Is gold being manipulated?

Considering the erratic behavior of gold this last month, with the price reaching $540 before falling to $490, it may be a good time to ask whether the price of gold is being manipulated.

One of the most vocal proponents of such a theory is Bill Murphy of the Gold Anti-Trust Action Committee (GATA http://www.gata.org/).

GATA, has gathered an inordinate amount of evidence the gold market has been managed for since 1994 by a cartel consisting of bullion banks (Goldman Sachs, JP Morgan Chase, etc.), IMF, Exchange Stabilization Fund, The US Federal Reserve, and The Bank for International Settlements.
 
In 2002 the GATA filed a lawsuit against the entire Gold cartel in Boston Federal Court. The judge declared the US has sovereign immunity against prosecution and that he did not believe GATA had proper legal standing to go forward - that the suit should be brought by a gold company - which is just what happened. Blanchard Coin filed a lawsuit last year in New Orleans Federal Court against JP Morgan Chase and Barrick Gold on gold price manipulation charges.
 
Oleg Mozhayskov, Deputy Chairman of the Bank of Russia, brought GATA to the attention of the mainstream gold world when he delivered the keynote address at the London Bullion Dealers Conference in Moscow on June 4th 2004. In his speech he claimed:

"This dualism in gold price formation distinguishes it from other commodities and makes the movements in the price sometimes so enigmatic that market analysts need to invent fantastic intrigues to explain price dynamics. Many have heard of the group of economists who came together in the society known as the (GATA) and started a number of lawsuits against the U.S. government, accusing it of organizing an anti-gold conspiracy.

"They believe that with the assistance of a number of major financial institutions (they mention in particular the Bank for International Settlements, J.P. Morgan Chase, Citigroup, Deutsche Bank, and others), some senior officials have been manipulating the market since 1994. As a result, the price dropped below $300 an ounce at a time when it should, if it had kept pace with inflation, reached $740-760."

How much gold is out there?

The gold establishment claims that the world's central banks have 32,000 tons of gold in their vaults, minus a few thousand tones of gold out on loan to gold producers. GATA says the central banks have less than half of that, or have less than 16,000 tones left in their vaults.

The difference is staggering.

GATA has discovered that the more than 13,000 ton difference can be accounted for by the gold cartel surreptitiously feeding central bank gold into the market place over the last decade to artificially suppress the price.
 
According to Murphy, the good news is since there is a 1500+ ton yearly supply/demand deficit; The Gold cartel is running out of enough available central bank gold to continue their scheme. With oil soaring, commodity prices in the US at 23-year highs, the dollar sinking fast and the physical market surging, the price-fixing scheme is on its last legs. The gold price, predicts, is going to skyrocket.

"For seven years GATA has discovered one piece of evidence after another supporting our long-held contention that the gold market is managed by certain central banks and their agents, the bullion bank," says Murphy. "For one to appreciate how this can go on and on and not be brought to the attention of the public, one need only to reflect on Enron and Refco. Before its initial public offering of stock, Refco was audited by the most highly regarded firms on Wall Street and nothing wrong was discovered. Yet look at what was really transpiring behind the scenes. Now the company is bankrupt and under criminal investigation. "

For years GATA has claimed that the key to the eventual surge in the price of gold was the rising physical demand for gold amid the diminishing supply of central bank gold used to suppress the price. The gold establishment has associated the rise in the price of gold over the years with the weakening of the U.S. dollar. GATA has claimed otherwise.

"We said the gold cartel was using the action of the dollar for price-rigging purposes," Murphy claims. "GATA has said over and over that the price of gold could rise hundreds of dollars per ounce and the dollar does nothing relative to other currencies. We said it would happen when the gold cartel began to lose control of its price manipulation scheme."

 Joel Bainerman writes on international economic affairs. His published archive can be viewed on his website at www.joelbainerman.com