Remarks by Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.
Mining Investment Asia Conference
Marriott Tang Plaza Hotel, Singapore
Thursday, May 16, 2024
Illustrations for these remarks can be viewed in this presentation, Gold Market Manipulation Update.
[ILLUSTRATION 1: Title]
For 25 years my organization, the Gold Anti-Trust Action Committee Inc., has been trying to persuade the monetary metals mining industry, financial news organizations, and investors of a truism: that central banks and governments, especially in the West and the United States, intervene in the gold market not just openly once in a great while but also surreptitiously and frequently to support their currencies against gold.
Despite the overwhelming documentation of this truism, GATA has had only limited success. Ironically, we have been least successful with the monetary metals mining industry itself, which has had the most to gain from wider recognition of the frequent intervention against its products.
[ILLUSTRATION 2: BIS Papers -- White speech]
Much of the documentation of this intervention is found in the archives and on the internet sites of central banks and governments themselves. Among my favorite confessions of intervention is the address given by William R. White, head of the monetary and economic department of the Bank for International Settlements, the central bank of the central banks, at a conference held at the bank in Basel, Switzerland, in July 2005.
White's address was titled "The Past and Future of Central Bank Cooperation." His audience included dozens of central bank officials and academics from around the world. White described what he said were four primary objectives of central bank cooperation. The fourth objective, White said, was "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful" :
https://www.gata.org/node/4279
[ILLUSTRATION 3: BIS PowerPoint – Our Products]
Indeed, at a BIS conference for prospective BIS members three years later, in 2008, the bank distributed a PowerPoint presentation actually advertising that its services to members include surreptitious interventions in the gold and foreign exchange markets:
https://www.gata.org/node/11012
Many other official documents and many other events in recent years show that the influence brought to bear on gold prices by central banks has almost always been to suppress them in favor of government currencies. The best-known gold price suppression mechanism of Western central banks may have been the London Gold Pool of the 1960s:
https://en.wikipedia.org/wiki/London_Gold_Pool
This mechanism was forthright and candid -- the open dishoarding of the gold reserves of the United States and seven of its western European allies to hold the market price of gold to the official price of $35 per ounce. Inflation of the dollar killed the gold pool in 1968 by sparking heavy demand for gold. The gold reserves of the United States and its gold pool allies were severely drained without reversing demand for gold.
To suppress the gold price since then the U.S. and its allies have undertaken spot sales of gold and the leasing of government gold reserves. More important recently, they also have encouraged or subsidized bullion banks to sell gold derivatives, with the selling of those derivatives directly or implicitly backed by a government guarantee to provide the banks with real metal if necessary.
This enabled what was called the gold carry trade of the 1990s, wherein Western central banks lent their gold to investment banks, charging only a nominal interest rate -- say, 1% -- and the investment banks sold the gold into the market and used the proceeds to buy government bonds paying 5% interest. The investment banks collected a risk-free spread of 4%. This mechanism helped government keep both the gold price and interest rates low, as long as government was ready to keep lending gold to hold its price down. Investment banks were well-paid to provide camouflage for government intervention against gold.
The U.S. and its allies also have suppressed the gold price lately by swapping gold among themselves and their associated bullion banks so the metal can be applied to markets where it is most needed for price control.
These gold swaps are arranged through the Bank for International Settlements and are obscurely documented in the bank’s monthly reports, which are scrutinized by GATA’s consultant Robert Lambourne. Here is a chart showing the volume of gold swaps arranged by the BIS since 2020:
[ILLUSTRATION 4: BIS swaps chart]
Since the BIS is entirely a central bank operation, its gold swaps are a measure of central bank intervention in the gold market. This chart of the BIS gold swaps volume shows a dramatic and steady decline over the last several years, a decline that broadly correlates with an increase in the gold price. The decline in the BIS gold swaps seems to signify the gradual withdrawal of many central banks from gold price suppression in conjunction with adoption of the bank’s so-called “Basel 3” bank regulations. These regulations aimed to protect the solvency of bullion banks by reducing their exposure to unbacked derivatives in gold.
But intervention against gold by the United States has continued even as the regulations of the BIS have been pushing bullion banks and some central banks out of the gold derivatives business.
