Egon von Greyerz talks to James Turk

James Turk interviews Matterhorn Asset Management's Egon Von Greyerz (one of the most brilliant minds in precious metals today) on the importance of owning physical gold (and silver of course) OUTSIDE the banking system.

Mystery and Intrigue in the Gold Market

Mystery and Intrigue in the Gold Market

By Mark Leibovit

Liebovit VR Gold Trader

Monday, August 15, 2011

Politicians, governments, media, etc. seem to overlook the true value of precious metals and try to deter individuals from owning them. This has been going on for centuries. Most recently, the United States government prohibited American citizens from owning gold between 1933 and end of 1974.

They continue to mislead people into believing that paper currencies are the real wealth. We hear from the chairman of the Federal Reserve, Ben Bernanke, that gold is not money, just "tradition." Despite Bernanke's comments, gold is indeed a currency that competes with government-issued currencies and helps determine not only the value of those currencies but also the level of interest rates and the value of government bonds.

Do they inject this propaganda to take attention away from what the central banks are actually doing with gold and the price of gold? Are they really overlooking or ignoring the true value of gold, or is this smoke and mirrors in front of what they are actually doing?

The gold-exchange standard protected citizens from hyperinflation and other abuses of monetary policy. President Nixon ended the gold-exchange standard on August 15 1971, which meant the end of direct convertibility of the dollar to gold. This removed the restrictions put on governments and central banks as to what they could do with the money supply.

Central banks want to continue to expand the money supply but not face the consequences. They seek ways to force down the price of gold because the price of gold is an indicator of central bank monetary policy.

How do the central banks continue to increase money supply while trying to keep the price of gold down?

The most common policy is to lease gold to a specialized group of insiders known as bullion banks. The central banks call this leasing, but it is operationally a form of gold sales.

The central bank leases gold at well under 1 percent per year to bullion banks. Bullion banks then sell the gold into the private market, take the money, and invest it in government bonds or other investments that pay far more than 1 percent per year.

That gold is gone. To get the gold back, the central banks would have to demand payment in gold by the bullion banks. The bullion banks could not repay this gold without going into the gold market and purchasing it. This would drive up the price of gold. It would bankrupt the bullion banks.

So central banks do not require the bullion banks to repay the gold the bullion banks borrowed. The central banks simply roll the loans over, year after year, and the bullion banks invest the money they get from selling the gold. These central bank sales are not recorded as sales by the central banks. The public remains oblivious.

The central banks maintain the fiction that they still own the gold. They report their holdings of gold as not having changed. But from an economic standpoint, the gold is gone and there is no possibility of central banks will ever get it back from the bullion banks.

Another way central banks and governments battle investors in gold is to announce from time to time that they are contemplating the sale of gold. This scares some gold investors, who sell. By threatening to sell gold, central banks are attempting to push down the price of gold.

The latest example of this came at the G20 meeting on April 2. An announcement was made that the International Monetary Fund would make available special drawing rights (SDRs), which serve as money for central banks. To raise some of this money, the IMF was to sell some of its gold. That was the official announcement.

The IMF has been threatening to sell gold for years. To do this takes a majority vote of the member nations of the IMF. It is clear that the member nations are willing to allow the IMF to do this. Previously, this was not clear.

Why would a central bank or the IMF say in advance that it planned to sell a large portion of its gold holdings? When a large holder of commodities is going to sell into the open market, he does not announce this in advance. His goal is to maximize the money he gains by the sale of the asset. If he warns the world how much he plans to sell and over which time period, this will depress the price if the sale constitutes a significant quantity.

It is economically irrational for a seller of commodity to say in advance how much he plans to sell. I say "economically irrational" on the assumption that the goal is to make a profit. But if the goal is not to make a profit but rather to harm people who hold a particular commodity as an investment, the announcement makes good sense.

A rising price of gold warns the public that the government's tax policies and the central bank's monetary policies cannot be trusted.

How do we believe our governments when they tell us that precious metals have no real value even as foreign governments and foreign banks continue to buy billions of dollars of the metals and some are even buying mining companies and mines to ensure continued supply?

In April 2009 China announced that its gold reserves had increased by 76 percent, from 600 tonnes to 1,054 tonnes. For the previous six years China had been reporting to the IMF only 600 tonnes. Had China acquired those 454 new tonnes only in the past year? Experts believe that China acquired those 454 new tonnes over at least several years, largely by purchasing the production of China's own fast-growing gold mining industry.

Global financial institutions continue to create paper contracts not backed by the physical metals. Is this their way to show plenty of supply in order to keep prices down so that they can continue to accumulate the bullion?

In 2000 CPM Group, a commodities market research, consulting, asset management, and investment-banking firm) released a document stating, "With the start of the London Bullion Market Association's release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply."

Years ago GATA disclosed that the IMF, the leading compiler of official gold reserve data, allowed member nations to count gold they had leased, gold that had left their vaults, as if it was still in their vaults. The effect of this accounting fraud was to deceive the gold market into thinking that central banks had much more gold left with than they really did.

While the major gold and silver exchange-traded funded frequently report their metal holdings, studies by GoldMoney founder James Turk and former GATA board member Catherine Austin Fitts and her lawyer, Carolyn Betts, suggest that this data is unreliable too. For the major ETFs won't disclose exactly where their metal is, and indeed their prospectuses say it's OK for the ETFs not even to know where their metal is kept among custodians and sub-custodians.

