The Fed On Gold Price Manipulation

Tyler Durden's picture

Lately various media outlets have been swamped with stories and allegations of precious metal manipulation ranging from the arcane, to the bizarre to the outright ridiculous. At issue is not that these claims of price fraud are unfounded - they very well may be completely true - but without a notarized facsimile of an actual trade ticket signed by Brian Sack, or his replacement Simon Potter, or any of the BIS traders confirming they are indeed selling gold on behalf of the Fed, BOE, ECB, SNB or BOJ simply to keep the price of the metal down, what such constant factless accusations (and no, sorry, a chart showing that the price of gold may go up or go down sharply indicates merely that and nothing about the underlying factors for such a move) do is to habituate the broader public to the real issues surrounding precious metal, and other asset class, manipulation. So instead of searching for circumstantial evidence which one can easily find everywhere, we decided to go straight to the source. To do that we go back to a post we wrote back in September of 2009, based on an internal previously confidential Fed document, which conveniently enough explains everything vis-a-vis gold manipulation and leaves nothing to speculation or misinterpretation. Zero Hedge presents the smoking gun that may provide responses to all the various open questions regarding the Fed's Modus Operandi in the gold arena which answer the core question - motive - courtesy of a declassified memorandum, written by none other than the then Fed Chairman, and addressed to the president of the United States.

From Zero Hedge, September 27, 2009.

Exclusive Smoking Gun: The Fed On Gold Manipulation

Zero Hedge has recently presented several declassified documents from the pre-1971 "Nixon Shock" days, that endorse the case for gold as a major historical factor in US monetary and foreign policy, as demonstrated by State Department and CIA disclosure. Gold's special status in policy and administrative decision-making was a direct factor in Nixon's choice to abolish the gold reserve at a time of an exploding budget deficit.

Yet what about the days after 1971, and specifically, how did that critical "behind the scenes" organization, the Federal Reserve, perceive and manipulate gold in the post Bretton-Woods world? Was gold, freed from its shackles to the dollar, once again merely a symbolic representation for money?

Zero Hedge presents the smoking gun that may provide responses to all the various open questions, courtesy of a declassified memorandum, written by none other than the then Fed Chairman, addressed to the president of the United States.

On June 3, 1975, Fed Chairman Arthur Burns, sent a "Memorandum For The President" to Gerald Ford, which among others CC:ed Secretary of State Henry Kissinger and future Fed Chairman Alan Greenspan, discussing gold, and specifically its fair value, a topic whose prominence, despite former president Nixon's actions, had only managed to grow in the four short years since the abandonment of the gold standard in 1971. In a nutshell Burns' entire argument revolves around the equivalency of gold and money, and furthermore points out that if the Fed does not control this core relationship, it would "easily frustrate our efforts to control world liquidity" but also "dangerously prejudge the shape of the future monetary system." Furthermore, the memo goes on to highlight the extensive level of gold price manipulation by central banks even after the gold standard has been formally abolished. The problem with accounting for gold at fair market value: the risk of massive liquidity creation, which in those long-gone days of 1975 "could result in the addition of up to $150 billion to the nominal value of countries' reserves." One only wonders what would happen today if gold was allowed to attain its fair price status. And the threat, according to Burns: "liquidity creation of such extraordinary magnitude would seriously endanger, perhaps even frustrate, out efforts and those of other prudent nations to get inflation under reasonable control." Aside from the gratuitous observation that even 34 years ago it was painfully obvious how "massive" liquidity could and would result in runaway inflation and the Fed actually cared about this potential danger, what highlights the hypocrisy of the Fed is that when it comes to drowning the world in excess pieces of paper, only the United States should have the right to do so. 

Another notable observation is that despite a muted antagonism between the Fed and the US Treasury persisting for decades, the fuse is and always has been short, and the conflict can promptly hit a crescendo, with the Fed ultimately always getting the upper hand. In the case of the Burns memo, the Fed's position was diametrically opposed to what the Treasury proposed was the proper approach. The result: full on assault by the Federal Reserve over the Treasury's credibility and even then, more than three decades ago, a veiled threat by the Fed involving escalating problems if the recommendation of the Treasury was picked over that of the Fed. "Severe criticism on the part of prominent and influential financiers would inevitably follow if the Treasury's present position prevailed." It is not surprising that the Fed's modus operandi has not changed one bit since 1975: it is our way or virtually assured destruction/embarrassment way.

Additionally, a curious tangent of the Burns memo is the fact that gold was explicitly used as an engine to enact political doctrine: "If the United States took a stand on the gold question that failed to satisfy the French in current international negotiations, would there be adverse economic or political consequences? I doubt it... If we do ever accede to French views on gold, we should at least use our bargaining leverage to achieve some major political advantage." And while gold as a policy mechanism was unable to satisfy its role this time, one wonders on how many subsequent occasions was global democracy trampled over in order to placate the US Federal Reserve:

"I have consulted Henry Kissinger as to whether there is some political quid pro quo we might want to extract from the French in exchange for acceding to some part or all of their desired position on gold. But Henry tells me there is none at this time."

At some point governments of advanced nations will say "enough" to the covert domination of their controlling bodies by the Federal Reserve, which through manipulation of its gold and money interests, effectively has control over not just the French, but every government which has a monetary basis to its respective economy and a relationship to the US "reserve" currency... Which means virtually every country in the world. The backlash, if and when it occurs, will be memorable.