To help conceal the continuing manipulation of the gold market by the U.S. government, the U.S. Commodity Futures Trading Commission has refused to answer, even for a member of Congress -- West Virginia Rep. Alex X. Mooney -- whether the commission has jurisdiction over gold and commodity market manipulation when such manipulation is undertaken by or at the behest of the U.S. government. Indeed, the Gold Reserve Act of 1934 appears to authorize the U.S. Treasury Department to use its Exchange Stabilization Fund to intervene in and manipulate not just markets in the United States but markets anywhere in the world:
https://home.treasury.gov/policy-issues/international/exchange-stabilization-fund
But now that war has broken out between Russia and Ukraine and economic war has followed between the United States and its allies, on one hand, and Russia, China, and their allies on the other hand, many governments have been wising up to the U.S. policy of gold price suppression.
The U.S. policy of gold price suppression still can’t be acknowledged and examined by mainstream Western news organizations, but those organizations are starting to report aspects of the intensifying currency war -- especially the hastening acquisition of gold by governments and central banks seeking to protect themselves against the risk of U.S. economic sanctions and expropriation of their assets by the U.S. if they don’t comply with U.S. demands.
One aspect of the currency war that still hasn’t been reported by mainstream news organizations is the probable repatriation of foreign custodial gold from the Federal Reserve Bank of New York.
[ILLUSTRATION 5: Mooney-Powell correspondence]
In December U.S. Federal Reserve Chairman Jerome Powell refused to answer Representative Mooney's question whether other nations recently have been repatriating their gold from the New York Fed.
Shown here are Mooney's letter asking the Fed chairman about gold repatriations and Powell's reply acknowledging Mooney’s letter but ignoring his question.
It is fairly suspected that the United States long has been using foreign custodial gold at the New York Fed for market interventions. Some nations repatriating their gold likely share those suspicions. But once again the Federal Reserve is hiding potentially sensitive information about gold and the influence gold’s price has on the value of the U.S. dollar.
In part because of GATA's work, Russia and China have known about Western gold price suppression policy and mechanisms for almost 20 years and slowly but steadily have been acting on that knowledge -- including the knowledge that the gold derivatives pushed by the U.S. and its allies are to a great extent just naked short positions against the metal and that there is very little real metal backing what is called "paper gold."
*
Why has it taken so long for this critical knowledge to escape official circles?
One big reason is the monetary metals mining industry itself. As Stefan Gleason, the chief executive of U.S.-based coin and bullion dealer Money Metals Exchange, wrote a few weeks ago --
https://www.gata.org/node/23151
-- gold and silver mining companies don’t seem to believe in their own product, or even understand it.
Gleason wrote: "These businesses quite literally mine real money. But like nearly every other business or individual, they still seem to be stuck in the fiat currency paradigm."
Most gold and silver miners, Gleason noted, don't even reserve part of their production in their cash balances, preferring instead to sell their production for government currency almost as fast as they get it out of the ground.
GATA long has seen this phenomenon with the miners in a slightly different light. We resent that few gold and silver mining companies acknowledge and agitate against government's constant if largely surreptitious market intervention to suppress monetary metals prices, intervention that supports government currencies against competition, even as GATA has extensively documented the intervention and begged the mining industry to act on it.
But we understand the reason for the negligence of the monetary metals mining industry. It's basically cowardice.
That is, the gold and silver miners are too scared of their governments and their banks to acknowledge that they all compete in the money business. The miners are too scared to stand up for themselves and their investors.
For government can shut down a mine quickly on several pretexts -- environmental regulations, royalty rights, sovereignty claims, and such. And most mines are so expensive to build and operate that they require financing from the biggest banks, most of which are the partners of government in market rigging, many of which being primary dealers in U.S. government securities.
So the World Gold Council, an international trade association, should be running interference for the miners in the war that government wages against them. But the council itself seems to be an accomplice of government and big banks, operating as if its main purpose is to make sure there never is a world gold council. The council has never addressed intervention by central banks to suppress monetary metals prices. The council cites central banks only when they are believed to be buyers.
As a result little GATA has been stuck doing the work the World Gold Council should be doing, exposing the government policies and operations that aim to prevent the monetary metals from being fairly valued, policies and operations that prevent the miners from making money and prevent the world from enjoying free and transparent markets and limited and accountable government.
The World Gold Council has an annual budget of many millions of dollars, drawn from dues paid by its approximately 32 member mining companies:
https://www.gold.org/about-us/our-members
In contrast, GATA's annual budget is small and irregular. We are a tiny, tax-exempt civil rights and educational organization that relies on donations.
But who has accomplished more for gold's cause?
