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The Complete And Unabridged History Of Gold Manipulation

Tyler Durden's picture





 

On November 1st, 1961, an agreement was reached between the central banks of the United States and seven European countries to cooperate in achieving a shared, and very clearly stated, aim.

The agreement became known as the London Gold Pool, and it had a very explicit purpose: to keep the price of gold suppressed “under control” and pegged regulated at $35/oz. through interventions in the London gold market whenever the price got to be a little... frisky.

The construct was a simple one.

The eight central banks would all chip in an amount of gold to the initial “kitty.” Then they would sell enough of the pooled gold to cap any price rises and then replace that which they had been forced to sell on any subsequent weakness.

 

*Statement is subject to standard terms and conditions and is not necessarily reflective of any evidence. Government entities are excluded from inclusion based on the fact that we can't really do anything about them and anyway; they could put us out of business; and it would make things really, really bad for them. Also, bullion banks are not covered under this statement because we were told to turn a blind eye; but individual investors are, and we can categorically confirm that, to the best of our knowledge, no individuals are manipulating the precious metals markets (at this time).

But, as Grant Williams explains in this excellent and complete summary of the history of Gold price manipulation, things don't always go as planned...

Human beings, when given means and motive, have rather a poor history of eschewing the easy profit in favour of doing the right thing. Governments, when faced with dilemmas, have a rather poor history of doing the right thing as opposed to whatever they think they need to do in order to cling to power. It's quite simple.

 

Libor, FX rates, and mortgages trades are all fiat in nature. The contracts that are exchanged have no tangible value. (Yes, technically speaking, mortgages have houses underneath them, but the houses are so far down the securitization chain as to be invisible). Such contracts can be created at the push of a button or the stroke of a pen and manipulated easily right up until the point where they can't.

 

Gold is a different beast altogether.

 

The manipulation of the gold price takes place in a paper market — away from the physical supply of the metal itself. That metal trades on a premium to the futures contract for a very good reason: it has real, intrinsic value, unlike its paper nemesis.

 

If you want to manipulate the price of a paper futures contract lower, you simply sell that paper. Sell it long, sell it short, it doesn't matter — it is a forward promise. You can always roll it over at a later date or cover it back at a profit if the price moves lower in the interim.

 

And of course you can do it on margin.

 

If the trading were actually in the metal itself, then in order to weaken the price you would have to continue to find more physical metal in order to continue selling; and, as is welldocumented, there just isn't so much of it around: in recent years what little there is has been pouring into the sorts of places from which it doesn't come back — not at these price levels, anyway.

 

The London Gold Pool had one thing in common with the rigging of the FX, Libor, and mortgage markets: it worked until it didn't.

 

The London Gold Pool proved that central banks can collude cooperate to rig maintain the price of gold at what they deem manageable levels, but it also proved that at some point the pressure exerted by market forces to restore the natural order of things becomes overwhelming, and even the strongest cartels groups (whose interests happen to be aligned) — which are made up of the very institutions granted the power to create money out of thin air — can't fight the battle any longer.

 

 

...The problem now is that currently there are almost 70 claims on every ounce of gold in the COMEX warehouse and serious doubts about the physical metal available for delivery at the LBMA.

 

Which leads us to today...

The London Gold Pool was designed to keep the price of gold capped in an era when the world's reserve currency had a tangible backing. In defending the price, the eight members of the Pool were forced to sell way more gold than they had initially contributed in order to keep the price from going where it desperately wanted to go — higher.

 

This time around, the need for the price to be capped has nothing to do with any kind of gold standard and everything to do with the defense of the fractional reserve gold lending system, about which I have written and spoken many times.

 

Gold is moving to ever stronger hands, and when the dam does inevitably break again, the true price will be discovered by natural market forces, free of interference.

 

This time, however, those chasing what little gold is available will include all those central banks that have kept their holdings "safe" in overseas vaults.

 

The Bundesbank has seen the writing on the wall and demanded its gold back. They were told it would take seven years before their 30 tonnes could be returned to them.

 

My guess is, this little scheme doesn't have seven years left to play out.

 

Everybody outta the pool!

Full Grant Williams letter here:

TTMYGH Twisted (by the Pool)

 


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Wed, 12/04/2013 - 22:19 | Link to Comment Lordflin
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Thank you... I needed a good laugh today... appear to be in an unusally cynical mood, which for a fundamental cynic does not forbode well....

