Gold Derivatives Banking Crisis : LUSENET : TB2K spinoff uncensored : One Thread

Here follows a slightly edited version of the Gold Anti-Trust Action Committee (GATA) full spread advertisement in the Roll Call newspaper, which reaches right through the U.S. Congress and Senate.

The timing of the placement is perfect, as it follows on intense meetings with top politicians in Washington last week, all of whom appear to have recognized the gravity of the situation viz-a-viz the gold price fixing that has continued uncorrected for at least two years now.

There is a strong feeling through the GATA camp, with which I have been closely involved, that the GATA inquiry into price fixing, which now poses a serious threat to the international financial system, is soon going to be breaking news.

With regards,

Boudewijn Wegerif Monetary Studies Programme Vardingeby Folkhogskola 150 21 Molnbo, Sweden


Second Banner: Extensive research has led the Gold Anti-Trust Action (GATA) to the conclusion that the gold market is being recklessly manipulated and now poses a serious risk to the international financial system.

Edited extract from advertisement text (with comments from me in parenthesis): (The demand for gold is much greater than supply, therefore the price of gold should be rising sharply; instead it is being repeatedly driven down by the bullion banks.)

According to the Office of the Controller of the Currency, the notional value of the derivative contracts (being used to manipulate the price of gold) on the books of the U.S. commercial banks surged from $63.4 billion to over $87 billion in the fourth quarter of 1999 and, at today's prices, is greater than the U.S. official gold reserves of approximately 8,140 tonnes.

The leading financial analysts in the field, Veneroso Associates, estimates private and official sector gold loans stood at 9,000 to 10,000 tonnes at the end of 1999. Yet mine supply at the end of 1999 was only 2579 tonnes. Thus the gold loans are far too big to be repaid in a short time.

It is believed that the Exchange Stabilization Fund (a slush fund that is not under public scrutiny) is being used to manipulate the gold price. The Fund is under the control of the Treasury Secretary.

Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers, responding to GATA's inquiries through members of Congress, have denied any direct involvement in the gold market by the Fed or the Treasury Department . But they have declined to address whether the Exchange Stabilization Fund is being used to manipulate the price of gold (via the bullion banks).

Several prominent New York bullion banks, particularly Goldman Sachs, from which the immediate past secretary, Robin Rubin, came to the Treasury Department, have moved to suppress the price of gold everytime it has rallied in the last year.

GATA believes that U.S. government officials and these bullion banks have induced other governments to add gold supply to the physical market in recent years to suppress the price. Britain's National Accounting Office is now investigating the Bank of England's decision to sell more than half its gold.

(Also:) Contrary to proper accounting practice, reductions of gold in the earmarked accounts of foreign governments at the New York Federal Reserve Bank are being listed by the Commerce Department as the export of non-monetary gold. These 'exports' from the Fed occur upon rallies in the gold price.


1. Suppressing the price of gold has made it a cheap source of capital for New York bullion banks, which borrow it for as little as one percent of its value per year. Gold is borrowed from central banks and sold, and the proceeds are invested in the financial markets in securities that have much greater rates of return.As long as the price of gold remains low, this 'gold carry trade' is a financial bonanza to the privileged few at the expense of the many, including in the gold producing countries, many of which are poor. If the price of gold was allowed to rise, the effective interest rate on the gold loans would become prohibitive.

2. Suppressing the price of gold gives a false impressisn of the strength of the U.S. dollar's strength as an international reserve asset and a false reading of inflation in the United States.

Too much gold is being consumed at too cheap a price. Massive amounts of derivatives are being used to suppress the gold price. J.P. Morgan's derivitive position alone went up from $18.3 billion to $38.1 billion in the last six months of 1999. ($38.1 billion is more than one and a half times the value of 1999's world's total gold production, and about three-quarters the estimated capitalisation -- i.e. capital value -- of the gold-mining industry as a whole, right round the globe!). If this situation is not corrected soon there will be a gold derivitative credit and default crisis of epic proportions that will threaten the solvency of the largest international banks and the world standing of the dollar. ###

This was posted on the Forum as a response to the above article --

Praise to Bill and GATA Posted By: Gary Date: Sunday, 14 May 2000, at 1:31 p.m.

In Response To: News Release! (webmaster)

Bill Murphy and GATA are to be commended for their efforts in exposing the manipulation in the gold markets. This last week was crucial in their strategy to bring this to public attention.

I find it interesting that Bill Murphy did not mention anything about the gold mining companies involvement within the content of the Roll Call newspaper. They too are a contributer to the suppression of the price of gold. They themselves hold unrealistic "hedge" short positions and cannot afford for the price of gold to break above $290. Ashanti Goldfields of South Africa lost $500 Million during the gold rally last September when the price broke out from $255 to over $330. They should have made money! Their shareholders were furious and caused other shareholders of other mining companies to demand that "hedge" short positions be reduced. I have not yet seen any real significant change by these companies, even after they were put in the hot seat. Therefore, they too need to be further investigated, perhaps on a congressional level.

Until we see some sort of official intervention, it will be very difficult to fight against those who print our money. The price of gold may not rise for some time. Investors should not try to speculate in gold at this critical time. I think the best way to ride this out is to just buy physical and sit tight.

-- Flash (flash@flash.hq), May 14, 2000


How come nobody's interested in this post? It's not just another Gold Loser type rant. Might just be something to this one.

-- Finance Guy (, May 14, 2000.

-- dd (s@d.nt), May 14, 2000.

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