Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Gold Market Manipulation Smoking Guns and Monetary Power

Commodities / Market Manipulation Sep 30, 2009 - 05:07 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis Article"The transcending value seen in the Dollar has lost its foundation..."

A SHORT SERIES of secret memos, published and dissected at ZeroHedge, provide the "smoking gun" of gold-market manipulation. Apparently.


And given this little slew of dusty archive-digging – throwing up three documents from 1968 to 1975, each one declassified within thirty years – then "If over 40 years ago the Fed and the members of the gold 'Pool' were openly intervening in the gold market, one can only imagine what the situation is now..."

Go on, just imagine. Because imagination is what you'll need if you're going to nail type-written notes from before the Moon Landings as primary, original-source evidence that the United States' official gold reserves – variously sold, lent, swapped or simply given away since the early 1990s – have been mobilized to suppress prices, pushing gold down from $250 an ounce a decade ago to, ummm, more than $1000 today.

These memos fret about shrinking gold reserves and the world's gold-driven money supply...Britain's failed deflation policy of the late '60s...whether South Africa will sell its new mine supply on the open market...German border taxes...and the "gold-like" qualities of the proposed Special Drawing Right (SDR). Such prehistory matters, yes. But it's a world away from demonstrating what newcomers to gold today may mistake for good cause to steer clear.

The little history these scattered notes sketch does echo today, however faintly. Are central banks buying gold at market prices – then France, now Beijing through via its domestic gold output? How to replace the abiding monetary standard – then gold, now the Dollar? And like the Fed memos reviewed on blogs elsewhere this year, the notes republished by ZeroHedge certainly prove one thing, at least:

Just how awkward gold became long before the collapse of the Bretton Woods monetary system. Bluntly put, it was a pain in the arse – and not only for Washington.

"Gold was causing such a rumpus that most authorities wished it would go away and stop bothering them," as the late Peter Bernstein wrote in his 2000 history, The Power of Gold. But with so much of the world's gold stacked up in their vaults, slipping away was impossible, and the world's monetary system instead "lurched from crisis to crisis" says Francis J.Gavin, University of Texas at Austin's professor of international affairs, in his 2004 monograph, Gold, Dollars & Power.

"There was not one year between 1958 and 1971," Gavin finds, "when the Dollar and gold problem was not the most pressing issue of American foreign economic policy." Or as President Kennedy put it in August 1962, "My God, this is the time...

"If everybody wants gold, we're all going to be ruined."

Luckily for JFK and the Dollar, not everyone wanted gold. Like Washington, the British government would have quite happily seen its former "badge of honor" turned to dust and swept away, too. Their private citizens were barred from owning gold, with strict controls applied across most of the rest of the developed (and communist) world. Yet with so many new US Dollars flooding the world...and with the Dollar-exchange clause of the 1944 Bretton Woods treaty still in force...less pliant friends increasingly asked for, and got, gold over dollars.

One nation actively sought to bring on the crisis. "There can be no other criterion, no other standard, than gold," announced French president Charles de Gaulle at a press conference on February 4, 1965 – "gold that never changes, that can be shaped into ingots, bars, coins...that has no nationality and that is eternally and universally accepted as the ultimate fiduciary value par excellence."

De Gaulle spoke in French, naturellement, in the gilded Salle des Fêtes of the Elysées Palace. But the White House's least Francophone staffers could get the message loud and clear when, six days later, de Gaulle's finance minister – future French president Giscard d'Estaing – announced in a lecture at the University of Paris that, from now on, France would swap every new Dollar it accumulated for gold bullion from the Federal Reserve.

The major powers, he said, should "make a solemn and unequivocal declaration" to likewise settle all their international payments in gold. Which was an easy thing for France to declare, given its large balance-of-trade surplus.

To drive the point home, France then made headlines around the world by announcing it would not only swap all new Dollars for gold...but immediately ship that new gold straight to France, too.

What could the United States do? As BullionVault has noted time and again, the final collapse of the Gold-Exchange Standard – put out of its misery in Aug. 1971, when Richard Nixon canceled America's gold-for-dollars obligation – came because the US government wanted to keep hold of its gold. The legerdemain of then "demonetizing" it through occasional sales and amendments to the IMF treaty only hid this plain fact; it didn't deny it.

The international promise signed after the Second World War in made defending that hoard impossible given America's domestic Dollar-inflation. Producing more dollars than the rest-of-the-world needed to finance its trade, the United States also invited a drop in the Dollar. That in turn invited withdrawals of gold from its vaults, effectively sparking a "run on the United States" as one advisor called it in the mid-60s' phase of the crisis.

"The kind of transcending value attributed to the Dollar," Charles de Gaulle had said at that 1965 press conference, "has lost its initial foundation, which was possession by America of the greater part of the world's gold." Never mind that de Gaulle himself knocked out that support. What mattered was the abiding idea – gold equals power. Thus US dominance was clearly ebbing away.

"The French this year have been cashing in dollars for gold at a $54 million-a-month rate," reported Time magazine in mid-1966. "Last week the Bank of France reported that as of Aug. 1, France had hoarded $5.13 billion in gold. Gold now constitutes 86% of all French reserves, compared with 73% at the end of 1964.

"Moreover, the [French] government is squirreling away the precious metal at such a rate as to account for the entire net US gold drain so far this year." Hence de Gaulle's jibe at the Dollar's fall became self-compounding. By demanding gold over dollars, he proved the value of metal, not paper. But only on the old tattered Gold Standard logic. Losing its dominance as the gold-hoarder par excellence, the United States still retained the supreme currency. The "exorbitant privilege" of which de Gaulle's advisor, Jacques Rueff, had complained, would now take America's economic power as its foundation. Depriving the US of its bullion backing, the promise to redeem Dollars for gold was replaced with the promise to redeem Dollars with interest.

Fast forward to the fall of 2009, and the United States remains the world No.1 holder of physical gold (the potential for secret sales, swaps, loans and outright gifts to Wall Street notwithstanding), but while France and the rest of Europe turned seller, Russia and emerging Asia began re-stocking this decade. Moreover, "The United States would be mistaken to take for granted the Dollar's place as the world's predominant reserve currency," as World Bank president Robert Zoellick told an audience at Johns Hopkins University in Washington this week.

"Looking forward, there will increasingly be other options to the Dollar...The future for the United States will depend on whether and how it will address large deficits, recover without inflation that could undermine its credit and currency, and overhaul its financial system."

Zoellick naturally mentioned the Chinese Yuan, noting that "Over 10 to 20 years [it] will evolve into a force in financial markets." He just happened to speak on the very same day, as Reuters observes, that Beijing issued its first Yuan-denominated bond open to foreign investors. Yet all the World Bank chief did, however, was confirm today's abiding idea – that monetary power builds on an economy's strength.

Maybe a new or even old idea will emerge in the next two decades or so. "The manner in which [this crisis] is resolved may well determine the shape of the world's monetary arrangements, and therefore our economic and political interests over the next generation," as then-Fed chief Arthur Burns memo'ed President Ford in June 1975, but the problem of excess Dollars was never quite fixed.

Still, we guess it's more than coincidence Beijing is now buying gold – as well as frantically powering its non-stop economy – as the world's monetary standard slides into crisis more.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2009

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules