By Martin W. Hennecke
It is an open secret among precious metals analysts and traders that the gold and silver markets are being heavily manipulated, mostly to the downside; i.e. their prices are being suppressed by various Western financial entities in what should be a scandal much bigger than the Libor rigging scheme.
Not only did a senior commissioner at the Commodity Futures Trading Commission (CFTC), Bart Chilton, reiterate recently his original statements from 26th October 2010 that “there have been fraudulent efforts to persuade and deviously control the price of silver” adding this time that ” there have also been silver and gold market anomalies outside of the [current] silver investigation” , but we have also heard similar comments from former Assistant Secretary of the Treasury Paul Craig Roberts: “I suspect that the Federal Reserve is manipulating the gold and silver markets in order to prevent its low interest rate policy from undermining the value of the US dollar. It is easy to offset rising prices of bullion due to physical demand by selling shorts in the paper market.”
And then, of course, there is the famous, albeit much older, remark from the maestro Alan Greenspan himself, in his July 24, 1998 testimony to the Committee of Banking and Financial Services, U.S. House of Representatives that: “Central banks stand ready to lease gold in increasing quantities should the price rise”.
What seems to be still much less known to most of the investing public and even the better-informed metals analysts, however, is that this news also appears to have very much come to China’s attention of late, and the country actually seems to have decisively entered the game on the opposite side, by taking advantage of the artificially low/suppressed prices to accumulate gold.
A cable from the U.S. embassy in Beijing on April 28, 2009 , brought to light by wikileaks, stated the following in this regard: “According to China’s National Foreign Exchanges Administration China’s gold reserves have recently increased. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.
It should come as little surprise then that recently China has been buying gold like there is no tomorrow. Gold imports through Hong Kong in only the first eight months of this year (at 512 tons year-to-date 2012) already have surpassed the entire official European Central Bank gold reserves.
Meanwhile the wikileaks-quoted strategy of ‘ China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold’ also seems to be working. Central banks globally have turned into net buyers since 2010, following 20 years of net selling.
And, mind you (short speculators watch out!), given China’s huge foreign exchange reserves, there is yet a long way to go for the country if it was to bring up its gold holdings to similar percentage levels as those of most Western countries (that is, if those Western countries’ gold that is shown on their books is actually still physically there. That, of course, is an issue that many are concerned about, including, as of this week, the German ‘Federal Auditor’s Office’ that just asked the German Bundesbank to seek to inspect its gold reserves held with the New York Fed.
Eddie says:
I certainly agree with the conclusions of this author.
The thing is, I see no reason the manipulation cannot continue to occur over the medium term (5-10 years even), as long as huge naked short positions are allowed, and the paper market dwarfs the physical market…and the regulators continue to do nothing but hem and haw and cast a blind eye.
Manipulating gold and silver is simply a policy decision, obviously sanctioned at the highest levels of our government.
Like or Dislike:
2 
0
24th October 2012 at 12:35 pm
Administrator says:
The Significance Of The Row In Germany About Inspecting Their Gold Reserves Held Abroad
By Tim Iacono
Amid global money printing on a scale never before witnessed by Mankind, word came yesterday that government auditors in Germany want the Bundesbank (the central bank) to have a first-hand look at the nation’s gold reserves, much of which are held outside the country and none of which they have inspected since sometime around World War II.
This raises some interesting questions for precious metals investors in general and gold ETF holders in particular, notably owners of the SPDR Gold Shares ETF (GLD).
Of course, the Bundesbank immediately shot back by saying they have complete trust in the foreign central banks that hold their gold, namely, the Federal Reserve in New York, the Bank of France, and the Bank of England, however, that hasn’t stopped the debate that appears to have somewhat of a grassroots origin, this in a country with an extreme fear of inflation stemming from the Weimar Republic hyperinflation in the 1920s.
The first intriguing detail about this story is the question of exactly how much of the country’s gold is stored abroad. Most reports indicate that about two thirds of Germany’s official gold holdings of 3,396 tonnes are held outside the country, however other reports cite much different numbers while still others note that there are no official figures.
