Price Manipulation in the Gold and Silver markets

Interview with: Chris Powell by Mike Gleason*

Futures Markets Give High-Volume Trading Discounts to Governments

Mike Gleason: It is my privilege now to welcome in Chris Powell, Secretary-Treasurer at the Gold Antitrust Action Committee, also known as GATA. Chris is a long-time journalist and hard money advocate, and through his tireless efforts at GATA he is working to expose the manipulation of the gold and silver markets. Through GATA’s work over the years. Some important revelations have come to light, which quite honestly should concern everyone.

It’s great to have him back on with us. Chris, how are you, and thanks for taking the time to talk with us today.

Chris Powell: Great to be with you Mike.

Mike Gleason: Well it’s been more than a year since the last time we had you on, and there actually are some developments finally in the whole precious metals manipulation realm, specifically Deutsche Bank coming under fire for rigging gold and silver markets. Talk about this Chris, bring us up to date here on the whole lawsuit, and then give us your thoughts on whether or not this is going to finally get us somewhere on ending the manipulation that has occurred in the precious metals markets for years, if not decades.

Chris Powell: Sure Mike. Deutsche Bank has essentially confessed to manipulating the gold and silver futures markets. It has offered to settle the antitrust lawsuits against it for manipulation for just a little less than $100 million. More importantly, I think the bank has volunteered to provide the antitrust lawsuit plaintiffs with evidence against other bullion banks that participated with the Deutsche Bank traders in the manipulation of the gold and silver markets. And that raises the possibility of all sorts of money that could be due in damages to at least gold and silver futures traders now.

Now unfortunately, the U.S. Justice Department is seeking to intervene in the antitrust case in New York to delay further discovery and deposition in the case, so that the government could undertake its own investigation of the rigging – which is pretty ironic since the U.S. Commodities Futures Trading Commission (CFTC) for years, was supposedly doing its own investigation of the silver market and kept saying they couldn’t find anything. Now, they want to hold up the civil lawsuit so they (the government) can investigate it. I don’t think that the government really wants to investigate the case at all, I think the U.S. government simply wants to delay any further disclosures that would come from discovery and deposition, because they know that eventually, the rigging investigation proceedings like these are going to lead to the U.S. government’s own participation.

But, anyway, there is now a formal admission by one major international bank, Deutsche Bank, that it helped rig the gold and silver markets, in collusion with other bullion banks. So, that degree of manipulation can’t be denied anymore. The other day, I guess last month, a former Deutsche Bank trader was convicted of a criminal violation for rigging the gold and silver futures markets through what’s called “spoofing,” placing a lot of fake orders that were immediately withdrawn after causing other traders to position themselves in certain ways. So, there’s more and more evidence and more and more documentation of this rigging that’s coming out.

My organization is more interested in evidence of manipulation by governments in central banks, so we’re pretty convinced that the bullion banks that are involved in the instance of litigation were most likely functioning as agents of central banks, and making trades on the market that the central banks wanted made in order to suppress prices controlled, prices. But the litigation has not yet gotten around to incriminating governments and central banks. We’re hoping that will happen eventually.

Mike Gleason: Yeah, certainly if nothing else, the latest developments here with the whole Deutsche Bank case have at least made it known that it’s no longer conspiracy theory, it’s conspiracy fact as we’ve been saying for a while now, and at least now everybody is aware of the fact that yes, the markets are actually being rigged.

Now Chris, people are finding out that the CFTC is simply a joke. GATA exists at least in part because regulators are completely in the hip pockets of those on Wall Street. In fact, we are learning more through Freedom of Information and Wikileaks about why the futures markets for gold and silver were created in the first place.

Our government wanted volatile markets largely to discourage ownership of physical gold and silver. Wikileaks released powerful evidence of that earlier this year. That, and the cozy relationship between regulators and Wall Street explains a lot about why the CFTC could investigate for five years, and somehow miss the fact that banks cheat. We wonder if they were embarrassed when Deutsche Bank admitted to rigging prices while the CFTC investigation took place, turning over 350 pages of documents and some audio recordings to settle a civil suit, helping plans to pursue other banks. So, can we expect regulators to ever do their job, Chris? And if so, can the civil courts hold the bullion banks accountable?

