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Globe and Mail comments on Sprott report on gold price suppression

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  • GATAComm@aol.com
    11:38a ET Wednesday, August 25, 2004 Dear Friend of GATA and Gold: The Globe and Mail in Toronto has taken long note of the Sprott Asset Management study of
    Message 1 of 1 , Aug 25, 2004
      11:38a ET Wednesday, August 25, 2004

      Dear Friend of GATA and Gold:

      The Globe and Mail in Toronto has taken long note
      of the Sprott Asset Management study of
      manipulation of the gold price -- a column by
      business writer Mathew Ingram, which is appended.

      It is valuable for calling attention to the report,
      but it misrepresents Federal Reserve Chairman
      Alan Greenspan's comment to Congress about
      central bank gold sales. Greenspan did not say
      that his comment was taken out of context;
      he said that OTHER central banks, not his
      own, were ready to lend gold in increasing
      quantities should the price rise. When he was
      asked by a U.S. senator, at GATA's request,
      exactly how he knew of the readiness of other
      central banks to lend gold to keep the price
      down, Greenspan replied that he knew by
      observation.

      That is, Greenspan's comments, spoken and
      written, were actually CONFIRMATION of
      central bank collusion against the gold price.
      Greenspan can see this collusion and even
      acknowledge it in public, even if it still
      confuses the Globe and Mail.

      But the Globe and Mail isn't alone in such
      obtuseness. After all, the central banks put
      out press releases and hold press conferences
      to discuss their collective efforts in regard to
      gold, and still when GATA notes the
      collectiveness of this public action, the
      mainstream financial press ridicules what it
      calls conspiracy theorists.

      That central banks are acting collectively in
      regard to gold is simply public record. The
      only question is how far that collective action
      goes. Maybe someday the Globe and Mail will
      pick up the phone and call a central bank
      to ask about it. That would be called
      journalism.

      CHRIS POWELL, Secretary/Treasurer
      Gold Anti-Trust Action Committee Inc.

      * * *

      In Search of a Golden Fleece

      By Mathew Ingram
      Globe and Mail, Toronto
      Tuesday, August 24, 2004

      http://www.theglobeandmail.com/servlet/story/RTGAM.20040824.wmathlater
      front0824/BNStory/Front/?query=Sprott

      There are plenty of conspiracy theories out there,
      from the Kennedy fetishists with their homemade
      copies of the Zapruder film to the Area 51 geeks
      with their tales of alien technology kept under
      wraps by NASA. In the financial arena, the most
      popular by far is the idea that central banks, the
      International Monetary Fund, bullion banks,
      and even the Federal Reserve Board are in
      cahoots to suppress the price of gold.

      But is this just a wacky theory promoted by gold
      bugs and Internet kooks with too much time on
      their hands, or is there more to it than that?

      Sprott Securities market strategist John Embry
      believes the latter -- that despite the
      loony-sounding ideas of some conspiracy
      advocates, there is a core of truth to their claims
      that gold is being "managed" by central banks
      and other financial institutions. He laid out those
      arguments in a recent 66-page research report.

      In effect, Mr. Embry says that while he doesn't
      like the term "conspiracy," he believes there is
      some evidence that various central banks,
      including the U.S. Federal Reserve, have acted
      in concert with the International Monetary Fund
      and others -- even the U.S. government itself
      -- to keep the price of gold depressed. This,
      Mr. Embry says, has taken advantage of
      "unsuspecting investors labouring under the
      illusion that gold is indeed a free market."

      This is not the first time Mr. Embry has sided
      with those who believe the bullion market is
      being manipulated by powerful forces. Two
      years ago he wrote a similar report in his
      capacity as a fund manager at Royal Bank of
      Canada. The bank seemed to take a dim view
      of Mr. Embry's thoughts on the subject,
      however, since the head of Royal Bank's
      investment management arm made it known
      that Mr. Embry's report was written for
      internal use and thus "in no way reflects the
      views of Royal Bank."

      As he did in that earlier report, Mr. Embry
      relies to a large degree on the "evidence" (as
      he puts it) collected by a U.S. group called
      the Gold Anti-Trust Action Committee.
      Although GATA is dismissed by many as a
      group of "grassy-knoll"-style conspiracy
      theorists, Mr. Embry describes their work
      as "excellent in scope, yet chronically
      underappreciated." At another point, the
      Sprott strategist admits he is content to
      "side with the alleged lunatic fringe on this
      contentious topic" because "their assertions
      appear to be essentially correct."

      In essence, GATA's gold price-fixing theory
      goes like this: Central banks, including the Fed,
      have colluded with various other institutions to
      keep the gold price low. They have done so in
      a number of ways: Central banks have announced
      large sales of gold, which has put downward
      pressure on the price, but in many cases they
      have never actually sold any gold. Others have
      allegedly engaged in swaps and other trades
      aimed at profiting from a falling gold price.

      Why would central banks and others, such as
      the U.S. Exchange Stabilization Fund (an arm
      of the U.S. Treasury) do this?

      According to Mr. Embry and GATA, there are
      a number of motivations involved. The United
      States, for example, is said to be interested in
      rigging the price of gold in order to help the U.S.
      dollar on the assumption that if gold were to rise
      too quickly, many foreign investors holding
      dollar-denominated assets might sell in favour
      of gold. Central banks are said to be concerned
      that their involvement in the short-selling of gold
      could come back to haunt them.

      This latter part of the theory stems from the gold
      "carry trade," a strategy that involves borrowing
      gold from central banks at a low interest rate and
      then selling or loaning the gold at a higher rate.
      Many of those loans, GATA says, have been used
      as collateral for short sales -- short sales that the
      group says far outweigh the amount of gold
      available on the market. If the price of gold were
      to rise sharply, the theory goes, those loans would
      be "called in" and large banks and other
      institutions (or even governments) would be hurt
      by the resulting chaos.

      One of the problems with any conspiracy theory is
      proving that the events in question couldn't have
      happened for some other reason -- by accident,
      for example. Mr. Embry himself quotes Goethe:
      "Why blame conspiracy when human stupidity
      explains so much?" He also says the kinds of
      manipulation described in the report could have
      "at least initially" been the result of powerful
      groups acting in their own self-interest. But the
      weight of evidence, Mr. Embry says, still shows
      that the gold price is being "actively managed."

      Unfortunately for GATA's case, however, which
      they attempted to bring to court in 2001 by filing
      a lawsuit against the U.S. Treasury, Fed Chairman
      Alan Greenspan and several banks, a lot of the
      evidence they use is questionable. For example,
      GATA likes to use a quote from Mr. Greenspan's
      testimony to Congress in 1998 in which he referred
      to central bank gold being available for sale. But
      the Fed chairman later wrote a letter saying the
      comment was taken out of context, and that the
      Fed has no role in management of the gold price.

      Another key piece of GATA evidence is the 1998
      bailout of hedge fund Long Term Capital
      Management, which it says occurred because the
      fund had a short position in gold of 400 tonnes,
      the unwinding of which would allegedly have hit
      too many banks and other institutions. Principals
      of LTCM, however, have said that they had no
      short position in gold, even a derivative one. But
      of course they and Mr. Greenspan are both in on
      the manipulation, so naturally their responses
      must be suspect.

      There's no question that the workings of the
      international gold market are murky, and that
      governments and central banks engage in all
      kinds of financial machinations that are poorly
      understood and in many cases poorly disclosed.
      It's quite a jump from that to a full-blown
      conspiracy theory, however, and Mr. Embry's
      latest report does little to help bridge that gap.

      ----------------------------------------------------

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      ----------------------------------------------------

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