And the custodians for the major gold and silver ETFs are, perhaps not so coincidentally, also the two major international banks that report having the biggest short positions in gold and silver, short positions that give these banks and metal custodians a powerful interest in suppressing the price of the assets they supposedly are holding for investors who want those assets to rise in value.

The biggest so-called "physical" gold market in the world is the one run by the London Bullion Market Association. The LBMA publishes statistics on how much gold and silver is traded by its members. But these statistics show spectacular volumes, more metal than could possibly exist. Of course much of this metal could be sold and resold back and forth many times every day. But an expert in that market, Jeffrey Christian of the CPM Group, acknowledged at the March 25 hearing of the U.S. Commodity Futures Trading Commission, as he had acknowledged in that explanatory report published in 2000, that the London bullion market is actually a fractional-reserve gold banking system built on the presumption that most gold buyers will never take delivery of their metal but rather leave it on deposit with the LBMA members from whom they bought it.

"Why is gold such a mystery? Why is it, along with silver, kept such a mystery? It's because the two precious metals are not only money but, from the point of view of free individuals, the best sort of money, less susceptible to what governments see as the most desirable quality of money -- the susceptibility to control by government and particularly its susceptibility to devaluation. You can print or otherwise issue gold and silver derivatives to infinity, but not the metals themselves."

What will this do to the price of gold and silver when the holders of these paper-backed securities realize that the actual supply does not meet the demand, that they will not be able to receive the bullion they paid for? We are already seeing the results of the increased demand as the price of gold continues to move higher.

* * *

Kitco's Jon Nadler still can't make up his mind about central bank gold price manipulation

Here's a special case of split identity in the person of  Kitco's analyst Jon Nadler and a brief story of gold price manipulation, as reported by GATA:

"How does Kitco senior gold market analyst Jon Nadler get away with it?

Interviewed Thursday morning by TheStreet.com's Alix Steel, Nadler dismissed complaints that central banks and their agents, bullion banks, collude to suppress the price of gold. As he did at the Vancouver resource investment conference in June (http://www.gata.org/node/8717), Nadler insisted, "There's no vested interest on anybody's part to suppress prices here."

You can find Nadler's comment to TheStreet.com here:

http://www.thestreet.com/story/10760375/1/top-5-reasons-gold-prices-move.html

But just a few hours later, interviewed about gold on the "Trading Day" program of Business News Network in Canada, Nadler remarked that a gold price of $5,000 would signify "disruptions on a major scale" and a price like that is "something that the central bankers of the world have decided probably not to allow to happen."

You can find Nadler's interview with BNN here:

http://watch.bnn.ca/#clip341191

So if central banks have no interest in suppressing the gold price, why should they decide not to allow gold to reach $5,000? Indeed, why should central banks care about the price of gold at all?

Of course the answer is well documented in history. Indeed, the modern history of gold is almost entirely a matter of central bank price manipulation and suppression, because gold is a currency that competes with central bank currencies and profoundly influences interest rates and the price of government bonds.

Much of the modern history of gold has been outlined well by Bill Buckler, publisher of The Privateer financial letter, particularly in regard to the London Gold Pool of the 1960s and the gold dishoarding by the International Monetary Fund and the U.S. Treasury Department in the 1970s, two acknowledged mechanisms of price suppression. You can find The Privateer's outline here:

http://www.the-privateer.com/gold2.html

And at least four chairmen of the Federal Reserve maintained or expressed interest in suppressing the gold price.

-- William McChesney Martin Jr., the longest-serving Fed chairman, kept in his archive a detailed plan, dated April 1961, for surreptitious government intervention to rig the currency and gold markets to support the U.S. 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. Along with some explanatory commentary it can be located here:

http://www.gata.org/node/7096

-- In June 1975 Fed Chairman Arthur Burns wrote a seven-page memorandum to President Ford about controlling the gold price through foreign policy and defeating a free market in gold. That memorandum can be found here:

http://www.gata.org/files/FedArthurBurnsOnGold-6-03-1975.pdf

-- In November 2004 former Fed Chairman Paul Volcker published an excerpt from his memoirs in the Nikkei Weekly in Japan in which he regretted that central bank intervention was not undertaken to suppress the price of gold during a currency revaluation in 1973. Volcker wrote: "That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake." The excerpt from Volcker's memoirs can be found here:

http://www.gata.org/node/8209

-- And former Fed Chairman Alan Greenspan has acknowledged or remarked favorably about central bank intervention to suppress the gold price a number of times, including during the May 1993 meeting of the Federal Open Market Committee. According to the minutes of the meeting, Greenspan said: "I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology." You can find the May 1993 minutes of the FOMC meeting here:

http://www.gata.org/node/8208

GATA has compiled so much more evidence of central bank manipulation of the gold market here:

http://www.gata.org/taxonomy/term/21

Given the U.S. government's fierce secrecy about gold -- GATA has had to sue the Fed in U.S. District Court for the District of Columbia for access to the Fed's gold records, including gold swap agreements the Fed acknowledges having with foreign banks -- we seldom can be sure of what central banks are doing in the gold market at any particular time. But central bank interest in controlling the gold price -- what Nadler keeps denying -- is the gold market's first and overwhelming fact.Any analysis that denies this is disinformation. And any analyst who denies and acknowledges it on the same day to different news organizations must be very confident that they're not paying attention and not inclined to do any research. Unfortunately Nadler probably has that much right."