Chris Powell: Well you’ve got to realize, Mike, that what has been happening with gold and silver, the manipulation and the price suppression, is probably completely legal, because the government is doing it. If you go to the U.S. Treasury Department’s internet site and find the page for the Exchange Stabilization Fund – which is an agency of the Treasury Department – you’ll find that the Treasury Department maintains that under the Gold Reserve Act of 1934, as amended, I think, through the 1970s, the Treasury Department, through the Exchange Stabilization Fund, is fully authorized to trade secretly, and manipulate, and rig any market in the world. Not just in the United States, but any market in the world.

I think that, in the end, is why the regulatory agencies have done nothing about the rigging of the gold and silver markets, because it has most likely been done, or most of it most likely has been done at the behest of the U.S. government, which is fully authorized by federal law to rig any market in the world in secret. I’m pretty confident, I mean if I had to bet my life, I would bet my life, that the CFTC knew this when it was investigating the gold market and the silver market, that all signs led back to the government, and the government most likely was using these big investment banks as its agents in manipulating the gold and silver markets, and that the investment banks could just shrug and say, “Hey, we’re only doing this as an agent for the government, and the government is fully authorized to do it, so there’s no violation by us here.”

I’d like to call people’s attention to that. I’m not privy to every trade that is undertaken by an investment bank or a bullion bank on behalf of the government, but I do know that according to documents filed by a CME Group, which operates all of the major futures markets in the United States, documents CME Group has filed with the Securities and Exchange Commission, and has come out of the Futures Trading Commission that CME Group numbers, governments and central banks, has among its clients in-secret trading of all futures contracts in the United States. And not just financial futures contracts, but commodity futures contracts as well. The CME Group offers a volume discount trading program to governments and central banks for trading futures contracts on all CME Group exchanges.

So, we know that governments and central banks are surreptitiously trading all of the major markets in the United States that have futures contracts attached to them. We also know that the gold reserve after 1934 fully authorizes the Exchange Stabilization Fund to rig any market on the planet. I think that’s the direction that financial journalism, if we had any, ought to go in. The CFTC and SEC are powerless here, I think, because the law fully authorizes the U.S. government to rig every market on the planet in secret.

Mike Gleason: And speaking of that, GATA focuses on manipulation in the metals markets, first and foremost, but these days people legitimately wonder if there are any markets that aren’t being rigged in some fashion. I mean, the Federal Reserve has hiked interest rates three times since December. The response in the markets has been a weaker dollar, flat bond yields, and roaring stock markets. Given that the Fed has been tightening, none of these things were expected, but hey, it’s sure working out for Janet Yellen and her comrades at the Fed. They are normalizing rates with none of the negative side effects, it’s almost like magic.

Chris Powell: Yeah, we know that central banks around the world are heavily purchasing various assets… not just government bonds, but they’re also purchasing stocks and derivatives and things like that. We know from the CME Group filings with the CFTC and SEC that governments are secretly trading the futures markets in every respect in the United States. And we know from the filings, the annual reports at the Bank for International Settlements and certain statements by central bankers that governments are surreptitiously trading in the gold market and the gold derivatives market, according to a French central banker, nearly on a daily basis. I think there’s documentation that central banks are openly and surreptitiously trading virtually every market in the world here.

So, yes, certainly, every major market is manipulated, I think there’s whole documentation of that. The problem here, I think, is not so much that any particular market is being manipulated, but rather that the world is losing, or already has lost its free market system. And if you believe as we at GATA do that free markets are a great engine of human progress, then this speaks very poorly about our future. It means we’ve lost the market economy, that we’re transitioning into a totalitarian system.

Mike Gleason: That leads me right into my next question here. Some may be listening to this and might be thinking that it doesn’t matter, or that what these governments and central banks are doing is in the best interest of the people. But speak to that, and discuss more about why it’s in fact harmful, and then who’s getting hurt here by this gold suppression scheme specifically?

Chris Powell: I would argue that really the whole world is getting hurt by the gold price suppression scheme, because gold is a measure of currencies, it’s a measure of asset prices, and if you tamper with the gold price, you’re really tampering with every price, because these prices are related. You’re distorting the whole world’s economy, you’re destroying the market system. Now, I don’t think you can find examples of history where a totalitarian system, over the long term, achieved great economic progress. I think you can find examples in history where market systems produce the greater prosperity and progress.

Well, if we’re losing the market system, we’re losing economic progress, and we’re also losing democracy because people cannot see how prices are being established, they cannot see how power is being allocated in society, and for what purposes? And if you lose the free market system and you lose democracy, I just wonder, what else is there?

