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Controlling The Price Of Gold
By Joel Skousen
World Affairs Brief
10 -5 -7

Part of that control is controlling real money-the precious metals. More and more gold traders are coming to the inescapable conclusion that the financial Powers That Be (PTB) are deliberately suppressing the price of gold in order to mask a real inflation rate of over 10% per annum. The dollar is crumbling at home and abroad and Fed chief Ben Bernanke is still talking about 2% inflation! This is a key strategy to hide the inflationary effects of fiat money that dovetails downward manipulations of the CPI and the PPI with other tactics to obscure the flood of money creation. This is why the fed stopped publishing M3, the broadest indicator of government expansion of money and credit. All of this adds to the arsenal of evidence pointing to multiple government conspiracies--the key issue that must be driven home to ordinary citizens if we are to preserve liberty. No other issue is as crucial as proving conspiracy on a large scale.
But, there will be no big name defectors, nor direct proofs. We will always be relegated to compiling dozens of examples of manipulation and piecing them all together into a pattern of collusion. James Turk of the The Freemarket Gold & Money Report (<(http://www.fgmr.com)> http://www.fgmr.com) wrote an excellent primer on the subject of central bank manipulation of gold pricing. Here are some key excerpts with [my comments in brackets]:
"It is becoming a well-known 'secret' that governments are trying to manage the gold price by intervening in the gold market, and Friday's trading was a good example of their fiddling with the free-market process. Here are some pointers for everyone interested in learning how governments intervene in the gold market.
1) "Work with a proxy. The U.S. Exchange Stabilization Fund is the ringleader of the government manipulation efforts, but it never enters the market directly itself, regardless whether it is intervening in the currency or the gold market. It works with proxies in order to cover its tracks. The secretive ESF places its orders to intervene with the Federal Reserve Bank of New York, which carries out all intervention for the U.S. government as well as all orders from foreign central banks placed for execution during U.S. market hours... the New York Fed places these
government-instigated trading orders with the big New York banks. Because these banks have such huge trading volume, the logic is that government-instigated trading will be hidden amid the huge order flow handled by these banks. This line of attack to hide the government's trades works, except when the government's orders are so huge and one-sided that they overwhelm normal market forces.
2) "Wait until after the London market closes, which, because of the time change, is noon in New York. The London market is basically a market for physical gold, while New York trades paper, which represents only promises to pay gold. There's a big difference between these two markets. It is easy to manipulate paper because all a government has to do is to create these paper promises out of thin air, as government does all the time when it intervenes in the foreign exchange markets. But governments cannot create physical gold out of thin air. So they tend to stay away from the London market, and put physical gold into their market interventions only sparingly because once they are out of physical, their intervention game is over. On Friday gold closed in London at $382.75, $13.35 above the New York close only 90 minutes later. So, clearly, the government through its compliant bank agents bombed only the paper market.
3) "Intervene on a Friday afternoon in order to have the maximum impact from your intervention. After noon New York time, not only is London closed but the rest of the world is closed as well. This afternoon period in New York represents the moment when the least amount of liquidity is in the market. So if government interveners want 'more bang for their buck,' they can get it when the rest of the world is asleep or already enjoying the weekend.
4) "Just keep selling and selling. When you intervene in the market on a Friday afternoon with the intention of forcing the market lower, you begin selling short. Because you are the government and you are creating promises only to pay gold 'out of thin air,' you just keep selling and selling until you hit key sell-stops resting in the market. After all, who is going to give the government a margin call? Consequently, there is no practical limit as to how many paper promises the government can sell. So how much do they sell? Simple -- they sell enough until they complete their task, which is to drive the market lower.
"Why does the government do this? Because market prices communicate information, and sometimes that information runs counter to what governments would like us to hear and believe. So governments intervene in a market by preventing it from alerting us of the market message governments don't want us to hear. For example, we all know that the message of a rising gold price means that the dollar is headed for rough times, which is useful and important knowledge." [They also do this because the government has a vested interest in keeping citizen taxes to a low enough level that they will not actively protest government spending. By huge deficit spending combined with tax cuts, people never feel the pain of the war in Iraq, for example.]