Lastly, the memo presents a useful snapshot into the cloak-and-dagger, and highly nebulous world of Central Bank negotiations and gold price manipulation:

"I have a secret understanding in writing with the Bundesbank that Germany will not buy gold, either from the market or from another government, at a price above the official price."

So to all conspiracy theorists claiming that gold is being manipulated on a daily basis by the Federal Reserve: when it occurs over and over, and is so well documented, it is no longer a theory, it is merely sad. And the fact that the US government goes to great lengths to hide the illicit dealings of the Federal Reserve, which through its monetary tentacles, has prima facie control over not just US policy but also over sovereign governments, is an unprecedented failure in the checks and balances system that the founding fathers had planned when they created the United States of America. Yet saddest is that the United States no longer pursues strategic goals that are in the best interest of the majority of its citizens, but merely manipulates other, less powerful nations into a servile existence that only provides gain to a very limited subset of the American financial oligarchy. It is time for the Fed's unprecedented control over affairs, both global and domestic, to end.

Full memo from Arthur Burns presented, compliments of Geoffrey Batt who collaborated in the creation of this post.


* * *

As a post-script to all those complaining about gold, silver and other PM price suppression, here is one simple question: can one buy more gold at $1,600 or at $16,000? This is not a trick question.

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falak pema's picture

the FED can do no wrong according to this BI Editorial :

The Myth That The Fed Buys Treasuries To Reduce Government Borrowing - Business Insider

Now we know that negative interest rates are for the good of the economy; the negative interest rate syndrome finds a rationale that is levitated like the risk asset FIRE economy!

I wonder what the CBs are collectively cooking up for us this week...

FRBNYrCROOKS's picture

Here is language from another post I carfted on gold lasy week or so. It has an interesting link for those not familiar with the Treasury claim ton have a lot of gold in Fort Knox:

Did it ever occur to anyone: The advent of the SLV and GLD ETFs are just a ploy to concentrate all of the gold in one place for future confiscation?

FDR did it in 1934 and, I think, they will do it again.

According to Treasury:


Status Report of U.S. Treasury-Owned Gold Overview

The Status Report of U.S. Treasury-Owned Gold (Gold Report):;">
  • Reflects gold bullion and gold coins owned by the federal government
  • Summarizes the fine troy ounces and the book value of gold held by various facilities
  • Identifies the value of gold coins and bullion on display at Federal Reserve banks; coins and bullion in reserve at the Federal Reserve Bank of New York; and gold held by U.S. Mint facilities

The book value of gold is currently $42.2222 per troy ounce. The information used to compile this reporting is received from the U.S. Mint, Federal Reserve banks, and FMS.

Current Report: June 29, 2012


If you have questions about this report, please call (202) 874-9866.

My Point: When they confiscate your gold they will give you a whopping $42/ounce for it!

That is the reason I don't buy gold and the reason I Spend my money to enjoy myself while I am here. Live for today since they have already stolen tomorrow!

shovelhead's picture


SWAT teams with metal detectors in your back yard. America has a lot of back yards.

I'm signing up for that job. Lots of union overtime pay.

Get real. You can't buy or sell weed either, it's against the Federal law. Notice how well that is working?

A 16 year old can buy reefer easier than he can get a six pack of legal beer.

They can make anything 'law' if they they want, but if it is universally ignored, then it is no law at all.

It's a numbers thing.

terryfuckwit's picture

I would love for the tyler's to pen an article for discussion titled "How low will the lying bastards go"  or similar

As in explore some of the underhand methodology that may be employed to undermine physical metals.. ie think like the fucktards do...for starters

1. Prominent news exposes on folks that get their metal in only idjits hold metals..

2. Pay some prof of physics to proclaim that within 5 years metal and silver will be factory made on the CERN production line...

3. Also i think that a super large amount of very well done fake ASE's being floated around would be a huge weapon for the fucktards..

just an idea...ZH are world leader's exposing how low they have gone and are best qualified to predict and explore "How low will the lying bastards go"


shovelhead's picture

New York Times:

"Startling Breakthrough in Alchemy. Gold bricks made from used condoms."

Unholy Dalliance's picture

As a post-script to all those complaining about gold, silver and other PM price suppression, here is one simple question: can one buy more gold at $1,600 or at $16,000? This is not a trick question.

No, it's not a trick question but it is a STUPID question which goes well with the old saw which is still trotted out that 'you can't eat gold'. The point is that neither gold nor silver have been allowed by means of simple market price discovery to find their real price for a very, very, very long time. It is completely immaterial that gold or silver are 'cheap' at present. COMPLETELY IMMATERIAL. The illogicality of the above question rests on the supposition that at some point in the future, gold and silver will rise in price which will render any purchases made now 'cheap' and therefore thsoe who bleat about price manipulation and 'conspiracies' should shut up and keep buying. It doesn't matter because PMs are cheap and the prices will, at some point unspecified in the future, sky-rocket. It is a completely fallacious argument and not worthy of ZH. It is the price discovery mechanism that has been tampered with for political reasons for decades that is important. Not that gold and silver are cheap.


passwordis's picture

 Here is the ONLY QUESTION that I care about. HOW MUCH LONGER can they control the price of PMs?

...2 years? 5 years? 10 years? 25 years? as long as they want?

  We have no idea what reserves are held by the banks and governments. For all we know they may have private contractors who do nothing buy mine gold and silver all day long and bring it to secrete refineries who then stock pile it in secret locations. If Gold/Silver is as valuable as everyone likes to believe (and promote) than you can bet your ass that this is exactly what the they are doing.