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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). P>
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…
http://www.goldrush21.com/
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 Café 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…
Now, fast forward to April 24,
2009…
GATA’s Credibility Soars On China Gold Buying News
GATA’s
credibility took another leap forward this morning when China announced it
has increased its gold reserves to 1,054 tonnes from 600 tonnes. For years
and years and years GATA has claimed that the gold world establishment has
failed to account for surreptitious gold lending operations by The Gold
Cartel to suppress the price. For there to be greater gold supply hitting the
market, there had to be greater demand to satisfy this undisclosed supply. As
a result of Frank Veneroso’s brilliant supply/demand work in years
past, we mentioned that one of the demand areas, that the likes of a GFMS was
not accounting for, was China, and that someday their stealth buying would be
reported. Voila…
China gold reserves apparently doubled
HONG KONG (MarketWatch) -- China has added to its gold reserves and now holds
1,054 metric tons of the yellow metal, according to a Friday report by the
Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State
Administration of Foreign Exchange. Hu said that China's gold reserves had
risen by 454 metric tons since 2003 and that the total was being reported to
the International Monetary Fund as per the organization's rules.
***
The next day a Café member reported that adding up the Chinese
purchases, reported in late 2003 and very early in 2004 by the GATA camp,
came to 510 tonnes … very close to the 454 tonnes reported in April.
This purchase alone is more than what the Chinese government just announced
(454 tonnes), and it was completed in Jan 2004 … and took five years to
be officially announced.
Equally crucial to understanding the Chinese interest in gold, GATA has
participated in three conference calls with the Chinese Investment
Corporation in Beijing since April 2008. On this recent September 3rd
Lawrence Williams reported the following in MineWeb…
Several
reports are coming out of China that there is pressure on state-controlled
organisations - notably the country's main sovereign wealth fund, China
Investment Corporation (CIC) to rapidly build investment in non-Chinese
enterprises.
http://www.mineweb.com/mineweb/view/mine
web/en/page67?oid=88400&sn=Detail
***
The Chinese
became extremely aware of GATA's findings and the reasons why the price of
gold was going to soar
During my
conversations with the Chinese it was apparent they were very concerned about
ruffling feathers, yet were becoming extemley aware of GATA’s findings
and the reasons why the price of gold was going to SOAR in the years ahead.
Subsequent
to these conference calls with the Chinese, I learned this past month from
TWO different sources they intended to buy hundreds of tonnes of gold per
year for years to come, but intended to do so as discreetly as possible.
And then
just the other day Ambrose Evans-Pritchard of The Telegraph in London came
out with the following…
Ambrose Evans-Pritchard: Gold now enjoys the 'Beijing put'
China has issued what amounts to
the "Beijing Put" on gold. You can make a lot of money, but you
really can’t lose….
I happened
to see quite a bit of Cheng Siwei at the Ambrosetti Workshop, a gathering of
politicians and global strategists at Lake Como, including a dinner at Villa
d’Este last night at which he listened very attentively as a number of
American guests tore President Obama’s economic and health policy to
shreds.
Mr Cheng was
until recently Vice-Chairman of the Communist Party’s Standing
Committee, and is now a sort of economic ambassador for China around the
world — a charming man, by the way, who left Hong Kong for mainland
China in 1950 at the age of 16, as young idealist eager to serve the
revolution. Sixty years later, he calls himself simply "a
survivior".
What he said
about US monetary policy and gold –
this bit on the record – would appear to validate the long-held belief
of gold bugs that China has fundamentally lost confidence in the US dollar
and is going to shift to a partial gold standard through reserve
accumulation.
He played
down other metals such as copper, saying that they could not double as a
proxy currency or store of wealth.
"Gold
is definitely an alternative, but when we buy, the price goes up. We have to
do it carefully so as not stimulate the market," he said.
In other
words, China is buying the dips, and will continue to do so as a systematic
policy. His comment captures exactly what observation of gold price action
suggests is happening. Every time it looks as if the bullion market is going
to buckle, some big force steps in from the unknown…
-END-
AND, not for nothing ... China,
who everyone knows thinks LONG TERM, has ENCOURAGED its citizens to buy gold
and silver after having only legalized gold ownership for citizens in 2007
and silver ownership in 2009.
*In addition
to the traditional sources of strong gold demand, such as India, which eats
up much of the annual gold mine supply, a new mega buyer has entered the
arena, huge investment buyers such as hedge funds and pension funds …
the most notable being John Paulson of Paulson & Co and David Einhorn of
Greenlight Capital.
Both have
made extensive commitments to the physical gold arena, primarily through SPDR
Gold Trust (GLD)…
17:07 FT discusses recent rally in gold
The FT notes that gold prices hit a six-month high on Thursday, approaching
the $1K an ounce level for the fifth time in two years. The article cites
traders who say that bullish technicals have triggered a jump in speculative
flows into the precious metal. The FT also highlights some piggybacking on
successful hedge funds such as Greenlight Capital and Paulson & Co.,
which have purchased gold this year following the massive monetary stimulus
on the part of the world's leading central banks.
