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Friday, February 25, 2011

Silver, the Opportunity of the Decade - Part 4: Evidence of Gold and Silver manipulation surfaces

This is the 4th part of a series on Silver, The Opportunity of the Decade.

Read Part 1: Shrinking Supply and Rising Demand

Read Part 2: The Comex, what is it?

Read Part 3: The Comex Silver Cartel

I received a number of email queries that indicate it would be worthwile to provide some evidence of the existence of a Cabal manipulating the price of Gold and Silver. It's important to cover this before going into our discussion of the short squeeze in Silver that has been playing out recently.

Much of the information here has been gathered by the Gold Anti-Trust Action Committee (GATA), a registered U.S. Internal Revenue Service tax-exempt educational and civil rights organization that advocates and undertakes litigation against illegal collusion to control the price and supply of gold, silver and related financial securities.

For years there have been allegations that there existed illegal collusion to control the price and supply of gold, silver and related financial securities.

Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price.

Throughout the 1960s the United States and Great Britain attempted to hold the price at $35 in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement came to be known as the London Gold Pool.

As monetary inflation rose sharply, the London Gold Pool was overwhelmed by demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold - convertibility for government treasuries that wanted to exchange dollars for gold.

At that moment currencies began to float against each other and against gold - or so the world was told.

Since then there have been those who claim that Central Banks had undertaken to surreptitiously continue that suppression of gold and silver gold prices. They have been branded as conspiracy theorists, dismissed and ridiculed as tin foil hat wearing wingnuts and derided as 'gold bugs'.

But the gold price suppression scheme became a matter of public record in January 1995, when the general counsel of the U.S. Federal Reserve Board, J. Virgil Mattingly, told the Federal Open Market Committee, according to the committee's minutes, that the U.S. Treasury Department's Exchange Stabilization Fund had undertaken gold swaps. Gold swaps are exchanges of gold allowing one central bank to intervene in the gold market on behalf of another central bank, potentially giving anonymity to the central bank that wants to undertake the intervention. The 1995 Federal Open Market Committee minutes in which Mattingly acknowledges gold swaps are still posted at the Fed's Internet site and you can see it here.

Then, in July 1998, Federal Reserve Chairman Alan Greenspan told Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." Greenspan himself, supposedly the greatest among the central bankers, had come out publically and contradicted the usual central bank explanation for leasing gold (which was supposedly to earn a little interest on a dead asset) and he had admitted that gold leasing is all about suppressing the price.

Greenspan's admission is still posted at the Fed's Internet site which you can read here.

Then, on February 28th, 2003, Barrick Gold (then the largest gold-mining company in the world) confessed to the gold price suppression scheme in U.S. District Court in New Orleans. In filing a motion to dismiss Blanchard & Co.'s anti-trust lawsuit against Barrick and its bullion banker, JPMorganChase, for rigging the gold market, Barrick's claimed that in borrowing gold from central banks and selling it, the mining company had become the agent of the central banks in the gold market, and, as the agent of the central banks, Barrick should share their sovereign immunity and be exempt from suit.

This stunning admission/confession to the gold price suppression scheme is posted at GATA's Internet site which you can read here.

In January 2009 a remarkable 16-page memorandum was discovered in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled "U.S. Foreign Exchange Operations: Needs and Methods." It is a detailed plan of surreptitious intervention to rig the currency and gold markets to support the dollar and to conceal, obscure, or falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis which you can read here.

In September 2009 a New York financial market professional and student of history (Geoffrey Batt) posted three declassified U.S. government documents involving the gold market on www.zerohedge.com.

The first document was a long cable dated March 6, 1968, from someone named Deming at the U.S. Embassy in Paris to the State Department in Washington. It is posted at the Zero Hedge which you can read here. The cable described the strains on the London Gold Pool to hold gold to the official price of $35 per ounce. Six months later the London Gold Pool collapsed.

Significantly, the cable is a detailed speculation on what would have to be done to control the gold price and particularly to convince investors "that there is no point any more in speculating on an increase in the price of gold" and "to establish beyond doubt" that the world financial system "is immune to gold losses" by central banks.

The cable recommends creation of a "new reserve asset" with "gold-like qualities" to replace gold and prevent gold from gaining value. To accomplish this, the cable proposes "monthly or quarterly reshuffles" of gold reserves among central banks - what the cable calls a "reshuffle club" that would apply gold where market intervention seemed most necessary.

