First of all, let me say that gold price suppression (“fixing,” “rigging,” “manipulating” or however else you want to think about it) is not just a conspiracy theory.
It’s a well-documented phenomenon, with real actors and real ramifications.
In 2014, Barclays was fined nearly $44 million for failing to prevent traders from manipulating the London gold “fix.” Late last year, a former JPMorgan trader pleaded guilty to manipulating the U.S. metals markets. Remember the gold futures “flash crash” of 2014?
The best people to speak to about this subject are the folks at the Gold Anti-Trust Action Committee, or GATA. For 20 years now, Chris Powell and others at GATA have made it their mission to expose collusion by international financial institutions to control the price and supply of gold.
This week I had the chance to sit down with Chris, GATA’s secretary/treasurer. I asked him how institutions manage to manipulate the price of gold on such a global scale.
“It’s done largely in the futures markets,” Chris told me. “It’s also done in the London over-the-counter (OTC) market. The mechanisms are gold swaps and leases between central banks and bullion banks, and through the sale of futures contracts.”
GATA’s Robert Lambourne reported on this in March of this year. As you can see in the chart below, gold rallied between November 2018 and February, when it peaked at around $1,343 an ounce.
Ordinarily, you could expect inventory in the bullion-backed SPDR Gold Shares ETF (GLD) to continue to climb at least until then. But that’s not at all what happened. Three weeks before the price of gold peaked, the holdings in the GLD curiously began to fall, and by March 4, the ETF had lost approximately 57.8 metric tonnes. And because the GLD is the largest gold ETF in the world—its value stands at $30.2 billion, as of this week—such selling will naturally impact the price of gold. Sure enough, the yellow metal soon fell below $1,300. What gives?
The answer to that question may lie in the BIS’ monthly statement of account for February. According to Robert’s reporting, the BIS was still actively trading gold swaps, which it uses to gain access to the metal held by commercial banks. Specifically, the bank placed as much as 56 metric tonnes of gold swaps into the market in February.
If you ask me, that amount is remarkably close to the 57.8 tonnes that fled the GLD in the first quarter of this year.
Hard to believe? This is only scratching the surface. I’ll let Chris Powell be the one to elaborate, but it will have to wait until a Frank Talk next week. Trust me when I say this is an interview you don’t want to miss! Make sure you’re subscribed to Frank Talk so you can be one of the first to read it.
This is an excerpt. For the full 'Investor Alert' click here
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