At least some major figures in the monetary metals mining industry, including Franco-Nevada founder Pierre Lassonde, a former chairman of the World Gold Council, lately have acknowledged that China particularly and Asia generally have taken control of the gold price by converting derivatives into real metal and taking delivery of it and that gold long has been steadily moving from West to East:
https://www.gata.org/node/23166
*
[ILLUSTRATION 6: World Bank Gold Investing Handbook]
Gold researcher Jan Nieuwenhuijs recently reported that European central banks seem to be preparing for an official upward revaluation of gold by using what they plainly call their gold revaluation accounts, mechanisms that can improve the solvency of central banks by revaluing their gold reserves.
Recently the World Bank published a report highlighting the usefulness to central banks of gold revaluation accounts --
-- and even issued a handbook for asset managers on gold investing:
https://www.gata.org/node/23100
Indeed, in 2012 two U.S. economists and fund managers, Paul Brodsky and Lee Quaintaince, hypothesized that even back then central banks were planning a return to gold as part of an international financial reset. Brodsky and Quaintance argued that to devalue heavy government and private debts and to reliquefy themselves and their governments, central banks meant to suppress the gold price long enough so they could redistribute gold among themselves and then push its price way up:
https://www.gata.org/node/11373
Brodsky and Quaintance wrote: "The key to a successful transition is a credible monetary reset. Gold is the default collateral for money because it has a long and established precedent in this role. All that would be needed would be a fairly equitable distribution of gold among global monetary authorities -- taking place now? -- and an agreed-upon exchange rate vis-a-vis baseless paper."
Brodsky and Quaintance continued: "It would have to be an exchange rate at which central banks could successfully monetize assets by tendering for physical gold with newly manufactured paper money, an exchange rate high enough to attract enough gold to cover unreserved credit held in the banking system. It's a high figure."
Brodsky and Quaintance added: "The relative cost of holding physical gold today is minimal (above-ground bullion or in-ground bullion through mining shares) against the negative real returns offered by the preponderance of financial assets in float. We suggest one keep identities straight: Invest with central banks, not against them, and consider the hollow rhetoric of the establishment that may temporarily suppress its paper price to be a gift. They are working for physical gold holders, not against them."
*
The gold-supportive ideas of Nieuwenhuijs, Brodsky, and Quaintance seem increasingly plausible and maybe even probable. But would an official revaluation of gold necessarily be an unqualified boon for gold investors and mining companies?
Will governments let gold investors keep their sudden gains at ordinary capital gains tax rates, or will governments impose punitive windfall profits taxes?
Will governments even let their people continue to own gold? Will governments resort to gold confiscation as they sometimes have done? Will governments call on their people to “voluntarily” give or loan their gold to their government to help it re-establish solvency?
In 2005 I pressed the U.S. Treasury Department on this issue. I had to recruit my congressman to compel the department to answer me, but eventually I got one from the department's Office of Foreign Assets Control, and it was surprisingly candid and thoughtful:
https://www.gata.org/node/5606
The Office of Foreign Assets Control said that under the U.S. Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and the 1977 International Emergency Economic Powers Act, which can be applied without declared wars, the Treasury Department, upon proclamation of an emergency by the president of the United States, can seize or freeze any gold- or silver-related asset.
But, the Office of Foreign Assets Control added, I should not get too paranoid about this because, under the same laws and with the same sort of proclamation by the president, the Treasury Department can seize or freeze anything it wants to seize or freeze.
Australia also has a law providing for gold confiscation. I imagine that other countries do as well.
If gold is sharply revalued officially, will mining companies be allowed to continue mining it on current terms? Will governments nationalize gold mining companies or change mining royalty requirements and patent laws? Will governments let mining companies keep windfall profits from gold revaluation?
We can only guess. But if gold returns as more or less official government money, governments likely would have a powerful interest in continuing gold’s production, just as they now have a powerful interest in creating fiat money. And of course when governments become too totalitarian they may not necessarily enjoy much voluntary compliance.
These circumstances may argue for some international diversification in locations for vaulting one’s gold. This is the closest I can come to offering investment advice: Search for a safe planet to keep your monetary metals on and when you find one, please call me.
Big as the gold question is in the financial markets, a bigger one remains for everyone else, and it is seldom addressed. That is, why even in nominally democratic societies is the valuation of money and thus the valuation of all capital, labor, goods, and services -- the ultimate power of government -- delegated to unelected agencies as unaccountable and secretive as central banks?
If the gold and silver mining industry ever realizes that it’s in the money business, it should ask that question.
[ILLUSTRATION 7: Contact]
Please e-mail me at CPowell@GATA.org if you'd like more information, and please visit GATA's internet site to subscribe to our daily dispatches.
Thanks for your kind attention.
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