Submitted by Ronan Manly,
Between 1962 and 1968, a cartel of central banks from the US and Europe ran a price manipulation scheme in London, aiming to keep the price of gold at $35 per ounce. They did this by constant intervention into the market, pooling their gold reserves to sell down the market. Conceived and coordinated at the Bank for International Settlements (BIS) in Switzerland by the G10 central bank governors, the dirty work of actual gold market intervention was done by the Pool's agent, the Bank of England gold trading desk in London.
The syndicate, known as the London Gold Pool was successful until it wasn’t, with the beginning of the end in early March 1968 as the huge run on gold became a tidal wave with sterling and US dollar weakness. On 10 March 1968, a Sunday, the consortium released a statement claiming that: “the London Gold Pool reaffirm their determination to support the pool at a fixed price of $35 per ounce”. At the same time, Fed chairman William McChesney Martin even vowed that the US would defend the Pool “to the last ingot”.
The Pool then proceeded to airlift hundreds of tonnes of gold bars from the US Treasury’s Fort Knox to RAF Mildenhall, which they dumped into the London market for the rest of the week (March 11 -14). With all the Good Delivery Gold siphoned off to the Market (actually a consortium of European merchant banks), the Rothschild and the Bank of England pulled the plug, and the London Gold Pool collapsed on the evening of 14 March 1968, ushering in an era of free market gold prices.
Moral of the story, don’t believe the pronouncements of the powers that be in the London and US gold markets, especially during a crisis.
Fast forward to today, and the parallels of the Pool with the modern bullion bank cartel, the London Bullion Market Association (LBMA) and CME’s Commodity Exchange (COMEX) are uncanny. In the space of a week, the LBMA – COMEX nexus, which together control price discovery in the global gold market through their combination of fractionally backed synthetic unallocated gold, and cash settled gold futures, has issued two statements to try to placate the gold market, each one more panic stricken.
Last week, as the contango between COMEX futures and London spot gold blew up to a nearly $100 differential, and London market maker bid-ask spot spreads blew out to $100, the LBMA in a rush to deflect attention, issued a statement claiming that:
“The London gold market continues to be open for business. There has, however, been some impact on liquidity arising from price volatility in Comex 100oz futures contracts. LBMA has offered its support to CME Group to facilitate physical delivery in New York and is working closely with COMEX and other key stakeholders to ensure the efficient running of the global gold market."
As we asked at the time last week:
Why is the LBMA colluding with the COMEX?
How can the London gold market be open for business if LBMA market makers are not providing liquidity in spot gold
Why is the LBMA deflecting attention from the London market and pinning the focus on the COMEX?
Why does the LBMA want to facilitate physical delivery in New York when its remit is the London Gold Market (loco London)?
Who are the other key stakeholders that the LBMA and COMEX are colluding with?
Then yesterday, April 1, for a second the LBMA and CME issued an unprecedented second statement, more desperate than the first, with the pair seemingly running scared:
“LBMA AND CME GROUP COMMENT ON HELTHY GOLD STOCKS IN NEW YORK AND LONDON
CME Group and LBMA..will continue to coordinate efforts as market circumstances evolve. Together, both CME Group and LBMA are actively taking measures to ensure the continued efficient operation of global gold markets during this unprecedented time.
LBMA reports record gold stocks
Gold stocks in London remain healthy with the latest published numbers showing record stocks of 8,326 tonnes of gold, which is equivalent to 666,045 standard 400-ounce gold bars. Visit the LBMA website for more information.
CME Group depositories open and gold stocks near record high
CME Group’s New York depositories are operating normally as they have been deemed essential businesses and deliveries are occurring as planned. As of March 30, 2020, our depositories currently hold 9.2 million ounces of gold (with 5.6 million ounces eligible), nearing a record high in terms of stock levels..."