*****
*The crisis bid … When gold ran up during the financial crisis, much of
that rise was attributed to a "crisis bid." Gold has now reached
close to its historic highs without that bid, but one which is VERY likely to
reappear this fall. At the moment the bullish gold sentiment is extremely low
relative to the rise in the gold price, probably because of the super lift in
the DOW … meaning GOLD is not on the general public’s radar
screen. If I am right, this will all change in the weeks ahead. This new
demand will put incredible strain on The Gold Cartel.
SUPPLY...
*Gold mine
supply has been falling for years due to the controlled low gold prices
relative to escalating mining costs … with an annual production of less
than 2300 tonnes at the present time, which is not much considering demand is
greater than 4,000 tonnes per year, perhaps a LOT greater.
*Scrap supply tends to increase on sharp price rises, as was the case earlier
this year. However, it tends to dry up at those price levels once those
buyers have sold and only picks up steam again when much higher new prices
are achieved.
*Of much significance is a usual source of gold supply has dried up: official
central bank selling. The European central banks were allowed to sell 500
tonnes per year, and then 400 tonnes per year, under back-to-back "Washington
Agreements," which came into being in September of 1999 and 2004.
However, their selling has been gradually drying up. Less than 150 tonnes
have been sold this year and NOTHING of any note over the past six weeks.
While fashionable to sell gold the past decade+, it is now seen as a sign of
imprudence, especially as all these sales have been losers and the US is bent
on "quantitative easing," and flooding the world with fiat dollars.
*This leaves the clandestine selling, and lending of gold by The Gold Cartel,
which is The US government; various bullion banks like JP Morgan Chase; and
other central banks like the Bank of England. The problem is The Gold Cartel
is hitting the wall regarding tapping into available central bank supply.
They are down to using either IMF or US gold to meet the increasing annual
demand/supply deficit. This has put them under severe pressure as these gold
sources are quickly depleting and cannot be sustained before President
Obama’s term is over. (Yes, The Gold Cartel is pressuring the IMF to
officially dump 400 tonnes of gold in the years ahead, but even if Congress
approves the sale, the Chinese will likely take it all). The only questions
are when, and how, does The Gold Cartel bite the bullet and let the price of
gold rise sharply in order to allow "Sticker Shock" to slow down
demand … in order to conserve whatever available gold supply the cartel
has left. It is the ONLY way they can conserve some of their selling
ammunition at this point, to prevent eventual financial market chaos. This is
a reason gold has risen the past nine years DESPITE the presence of this Gold
Cartel. But, now so many factors are going against them ALL AT ONCE! They
CANNOT prevent the price of gold from rising to much higher levels and soon…eventually
to $3,000 to $5,000 per ounce the way I see it.
At GATA’s African Gold Summit in Durban, South Africa on May 10, 2001
GATA consultant Frank Veneroso predicted The Gold Cartel would run out of
available central bank supply in 7 to 10 years. Well, we are in the middle of
that zone RIGHT NOW, with a confluence of factors all coming together, which
ought to give us liftoff very shortly.
THIS IS KEY:
The Gold
Cartel does not have enough available central bank gold left to ration
growing demand at these price levels ... not even close. It will take MUCH
higher prices in the short term for them to even stay afloat!!! It will take
$1500 gold to ration current demand, or clear the market, FOR STARTERS.
In addition
to the very bullish demand/supply situation, there is another special factor
which has recently crept into the gold arena…
CONCERN OVER GOLD OWNERSHIP
GATA has
long been concerned over dual ownership, or paper claims, over the same
bullion. There has been a great deal of concern over this issue on certain
ETF’s … especially the ones whose stewardship is led by bullion
banks in The Gold Cartel, certain Mints/gold depositories, and in other
bullion banks. This concern is suddenly spreading outside of The GATA
camp….
*Recently,
Greenlight Capital’s David Einhorn shifted his enormous physical gold
holdings out of GLD to "bullion" ownership.
* Hong Kong
is calling its gold home:
Hong Kong
recalls gold reserves, touts high-security vault
In a
challenge to London, Asian states invited to store bullion closer to home
By Chris Oliver,
MarketWatch
HONG KONG
(MarketWatch) -- Hong Kong is pulling all its physical gold holdings from
depositories in London, transferring them to a high-security depository newly
built at the city's airport, in a move that won praise from local traders
Thursday....
-END-
*There has even been a hullabaloo
of late about the status of Germany’s gold reserves. From a recent GATA
missive sent out by GATA Treasury/Secretary Chris Powell:
Germany's
gold is in U.S. custody, Bundesbank confirms International journalist Max
Keiser has just posted a nine-minute documentary he has done about the
British government's gold sales that were begun in 1999 and now are
disparaged as "Brown's Bottom," after then-Chancellor, now-Prime
Minister Gordon Brown, who decided upon the sales and remains unashamed that
they marked the bottom of the gold market. Keiser's documentary is based
largely on an interview with Conservative Party opposition Member of
Parliament Phillip Hammond, who is shadow chief secretary of the treasury and
who remarks that the British gold sales seem to have been structured
precisely to knock the price of gold down rather than to maximize the return
to the British government. Hammond also wonders aloud whether "something
other than achieving the best price" might have been the objective of
the gold sales scheme.