Wed, 12/04/2013 - 22:27 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA has written that getting up to 10 tonnes physical tonnes is not that hard (if you have the money), but he believes that it would be VERY HARD to get more than, say, 70 tonnes.

It looks like the strong hands in gold will win...

Wed, 12/04/2013 - 22:35 | Link to Comment Grande Tetons
Grande Tetons's picture

How much would 1/4 ton of Silver go for today?  About 150k USD I figure.  Is it just me....or does that seem like a bargain. 

Thu, 12/05/2013 - 06:09 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Better price in a forklift while your at it......that crap is really heavy.

Thu, 12/05/2013 - 10:27 | Link to Comment Atlasshruggedme
Atlasshruggedme's picture

Its only 550 pounds, you can move it in a couple trips. 

Thu, 12/05/2013 - 08:33 | Link to Comment Tapeworm
Tapeworm's picture

iT WAS A bargain when below 5.00

Wed, 12/04/2013 - 22:28 | Link to Comment LetThemEatRand
LetThemEatRand's picture

And another conspiracy theory is conspiracy fact.  I swear, I'm starting to see plants on alternative news sites talking up real conspiracy facts and then dropping shit like Niburu to throw off the casual observer.

Wed, 12/04/2013 - 22:28 | Link to Comment Xibalba
Xibalba's picture

Nibiru?  Isn't that the place of human origin (on Earth).   /sarc

Wed, 12/04/2013 - 22:34 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Yes, the NY Giants lived there.  Just before gold manipulation started.  

But seriously, it is becoming increasingly clear that TPTB are trying to infiltrate alternative media to put out wild claims along with valid ones to make both seem wild.

Wed, 12/04/2013 - 22:34 | Link to Comment Xibalba
Xibalba's picture

had that Zecharia Sitchin stuff hawked at me the other day....from a Hollywood guy.  

Would make a great film imho.

Wed, 12/04/2013 - 22:41 | Link to Comment LetThemEatRand
LetThemEatRand's picture

There's a video going around from some supposed World Bank person who mixes crazy talk with real conspiracy fact.  It's brilliant if you ask me, and will probably cause a lot of people to reject everything she says because of the obvious craziness mixed in.'

Paraphrasing:  "Greenspan deliberately blew bubbles and Ben deliberately printed money to enrich bankers.  And gold is manipulated, which I learned from moonbeams I caught from my Nibiru observatory."

Wed, 12/04/2013 - 22:54 | Link to Comment Ignatius
Ignatius's picture

I'm gonna guess:  Karen Hudes

All I gotta do is stand next to you in a picture...

Shirt tail out the open fly -- check

String hanging from corner of mouth -- check

Droolng -- check

Say "Cheese"

 

Wed, 12/04/2013 - 23:26 | Link to Comment LetThemEatRand
LetThemEatRand's picture

That's the one.  Well played, TPTB/TBTF.

Wed, 12/04/2013 - 23:34 | Link to Comment Ignatius
Ignatius's picture

I've been on the trail a few years now researching 9/11, etc.. 

'Poisoning the well' is well worn turf.

These guys are pretty good, hence, on top.

Thu, 12/05/2013 - 02:58 | Link to Comment OutLookingIn
OutLookingIn's picture

Recently the banks have paid large amounts in fines for rigging:

1/ LIBOR benchmark rates

2/ EURIBOR benchmark rates

3/ Settlement values for currencies

4/ Reference prices for energy

5/ Benchmark lending rates

6/ Interest rates for derivatives

 Now, financial regulators suspect??? that banks may??? manipulate the gold and silver markets!!!

NO SHIT SHERLOCK!

Thu, 12/05/2013 - 10:02 | Link to Comment RockRiver
RockRiver's picture

Don't forget oil prices via the Platts trading window each day...

Thu, 12/05/2013 - 03:49 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Funny how this article appears NOW, and not a year ago.

How come the ZH gold fans did not realize that their attempts at front-running the Fed's QE with ever higher gold prices would not be countered with price manipulation?

If they had, the ZH consensus would've been to "wait till there's a 30% price correction to the 10-year bull run. Instead, it was an almost unanimous chant/matra of "gold to go sky high", "gold to crash the Dollar", etc, etc.

Truth is a cruel, two-faced mistress, whose ruthless side few are "man" (mature) enough to face.