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

Adrian Douglas: Gold market isn't 'fixed'; it's rigged

GATA board member Adrian Douglas has studied the morning and afternoon "fixing" of the gold price by the major London trading houses and concludes that it is just as much a price-suppression mechanism as the London Gold Pool of the 1960s admittedly was. Douglas' analysis is titled "Gold Market Is Not 'Fixed,' It's Rigged" and you can find it here:

Adrian Douglas: Gold market isn't 'fixed'; it's rigged

Adrian Douglas: The LBMA joins the gold squeeze cover-up

The LBMA joins the gold squeeze cover-up

The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members. (Seehttp://www.lbma.org.uk.)

I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association's own data to show that the LBMA's bullion banks are operating on a "fractional reserve" basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent

At the March 25 public hearing of the U.S. Commodity Futures Trading Commission on precious metals futures markets I cited the LBMA's own statistics to label the "unallocated gold" accounts of the bullion banks as a Ponzi scheme. (See Reference 3 below.) There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC's Internet site but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the "physical market" is in reality a largely "paper market" trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical gold.

When the LBMA first made its trading statistics available in January 1997, observers and analysts were shocked. (See Reference 5 below.) No one could reconcile the statistics with other market data, nor comprehend how the bullion banks could be trading on a net basis more than 240,000 tonnes of gold annually while the global mine output was only 2,400 tonnes. Over the years the furor over these statistics had subsided until the end of 2009, when I commenced writing about my studies, showing that the statistics can be reconciled with other market data if the bullion banks are operating a fractional-reserve bullion banking operation with a recklessly low reserve ratio. I have also shown how the price of gold is suppressed because 45 ounces of demand are being diluted to result in purchase of only 1 ounce of real metal. If instead all 45 ounces were to be sourced and purchased, the gold price would be multiples of the current price.

Typically when people are exposed in a scandal their first reaction is a cover-up. The most notorious examples of this are the Nixon administration, when it doctored the Watergate tapes, and Arthur Anderson, which shredded millions of pages of documents relating to audits of Enron Corp.

The LBMA has now commenced a cover-up with respect to the gold trading activities of its member bullion banks, withdrawing statistics from the public domain.

This appears not to be the only cover-up going on in the gold market.

For years the International Monetary Fund has made great fanfare of its mere contemplation of selling some of its gold, and actual sales by the IMF have been widely publicized. Since February the IMF has been surreptitiously selling large tonnages of gold each month, but these sales now are to be found only by digging through the IMF's financial statements, and even there the recipients of the gold are not disclosed. (See Reference 6 below.) One has to wonder why the IMF now is trying to fly under the radar with its gold sales.

Similarly it was recently discovered that the Bank for International Settlements didn't feel it necessary to announce its involvement in the largest gold swap in history, 346 tonnes. (See Reference 7 below.) The BIS swaps instead were discovered only because a market analyst dug through the footnotes of the bank's financial statements.

These developments have all the hallmarks of cover-ups.

In June the LBMA trading statistics showed that in May 2010 the average net daily trading in gold by LBMA member banks jumped a massive 50 percent from the month before to 24 million ounces each day from 16 million ounces each day. That translates to $7.5 trillion annually. If an operation is running on a razor-thin fractional reserve basis, such step changes are often fatal.

It appears that a run on the bullion banks has commenced.

There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information.

There has been much debate about how investors, politicians, and regulators didn't see the 2008 financial crisis coming, and lack of transparency was cited as a key reason. Clearly those who have been manipulating the gold market are trying to skulk deeper into darkness. They have a lot to hide.

Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups.

Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion.

Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price.

I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast.

----

References:

1. Adrian Douglas: Proof of Gold Price suppression -- Gold and the U.S. Dollar:

http://www.gata.org/node/8844

2. Adrian Douglas: Price Suppression Follows Inevitably from Fractional-Reserve Gold Banking:

http://www.gata.org/node/8820

3. Adrian Douglas: It's Admitted to the CFTC: London Gold Market Is a Ponzi Scheme:

http://www.gata.org/node/8478

4. Adrian Douglas: Jeff Christian's CPM Group Explains How to Make Paper Gold:

http://www.gata.org/node/8627

5. The Grand LBMA Expose: A Collective-Mind Analysis:

http://www.gold-eagle.com/gold_digest/baron907.html

6. Adrian Douglas: IMF Can't Explain Gold Sales Now Without Revealing Squeeze:

http://www.gata.org/node/8607

7. Adrian Douglas: Mysterious BIS Gold Swaps Are Likely a Bullion Bank Bailout:

http://www.gata.org/node/8803

-----

Adrian Douglas publishes the Market Force Analysis letter (http:/www.MarketForceAnalysis.com) and is a member of GATA's Board of Directors.

* * *

Doubts about gold ETFs broadcast today on two major networks

Within a half hour of each other today the leading business television networks in North America reported doubts that gold exchange-traded funds either have the gold they claim to have or can get enough real gold to meet likely demand.