London Gold Pool - Bank for International Settlements (BIS), Basel
Never before has the gold market seen such panic from the paper gold conductors, and all this in the presence of record physical gold demand, cleared out gold bars and coin inventories across the entire gold supply chain, closed down precious metals mints and refineries, and a price disconnect between the physical and paper gold markets.
The fact that the LBMA - COMEX tag team which front for the modern bullion bank cartel have to comment not once, but twice in a week about the health of gold inventories in London and New York means they are panicking. It's unprecedented.
And this comes after the bullion banks placed disinformation into the media last week about needing to physical deliver gold bars from London to New York (hint - In modern times the US never imports physical gold from the UK), and were panicked into moving the goalposts with the launch of a new CME COMEX futures contract that brazenly tries to prop up COMEX GC 100 trading with the figment of fractional delivery of 400 oz gold bars that sit in London. Not to mention that on Monday this week, after CME published a COMEX vault report that had 400 oz bar categories listed for all the vaults, but with absolutely no 400 oz gold bars listed, and we mentioned it here on ZeroHedge, the CME then panicked and pulled the 400 oz version of the report, reverting back within an hour to the original version
The entire LBMA - CME Group statement about healthy gold stocks is, in the words of Francis Bacon - “of Simulation and Dissimulation” - simulation being a pretense of what is not, and dissimulation being a concealment of what is.
The LBMA reference to 8326 tonnes of gold in its network of London vaults is completed misleading.
This figure is from 31 December 2019, which is 3 months ago
Of this 8326 tonnes figure, 5373 tonnes (65%) represents gold held by central banks at the bank of England, and another 1895 tonnnes representes gold backing Exchange Traded Funds held in London LBMA vaults, such as the vaults of HSBC and JP Morgan. Subtracting these leaves 1057 tonnes (13% of total). Thais 1057 is just the maximum possible London float and does not itself exclude allocated gold held by entities such as sovereign wealth funds, investment institutions, ultra wealthy and family offices. I am hearing from the London gold market sources that the real LBMA bullion bank float is less than 500 tonnes and maybe be as low as 200 - 300 tonnes.
Looking at the COMEX data and vaults, as always, COMEX has very low gold holdings. The 9.2 mn ozs number which CME refers to in the above statement (actually 9.245 mn ozs) is only 287 tonnes of gold. Of that figure (which refers to Tuesday 31 March), 114 tonnes was in the Registered, meaning there already are vault warrants issued against that.
The other 5.6 mn ozs (actually 5.85 mn ozs) is ‘Eligible gold’, but eligible just means any gold that happens to be in the approved COMEX vaults that is in the form of kilo bars or 100 oz bars. It could be anything. It is already owned by entities, which would include mints, refiners, and jewellery companies, and eligible gold may have nothing to do with COMEX or CME.
There are now over 2.19 mn ounces of Comex contracts standing for delivery in April (stops issued) - that's 68 tonnes..and increasing.
This LBMA statement is reminiscent of the empty reassurances of the London Gold Pool in early 1968 that it had adequate gold to cap (suppress) the gold price at $35 per oz. With colossal losses, the Pool collapsed on 15 March 1968, ushering in an era of free market gold prices. https://t.co/xy3D70xoD7— BullionStar (@BullionStar) April 1, 2020
From this latest April Fool’s Day statement, we can conclude that the LBMA is terrified that unallocated investors who have claims on LBMA bullion banks, will line up to take allocation of gold in London, while the CME is terrified that COMEX futures contract holders will increasingly try to take physical delivery of gold in New York (not just delivery of warrants but actually withdrawing the gold bars out of the COMEX vaults.
In March 1968 during the last days of the London Gold Pool, the cartel of central banks kept playing while the ship began to sink, brazenly saying that “the London Gold Pool reaffirm their determination to support the pool."
This time around, with their “healthy stocks of gold in London and New York” (you can be the judge of that), “the LBMA has offered its support to CME Group”. It therefore seems that while history doesn't repeat itself, it often rhymes.