secretary of the treasury,
with the approval of the president, whose decisions
shall be final and not subject to review by another
officer of the United States." The 1934 act authorized
the ESF to deal in gold and foreign exchange in order
to stabilize the exchange value of the dollar. The
secrecy arrangement was intended to cloak foreign
exchange market intervention. It promoted two
objectives. The first objective was to conceal from the
public and Congress the exchange rates at which foreign
currencies were bought and sold, particularly if they
involved losses. A second objective was to permit the
Treasury, if it so desired, to conceal information
about any other operations the ESF might undertake...."
Last Friday two Treasury officials responded to
questions asked of Treasury Secretary Lawrence Summers
by GATA in an open letter in Washington's Roll Call
newspaper last Dec. 9. Those responses were sent to
Sen. Mitch McConnell of Kentucky and Rep. Sherrod Brown
of Ohio, denying any Treasury involvement in the gold
market.
We asked the same questions of Federal Reserve Chairman
Alan Greenspan, who responded right away to Sen. Joseph
I. Lieberman, who requested that he do so. It took the
Treasury more than three months to respond to Senator
McConnell, and they apologized for taking so long.
Senator Leiberman has yet to hear from Secretary
Summers.
Perhaps the Fed and the Treasury are not involved in
the gold market in any way. Should we accept the
Treasury responses and Alan Greenspan's response along
with the "no" answers to all of our questions? Maybe.
But where we would be today if:
* We just said OK when President Nixon said, "I am not
a crook."
* We agreed with President Clinton when he wagged his
finger at us saying he had no sexual relations with
Monica Lewinsky.
There are so many factors to consider. The Clinton
Administration has little credibility on "telling the
truth" because of the "is" factor. Greenspan himself is
famous for his "Greenspeak"; that is, many different
interpretations on what he says. Why should his
comments about gold be any different?
Former Fed Governor Alan Binder was quoted in the Wall
Street Journal last year as saying: "The last role of a
central bank is to tell the truth to the public."
Did we not get into the Vietnam War over an incident
reported to us by our government that never happened?
How may lives might have been saved if that government
report had been seriously questioned?
There are other considerations for further probing of
the Fed and Treasury regarding their responses to GATA.
There is a great deal at stake here.
Last year the U.S. Treasury was urging that the
International Monetary Fund sell gold to help out the
poor. One minor problem with that: 36 of 41 poor
countries requested that the IMF NOT sell its gold
because the low gold price was devastating their
mineral-producing economies. And the Congressional
Black Caucus was against the IMF gold sales, thus
supporting the black population in gold-producing
countries that have been hurt so badly by the low gold
price.
How does the Treasury now say that it has not been
active in holding down the price of gold? The hypocrisy
that would be revealed would result in cries of outrage
around the world and might hurt Al Gore's presidential
election chances.
In my opinion Frank Veneroso of Veneroso Associates
knows the nitty gritty (the supply/demand numbers) of
the gold market better than anyone else in the world.
According to Frank, if the manipulation of the gold
market were to cease, the price of gold would rise to
$600 per ounce. That is what kind of a price move it
will take before an appropriate equilibrium price can
be attained -- for the past few years, too much gold
has been consumed at too low a price.
Why should that even matter?
The oil price triples and it barely created a few
outcries. A move to $600 would only be a doubling of
the gold price. It may not be the price that matters at
all, but the perception of what it means. Not a week
goes by that Lawrence Kudlow, CNBC chief economist,
does not point to the low gold price of how all is "oh
so well" in America's financial land. If the gold price
were allowed to rise to its proper level, would that
effect interest rates in the United States, and would
it affect the dollar? How would it reflect on Alan
Greenspan and Federal Reserve policies? The motive for
some U.S. officials to hold down the gold price is
obvious.
The Gold Anti-Trust Action Committee -- formed by Chris
Powell, managing editor of the Journal Inquirer in
Connecticut, and myself -- is only trying to ferret out
the truth about the gold market and to determine if
there might be violations of the Sherman and Clayton
Anti-Trust Acts. We formed the committee in January
1999 after hearing that Long-Term Capital Management
was let out of a 300-tonne short gold position in a
rigged "off-market" transaction that prevented a gold
price explosion while the New York Fed was
orchestrating LTCM's bailout to prevent a financial
crisis.