The first doubt was expressed on CNBC in the United States, where market analyst Rick Santelli comments at 5:30 into this segment:

http://www.cnbc.com/id/15840232?video=1494145732&play=1

The second doubt was expressed on BNN in Canada, where reporter Niall McGee commented at length:

http://watch.bnn.ca/#clip302139

There seems to be growing consensus in favor of what GATA long has been urging gold and silver investors to do: to take possession of their metal or make certain that any custodian has got it in allocated and audited form, especially since the custodians of the largest gold and silver ETFs are also the biggest gold and silver shorts, a grotesque and unacknowledged conflict of interest:

http://www.gata.org/node/8600

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

Michael Snyder: People are realizing that LBMA system has little gold

Michael Snyder, editor of The Economic Collapse blog, writes this week:

"Anyone who follows the gold market knows that big financial institutions regularly work to suppress the price of gold. In fact, one industry insider recently decided to be a whistleblower and came forward with 'smoking gun' evidence of price manipulation in the precious metals markets, but the CFTC didn't do a thing about it.

"Fortunately, the overwhelming demand for gold is now pushing the price up despite efforts to suppress it.

"In addition, once it becomes apparent that most of the "gold" that is traded in the world is not backed by the actual metal itself, the price of gold will go even higher.

"For years, almost everyone has assumed that the London Bullion Market Association (LBMA), the world's largest gold market, had actual gold to back up the massive 'gold deposits' at the major LBMA banks.

"But that is just not the case.

"People are now starting to realize that there is very little actual gold in the LBMA system.

"When most people think they are buying 'gold,' what they are actually buying are just pieces of paper that say they own gold.

"Egon von Greyerz of Matterhorn Asset Management in Switzerland recently elaborated on this point. He says that 'a lot of people who have studied it closely are convinced that there is a major shortage in physical gold at LBMA. LBMA trades around 700 tons net of gold daily. That is 25 percent of world annual production and around $6 trillion annually. To back that amount of trading on a 100-percent reserve ratio basis, it would need several years' production of physical gold, which they definitively haven't got.'"

Snyder's commentary is headlined "Has Gold Become a New Reserve Currency?" and you can find it at the Economic Collapse Blog HERE

Business Insider exposes IMF's gold cover-up

At the urging of GATA and Sprott Asset Management CEO Eric Sprott, Business Insider reporter Vince Veneziani recently put to the International Monetary Fund five specific questions about the IMF's supposed gold reserves, questions similar to those put to the IMF by GATA's Chris Powell  in April 2008. (See http://www.gata.org/node/6242.)

Business Insider's two most important questions may have been:

1) Exactly where is the IMF's supposed gold? and

2) When the IMF sells gold, does any real gold change hands or are such sales essentially just bookkeeping transactions among central banks?

Tonight Veneziani reports that IMF spokesman Alistair Thomson replied to Business Insider's five questions as follows: "I looked through your message; we don't have anything more for you on this."

How's that for accountability from an international governmental organization?

Veneziani concludes: "Certainly this unwillingness is only fodder for skeptical gold folks out there."

Indeed, the IMF's refusal to answer Business Insider is more evidence that the gold it has been threatening the gold market with for years is an illusion -- that the IMF has no gold at all but only a tenuous claim on the gold reserves of its member nations, nations that, the ever-more-valuable CPM Group reports today, seem not at all inclined to part with it anymore:

http://www.reuters.com/article/idUSN2746801820100427?type=marketsNews

Thus Veneziani and Business Insider have accomplished something apparently not yet accomplished by any major news organization in the world: They have put important, critical, inconvenient, and direct questions to a central banking institution. Further, Veneziani and Business Insider have been treated with contempt for doing so and have publicized the refusal to answer.

Not even The New York Times, Financial Times, and The Wall Street Journal have yet dared attempt such ordinary journalism in regard to central banking.

The Business Insider report is headlined "Five Questions About Gold the IMF Refuses to Answer" and you can find it HERE

New York Post: Trader blows whistle on gold, silver price manipulation

Metal$ Are in the Pits

Trader Blows Whistle on Gold and Silver Price Manipulation

By Michael Gray

New York Post

Sunday, April 11, 2010

There is no silver lining to the activities of JPMorgan Chase and HSBC in the precious-metals market here and in London, says a 40-year veteran of the metal pits.

The banks, which do the Federal Reserve's bidding in the metals markets, have long been the government's lead actors in keeping down the prices of gold and silver, according to a former Goldman Sachs trader working at the London Bullion Market Association.

Maguire was scheduled to testify last week before the Commodities Futures Trade Commission, which is looking into the activities of large banks in the metals market, but was knocked off the list at the last moment. So he went public.

Maguire -- in an exclusive interview with the Post -- explained JPMorgan's role in the metals pits in both London and here, and how they can generate a profit either way the market moves.

"JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the US dollar. JPMorgan is insulated from potential losses" on their short positions "by the Fed and/or the US taxpayer," Maguire said.

In the gold pits, Maguire sees HSBC betting against the precious metal's price without having any skin in the game in the form of a naked short.

"HSBC conducts an ongoing manipulative concentrated naked short position in gold. Silver is much easier to manipulate due to its much smaller [market] size," Maguire added.

"No one at JPMorgan is familiar with Andrew Maguire," said Brian Marchiony, a company spokesman. HSBC declined to comment.

Also during the CFTC hearing, Jeff Christian, founder of the commodities firm CPM Group, said that the LBMA, the physical delivery market for gold and silver in the UK, has been using leverage, which is another way to depress the price of gold and silver.