Do I have documents proving the government intervention I discuss above? No, but the body of evidence developed over the past few years by me (http://www.fgmr.com> www.fgmr.com ), www.GATA.org , Reg Howe (see www.goldensextant.com), Frank Veneroso ( http://goldmoney.com/en/commentary/2003-09-04.html) as well as many others is not only huge and compelling but also growing." Once again, conspiracy by government is hard to prove because they control all of the key information and use "national security" to thwart public access. People with good inductive reasoning skills can, however, see patterns of conspiratorial conduct if you look at enough examples.
Adrian Ash of the Bullion Vault company noted with pleasure how two of the establishment bankers (Credit Agricole and Citibank) tacitly acknowledged that central bankers were manipulating the price of gold. Typical of the outrage from the establishment financial press were these random quotes "...What is it with leading commercial banks - first Credit Agricole...now Citigroup - and their accusations of wanton gold-price manipulation by central bankers... It was SO embarrassing..."
Ash writes that "The Remonetization of Gold by Paul Mylchreest put the reputation of France's largest bank right on the line - the very same line spun by the Gold Anti-Trust Action Committee (GATA) since 1999. 'Central banks have 10-15,000 tonnes of gold less than their officially reported reserves of 31,000' the Chevreux report announced. 'This gold has been lent to bullion banks and their counterparties [to avoid showing it as a sale] and has already been sold for jewelry, etc. Non-gold producers account for most of the borrowing and may be unable to cover shorts without causing a spike in the gold price. In other words, 'covert selling (via central bank lending) has artificially depressed the gold price for a decade [and a] strongly rising Gold Price could have severe consequences for US monetary policy and the US Dollar.'"
What Mylchreest was saying is that the gold markets are not totally public nor transparent. Central Banks have ways of buying back, lending, and borrowing gold in private-off the books.
Turk also noted that "Back in December 2000 I wrote 'The Smoking Gun' (<http://www.fgmr.com/smokegun.htm>http://www.fgmr.com/smokegun.htm) and noted the discrepancy between the size of the U.S. gold stock as published by the Federal Reserve in its monthly Bulletin, which included 'gold held by the ESF [Exchange Stabilization Fund]' in its report, and the size of the gold stock published by the U.S. Treasury in its monthly Bulletin. The two reports were different, establishing that the ESF held gold or owed gold (because in some months the discrepancy was a negative balance) at the month-end record dates in which there was a discrepancy, which was virtually every month from the end of 1996 to my December 2000 publication date.
"Then, less than two months after the publication of my discovery, the Federal Reserve in February 2001 inexplicably changed its reporting of the gold stock to delete any reference to the ESF, thus making its record of the size of the U.S. gold stock equal to the Treasury's report... This after-the-fact 'adjustment' to U.S. government reports was revealing, given that the government felt sufficiently compelled to hide further the tracks of the ESF to make this embarrassing change to its reports. That appeared to be the end of this little window into the operation of the shadowy ESF, because the Fed was no longer reporting the U.S. gold reserve plus the ESF's gold balance.
"Or so I thought. Recently I was analyzing the Fed's audited balance sheet released in its 2002 annual report and I noticed that the discrepancy has reappeared....What is the reason for this divergence in these two reports? It seems obvious that this difference is the weight of gold held by the ESF, which used to be reported by the Federal Reserve
in its monthly Bulletin. The divergence between the two reports has reappeared because the Fed can report in its monthly Bulletin whatever it wants to include, or in this case, exclude. But it cannot exclude the impact of the ESF on its year-end financial statement because if it did, its auditors, KPMG, would not give an unqualified opinion in the audit [Not necessarily so. KPMG and other of the "big 4" accounting firms often cover for government connected firms, as at Enron.]
"Does this blatant management of the gold market by the U.S. government mean that we should not buy gold?
Definitely not, unless you would rather rely upon the hollow promises of politicians instead of the proven and reliable trustworthiness of gold." I partly disagree. While gold cannot be totally suppressed, private ownership is always at risk for government restrictions, sales or even confiscation. Right now it's a good hedge against very heavy inflation. The US dollar lost, according to one newsletter writer, a "full 10% of its value in September alone."
World Affairs Brief - Commentary and Insights on a Troubled World
Copyright Joel Skousen. Partial quotations with attribution permitted.
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