As the fall went on, many of the bullion banks that
bailed out LTCM were always there at the same time to
knock back the price of gold every time it looked as if
the price would take off. The gold market manipulators
took no chances of losing control of this rigged market
and money making bonanza. Their line of defense points
-- first right above $300, ratcheted down to $296 and
then $290. We then heard this same cartel was offering
unheard-of relaxed credit terms to producers if they
would just sell forward. At the same time we twice
received feedback from very reliable sources that U.S.
officials had asked Asian officials to refrain from any
aggressive gold purchases, as they were in the market
at the time.
After all this, the Counterparty Risk Management Group,
led by Goldman Sachs and J.P. Morgan, was formed to
manage risks in the financial sector along with the
likes of scandal-ridden Credit Suisse. How long do you
think it would stand if Chrysler, General Motors, and
Ford got together to do the same thing in the
automobile industry?
The anecdotal evidence could not be more clear that
there is an orchestrated effort to hold down the gold
price.
On the afternoon of May 6 last year I received word
that Deutsche Bank was telling its clients that the
price of gold would NOT go past $290 -- and gold was
trading at $289 at the time. I put that up in boldface
on my web site, www.LeMetropoleCafe.com.
The very next day, May 7, Britain announced its new
gold sale policy. The Bank of England was the first
central bank in more than 20 years to announce a gold
sale in advance. They knew this announcement would
devastate the market and send gold prices crashing --
and, of course, it did. The gold price went straight
down more than $30 per ounce. This assured British
citizens the worst price possible and cost that country
many millions. In Abbot and Costello "Who's On First
comedic style," no one in the British government would
own up to making this mysterious decision that
devastated poor African countries and gold companies
alike. However, it pleases me to tell you that the
National Accounting Office in Britain has launched an
official investigation into this woeful event.
Last fall, after the 15 European central banks
announced they were going to curtail their selling and
lending of gold for the next five years, the gold price
exploded. That was followed by:
* An unprecedented announcement by Kuwait that it
deposited 79 tonnes of gold reserves with the Bank of
England for investment on world markets. (That meant
gold supply lent into the physical market.)
* And rampant rumors that Peter Fisher of the New York
Federal Reserve Bank was active in calming down the
gold market via a trading account at Goldman Sachs.
Getting right to the point, all GATA's investigative
roads lead to Goldman Sachs, the New York investment
house and former home of former Treasury Secretary
Robert Rubin.
Many bullion dealers were caught short (in big trouble)
last fall and had to call for help once again. It was
so bad that on Oct. 11 that we got the following
statement from that perennial gold bear, Prudential's
London gold analyst, Ted Arnold.
"Central banks, according to our sources, have acted
swiftly to prevent a repeat of an LTCM-type of crisis
by making sure that gold prices remain in a tight
range. Enough selling is done by agents of the monetary
authorities involved to cap gold.
"Central bank 'regulation' of the bullion market always
seems very far-fetched to most observers, but it is a
'cheap' option compared with the potential cost of
bailing out banks and generally injecting liquidity
into an economy if there were a full-blown crisis."
What an outrage! The price of gold was only $325 at the
time. What kind of crisis would there be with $425 gold
or $525 gold?
That is the message that GATA is taking to Washington
and the Congress of the United States of America. Last
April I met with U.S. Rep. Jim Saxton, chairman of the
Joint Economic Committee. I explained to him and his
staff that GATA believed that the macro-economist Frank
Veneroso is correct about the gold loans -- that they
are greater than 10,000 tonnes, which is more than
DOUBLE the figure commonly accepted. Since mine
production in 1999 was only 2,559 tonnes, we told all
that would listen in Washington that the gold loans had
become too big to pay back in a short time. They had
now become a "systemic risk" problem and if not reduced
soon they could cause another savings-and-loan type of
financial crisis.
GATA is scheduling meetings with other members of
Congress in coming weeks.
GATA would also like to know more about Alan
Greenspan's twice-made comment -- on July 24, 1998,
before the House Banking Committee and on July 30,
1998, before the Senate Agriculture Committee: "Central
banks stand ready to lease gold in increasing
quantities should the price rise." This statement by
Greenspan set the stage for this big money game and for
the manipulation of the gold price.