These "reshuffles" sound like the central bank gold swaps of recent years.

The idea, the cable says, is for the central banks "to remain the masters of gold."

Also in September, Batt disclosed a memorandum from the Central Intelligence Agency dated December 4, 1968, several months after the collapse of the London Gold Pool. You can read here. The CIA memo said that to keep the dollar strong and prevent "a major outflow of gold," U.S. strategy would be "to isolate official from private gold markets by obtaining a pledge from central banks that they will neither buy nor sell gold except to each other."

And:

"to bring South Africa to sell its current production of gold in the private market, and thus keep the private price down."

The third document, and most interesting, was written on June 3, 1975. 1975 was four years after the last bit of official fixed convertibility of the dollar and gold had been eliminated and the world had been told that currencies henceforth would float against each other and gold and gold would be free trading.

The document is a seven-page memorandum from Federal Reserve Board Chairman Arthur Burns to President Gerald Ford. It is all about controlling the gold price through foreign policy and defeating any free market for gold. It is posted at Zero Hedge as well and you can read it here.

Burns tells the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" (that would be Helmut Schmidt, West Germany's chancellor at the time), "that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce."

Burns adds, "I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price."

The GATA have amassed numerous other documents on this subject. What you see here is only a small sampling of what they have found.

All of the documentation leads them to suggest that suppressing the gold price is clearly part of the general surreptitious rigging of the currency, bond, and commodity markets by the U.S. and allied governments.

They do this surreptitiously because the market rigging is the foremost objective of U.S. foreign and economic policy, and because this rigging cannot work if it is exposed and the markets realize that they are not really markets at all.

This rigging, however, is increasingly being exposed and understood.

It is widely acknowledged that annual world gold production is about 2,400 tonnes, that annual net world gold demand is about 3,400 tonnes, that gold production has been falling as demand has been rising, and that the thousand-tonne gap between production and net demand has been filled mainly by central bank dishoarding and leasing.

What do you suppose the gold price would be if central banks were not supplying more than a quarter of annual demand?

That dishoarding was not all innocent management of a foreign exchange reserve portfolio. Much of it was meant as market intervention -and after all, market intervention is exactly why central banking was invented.

Intervening in markets is what central banks do. They have no other purpose.

Central banks admit intervening often in the currency markets, buying and selling their own currencies and those of other governments to maintain exchange rates at what they consider politically desirable levels. Central banks admit doing the same in the government bond markets. There is even evidence that the Federal Reserve and Treasury Department have been intervening frequently in the U.S. stock markets since the crash of 1987.

Ben Bernanke went on 60 Minutes earlier this year and openly admitted the US Federal Reserve's intent was to raise stock values and create a 'wealth effect' to lift the country out of the current Great Recession.

Which brings us to Silver.

This intervention exists in Silver as well as Gold and dramatic evidence proving this came to light in November 2009.

Andrew Maguire, a metals trader in London, turned whistleblower and provided detailed information of how traders working for JPMorganChase manipulatesthe precious metals markets and how they make money doing it.

Maguire contacted the Commodities and Futures Trade Commissioin (CFTC) enforcement division and reported this criminal activity.

He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

On February 3, 2010 Maguire gave two days' warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5, 2010.

On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

Maguire wrote: "It is common knowledge here in London among the metals traders that it is JPM's intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits. I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC's allowing by your own definition an illegal concentrated and manipulative position to continue."

Maguire's bombshell revelations lead to a formal investigation by the CFTC and open allegations by the CFTC that JP Morgan and HSBC have engaged in "fraudulent efforts to persuade and deviously control the price of silver."

As the bright lights of media attention began to focus on the allegations and CFTC investigation, JP Morgan came out and admitted it's massive short position and activities in the Silver market.

What has played out since then has been a dance between JP Morgan, the CFTC, the Silver market and a series of hedge funds seeking to take advantage of JP Morgan being caught with their "hand in the cookie jar", so to speak.

In the process, Silver has shot up over 110% since the revelations were made public.

More tomorrow.

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1 comment:

  1. My concern is this. I agree with yours and others assessments of the situation - but in order for the price of silver to increase substantially it would mean that the governments and private interests would need to be held accountable. In other words not just caught as they are now but also stopped.

    Is there evidence that HSBC or JPMorgan or any other big players are actually at any risk? It seems that players this big, ones that set the economic tone of entire countries are beyond the courts.

    That said I'm certainly hedging with my physical coin.

    ReplyDelete