Malfeasance in the Gold Market

By Ron Robins, Founder & Analyst - Investing for the Soul



The increasing recognition and prominence of gold as a currency makes any discussion of gold price suppression disconcerting to numerous financial elites.

However, there is a long history of gold price suppression. In 1961, the London Gold Pool was established to maintain the gold price at $35 an ounce. The participants supplying gold to the Pool were the central banks of the US and some European countries. In 1968, the Pool dissolved due to the tremendous demand for gold that was created as monetary and currency conditions deteriorated in the US and Britain.

However, since about 1993—just like in the 1960s—mounting evidence again implicates a central bank and bank cartel attempting to suppress gold prices. It particularly affects the London physical gold market where about 90 per cent of the world’s gold is traded, and the ‘paper’ gold futures market of the NY Comex.

In London, the gold price is ‘fixed’ twice daily at GMT 10:30 AM and 3:30 PM by five big international banks dealing in bullion. In recent years a number of researchers studying the London gold price fixing data and the NY Comex gold futures markets have come to the conclusion that gold price suppression has existed for many years. Perhaps the first to indicate this was Dimitri Speck from Germany.

After performing detailed statistical gold price research, Mr Speck found that gold price suppression seems to have begun on August 5, 1993, when, “America's strong-dollar policy was first officially introduced… Since then [and until the end of his study September 2005], gold price manipulation has been characterised by a pattern of sharp drops in prices during the New York [Comex] trading session.” See his articles, “Price Anomalies in the Gold Market,” December 5, 2005, and “10 Years Gold Price Manipulation: A Retrospective Look and a Chart Update,” August 3, 2003.

Eric deCarbonnel, in studying the gold prices during 2009, found a similar pattern. In, “Excellent Opportunity to Buy Gold,” December 23, 2009, he says, “by looking at these charts of the 24-hour spot price of gold, [in] four out of five trading days over a one-year period the [NY] Comex closed lower than the London AM [gold price] Fix.”

The third piece of research showing a similar pattern, but more extensive and up-to-date, is by Adrian Douglas who published his findings in, “The Failure of the Second London Gold Pool,” on August 19. He stated, “that had a trader consistently bought gold on the London AM Fix and sold it the same day on the London PM Fix and repeated it every day from April 2001 through to today [August 14, 2010] the cumulative loss would be $500 per ounce. Yet gold has been in a bull market during that time and a ‘buy and hold’ strategy over the same time period would have returned a gain of $950 per ounce.”

Others who have found apparent malfeasance in the gold market include Reg Howe, James Turk, and Frank Veneroso. Mr Veneroso’s research suggests that actual, physical, global central bank gold holdings might be 30 to 50 per cent lower than reported.

Despite suppression efforts, the gold price has risen about five-fold since 2001, to over $1,300 today. According to the renowned gold trader Jim Sinclair and others, much of the reason for gold’s ongoing strength comes from physical gold buying in the Asian gold markets. Gold, incidentally, trades around the world on an almost 24-hour basis, Monday to Friday.

But who and why would anyone want to suppress gold prices today? In my article, Manipulated Markets Can Cause Ruin, I wrote, “gold is the ‘anti-dollar’ and barometer of confidence in the dollar.” Therefore—and noting Mr Speck’s observation that the most recent era of gold price suppression began with America’s declaration of a ‘strong dollar policy’—providing a possible clue as to who might be behind it. Also, such an entity would require incredible financial muscle.

The most likely candidate for leading a gold price suppression scheme is the US Treasury and various central banks who want to maintain the US dollar’s value. After all, US dollar denominated assets often form more than 60 per cent of most central bank assets and it is still the ‘global currency.’ Therefore they have powerful, strategic reasons to want a strong dollar.

Also, as recently as October 18, the US Treasury Secretary Tim Geithner reiterated the US strong dollar policy by saying, “we're going to work very hard to make sure that we preserve confidence in the strong dollar.”

With the advent of investors and regulators acknowledging fraud in the silver markets, those behind the apparent gold price suppression must be incredibly worried as their scheming to suppress its price is no longer hidden.


Read it all here.
E-mail the writer: r.robins@alrroya.com