Thu, 12/05/2013 - 07:56 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Funny how this article appears NOW, and not a year ago.

 

Member for 42 weeks 4 days

 

So where the hell were you a year ago mister genius?

Thu, 12/05/2013 - 08:28 | Link to Comment sleigher
sleigher's picture

I haven't been here that long either, but I did read the site long before I signed up to post...  

Thu, 12/05/2013 - 09:03 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I think that's pretty normal.....so you probably understand the sarc.

Wed, 12/04/2013 - 23:27 | Link to Comment ZH Snob
ZH Snob's picture

federal reserve?  no conspiracy here.

Wed, 12/04/2013 - 22:27 | Link to Comment akak
akak's picture

And once again, for all those pro-Establishment lackies like Jon Nadler, Jeff Christian and Martin Armstrong who insist that the coordinated and surreptitious manipulation of the price of gold is "impossible", and would be ineffective even if attempted, then I would like to ask them: just WHAT was the London Gold Pool, if not EXACTLY that?  And did it not operate over a period of years?  And was it not in fact PROVEN and DEMONSTRATED to be the official suppression of gold that it was by the rapid rise of the price of gold immediately upon its termination?

I guess no amount of proof will be enough for some people.  But, sheep will be sheep, and spineless Quislings will be spineless Quislings.

Wed, 12/04/2013 - 22:29 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Sheep go "baaah.  baah.  baaaahaa!"

Quislings say: "Javohl!"   ???

Wed, 12/04/2013 - 22:44 | Link to Comment akak
akak's picture

Quislings also like to blab about their latest breakfast with some pension fund manager, and like to declare that gold has been "blowtorched" after falling in price for the last ten minutes while simultaneously talking up their most recent momo-chasing stock de jour that has risen into bubble territory after being "different this time".

Wed, 12/04/2013 - 22:24 | Link to Comment Mad Mohel
Mad Mohel's picture

Rock on!

Wed, 12/04/2013 - 22:26 | Link to Comment StillSilence
StillSilence's picture

If you want to control the money, then you've got to control the money.

Wed, 12/04/2013 - 22:28 | Link to Comment frankTHE COIN
frankTHE COIN's picture

That agreement was done in the booth, in the back, in the corner and in the dark.

Wed, 12/04/2013 - 22:36 | Link to Comment fonzannoon
fonzannoon's picture

NEW YORK (MarketWatch) -- Fifth Third Bancorp FITB +0.25% and its former chief financial officer have been charged with improper accounting of commercial real estate loans in the midst of the financial crisis by the Securities and Exchange Commission on Wednesday. The Cincinnati-based holding company has agreed to pay $6.5 million to settle the charges. The former CFO Daniel Poston has agreed to pay a $100,000 penalty and has been suspended from practicing as an accountant on behalf of any publicly traded company or any firm regulated by the SEC. Both are accused of improper accounting on the sale of large pools of troubled loans which misled investors "during a time of significant upheaval and financial distress for the company," according to the regulator. Shares for the firm were down 0.1%

http://finance.yahoo.com/q/bc?s=FITB+Basic+Chart&t=5y


Wed, 12/04/2013 - 23:19 | Link to Comment akak
akak's picture

I think they should already change their name to 1.67 Bank.

Because, as everyone knows, four out of three people are bad with fractions, and three out of two of them don't even know it.

Wed, 12/04/2013 - 23:26 | Link to Comment fonzannoon
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4 out of 5 people say the 5th person's an idiot.

Thu, 12/05/2013 - 01:33 | Link to Comment TheReplacement
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1 out of 1 says +1

Wed, 12/04/2013 - 22:49 | Link to Comment Hmmmmm
Hmmmmm's picture

Was Killer there?

Wed, 12/04/2013 - 22:43 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Gold has been manipulated since a goldsmith once realized that not all people were taking out their gold and that he could write paper certificates of deposit for gold that did not exist...just lately has it become demonstrably obvious, they no longer even attempt to hide the fact....No middle-ages goldsmith would dream of writing 65 certificates of deposit for each ounce of physical gold entrusted in his care...

Wed, 12/04/2013 - 23:06 | Link to Comment Al Huxley
Al Huxley's picture

Not unless he wanted to risk losing his hands, or his testicles...

Wed, 12/04/2013 - 23:14 | Link to Comment W74
W74's picture

Ah, and here's the problem.  We the people simply need more cleavers and garden shears.

