Political Metals

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The largest physical movement of gold in recent history is under way.

Hugo Chavez, Venezuela’s President wants to move his country’s 211 tonnes of gold (over $12B at Friday’s close) currently stored in American & European banks back to Caracas.

Major upward moves in gold prices over the past couple of years have been tied to central banks’ activities in the gold market, like the big purchases by India, China & Russia.

However, this recent move by Venezuela is rather unique. Instead than buying more gold, Venezuala merely wants to repatriate what is already hers. Unlike central bank purchases, which could involve just a ledger entry, this is the real thing. Physical gold is being moved around. What’s more significant is the discovery that after accounting for the 99 tonnes and 11.2 tonnes being held at the Bank of England (BoE) and Bank of International Settlements (BIS) respectively, about half of this huge stash are held in bullion banks like JP Morgan Chase et al - all major gold shorts. The move has left them scrambling for the real stuff.

This has led many to believe that the “Golden Retrieval” may have been a contributing factor to the most recent spike in gold price. It hits at the core of what GATA has been highlighting for over a decade - that bullion banks have been working hand in glove with central banks to suppress the price of gold, and that much of the physical gold at bullion banks and central banks are encumbered, leased or sold many times over, resulting in multiple claims for each bar of physical gold.

Bullion Bank Run - Pressure from all sides

When a major “client” like Venezuala suddenly decides to take physical possession of her gold, it may cause a run on the bullion banks, not unlike the much feared bank run for cash. Bank runs start when depositors begin to lose confidence in the banks holding their cash. All it takes is a a few large depositors withdrawing at the same time, thereby creating the initial stress in the fractional reserve banking system. Soon, the panic hits the masses and long lines form outside the banks.

We have to depend on what the west often refers to as rouge nations - and there are good reasons to believe that there are several out there in a position to take the cue from Venezuala. That’s because it is common practise among central banks to hold their gold outside their countries at ”trading centers” where the bank conducts “its gold activities” - according to a report by GATA citing a comment from Bundesbank. Take a look at this list and see how many potential rouge nation triggers you can spot among the larger holders of gold. As highlighted by Adrian Salbuchi in the video above, there is a political element to Chavez’s radical decision. I can see several rouge nations in that list having similar political motives.

With increasing awareness that the perils of wars, global poverty and social injustice can be attributed in part to our present fraudulent monetary system, there have been many calls to help speed up the inevitable demise of the failed experiment to run a global economy on a debt-based monetary system. All adopt the common strategy of advocating the purchase of physical gold & silver (especially the latter) to protect oneself financially while helping to create stress in the supply of physical bullion to bring down the banking cartel. They include:

• Silver Liberation Army - Buy physical silver coins, bring down JP Morgan & the banksters
• Sons of Liberty Academy - The Silver Bullet And The Silver Shield
• Underground Investor - Smack down the criminal global banking cartel with gold & silver

The set up before us is interesting. While the masses apply pressure from the bottom, we have the deep pocketed boys, institutional investors and money managers primed to move big time money into gold & silver following the recently concluded GATA’s Gold Rush 2011 London conference.  That’s pressure from the middle. Now, with the likes of Venezuala starting to apply pressure from the very top, we may see the tipping point for a bullion bank run soon.

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Updated:

Aug 22, 2011
Libya Down: The link between Libya’s swift regime change, its 144 tonnes of gold & Venezuela’s gold repatriation.

Related Articles:

• Gold Manipulation
• What Big Banks are doing in the commodities market

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Fed's Check to GATA for illegally withholding a gold-related document GATA sought in its FOI lawsuit against the Fed in U.S. District Court

Today, GATA announced that they’ve received a check from the Fed for $2,870 in attorney’s fees and costs  for illegally withholding a gold-related document GATA sought in its FOI lawsuit. Nice piece of souvenir for GATA’s more than a decade long effort in exposing the gold price suppression scheme of the Fed.

For a brief history to this, see my earlier post G-10 Committee Meeting Minutes released to GATA by the Fed, as ordered by U.S. District Court judge Ellen Segal Huvelle, where I highlighted how the US Fed continues to operate in secrecy just as it was conceived way back in 1910 on Jekyll Island.