If the Bundesbank is to nip this little row in the bud, the first thing they should probably do is clear up whatever confusion there is about how much of the country’s gold is safely secured in its own vaults and how much is being entrusted to foreign central banks.
Another curious aspect of this development is that it seems to have some unusual supporters – German economists.
According to this AP report, the effort dubbed “Bring Home Our Gold” is “backed by some German economists, industry leaders and a few lawmakers” and has attracted 10,000 or more supporters online so far (a number that presumably has gone much higher in the last day or so after this story made it into the newspapers).
I don’t know about you, but I don’t know of a single economist in the United States who has the least bit of interest in our gold reserves and, while there is a small contingent of lawmakers in Washington D.C. – headed by Rep. Ron Paul (R-TX) – who have shown great interest in auditing our stash of gold bars, they are viewed by most people as conspiracy theorists, not to be taken seriously.
My guess is that if you would ask a German man on the street what he thought about the nation’s gold reserves, you’d get an entirely different answer than if you asked that question on Main Street in the US.
The nascent movement to repatriate Germany’s gold comes about a year after Hugo Chavez brought back all of Venezuela’s 160 tonnes of gold from vaults in London, a move that the mainstream financial media characterized as an oddity, a curiosity, or just another example of this leader being pretty nutty.
Few people are calling the Germans nutty about wanting to check in on their gold – after all, they’ve been about the only thing that has kept the eurozone currency experiment alive in recent years.
Adding to the intrigue is the revelation that the 500 tonnes of German gold stored in London is not quite 500 tonnes anymore, some portion of this having exited the vaults without a corresponding official announcement. Some think this was related to sharp increases in gold leasing or gold swaps in recent years, an effort that allows central banks to push this physical gold into the market while still claiming ownership.
But, what’s probably most revealing about this row between German auditors and their central bank is the relatively trifling dollar amount involved.
All of Germany’s gold reserves – nearly 3,400 tonnes – only amount to about $190 billion at today’s prices, a small sum as compared to the amount of money the European Central Bank has conjured out of thin air since the sovereign debt crisis began three years ago and a pittance when compared to the nearly $10 trillion in new money that all the world’s central banks have created.
By comparison, the US gold reserves of over 8,000 tonnes are valued at about $450 billion – less then half of this year’s budget deficit, and just a tiny fraction of the overall US debt.
So, what’s all the fuss amongst the German people about wanting to check in on their gold?
It must be that some of the German people are getting a little concerned about what they see happening today all around them. More importantly, this concern can’t simply be shrugged off as if it was someone like Hugo Chavez making news about his country’s gold (and who, perhaps, might not have been so nutty after all about getting all of Venezuela’s gold back from overseas).
What does this mean for investors?
There’s been a growing trend in recent years to take physical possession of precious metals rather than to rely on counter-parties in ETF form and this is clear to see in recent statistics that show physical demand rising at a much faster pace than ETF holdings and, in some ways, the German people are expressing the same kind of concern that, for years, has been directed at gold and silver ETFs.
Put simply, in a worst-case scenario (that, by the way, looks more likely with each passing year), it’s nice to know that you can actually get your hands on the gold you own and that’s probably what’s really driving this effort in Germany to check in on their gold held overseas.
I’ve long advocated owning as much precious metals in physical form as is practical and then rounding out your holdings or adding trading position with ETFs for this very reason – you never know when getting your hands on the actual metal might be important and, with ETFs, it may not even be possible.
It seems as though the German people are thinking along these same lines.
Well-loved. Like or Dislike:
5 
0
24th October 2012 at 3:08 pm
Leobeer says:
What happens when…
Author : Bill Holter
Published: October 24th, 2012
http://blog.milesfranklin.com/what-happens-when
…central banks don’t trust other central banks? I think I have a pretty good idea what happens, I’m quite confident that we will soon find out. Germany’s central bank is being required by their auditors to audit their Gold reserves held in London, Paris and New York. There is also fear by Germans that since their Gold has NEVER been audited that “tungsten” may have have weaseled its way into the vaults.