Christian said that the LBMA -- the same market Maguire trades in -- has leverage of about 100-1 on the gold bars settled on the exchange. In layman's terms, that means if 100 clients requested their bullion bars be delivered, the exchange could give only one client the precious metal.

The remaining requests would have to be settled for cash equivalent. "That is tantamount to a default on the trade," says Bill Murphy, chairman of the Gold Anti-Trust Action Committee.

Maguire goes further and calls it a fraud: "If you sell something you do not own, then that is fraud."

Back in 2007, Morgan Stanley agreed to settle a $4.4-million lawsuit brought by precious-metal clients, who alleged that Morgan offered to buy gold and silver and store it for the investors, but never purchased any metal and still charged them storage fees.

Morgan Stanley denied the charges at the time but "settled the case to avoid the cost and distractions of continued litigation," the firm said.

Despite gold's rise each of the last 10 years, Murphy believes the price of gold today would be closer to $2,300 an ounce if the price just moved with inflation.

Maguire believes the price should be even higher given the fear trade that would have sent prices spiking during the financial crisis in 2008-09.

Both precious metals have seen a recent spike since Maguire's e-mails became public. Gold has gained 6.5 percent to close at $1,161.55, while silver has spiked 10 percent to $18.38.

According to the e-mails Maguire sent to CFTC regulators, he was spot-on in his expectations of how the precious metals would trade on release of the January jobs report.

This message is to "confirm that the silver manipulation was a great success and played out exactly to plan as predicted yesterday. How would this be possible if the silver market was not in the full control of the parties we discussed in our phone interview?," Maguire wrote to a staff investigator after the trading day.

CFTC commissioner Bart Chilton said, "I'm appreciative of the information Mr. Maguire provided and I'm glad it was introduced into the investigation."

... High, low silver

The prices of gold and silver have been allegedly suppressed by JPMorgan Chase and HSBC, according to a London whistleblower.

Andrew Maguire, who laid out the banks' plan in e-mails to the CFTC prior to trading on the Comex on Feb. 5.

1.) From: Andrew Maguire

To: Ramirez, Eliud [CFTC]

Cc: BChilton [CFTC]

Sent: Wednesday, February 03, 2010 3:18 PM

Subject: Re: Silver today

Thought it may be helpful to your investigation if I gave you the heads up for a manipulative event signaled for Friday, 5th Feb. Scenario 1. The news is bad (employment is worse). This will have a bullish effect on gold and silver as the US dollar weakens and the precious metals draw bids, spiking them higher. This will be sold into within a very short time (1-5 mins) with thousands of new short contracts being added.

Scenario 2. The news is good (employment is better than expected). This will result in a massive short position being instigated almost immediately with no move up. This will not initially be liquidation of long positions but will result in stops being triggered, again targeting key support levels. Kind regards,

2.) From: Andrew Maguire

To: Ramirez, Eliud [CFTC]

Cc: BChilton [CFTC]; GGensler [CFTC]

Sent: Friday, February 05, 2010 3:37 PM

Subject: Fw: Silver today A final e-mail to confirm that the silver manipulation was a great success and played out EXACTLY to plan as predicted yesterday. How would this be possible if the silver market was not in the full control of the parties we discussed in our phone interview? Kind regards,

3.) Andrew T. Maguire

From: Ramirez, Eliud

To: Andrew Maguire

Sent: Tuesday, February 09, 2010 1:29 PM

Subject: RE: Silver today Good afternoon, Mr. Maguire, I have received and reviewed your email communications. Thank you so very much for your observations.

GATA: Attack on King World News site meant to shut it down

King World News today received more detail about yesterday's attack on its Internet site, which happened soon after the posting of Eric King's half-hour interview with GATA Chairman Bill Murphy, board member Adrian Douglas, and your secretary/treasurer about last week's hearing of the U.S. Commodity Futures Trading Commission.

The major Internet hosting company that maintains the King World News site reported to King World News: "Your hosting account is the target of a distributed denial of service attack. To protect the network resources, we have temporarily placed your Web site behind a network filter. Once the attack has ended, service will be restored to normal. ... Computers were attacking your account."

Wikipedia says a distributed denial-of-service attack "is an attempt to make a computer resource unavailable to its intended users. Although the means to carry out, motives for, and targets of a DDoS attack may vary, it generally consists of the concerted efforts of a person or people to prevent an Internet site or service from functioning efficiently or at all, temporarily or indefinitely."

Eric King told GATA today, "We are on one of the top grid server systems in the world, where traffic is not an issue, and this has never happened before. This was a case of an entity needing to silence the messenger."

No Internet site has given as much voice to GATA and other pro-gold and free-market advocates as King World News has, so given the scope of the attack on the the King World News Internet site, it is hard not be awfully suspicious about it.

King's interview with Murphy, Douglas, and your secretary/treasurer can be found here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/31_GATA.html

Meanwhile, GATA's friend Trace Mayer, proprietor of RunToGold.com, reports that his March 28 commentary on last week's hearing of the U.S. Commodity Futures Trading Commission --

http://www.runtogold.com/2010/03/cftc-gold-and-silver-hearing-is-old-news/

-- was followed by a similarly massive attack on RunToGold's Internet server. "To handle spikes in traffic," Mayer says, "I am on an expensive enterprise-level cloud server with a company that handles hosting for some of the big dogs, like Sony and Toyota, and my server got hammered. The site was down for 2 1/2 hours, from about noon to 2:30p PT on March 30. There were no issues with my hosting provider and it appears we have everything under control now. I have never had an issue like this before. Anyway, it looks like we have someone's attention. Keep yanking on that tail."