I decided to swap my savings in paper currencies for gold (& silver) years ago after studying GATA’s work. Had not for their very well documented exposé of how governments had been manipulating the gold price for decades, I would still be counted among the many who consider gold as a barbaric relic being dug out of one hole only to be buried in another. Thanks Bill Murphy, Chris Powell & others at GATA.

If you do not own a single ounce of gold or silver yet, I hope this check may trigger your interest to start your investigation. A good place to start would be the links in GATA’s news release below and some information compiled from various sources in this website:  Why hold gold, Why hold silver, Gold manipulation & Silver manipulation.

For illegally withholding gold information, Fed pays GATA
Friday, May 13, 2011  Chris Powell | GATA

By Chris Powell | GATA | 8:29a ET Thursday, May 5, 2011

Fed Must Release Data on Emergency Bank Loans as High Court Rejects Appeal

Hardly 2 months after judge Ellen Segal Huvelle ordered the Federal Reserve to release some tightly held records related to its gold price suppression scheme sought by GATA, it is now ordered to release details of emergency loans made to banks in 2008. The records were originally requested by Bloomberg under the Freedom of Information Act. A federal trial judge ruled in 2009 that the Fed had to disclose the records, and a New York-based appeals court upheld that ruling.

The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.

The justices today left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. The Clearing House Association LLC, a group of the nation’s largest commercial banks, had asked the Supreme Court to intervene.

“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.

The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.

“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.

Source [Bloomberg]

Obviously the reporter, Greg Stohr, was not aware of the GATA suit. G-10 Committee Meeting Minutes released to GATA by the Fed, as ordered by U.S. District Court judge Ellen Segal Huvelle.

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Judge Ellen Segal Huvelle - US District Court, District of Columbia

True to its form, the US federal Reserve (Fed) continues to operate in secrecy just as it was conceived way back in 1910 on Jekyll Island.

The Gold Anti-Trust Action Committee (GATA) sent two letters, one on December 2007 and another on April 2009, to the Fed board requesting the central bank’s records of its market intervention to suppress the price of gold (specifically “gold swaps” related documents). Both requests were denied, despite appeals.

After the unsuccessful attempts to obtain such records under the Freedom-of-Information Act (FOIA), GATA filed a lawsuit against the Fed Board seeking a court order for disclosure of some specific documents on 30th December 2009.

On 3rd February 2011, judge Ellen Segal Huvelle of U.S. District Court for the District of Columbia ruled that most of the Fed’s documents were exempt from disclosure under the FOIA for being “pre-decisional or deliberative”. However, she ordered the disclosure of one document - “a staff member’s notes on the discussion by the Gold and Foreign Exchange Committee of the Group of Ten (or “G-10″), as well as a transmission memorandum from Mr. [Ted] Truman to the board” , and that it be handed over to the plaintiff by February 18.

The very fact that there existed a Gold and Foreign Exchange Committee at the G-10 level suggests that gold is high up the agenda of central banks, rather than being a “barbaric relic” as some would have us believe. Reproduced below is Chris Powell, GATA’s secretary/treasurer’s comments on the minutes of this meeting held on 7th April 1997 that the Fed has been refusing to release until now.

They quote a British delegate as saying that while the gold price seemed “sluggish,” the gold market itself was actually showing “resilience” and “physical demand is high.” The British delegate described the gold market as “traditionally secretive.”

The minutes show committee members acknowledging the heavy involvement of central banks in gold leasing, with the British delegate estimating that a year’s worth of gold production already had been sold forward. That was 14 years ago and of course much central bank gold leasing followed until the last year or so.

According to the minutes, the U.S. delegate cited above, identified only as “Fisher” — apparently Peter R. Fisher, head of open market operations and foreign exchange trading for the Federal Reserve Bank of New York — also warned that central bank gold sales and leasing might be construed as positive for gold. The minutes say: “First, he noted that some market cynics viewed central bank activity as a contrary indicator and therefore one had to be conscious of possible feedback effects. Second, he noted that the price of gold, unlike other commodities, had historically not trended toward the cost of production. This seemed to suggest an ongoing supply/demand imbalance. Third, he had the sense that the gold leasing market was an important component in this puzzle, though he did not understand enough about that market, particularly the credit risk aspects of gold lending.”