This flap is just now starting to brew as just this morning the AP is reporting that “German Gold held by The Bank of England has dropped below 500 tons.” The story can be read here courtesy of GATA:
FLASH: German gold report reveals secret sales that likely were part of swaps
This very situation HAD to finally come to a head from a mathematic standpoint. Since at least 1996, global supply of roughly 2,500 tons per annum has not kept pace with demand which at a minimum has been 4,000 tons per year and quite likely much much higher. Do the math yourself and even be quite generous with the amount of “scrap” Gold that you use to “plug the gap” with, central banks have BURNED THROUGH at least 15-20,000 tons. This is half to 2/3rd’s of central bank reserves at a minimum, the “jig” so to speak is just about up.
So here we have the German bank being “pushed” to an audit of foreign held Gold and they are “requesting” that New York send 50 tons per year for 3 years back to Germany. …And why is it that they don’t just say “send us 150 tons now”? Would this piddling amount upset the apple cart? It has also been said that a “suitable room” to inspect the Gold cannot be found. Do they believe that anyone buys this argument?
This could morph very quickly from one central bank not trusting another, to citizens not trusting their own central bank. I might add, as well they should! We in the U.S. have not had a Gold audit since the Eisenhower administration and now it turns out that Germany has not had a physical audit… ever…? What is the argument (I know, it is said that an audit of US Gold would be “too costly”)? “Don’t worry the Gold is all there”? That’s right, why worry, these central banks who passed around $16 trillion of “secret Fed loans” back in 2009 would never fudge anything nor would any of the well respected global financial institutions who have been repeatedly caught with their hands in the cookie jar and in clients wallets?
Back in 2001, Gold with coin melt “fingerprints” began turning up around the world for a very short period of time, it then stopped abruptly. James Turk did a piece after this occurrence showing that the Germans had swapped their NY Fed Gold (1,700 tons) for the West Point “coin melt” Gold and suggested that this was how the U.S. got around being forced to use coin melt to quell the market price. I mention this because I would like to take you back even further in time, to 1990-91. Back then, Gold started to turn up with the stamp of the Russian Czar on it. When I first heard about this, I immediately thought, “The USSR is scraping the bottom of the barrel and will shortly cease to exist.” I was correct, they in fact had run out of “hard currency” and collapsed shortly thereafter. What is going on now is not about just one country, it is about the entire global financial system because the Dollar is used by everyone and are reserves for all central banks.
Lots and lots of questions, very few answers and the ones we do get, a 3rd grader could see through immediately. The macro problem now is that the entire system is based on trust or in other words “confidence.” It is bad enough when the population asks questions (they can be portrayed as lone lunatics off in the distance) but when central banks start asking questions (or are forced to), “pay no attention to the man behind the curtain” just doesn’t pass muster. This is the sort of stuff that financial panics and or wars are bred from. It will be worth keeping a very close eye out to see what other questions are asked, how quickly they come and how absurd the answers are. “Empty vaults and empty promises” are very close to becoming well known to all!
Like or Dislike:
1 
0
24th October 2012 at 9:55 pm
Why Did the Price of Gold Drop? says:
[...] Gold Market Is Rigged – for Now [...]
Like or Dislike:
0 
0
24th October 2012 at 11:22 am
Administrator says:
“As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not.”
John Carney, CNBC, The Germans Are Coming For Their Gold, MF Global edition
Like or Dislike:
0 
0
24th October 2012 at 3:28 pm
Administrator says:
25 October 2012
Jesse
As for Germany’s Gold, Things Are What We Say They Are
“Why wasn’t the gold counted before this ?
Because it’s very complicated and requires a big effort (so the americans say). In fact the bars are lying around chaotically in the vaults of the US Fed, some of them at the far end of the walls.”
Bild.de, Schützen Soldaten den Gold-Transport?
“In reality, it does not matter one bit whether the Federal Reserve Bank of New York actually has the German central bank’s gold, or whether the gold is pure.