GATA indeed will keep yanking on that tail but our friends also risk getting bitten. We're grateful to them for that.

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

Sophisticated attack disables King World News site for 2 hours

Internet servers hosting the King World News Internet site, which today posted a half-hour interview with three GATA board members, were attacked and disabled tonight from approximately 8 to 10 p.m. ET.

The servers are maintained by one of the largest Internet site hosting companies in the world and one of its technicians told King World News proprietor Eric King, "We cannot figure out why this cluster of servers is being attacked." The King World News site host has maintained the site on a "grid" system of servers so that ordinary technical problems with any one server cannot disable the site, but tonight's attack was sophisticated and brought down the entire grid.

King and his family have not been attacked and one may suppose that what happened tonight at least is preferable to being rammed by a hit-and-run driver, as CFTC whistleblower Andrew Maguire and his wife were rammed in London the day after GATA disclosed at last week's hearing of the U.S. Commodity Futures Trading Commission that Maguire had given the commission detailed warning of a manipulation of the futures market and the commission had done nothing about it.

At this hour the King World News interview with the three GATA board members -- GATA Chairman Bill Murphy, Adrian Douglas, and your secretary/treasurer -- appears to be accessible again here:

If King World News is becoming Radio Free America, this sort of thing may happen again.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

CFTC whistleblower Maguire, GATA's Douglas interviewed by King World News

London metals trader and CFTC whistleblower Andrew Maguire was interviewed with GATA board member Adrian Douglas for 40 minutes Tuesday by Eric King of King World News. 

Maguire explained how he came to complain to the CFTC about silver market manipulation by JPMorgan Chase traders in London and then to Douglas when the CFTC failed to call him to testify at its hearing last week on futures trading in the metals market. 

You can listen to the interview at the King World News Internet site here:

CFTC whistleblower injured in London hit-and-run

It seems that stakes in gold price suppression are higher than otherwise thought. As the video from Bill Murphy's testifying before the CFTC posted here shows, the noose around the anti-gold cabal necks is uncomfortably tightening. And they wasted no time reacting.....

Here's the latest GATA release on this issue:

"Dear Friend of GATA and Gold:

London metals trader Andrew Maguire, who warned an investigator for the U.S. Commodity Futures Trading Commission in advance about a gold and silver market manipulation to be undertaken by traders for JPMorgan Chase in February and whose whistleblowing was publicized by GATA at Thursday's CFTC hearing on metals futures trading --http://www.gata.org/node/8466-- was injured along with his wife the next day when their car was struck by a hit-and-run driver in the London area.

According to GATA's contact with Maguire, board member Adrian Douglas, Maguire and his wife were admitted to a hospital overnight and released today and are expected to recover fully.

Maguire told Douglas by telephone today that his car was struck by a car careening out of a side road. When a pedestrian who witnessed the crash tried to block the other driver's escape, the other driver accelerated at the pedestrian, causing him to jump out of the way to avoid being hit. The other driver's car then struck two other cars in escaping. But the other driver was caught by police after a chase in which police helicopters were summoned.

We'll convey more information about the incident as it becomes available.

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc."

Adrian Douglas: If your gold is at an LBMA bank, you may be just an unsecured creditor

By Adrian Douglas

Monday, March 1, 2010

Recently I have written several articles that have discussed how much "paper gold" has been sold, principally through the unallocated accounts of the London Bullion Market Association, though there are other vehicles that achieve the same end, such as pool accounts, unbacked exchange-traded funds, futures, and derivatives, etc., but the LBMA dwarfs them all.

See:

http://www.gata.org/node/7911

And:

http://www.gata.org/node/7908

I estimate that as much as 50,000 tonnes of gold have been sold that do not exist. That is equivalent of all the gold reserves in the world that are yet to be mined -- or, put another way, 25 years of gold production.

That is the granddaddy of all short positions.

The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100 -- a $5 trillion fraud as opposed to a $50 billion fraud.

Like all financial scandals before it, this one will be exposed just as surely as night follows day. Gold is unique among all commodities. It is the only commodity that is not bought to be consumed. Rather, it is purchased as a store of wealth. Because it is not consumed, the buyer does not need to take possession of his gold but can be persuaded to trust the seller to store his gold on his behalf.

This unique wrinkle allows bullion bankers to sell gold that does not exist. This allows them to make huge profits, since they have very little cost, as they don't have the inconvenience of actually having to purchase the gold before they sell it.

The consequence of this illegal activity is that it suppresses the price of gold because the "paper gold" supply has the same effect on prices that would happen if real gold had actually been supplied to the market.

Such racketeering is extremely beneficial to the central banks, which are hostile to gold because a free-market gold price would blow the whistle on their perpetual inflationary actions. A suppressed gold price makes fiat currencies appear to have higher purchasing power.

The central banks do not just turn a blind eye to the bullion banks' fraud but actively assist it; the central banks lease gold at a pittance of a lease rate to make sure there is always enough liquidity so the scam is not exposed from the bullion banks' inability to deliver real metal when asked.