At least under the feudal system you knew the bloke who was fucking you lived just up the hill.

Wed, 12/04/2013 - 23:28 | Link to Comment JohnnyBriefcase
JohnnyBriefcase's picture

That goldsmith's name was Goldman.

Thu, 12/05/2013 - 07:54 | Link to Comment Confused
Confused's picture

"....fucking you lived just up the hill"

 

So things haven't changed all that much. ;-P

Wed, 12/04/2013 - 22:46 | Link to Comment yrbmegr
yrbmegr's picture

Next could we have a peek under the rug at the oil market?  Just, you know, if we don't have anything better to do?

Wed, 12/04/2013 - 22:56 | Link to Comment Ignatius
Ignatius's picture

The point has been made that none of the other manipulations work unless gold is also manipulated.

Wed, 12/04/2013 - 23:05 | Link to Comment Al Huxley
Al Huxley's picture

The biggest thing about gold price manipulation by governments is that the governments of ALL significant economies have to play along for it to work.  If one goes rogue and starts taking advantage of the manipulation by the others  (which is presumably being done so they can have more 'flexibility' in their budgeting processes) then I'd say the ability to manipulate ends when the rogue state takes all the gold from the manipulators (I don't have to explicitly name countries here, do I?)

Wed, 12/04/2013 - 23:07 | Link to Comment Ignatius
Ignatius's picture

Who tells the truth in a poker game?

They ALL cheat.

Wed, 12/04/2013 - 23:27 | Link to Comment Al Huxley
Al Huxley's picture

There's a difference between cheating within the rules (to keep the price down so you can be 'flexible with your fiat') to keep the game going, and using the rules to cheat because you're planning on shutting down the game and starting a new one that you control.

Wed, 12/04/2013 - 23:29 | Link to Comment fonzannoon
fonzannoon's picture

Yeah you usually do the second one when the first one is not working out so well.

Wed, 12/04/2013 - 23:46 | Link to Comment HoofHearted
HoofHearted's picture

China, anyone?

Wed, 12/04/2013 - 23:43 | Link to Comment Luckhasit
Luckhasit's picture

Why should China care, they were one of the firsts to have fiat.  Which is why they nod their head and take that gold which they traded FRNs for i suspect. 

Hows that bond market since they said they aint buying anymore?

Thu, 12/05/2013 - 01:38 | Link to Comment TheReplacement
TheReplacement's picture

Not all significant economies in the world today were significant not so very long ago.  Some that were are not so much any more.  It's hard to achieve global domination.

Wed, 12/04/2013 - 23:10 | Link to Comment W74
W74's picture

My purchase on Monday could be classified as manipulation.  Boy was it a doozy!  It was like putting half of my shaft down the tube when I had my collective assets' head already in.  Push dem prices down moar soes I can go All-In!!!

Thu, 12/05/2013 - 00:13 | Link to Comment starman
starman's picture

Banks slapped with $2.3 billion fine for rate manipulation

Dailyjobcuts.com

Thu, 12/05/2013 - 00:16 | Link to Comment Brazen Heist
Brazen Heist's picture

On a separate note, everybody should have a read of this report:

http://www.europarl.europa.eu/document/activities/cont/201307/20130703ATT69107/20130703ATT69107EN.pdf

Get ready for upcoming bail-ins! Its the next wet dream of the central planners - confiscating your deposits.

"The recent EFTA Court Ruling and events in Cyprus indicate that the legal obligation of sovereigns to provide depositor insurance is limited in the event of systemic crises. While governments are credible that they will go to great lengths to protect their insured depositors, their willingness to protect uninsured depositors may not be as great had been thought."

"For a while it appeared that small deposit holders might bear some of the burden of bank. The adoption of the second proposal makes it clear that if there ever was an implicit government promise to protect all deposit holders, it no longer exists. Large deposit holders can be treated as just another type of senior unsecured creditor."

Get informed!

Thu, 12/05/2013 - 00:27 | Link to Comment Quaderratic Probing
Quaderratic Probing's picture

And the price of Gold did what right after $800

Thu, 12/05/2013 - 01:18 | Link to Comment OneTinSoldier66
OneTinSoldier66's picture

And what has happened to the value of the dollar since the creation of The Federal Reserve System?

 

Or can you guide me to a place where I can still buy penny candy?

