By: Chris Powell
May 19, 2014
The Swiss National Bank evades the crucial question.
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3:09p ET Monday, May 19, 2014
Dear Friend of GATA and Gold:
To prove surreptitious intervention in the gold market by Western central banks, it long has been necessary only to review the documentation collected by GATA and to ask a few questions:
And sometimes you don’t even have to ask any questions at all; you can just wait for their press release announcing market manipulation, like today’s press release from the European Central Bank about the renewal of the gold agreement among its members:
The communique declares:
“The signatories will continue to coordinate their gold transactions so as to avoid market disturbances.”
Of course that statement is meant to be construed as saying that the participating central banks don’t want to be the ones to “disturb” the gold market. But then by definition a free market is always subject to “disturbances” arising from the interaction of its many participants. What matter is it to central banks if the gold price is “disturbed” any more than the market for pork bellies is “disturbed” — unless, of course, gold, unlike pork bellies, has a powerful influence on financial instruments of vital importance to central banks, instruments like currencies, government bonds, and interest rates, unless gold is, to central banks, the most dangerous form of money, a form potentially independent of central bank control?
Today’s statement by the European Central Bank added that the signatories to the new gold agreement “do not have any plans to sell significant amounts of gold.” Taking this assertion seriously requires believing that the signatories indeed still have “significant amounts of gold.” As was disclosed by the secret March 1999 report of the staff of the International Monetary Fund, preventing an authoritative answer to the gold reserve question is the foremost objective of Western central bank accounting:
But regardless of whether the signatories have any gold left, their assertion that they have no plans to sell “significant” amounts of gold can’t be taken as much assurance, since tomorrow they could meet as secretly as they did to negotiate the agreement announced today and develop a plan to sell gold. And while Western central banks may have no plan to sell gold itself, that does not mean that they are not still active in the gold market by trading in gold derivatives.
Indeed, last September a high official of the Banque de France told a meeting of the London Bullion Market Association that the bank secretly trades gold for its own account and for other central banks “nearly on a daily basis”:
And according to its annual report, the Bank for International Settlements functions largely as a gold broker for its member central banks:
To potential members the BIS even advertises its services in rigging the gold market:
Since the Banque de France and BIS, in conjunction with today’s ECB statement, did not announce that they were getting out of the gold business, maybe they will continue to offer ECB members cover for interventions in the gold market.
But despite all the documentation of gold market manipulation, it’s still useful to put gold-related questions to central banks, as your secretary/treasurer put some last week to the Swiss National Bank:
You may seldom get a useful answer from central banks, but much can be inferred from the questions for which answers are refused.
Your secretary/treasurer put six questions to the Swiss National Bank’s communications office:
Two were quickly answered by the bank’s head of media relations, Walter Meier, and then, with a little pressing, a few more questions were answered quickly. Meier denied the May 12 speculation by the TF Metals Report that the assault on the gold price in recent months was conducted by mobilizing Swiss gold reserves:
Meier also wrote that the Swiss National Bank has neither bought nor sold gold since 2008 and that it stopped lending gold in 2011.
Whereupon your secretary/treasurer wrote to Meier: “I think this leaves one issue open: Apart from the gold lending you have itemized, is the bank trading gold or gold derivatives now, or has it done such trading in gold or gold derivatives in the last five years? I’m trying to ascertain whether the bank is involved in the gold market in any way or has been completely out of the market since it stopped gold lending in 2011.”
And the answer to the question of whether the Swiss National Bank has been trading gold derivatives in the last five years or has been completely out of the market since 2011 is . … yet to arrive. There is no answer.
Similarly, while the signatories to the new central bank gold agreement may not be selling gold or may not have plans to sell gold, are they trading in gold derivatives or are they still swapping gold with central banks that are not signatories to the new agreement, central banks like the U.S. Federal Reserve, and could those other central banks be using ECB-member gold for surreptitious market intervention?
These would seem like good questions for financial journalism generally and journalism about the gold market particularly.
But anyone who construes today’s ECB disclaimer of interest in selling gold as certification that Western central banks are now completely out of the gold market may be credulous enough to work for the Financial Times, Reuters, The Wall Street Journal, or Kitco News — or, if not credulous enough, under instructions never to ask the right questions.
Gold Goliath is not your typical gold dealer.