There is nothing new about gold bankers selling gold they don't have. The goldsmiths invented the scheme in the 16th century. As recently as 2005 Morgan Stanley was sued for selling imaginary precious metals. Morgan Stanley even had the audacity to charge storage fees on metal that didn't exist. The firm settled the lawsuit out of court but no criminal charges were ever filed. Morgan Stanley maintained that it did nothing wrong because none of its clients had lost any money in the scam. That was innovative. I will try stealing a billion dollars from a bank and then I will pay it back the following day and see what the FBI thinks of that legal defense.

The LBMA operates a fractional reserve system. It sells much more gold than it has. The LBMA keeps on hand the amount of gold that it estimates, in the worst-case scenario, it will be called upon to deliver.

In a recent article I analyzed data from the LBMA's own Internet site that shows that a net of approximately 20 million ounces of gold are traded every day:

http://www.gata.org/node/8248"

This means that we are meant to believe that the equivalent of 25 percent of global annual gold production changes hands each day on the LBMA. On a gross trading basis this probably represents the whole of annual worldwide gold production traded every day. In dollar terms it represents $5.7 trillion of net trade annually. That is almost 60 percent of the entire U.S. economy or 10 percent of the entire global economy being traded through a handful of gold bullion banks.

It is simply mind boggling. You don't have to be a rocket scientist or a market regulator to smell something fishy. To back that level of trading on a 100 percent reserve ratio, the bullion banks would have to own almost 40 percent of all the gold ever mined. There are simply not enough London Good Delivery bars for that to be the case.

You don't have to rely on me to tell you that the LBMA is running a fractional reserve gold racket. This is from the LBMA's own Internet site:

http://www.lbma.org.uk/london/accounts"

"Unallocated Accounts

This is an account where specific bars are not set aside and the customer has a general entitlement to the metal. It is the most convenient, cheapest, and most commonly used method of holding metal.

"The units of these accounts are 1 fine ounce of gold and 1 ounce of silver based upon a .995 LGD (London Good Delivery) gold bar and a .999-fine LGD silver bar respectively. Transactions may be settled by credits or debits to the account while the balance represents the indebtedness between the two parties.

"Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held. The client is an unsecured creditor.

"Should the client wish to receive actual metal, this is done by 'allocating' specific bars or equivalent bullion product, the fine gold content of which is then debited from the allocated account."

There are some real peaches in this description. For example: "Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held."

They don't say that the bullion dealer has to hold the amount of gold he has sold, just that these unallocated accounts are backed by the bullion dealer's stock. His stock could be a thousand ounces or none at all.

Note the statement: "The client is an unsecured creditor." So this really spells out what "unallocated" means. It means that there is no gold allocated to the customer. The customer owns only an IOU for gold.

If the LBMA were running a system that had on hand 100 percent of all the gold being sold but just didn't want to assign specific bars and serial numbers, then all creditors would be secured. But the LBMA spells out that all clients are unsecured creditors. The buyers have no gold guaranteed against the IOU from the bullion dealers.

Who exactly are the members of the LBMA? The clearing members are as follows:

-- HSBC Bank USA National Association

-- JP Morgan Chase Bank

-- The Bank of Nova Scotia

-- Barclays Bank

-- Deutsche Bank

-- UBS AG

HSBC and JPMorgan Chase are the biggest short sellers on the New York Commodity Exchange. Together they own 95 percent of the over-the-counter precious metals derivatives. They are also custodians of the bullion supposedly held by the GLD and SLV exchange-traded funds, respectively, and they are clearing agents for the LBMA.

That is one fine set of credentials. These banks are so arrogant and confident that their racketeering will not be exposed that the quarterly publication of the LBMA is titled "The Alchemist."

Unlike the alchemists of the middle ages who tried to turn lead into gold, the alchemists at the LBMA turn paper into gold. (Well, gold IOUs, to be exact.)

In 2003 Graham Tuckwell, chairman of Gold Bullion Securities, made a presentation to the annual LBMA precious metals conference about his firm's new gold-backed ETF that today trades on the American Stock Exchange under the ticker symbol "GOLD." The transcript of his speech can be found here:

http://www.lbma.org.uk/docs/conf2003/2e.tuckwellLBMAConf2003.pdf

In that speech Tuckwell said:

"There are three essential components of [a] listed security, in our opinion. Firstly, ownership of the gold; investors want allocated gold, not a third-party credit risk, which is what unallocated gold is. In fact, you could argue unallocated gold isn't gold; it's just a piece of paper issued by a bank, and in most cases, unsecured risk."

You have to remember that this is a speech being made in front of all the members of the LBMA. You simply can't make such a statement in front of such a crowd if it isn't true. And we know it is true because the LBMA says the same thing on its Internet site. They say their clients are "unsecured creditors."

The LBMA peddles gold promises to those gullible enough to trade off convenience against title.

Many people do not understand what fractional reserve accounting means. I will give you an example of a less important real-life case.

Commercial airlines routinely sell more seats on a flight than the airplane has. If the plane holds 200 passengers but from statistics the airline knows that on average only half the passengers with ticket show up for check-in, the airline can sell 400 seats and be confident that the plane will fly full, which increases the airline's profitability. If the airline sold only 200 tickets, the plane would fly half empty. Occasionally the airline gets caught when, say, 210 passengers check in. In such circumstances the airline offers a free night in a hotel, a first-class upgrade, and some cash for any 10 passengers volunteering to fly later or the next day. But all the people who purchased tickets believed that they were buying actual available seats, not unallocated virtual seats.