Thu, 12/05/2013 - 01:33 | Link to Comment Zero Point
Zero Point's picture

You guys still have pennies?!

Australia got rid of them, when scrap merchants started grabbing them up for scrap value.

Thu, 12/05/2013 - 00:30 | Link to Comment Cookie
Cookie's picture

For us ancient Brits. Morcombe and Wise are a panacea, thanks for the 12 minute grin

Thu, 12/05/2013 - 01:07 | Link to Comment OneTinSoldier66
OneTinSoldier66's picture

Jeff Christian says there is nothing to worry about at the COMEX.

 

Disclaimer: No self-respecting Gold and Silver bugs were harmed or changed their minds by this public service announcement.

Thu, 12/05/2013 - 02:48 | Link to Comment joego1
joego1's picture

That was a refreshing, albeit somewhat depressing, view of the financial world for me, thanks Grant and Zero Hedge.

Thu, 12/05/2013 - 07:44 | Link to Comment Sufiy
Sufiy's picture


Bitcoin Crashes As China Bans Financial Companies From Bitcoin Transactions


 After Peter Schift, The Economist, Forbes and even Mr Bubble himself - Mr Greenspan - have called Bitcoin The Bubble it took the announcement from China to Crash it down from Double Top and parity level with Gold. It is important to note thatChina has been buying the record amount of Gold this year and has encouraged its citizens to accumulate it. Now China is explicitly warning its people about the dangers of Bitcoin speculative Bubble and effectively taking its out of official monetary system.   Now position of FED and Congress on Bitcoin is getting more interesting: do we have the Mexican standoff between Gold backed China, FED backed US Dollar and ... NSA, sorry Satoshi Nakamoto backed Bitcoin?   Gold should be waking up to the Bitcoin action after this Chinese move and its timing is very important as well: Gold is very close to retest this year low. http://sufiy.blogspot.co.uk/2013/12/bitcoin-crashes-as-china-bans-financ...

Thu, 12/05/2013 - 09:07 | Link to Comment Quinvarius
Quinvarius's picture

Lately the manipulation is done for profit.  I think it has been that way since the LTCM fiasco at least.  No one with any sort of common sense would have tried to cap gold at these prices.  No sane central bank would part with their gold at these levels.  Only a momo chaser private entity using other people's assets and money would make trades  this fundamentally counter productive.  They are literally giving gold away at the cheapest prices in history just to put a print on the screen.

Thu, 12/05/2013 - 09:13 | Link to Comment Cumulus Nimbus
Cumulus Nimbus's picture

I think Santander are doing their bit to stop the price from rising too. Tried to buy 5 Krugs this morning online but they would not approve payment until it jumped through the various security hoops. Eventually they were satisfied it was me but when I went to process the order again, my supplier was sold out. :-(

Thu, 12/05/2013 - 10:10 | Link to Comment Toolshed
Toolshed's picture

I am curious to know, in this current environment, what other readers here feel is the wiser investment, gold or silver. I like the portability of gold due to it's value to weight ratio, but I fear when the gold manipulation jig is up, our dear leaders will once again confiscate the citizen's gold since they will have no other "easy" source to get their grubby little hands on. I am sure many, including myself, will be prevented from doing their duty as a good citizen and turn over their gold, since they will no longer be able to locate their gold due to a loss event (boating or otherwise). However, when this happens I feel the price of silver will skyrocket. I also think it is very unlikely that our overlords will attempt to confiscate silver, as it is used widely in various industries, making it a safer holding. Although, I would not be surprised if the increasingly desperate scum who run the show attempt to ban all private ownership of PM's. Desperation causes all sorts of madness afterall. What do you, my enlightened fellow readers of ZH, think about this developing dilemma?

Thu, 12/05/2013 - 10:39 | Link to Comment Took Red Pill
Took Red Pill's picture

I think the fears of PM confiscation are over blown. Much is said about it happening in 1933. However, many did not turn in their gold and no one came knocking. No one went to jail. Both metals are good to have. Obviously, gold is more expensive, making it more portable. Silver is used more in industry and can turn down when the economy is down (like copper). Gold is more traditional, being a store of wealth and form of currency for thousands of years. In my opinion, gold is a better investment but it's best not to put your eggs in one basket. Have gold, silver, cash, hard assets, seeds, medicines. Above all, don't have debt!

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