By: xxxxxx on Martedì 16 Luglio 2002 22:08
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GOLD DERIVATIVE BANKING CRISIS
Extensive research has led the Gold Anti-Trust Action Committee (GATA) to the conclusion
that the gold market is being recklessly manipulated and now poses a serious risk to the
international financial system.
* Annual gold demand, currently at record levels, exceeds mine and scrap gold supply by more than
1,500 tonnes. In the Washington Agreement of Sept. 26, 1999, 15 European central banks announced
that they were capping their lending of gold and would limit their official sales of gold to 400 tonnes
per year for the next five years. Some major gold producers have reduced their forward sales, and
speculators have reduced their borrowed gold selling. Commodity prices and wages are rising. Yet the
price of gold has declined steadily. With demand so much greater than supply, the price of gold
should be rising sharply.
* According to the Office of the Controller of the Currency, the notional value of the off-balancesheet
gold derivatives on the books of U.S commercial banks exceeds $87 billion, which is greater
than total U.S. official gold reserves of approximately 8,140 metric tonnes.
* Gold derivatives surged from $63.4 billion in the third quarter of 1999 to $87.6 billion in the fourth
quarter, after the Washington Agreement was announced. The notional amount of off-balance-sheet
gold derivative contracts on the books of Morgan Guaranty Trust Co. went from $18.36 billion to
$38.1 billion in the last six months of 1999.
* Veneroso Associates estimates that the private and official-sector gold loans stood at 9,000 to
10,000 tonnes at the end of 1999. Most of these loans represent gold that has been sold in the form of
jewelry and cannot be retrieved. Mine supply of gold for all of 1999, according to trade sources, was
only 2,579 tonnes. Thus the gold loans are far too big too be repaid back in a short time. The swift $84
rise in the gold price following the Washington Agreement caused a panic among bullion bankers. But
that was only a warning of what is to come.
* Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers, responding
to GATA's inquiries through members of Congress, have denied any direct involvement in the gold
market by the Fed and the Treasury Department. But they have declined to address whether the
Exchange Stabilization Fund, which is under the control of the treasury secretary, is being used to
manipulate the price of gold.
* Several prominent New York bullion banks, particularly Goldman Sachs, from which the immediate
past treasury secretary, Robert Rubin, came to the Treasury Department, have moved to suppress the
price of gold every time it has rallied over the last year.
* The Gold Anti-Trust Action Committee believes that U.S. government officials and these bullion
banks have induced other governments to add gold supply to the physical market in recent years to
suppress the price. Britain's National Accounting Office is now investigating the Bank of England's
decision to sell off more than half its gold. Contrary to proper accounting practice, reductions in gold
in the earmarked accounts of foreign governments at the New York Federal Reserve Bank are being
listed by the Commerce Department as the export of non-monetary gold. These "exports" from the
Fed occur upon rallies in the gold price.
*Why would anyone want to suppress the price of gold?
1) Suppressing the price of gold has made it a cheap source of capital for New York bullion banks,
which borrow it for as little as 1 percent of its value per year. Gold is borrowed from central banks
and sold, and the proceeds are invested in the financial markets in securities that have much greater
rates of return. As long as the price of gold remains low, this "gold carry trade" is a financial bonanza
to a privileged few at the expense of the many, including the gold-producing countries, most of which
are poor. If the price of gold was allowed to rise, the effective interest rate on gold loans would
become prohibitive. 2) Suppressing the price of gold gives a false impression of the U.S. dollar's
strength as an international reserve asset and a false reading of inflation in the United States.
*Too much gold is being consumed at too cheap a price. Massive amounts of derivatives are being
used to suppress the gold price. If this situation is not corrected soon, there will be a gold derivative
credit and default crisis of epic proportions that will threaten the solvency of the largest international
banks and the world standing of the dollar.
The Gold Anti-Trust Action Committee requests that a full and complete investigation be
launched into this matter as soon as possible. The longer the gold price is artificially held down,
the bigger the eventual banking crisis.