Mike Gleason: Isn’t there a limit to how long price suppression can persist though? I mean, if prices are held lower than a free market would cause for years or even decades, it seems, at some point, shortages would crop up, and prices would shoot up. What are your thoughts on this as we begin to close, do you think we are near such a point in time?

Chris Powell: Well yes, theoretically you’re right, but that theory has really developed before the age of derivatives. And now, we have this derivative system where infinite supply, at least infinite paper supply of commodities and financial assets can be created with just a few keystrokes on a computer. Eventually, there will be shortages, but not necessarily in the near future. If people, for example, with gold and silver, if investors in the monetary metals are prepared to accept unbacked paper as equivalent of real metal, then I imagine the gold and silver suppression scheme can go on forever.

If the metal eventually does run out, as it did run out in March 1968 upon the collapse of the London Gold Pool and then again in 1971 when President Nixon took the United States out of the Bretton Woods agreement. You know, governments can just declare force majeure, they can outlaw the private possession in the monetary metals or try to outlaw them. They can impose capital controls, they can impose windfall profits taxes on monetary metals, investors. There’s really no limit to the power of totalitarian governments, or governments that want to engage in totalitarianism.

So I make no prediction as to whether or when this system is going to end. I think it’s just as likely that it’ll grow worse. George Orwell’s vision of the future expressed by one of his characters in his novel 1984 was a boot stomping on a human face forever. I hope that’s not the future that we’re heading for, but I think there’s a chance that is unless people around the world are going to stand up for individual liberty and limited government, and accontable government and free markets.

Mike Gleason: You certainly have to wonder what may happen if we have another financial collapse, and how many people will actually run to the safety of physical gold and silver. Maybe we have a real divergence between the paper market price and the physical price. I think that’s certainly a possibility.

Chris Powell: Well, when that day comes, the metal will not be available to people. If they think that there’s any chance that the monetary metals will ever be fairly valued, I think you’ve got to get your metal now, and maybe it’ll never be fairly valued, and maybe it will. But when the great reset comes, if it does come, it’ll be too late to get your hands on any real metal.

Mike Gleason: Yeah, very well put. Well excellent stuff Chris. I want to thank you for your insights today, and for the work you’re doing there at GATA. Now before we let you go here, can you give our listeners more information on how they can learn more about this and follow what you’re doing there at GATA?

Chris Powell: Sure Mike. We’ve got an internet site, We have daily dispatches to our supporters on our mailing list. You can enroll at our internet site to receive our dispatches there. They’re free. If you do care for our work, if you take a look at the documentation we’ve collected on our internet site and the agitation we do, we welcome financial contributions. We are federally-recognized tax-exempt civil rights and educational organization in the United States under Section 501c3 of the U.S. internal revenue code.

So, financial contributions to GATA are not just gratefully accepted, but they are tax deductible, and we really do solicit support from metals investors and people who believe in free markets. The mining industry, the monetary metals mining industry now, is so demoralized. I think it’s really cowardly that we can’t get too much support from them. So individual investors and supporters of free markets are vital to our continuing.

Mike Gleason: Well it’s a very noble cause, we certainly appreciate everything you’re doing there. We’re big fans of those efforts and would love to visit with you again down the road. Thanks very much for your time, and enjoy your weekend Chris.

Chris Powell: Thank you Mike.


SP ARTICLE – LINK NOT WORKING: GATA Points to ‘Proof’ of Gold Price Suppression Intent

The link on the Sharps Pixley website to the above article doesn’t seem to be working and  readers can’t access it at the moment, so here’s a second copy of the original article:

GATA Points to ‘Proof’ of Gold Price Suppression Intent

It has long been claimed that the gold price, along with virtually every other traded market, is manipulated by financial interests which can lay hands on sufficient funds, or credit, to be able to do so.  That is an unfortunate aspect of the capitalist system and tends to benefit the big money, mostly at the expense of the small investor.  But since its formation in 1998 the Gold Anti-Trust Action Committee (GATA) has gone a stage further with its claims that not only is the gold price manipulated (which suggests it can be pushed up as well and down), but that there is collusion by big money (mainly the bullion banks), central banks and governments to go a stage further and keep the gold price SUPPRESSED, given that a rising gold price is seen by the financial markets as a sign of weakness in the almighty dollar and in the global economy.  That runs counter to the impression that governments wish to portray.