This is exactly the same situation with the LBMA; the LBMA sells more gold than it has. It knows from statistics on average how many clients will ask for delivery and that determines the LBMA's minimum stock level.

But just like the case of the airlines, this scheme is destined to be discovered. When more gold is demanded than the bullion banks can deliver, they try to lease or buy gold from central banks. If this can be done in a timely fashion, the bullion banks' clients are none the wiser. If the central banks cannot provide supply, then the bullion banks are obliged to offer premiums over the spot gold price to encourage clients to accept cash in lieu of metal.

We are hearing anecdotal stories that recently there have been cases of premiums of up to 25 percent being offered for gold buyers to settle in cash instead of metal. It would seem that the bullion banks have pushed the game too far and are on a collision course with default. In addition the central banks have dishoarded a large proportion of their gold and are not in a position to come to the rescue of the bullion banks as much as in the past.

I recently made an analysis of the Comex warehouse inventory of gold and silver in an article entitled "Alarming Trend in Comex Gold and Silver Inventory Data":

http://www.gata.org/node/8373

One of my conclusions is that in the last six months there has been a dramatic decline in the inventory held by the dealers on the Comex (the registered category), while over the same period the open interest has increased. This essentially means that each open contract has less warehouse gold or silver backing today than it did six months ago.

This is a classic reduction in reserve ratio. It is a sign that the gold cartel is running out of physical gold and silver.

This observation is supported by other data. During the last two years the U.S. mint has periodically suspended production of gold and silver coins due to shortages of bullion, and the Comex futures have displayed contracting contango and/or mild backwardation, which is indicative of physical market stress.

There is anecdotal evidence that the LBMA OTC market in London has been having difficulties in making deliveries and requiring central bank gold to do so.

There are also rumors of large premiums being offered for cash settlement in lieu of the bullion.

Sources active in the London market tell us it is difficult to find large amounts of bullion.

The central banks have stopped selling and have become net buyers of gold. Further, at the end of last year the politically connected miner Barrick Gold announced a panicked buying back of its hedges.

The clients of the LBMA are not speculators or gamblers. They have bought gold that they believe is being held in a vault for them by the LBMA members. As the suspicions about the LBMA rise, more clients will ask for delivery, which will expose this fraudulent operation.

As I wrote here earlier, I estimate that as much as 50,000 tonnes of gold have been sold that do not exist. That is equivalent to all the gold in the world that is yet to be mined, or, put another way, 25 years of gold production, the granddaddy of all short positions.

The fractional reserve operation of the LBMA is likely to be the next Madoff scandal, except multiplied by 100 -- a $5 trillion dollar fraud as opposed to a $50 billion fraud. Those holding real bullion will see the price multiply many times as the price adjusts to the supply and demand fundamentals of real metal.

There is only one way to protect yourself and to profit. You should own physical bullion. Simply don't trust intermediaries like the LBMA that purportedly sell you gold but label you an "unsecured creditor." Anyone who thinks he holds gold at the LBMA should demand delivery.

The major desirable and unique characteristic of gold is that it is no one else's liability, unlike almost every other financial asset. If you own a credit risk, like IOU gold, you have not achieved the principle objective of owning gold.

Are you a gold owner or an "unsecured creditor"?

You cannot be both.

-----

Adrian Douglas is publisher of the Market Force Analysis letter (www.MarketForceAnalysis.com) and a member of GATA's Board of Directors.

* * *

James Turk: A spectacular year for gold and silver

In his new commentary today, GoldMoney founder, Free Gold Money Report editor, and GATA consultant James Turk celebrates the spectacular performance of gold and silver in 2009. 
Turk reports that gold rose in all major currencies except the Australian dollar, and silver beat even that. Turk's commentary is headlined "Gold Shines for the Ninth Consecutive Year" and you can find it at GoldMoney's Internet site HERE

Paul Mylchreest: Gold Market: Accident Waiting to Happen Or Crime Scene?..

Market analyst Paul Mylchreest, who wrote the 2006 report for Credit Agricole's Cheuvreux brokerage house concluding that the gold market was being manipulated surreptitiously by central banks (http://www.gata.org/files/CheuvreuxGoldReport.pdf) and, the following year, a similar report for Redburn Partners, (http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf), has revisited the gold market in a study for his own analysis service, the Thunder Road Report.

Mylchreest examines the gold traded in the world's biggest gold market, London, and concludes that either a tiny amount of real metal is supporting a spectacular volume of paper trades, "an accident waiting to happen," or else that the world's gold supply is spectacularly larger than officially acknowledged and the London gold market has been used in recent years to launder questionably obtained gold, perhaps the fabled "Yamashita's gold" plundered from Asia by the Japanese military during World War II, in which case the London gold market is a "crime scene."

Mylchreest's report is fascinating and as conscientious as the obscurantism of the gold world allows. It's titled "Gold Market: Accident Waiting to Happen Or Crime Scene? Don't Shoot the Messenger," and you can read it HERE

GATA: Fed admits hiding gold swap arrangements

Dear Friend of GATA and Gold:

The Federal Reserve System has disclosed to GATA that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)

The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

While the letter is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.

GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.

In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for your financial support and that of all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:

http://www.gata.org/node/16

You can also help GATA by bringing this dispatch to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression schemes generally.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.