How did Greenspan know that central banks would be
leasing gold to suppress its price, and what central
banks was he talking about?
We will tell them that GATA is not alone in its
concerns that the gold market is being manipulated.
The acclaimed Financial Times journalist Barry Riley on
wrote in that newspaper on Feb. 12: "The gold
manipulation might well have started out as a minor
smoothing operation that got out of control."
>From the February issue of The Economist: "Until
recently it has been easy to dismiss them (gold bugs)
as flat-earthers, clinging to outdated ideas. Now,
however, it is harder to explain why the gold price
remains so low."
The Gold Anti-Trust Action Committee will request that
Congress conduct the first complete independent audit
of the gold in Fort Knox since the Eisenhower
Administration to determine if all the gold that is
supposed to be there really is there.
And when the GATA delegation visits Washington, we will
formally request a full congressional investigation
into the gold market manipulation, which we believe has
greatly benefited a number of New York financial
institutions at the expense of so many unsuspecting
others -- like us.
GATA will make it very easy for Congress, as we will
present a detailed roadmap of exactly where to go and
whom to ask to get the answers necessary to understand
if our allegations are correct.
Yes, we will tell them we are upset because we have
invested in a game that was rigged against us. In
hindsight, we never had a chance. In the meantime, the
"in the know" crowd was borrowing gold at 1 percent
lease rates and investing those funds in all kinds of
investments, making a fortune.
I am a former professional athlete (starting wide
receiver with the Boston Patriots in 1968) and thus I
am used to being banged around by some pretty big
characters. I did not mind that because I knew what I
was getting into and knew I was playing on a level
playing field for all. The refs were not fixing the
games against us.
The gold market has been rigged in a clandestine manner
for some time now. If this was the athletic arena, the
cry "foul" would be greater than that of the Chicago
Black Sox scandal of baseball World Series lore.
Yes, we are mad as hell and we are not going to take it
any more. I do not think it will sit well if Americans
find out that the New York investment banking crowd
became richer -- in violation of U.S. law -- at the
expense of unsuspecting others. It will be even worse a
scandal if they had the blessing of the U.S. Treasury
or New York Fed -- or if they have put some of our gold
reserves in Fort Knox in jeopardy. Does not the U.S.
government preach the importance of free markets and
non-government interference to the rest of the world?
I cannot think of a subject more important to this
committee. What has transpired in the gold financial
arena has greater significance than the gold market
itself and that is what we will tell Congress.
When I approached Absolut Vodka artist Alain Despert
about doing a painting for GATA, I gave him only the
background of what I felt was going on. In his natural
brilliance he who came up with the idea of GATA shining
light on a dark situation, the idea of "the people"
taking on the the big money New York banks and a facet
of the U.S. government, and of a Don Quixote-like
effort "to right an unrightable wrong, to beat an
unbeatable foe."
That is our quest, my friends. For G-A-T-A is how
America became America. G-A-T-A: It stands for "Going
Against The Authorities," when they are wrong.
America became America because the colonists fought for
what was right. They took on the establishment, risking
their lives to fight tyranny, to fight taxation without
representation.
Well, what this collusion crowd has done to all of us
in the gold industry is not all that much different.
And funny enough, the British are involved once again.
But just as in 1776, the British and their allies will
lose one more time. The voice of the aggrieved people,
those of us who believe in free markets, will be heard.
The Internet in all its glory is making all this
possible.
GATA has support all over the world now as our message
is resounding via this omnipresent medium. That is why
so many congressmen are responding to the people's
queries about the gold market mystery.
The gold price spikes up in September and January can
be likened to minor eruptions of a dormant volcano that
is becoming active. These recent gold price spikes were
just warnings of what is to come. It is clear that the
shorts are now very desperate to contain an explosion.
The Gold Anti-Trust Action Committee is making great
strides in exposing the manipulation of the gold
market. Our "enveloping horn" strategy is surging
forward relentlessly as the realization that something
is very wrong in the gold world sinks in.
It is only a matter of some time now before the big
gold shorts are going to have to cover their positions
as the gold market facts are revealed. The price of
gold will then rise dramatically. And maybe then
"tilting at windmills" will become more in fashion.
-END-
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