Political Metals

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If you’ve checked out the Compare AFE, BullionVault & GoldMoney page, you’d have noticed that BullionVault & GoldMoney packaged their bullion dealership and custodian services very differently. It’s interesting to note how the same service can be approached in such a contrasting manner.

There is however, one other significant difference not highlighted in the comparison. It’s not so much about differences in the companies’ services. Rather, it’s over differing opinions of the founders in the much debated the matter of Gold Cartel and Gold Price Manipulation.

In a recent interview by Chris Martenson, Paul Tustain of BullionVault said:

I am not really strongly in the manipulation camp but I do agree that market manipulation tends to happen in futures contracts. This is not anything to do with gold or silver specifically, it is to do with the way futures contracts work.

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London AM & PM Fix

There are many gold and silver market abnormalities that have been cited as supporting evidence of gold price suppression by the “manipulation camp”. One of the more interesting ones is the phenomenon where the London AM fix has almost always been higher than the PM fix for over a decade. When asked concerning the above, Paul responded:

But I think there is a rational market explanation and I do not think that market manipulation by governments is in fact it. I think it is much simpler than that.

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It appears that he is using the Occam’s Razor, which is a principle urging one to select among competing hypotheses that which makes the fewest assumptions and thereby offers the simplest explanation of the effect. Put another way, it admonishes us to choose from a set of otherwise equivalent models of a given phenomenon the simplest one. It should be noted however, that simplest available theory need not be most accurate. Listen to Paul’s take on this issue and make your own conclusion after reading a detailed analysis of this phenomenon by Adrian Douglas. Paul also goes into great detail showing how other perceived market abnormalities or statistical aberrations can be explained away without invoking the manipulation theory, including the much discussed bullion banks’ short position in the futures market. A transcript of the interview can be found here.
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Gold trading is influenced by government intervention

On the other corner of the gold price manipulation ring, we have James Turk, founder of GoldMoney, director of GoldMoney Foundation and consultant at Gold Anti-Trust Action Committee (GATA). James’ work exposing the gold price suppression scheme is all over the web.

In his April 13 article Some Answers to Doug Casey’s Questions James wrote:

The investigation into the inner workings of the gold market that are out of public view and decided behind closed doors in central banks is an ongoing effort. It has been that way for years, and fortunately, the Gold Anti-Trust Action Committee has been there relentlessly compiling the mounting evidence that something is amiss, that gold trading is influenced by government intervention aimed at keeping the price from rising to its fair value. Or to put it another way, by allowing the gold price to climb higher year after year in what I have dubbed a “managed retreat”, governments hope that people will not notice what is happening to the ongoing debasement of the US dollar…

That was his conclusion at the end of his argument for the case that gold (& silver) price manipulation by central planners  has been and still remains a strategic policy to keep the dollar and the banks that support it alive. Read the full article here.

In his presentation at the GATA 2008 conference, James explained why central banks interfere in the gold market. Interesting to note how he foresaw the Lehman Brothers bankruptcy by predicting another Bear Stearns collapse was only several months away.

So there you have it – two innovative entrepreneurs, two great companies, very contrasting views on PMs market manipulation but they share one very important thing in common – Their relationships with their clients are on a Bailee/Bailor basis and not on a Debtor/Creditor basis. Both companies vouch in no uncertain terms that their clients have complete ownership of physical bullion in their custody. Their At the end of the day, I think that’s what matters most.

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Further Reading:

• Learn more about BullionVault & GoldMoney
• Gold Manipulation
• Silver Manipulation