From time to time GATA has also managed to acquire documents which support its point of view in terms of memos from some key figures, particularly from the US Treasury and Federal Reserve, which would appear to support the idea of a gold price suppression policy.  And now it has just been involved in publishing a document, dating back to the early 1970s, which has just appeared in the TF Metals Report, citing a cable obtained by Wikileaks.

The cable, according to GATA, suggested that the U.S. gold futures market was created in December 1974 as a result of collusion between the US government and gold dealers in London to facilitate volatility in gold prices and thereby discourage gold ownership by US citizens.  That is perhaps an arguable contention as it perhaps rather points out the consequences of a change in US policy in allowing citizens to own gold.

The cable was sent to the State Department from the US Embassy in London and describes the embassy’s extensive consultations with London bullion dealers about the imminent re-legalization of gold ownership in the United States and possible substantial gold purchases by oil-exporting Arab nations.

The cable reads: “The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.

The cable is interesting not just for confirming the assertions by GATA and others in the gold-price suppression camp that futures markets also function as mechanisms of commodity price suppression and support for government currencies, an assertion perhaps first made comprehensively in 2001 by the British economist Peter Warburton, but also for showing the close connection at the time between the U.S. government and London-based gold dealers and producers, some of which are cited by name.  Those cited include Samuel Montagu & Co., Sharps Pixley & Co., Mocatta & Goldsmid, and Consolidated Gold Fields.  The first three mentioned were at the time London’s largest bullion dealers and the latter was in effect, mainly through its South African subsidiaries and associates, the world’s largest miner of gold.

It should be noted, however that none of the above cited companies exist in their original form nowadays, and, except perhaps for Mocatta’s successor, can  no longer be considered part of any grouping which exerts any significant effect on the gold price today.  The following is a note to set the record straight on this given that the companies quoted may well have had a major influence in the markets around four decades ago.

Thus, Samuel Montagu is no longer a bullion dealer/broker, but now just forms part of the private banking service of HSBC. The name was actually last used by HSBC in 2000. But its former precious metals broking activities will now form part of HSBC’s continuing business – but not under the Samuel Montagu name.

Sharps Pixley was bought by Kleinwort Benson and then by Deutsche Bank which effectively closed it down.  Subsequently the name was acquired by current CEO, Ross Norman, who relaunched the company around six years ago as a website portal to sell gold in UK markets, as well as providing news and information about the precious metals markets. In 2013 Sharps Pixley was acquired by Degussa Goldhandel from Germany which claims to be one of the largest sellers of retail physical gold in Europe, but the Sharps Pixley end is still run by Ross Norman.  It recently launched a state of the art retail bullion shop/outlet in London’s prestigious St. James Street.

Mocatta & Goldsmid is now ScotiaMocatta, the precious metal and base metal banking division of the  Bank of Nova Scotia, while Consolidated Gold Fields was originally the controlling entity for the gold mining company that is now Gold Fields of South Africa.

The abovementioned cable from the US Embassy in the UK to the State Department perhaps does not quite provide ‘proof’ of US Government involvement in actual gold price suppression, but is yet another piece of circumstantial evidence that it was certainly aware of the likely effects of the futures market on the gold price pattern and may well have colluded in this as being in its best interests.


How and why central banks manipulate the gold price

I am indebted to Ed Steer for highlighting the following article which appeared in his five days a week newsletter  wherein he was interviewed by Dennis Miller on what is one of his favourite subjects – gold price manipulation – the why’s and wherefores.  A link to the full article is here: Are the Central Banks Manipulating the Price of Gold?

In the interview Ed sets out what he sees as the incontrovertible evidence that central banks, via their bullion bank allies, do indeed manipulate the gold price, and the reasons for so doing – it is hugely profitable and they will also tell you they are helping prevent the whole global house of cards fiat currency systems from collapsing.

The views expressed in the Q&A session are contentious – most mainstream commentators are in denial as to whether this is actually taking place, although increasingly non-believers are coming around to accepting that at least some of the points noted by Ed – and by organisations like GATA who have been ploughing this furrow for many years – could well be taking place. The views certainly lend an understanding of some of the strange seemingly-concerted efforts to suppress the gold price as and when it looks like suddenly taking off, or to coincide with government and U.S. Fed data announcements and expressed opinions, often kicking in in concert with them – even before their actual release on occasion.

Do read the linked article.  It is enlightening and certainly expresses a viewpoint which many see as key to where the gold price – and consequently other precious metals prices – are likely headed.