A Canadian delegate, the minutes say, wondered whether data about the gold market could be trusted — a point much pressed by GATA and others lately.

U.S. delegate Fisher, the minutes say, “explained that U.S. gold belongs to the Treasury. However, the Treasury had issued gold certificates to the Reserve Banks, and so gold (by these means) also appears on the Federal Reserve balance sheet. If there were to be a revaluation of gold, the certificates would also be revalued upwards; however [to prevent the Fed's balance sheet from expanding] this would lead to sales of government securities. So the net benefit to Treasury would need to be carefully calculated, since sales of government securities would expand the public portfolio of government securities and hence also expand the Treasury’s debt-servicing burden.”

This seems to be as candid an acknowledgement as any of the U.S. government’s profound interest in suppressing the price of gold.

Two years after the G-10′s Gold and Foreign Exchange Committee discussed coordinating Western central bank policies toward gold, most of those central banks announced just such a formal mechanism of cooperation, the Washington Agreement on Gold:

http://www.ecb.int/press/pr/date/1999/html/pr990926.en.html

The minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, which the Fed sought to conceal, along with the secrecy on which the Fed successfully has insisted for its other gold records, are powerful confirmations of Western central bank interest in controlling the gold market surreptitiously. The minutes have been posted at GATA’s Internet site here:

http://www.gata.org/files/FedMemoG-10Gold&FXCommittee-4-29-1997.pdf

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

Here is ZeroHedge’s take on Fisher’s comments:

Fisher’s comment relates to what would happen to the Fed’s securities portfolio should there be a sudden or gradual revaluation in the price of gold. His conclusion is that in order to keep the Fed’s balance sheet stable, an (acknowledged) surge in the price of gold would lead to a forced selling in Treasurys. Of course, that would mean that the Fed would have to actually value gold at its actual market price, instead of that relic price of $42.22 per ounce. Which means that valuing gold at fair market value would result in dumping over $300 billion in Treasurys, something the Fed can not afford to do at a time when it is engaged in purchasing $100+ billion each month.

To an extent we agree with GATA’s summary of the implication of this statement: “This seems to be as candid an acknowledgement as any of the U.S. government’s profound interest in suppressing the price of gold.” Yes and no. While this is in fact indicative of the Fed’s desire to keep gold price low, it is the case in a world in which the Fed were to see gold as priced at $1,390/ounce. Not at the fake price of $42.22/ounce (perhaps the Fed can sell us some gold at that price?)

Now keep in mind that the Fed discloses the value of its gold stock as $11.041 billion in each weekly H.4.1. If the Fed were to value gold at FMV, the asset side of the Fed’s balance sheet would suddenly balloon by just over $350 billion, as the fair value of the 8,133.5 tonnes of gold allegedly in possession by the US is valued at $361.8 billion. Which of course also means that to account for the surge in paper assets by $350 billion, the Fed would either have to sell a like amount of Treasurys or increase the liabilities side of its balance sheet, by either increasing the Currency in circulation or the Excess bank reserves by a like amount, a result which would increase inflationary expectations by a massive percentage. Both are obviously outcomes that the Fed will fight to the death to avoid.

As for the question of how much of this unauditable gold tonnage is actually there, that’s a different matter entirely.

So yes, thank you JP Morgan for continuing your sworn duty of doing all you have to do, to maintain the Fed’s 4th mandate of suppressing the price of gold, and preserving the myth that there is no inflation in the US. The people of this truly great and democratic nation applaud your efforts.

Finally, this is what I consider a must watch video interview between James Turk of GoldMoney and Chris Powell of GATA, especially if you are new to the political nature of gold & silver and GATA’s work. Listen to what Chris had to say about the FOIA lawsuit, what else is pending besides the disclosure discussed above, the secretive Gold Stabilization Fund (GSF), Gold Reserve Act 1934, what Deutsche Bundesbank (German central bank) had to say about their gold swap operations, central banking secrecy and gold price suppression scheme in general.

For more information on GATA’s work in exposing the central banks’ role in price suppression of PMs, visit www.gata.org

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