Mining Companies, Regulators Deathly Silent After Midnight Raid On Gold Prices

Mining Companies, Regulators Deathly Silent After Midnight Raid On Gold Prices by Mike Gleason is a Director with Money Metals Exchange

With gold and silver on the defensive following a dramatic midnight raid on gold prices last week, Mike Gleason reached out to Chris Powell, Secretary Treasurer at the Gold Anti-Trust Action Committee, also known as GATA to discuss possible gold price manipulation.

Mike Gleason: Several days ago, we had another attack on the gold market – right as it was holding above a critical price support zone. Someone sold several billions of dollars in gold futures contracts during the wee hours of the night immediately before the Chinese trading day began. It happened during a time of low liquidity like it normally does, and it took the price down over $40 in the matter of a few seconds, halting trading twice for a brief period. What are we to make of all this Chris?

Chris Powell: Well it’s pretty depressing for monetary metals investors. On the other hand, I suppose you could see it in a way as progress for the cause because it was the most brazen, obvious, clumsy attack yet, and it has prompted a few people to acknowledge that it was a manipulation.

The problem is the people who are acknowledging that cannot quite bring themselves to question whether the central banks were involved in it. But it was so obvious that even people who are not aligned with the manipulation school are acknowledging that somebody was very heavily trying to drive the price down.

Now I think we’ve advanced to the point where most market observers will acknowledge that somebody is tampering with the gold market, that it’s not a free market, and the question now is really only who’s doing it, and perhaps in another few hundred years financial journalism will try to put a critical question to central banks about their own surreptitious trades in the gold market.

Mike Gleason: It certainly seems manipulative, because obviously a legitimate seller would try to sell when there is actual liquidity in the market as to maximize the sale price, and we’ve seen this sort of thing a number of times going back years now. So it is quite obvious what’s happening, and there don’t seem to be major investigations into these price raids. It just keeps happening. Why don’t we see government authorities or large investors crying foul?

Chris Powell: Well because these raids, I am sure, are essentially instigated or underwritten by, if not actually implemented by governments. What some people don’t realize Mike is that it is explicitly authorized by federal law here in the United States for the U.S. government, acting through the Exchange Stabilization Fund and the Federal Reserve, to rig any market. Not only in the United States, but in the world.

GATA brought a lawsuit in U.S. district court in Boston back in 2001. I attended the only hearing on this lawsuit, and an assistant U.S. attorney representing the Fed and the Treasury Department told the court in support of a motion for summary judgment dismissal that the lawsuit had to be dismissed because the complaint of market rigging had no remedy at law. Because the assistant U.S. attorney said the United States government claimed the power to do all the market rigging that our lawsuit accused it of doing!

Our own subsequent research into the Gold Reserve Act of 1934 as amended in the 1970’s tended to confirm that assertion. The nice thing about that hearing was that the U.S. government through this assistant U.S. attorney got up and claimed the power to rig every market in the world. That’s what the statute says.

We’re just having a very hard time getting the mainstream financial press to look at the statute and to put questions about surreptitious trading by central banks to the central banks themselves. But this most recent attack was so brazen and really clumsy. I know people think it was so clever because of its timing and the timing of it, the lack of liquidity and everything like that, but they gave themselves away. And I think that is a sign of desperation that they no longer can attack gold and keep the price down in subtle ways. They have to do this really obvious ham-handed stuff that even gets some pretty dense market observers suspicious.

For 10 years, GATA Chairman Bill Murphy and I have been observing this market, and practically every day for 10 years we’ve been saying they couldn’t get any more obvious. And the next day they DO get more obvious. This one really I think took the cake, there’s a Reuters’ story that quotes a couple of gold traders as acknowledging that this was a manipulation, and they’re wondering out loud who’s behind it.

Now if Reuters can acknowledge that this attack on the gold market was a market rigging attack…. Well, we’re that much closer to pinning responsibility on the main parties involved,