But Keiser's documentary may be sensational for getting an acknowledgement
from the German central bank, the Bundesbank, that Germany's gold reserves
are actually in the custody of the United States. This is a detail the
Bundesbank long has denied to others who have inquired and is potentially a
matter of great controversy in Germany. It raises the question of whether the
German gold reserves are actually intact at all or whether they have been
used by the U.S. government as part of its long-time gold price suppression
scheme or have been comingled and diminished with the gold reserves of other
countries held in the United States.
While Keiser's documentary does not identify the Bundesbank spokesman who
confirmed the transfer of the German gold reserves to New York, it does
provide the date and location of the confirmation: March 17, 2008, at
Bundesbank headquarters in Frankfurt. The documentary shows that Keiser was
there and got the interview.
After his interview at the Bundesbank, Keiser remarks: "The most
fascinating thing I've heard is that all the gold in Germany is in New
York." Indeed.
Keiser's
documentary is titled "Brown's Bottom" and you can watch it at
YouTube here:
http://www.youtube.com/watch?v=EzVhzoAqMhU"
target="_blank"> http://www.youtube.com/watch?v=EzVhzoAqMhU
-END-
An
embarrassed US Treasury changed the nomenclature of all US gold to "Deep
Storage Gold."
GATA has
long claimed the 1700 tonnes of US gold reserves at West Point were swapped
for Germany’s gold, which is why the US Treasury changed its nomenclature
from "Gold Bullion Reserve" to "Custodial Gold" in 2000.
The GATA camp caught this change and made a huge stink … so much that
an embarrassed US Treasury changed the nomenclature of all US gold to
"Deep Storage Gold."
There is too much smoke of late when it comes to concerns over gold ownership
… from big league folks. Perhaps the biggest bombshell of all could
eventually be from a massive melt-up due to the ramifications over this
report and the huge gold derivatives positions held by JP Morgan Chase and
others…
Beijing's derivative default stance rattles banks
Mon Aug 31, 2009 7:42am EDT
*
State-owned firms may default on commodity hedges - report
* Bankers dismayed, confused by report; seek more details
* Lawyers question legality of the move
* Traders suspect lurking losses may have prompted warning
By Eadie
Chen and Chen Aizhu
BEIJING, Aug
31 (Reuters) - A report that Chinese state-owned companies will be allowed to
walk away from loss-making commodity derivative trades provoked anger and dismay
among investment bankers on Monday as they feared it may set a damaging
precedent…
-END-
What makes GATA different is that we are the only
activist organization in the gold industry ... at least as far as anything
that really counts. On December 18, 2008 I met with CFTC Commissioner Bart
Chilton, and three others including their Senior Counsel, laying out GATA's
case in the process. Bart is unique in the bureaucratic world and a heckuva
smart guy, but the bottom line is despite one on-going investigation in the
silver market after another, due to the incredible concentrated short
positions of a very few bullion banks, the CFTC does nothing and allows no
public comment on this most critical issue re their hearings. Instead they
muddle around about zip in the energy and grain markets. GATA has been all
over the manipulation of the gold/silver markets with the CFTC as long as
Harry Markopolos tried to expose Madoff with the SEC ... with a similar
response. This lack of response to a decade of GATA's efforts deserves
serious media inquiry.
THE PERFECT GOLD STORM
Add all this
up and you have the recipe for the PERFECT GOLD STORM, one which will send
The Gold Cartel reeling and the price of gold headed towards the moon.
On January
31, 2009 GATA placed a $264,400 full-age color ad in the Wall Street journal
titled, "Anybody Seen Our Gold?”
http://www.gata.org/node/wallstreetjournal
In this ad,
we made the following statement:
"Gold’s recent price rise towards $900 shows the gold price
suppression scheme is faltering. When it is widely understood how central
banks have been suppressing gold, its price may rise to $3,000 or $5,000 or
more."
Much more for subscribers…
Bill Murphy
Editor
Lemetropolecafe.com
Chairman
Gold Anti-Trust Action Committee
Le Metropole Café is a Membership site.
Visit and Experience a 2 week Free Trial !
Bill Murphy is chairman
of the Gold Anti-Trust Action Committee.
and proprietor of www.LeMetropoleCafe.com, an Internet site devoted to financial commentary with emphasis on
the precious metals. You can
become a trial member for free for two weeks by clicking here.
He has also chaired three international gold
conferences…
*The GATA
African Gold Summit in Durban, South Africa on May 10, 2001.
*Gold Rush 21 in the Yukon’s Dawson City on August 8-10, 2005.
*GATA Goes To Washington in Arlington, Virginia on April 17-19, 2008.
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