As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not.”
John Carney, CNBC, The Germans Are Coming For Their Gold
“‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean — neither more nor less.’
`The question is,’ said Alice, `whether you can make words mean so many different things.’
`The question is,’ said Humpty Dumpty, `to be master — that’s all.’”
Lewis Carroll, Through the Looking Glass
The American response is to arrogantly dismiss any concerns that the German people may have for the integrity, and even the existence, of a large portion of their national bullion reserves.
They believe that the German people will forget about this, and turn their minds to something else, and the audit can be explained away, delayed, and never done. It is too difficult, it is too expensive.
And these days, that is all the American financiers have to say to their own people to get anything they wish, to make any sacrifice that they may require of them.
Oh, you wish to have decent preventitive medicial care? You wish to have safe banks? You wish to know what the M3 level of your own money supply may be? I am sorry, it is too expensive. Now run along and leave these complicated things to your betters.
If there was an audit done, as some might say, thirty years ago perhaps, then it ought to be easy to do another, if the gold has remained untouched. All one has to do is to verify what has been done.
And if it has not been done, then it is about time one should do it, given the value of the possessions which you are holding in trust for another. Unless of course you follow the modern financial management practices of MFGlobal and PFGBest.
Madness always makes sense, to the mad.
I do not think that this will go away. When it comes to money, the German people are no fools.
“For decades, the Bundesbank has relied on written confirmation of its gold holdings in London, Paris and New York. According to the report from the German audit court, the last time Bundesbank officials physically inspected the central banks gold holdings was, well, never.
(It should be stated that the folks at FT Alphaville quote a report saying an inspection took place in 1979/1980.)
Interestingly enough, the Bundesbank is apparently quite happy with taking the word of other central bankers about the existence, location and size of its gold reserves. It put out the word that it disagrees with the Audit Court, which only has advisory power and cannot force the Bundesbank to follow its recommendations, about the need for inspections. Nonetheless, the Bundesbank is actually going to follow the recommendation that it verify the gold stocks. It also has plans to ship some 150 tons of gold back to Germany for a more “thorough examination.”
The Bundesbank is, of course, quite right in its opinion of the value of the examinations. In reality, it does not matter one bit whether the Federal Reserve Bank of New York actually has the German central bank’s gold or whether the gold is pure. As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not.”
John Carney, CNBC, The Germans Are Coming For Their Gold
Like or Dislike:
0 
0
24th October 2012 at 3:30 pm
Eddie says:
From Wiki: (hey they could be right)
“The Federal Reserve Bank of New York maintains a vault that lies 80 feet (24 m) below street level and 50 feet (15 m) below sea level,[8] resting on Manhattan bedrock. By 1927, the vault contained 10% of the world’s official gold reserves.[6] Currently, it is reputedly the largest gold repository in the world (though this cannot be confirmed as Swiss banks do not report their gold stocks) and holds approximately 7,000 tonnes (7,700 short tons) of gold bullion ($415 billion as of October 2011), more than Fort Knox. Nearly 98% of the gold at the Federal Reserve Bank of New York is owned by the central banks of foreign nations”
More than 98% of the gold held at the Fed is foreign gold. If there is the slightest question of impropriety that is brought to light by the Germans, how long do you think it will take for all the other depositor nations to ask for theirs back?
No long, I’m guessing.
So the Germans will get the gold they’re asking for…even if the Fed has to buy some from Doug Casey. The Fed won’t risk a stampede.
But what happens if other countries start asking for their gold back anyway.?
I’m guessing there will be good reasons given for this being completely and absolutely impossible.
Like or Dislike:
0 
0
24th October 2012 at 3:54 pm
Eddie says:
I read some more about this. It seems the Fed keeps track of the gold held in their vault by an anonymous internally generated number system, the details of which are known only to them.
So they could allow any audit team to “visit” their gold…and they would have no way to know if the gold they were being shown was really theirs at all.
Like or Dislike:
0 
0
24th October 2012 at 8:20 am