[Mb-civic] Gold conspiracy gets mainstream kicker

[Michael Butler]

 Sandy sent this


Gold conspiracy gets mainstream kicker
Tim Wood
'24-AUG-04 20:00'

NEW YORK (Mineweb.com) -- John Embry, chief investment strategist of Toronto
based Sprott Asset Management, on Tuesday published a gold conspiracy
compendium that he believes provides nearly irrefutable evidence of a global
gold price suppression scheme.

In a covering note to clients, Embry and co-author, Andrew Hepburn, explain
that anecdotal evidence such as ³counterintuitive price action² is one
indicator pointing to a gold market that is ³not free² based on a decade of
evidence. The report says initially disconnected activity by powerful gold
market players has essentially synchronized. ³A potentially highly dangerous
situation developed which now requires expedient collaboration to stave off
the inevitable bad ending.²
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The report says the market manipulation hurts all gold investors, but its
true victims are communities that depend on gold mining. It says the
beneficiaries are central banks intent on camouflaging ³increasingly
reckless monetary policies², whilst financial institutions are profiting by
gulling investors who think the gold market is free.

Whilst previously employed by RBC Asset Management, Embry issued a brief
that was closely aligned with the position of the Gold Anti-Trust Action
Committee (Gata). RBC repudiated the June 2002 report almost immediately,
telling investors that it was meant for internal consumption only.

Sources blamed the hasty repudiation on Gata chairman, Bill Murphy, for
distributing the report without RBC¹s and Embry¹s permission. Murphy told
Mineweb that he had merely passed on a document forwarded to him by an RBC
private client. ³As far as I was concerned, it was a public document that
drew largely from specifics in Gata¹s own published research,² Murphy said
at the time.

The wheel has since turned. Embry parted ways with RBC, joining Sprott in
March 2003 which has been an aggressive gold bull for some time. Ironically,
just days before Embry¹s original report hit the Internet, Eric Sprott of
the eponymous investment firm issued a public retraction about Barrick¹s
[ABX] vulnerability to rising gold prices because of its hedge book.

Entitled: Not Free, Not Fair: The long term manipulation of the gold price,
the report runs to 63 pages. It is notable that whilst Gata is acknowledged,
Murphy receives no direct recognition although his name litters the
footnotes. The primary sources are listed as Frank Veneroso, Reg Howe,
Michael Bolser and James Turk, all of whom are in the Gata camp.

In a nutshell

Even though the gold price has risen some $150 per ounce since it bottomed
in 2001, the report says market manipulation has capped those gains. Only
when the claimed manipulation is ended, by intervention or accident, will
gold soar to an equilibrium value which is seen as a four-digit number.

The report dates the gold price suppression conspiracy to the rescue of
Long-Term Capital Management in 1998, thereafter commencing ³in earnest
after the post-Washington Agreement gold price explosion in 1999.²

It is alleged that the 1999 blow up which crippled Ashanti, since acquired
by AngloGold [AU], and Cambior [CBJ], unmasked a gold carry trade run amok.

 Having borrowed gold nearly limitlessly to sell forward and invest the
proceeds in higher interest bearing instruments, the parties and their de
facto insurers, central banks, realized that the positions could not be
easily unwound. LTCM¹s apparent gold short position of 300-400 tonnes, which
is equivalent to nearly a whole year of South African new mine production,
could not have been settled without causing a run on the gold price that
might have triggered a collapse of the financial system.

The belief is that central banks and the primary financial institutions
agreed on a scheme to manage down or conceal the risks without causing a
panic. As part of this arrangement, the Bank of England agreed, on behalf of
the UK Treasury, to sell a large quantity of gold through a series of
bizarrely structured auctions.

Apparently aiding and abetting the Brits were the super-secretive US
Exchange Stabilization Fund and the Federal Reserve. The IMF also provided
cover by allowing governments to misreport the status of gold reserves and
gold swaps.

Not Free, Not Fair repeatedly rejects the statistical compilations of GFMS
Limited and other ³consensus statisticians² such as Jessica Cross. It cites
the work of Frank Veneroso as more reliable. ³Given Veneroso¹s more reliable
numbers, we also believe total gold loans to be on the order of
10,000-16,000 tonnes. By contrast, GFMS only reports approximately 4,000
tonnes of total central bank liquidity in the market,² the report says. The
Veneroso number suggests that central bank vaults are ³one-third to one-half
empty² of their reported gold.

Gold producer executives have generally shied away from endorsing a
conspiracy theory. This is primarily because of the association with Gata¹s
Bill Murphy, a former commodities trader, was fined and expelled by the CFTC
over allegations of copper market rigging. He is also prone to incendiary
statements and imprudent foretelling that have made a pariah of the activist
organization in reasoned company. However, Embry and Hepburn say there is a
³greater inclination [among executives] toward the manipulation hypothesis
than most market observers may realize.²

Embry and Hepburn also agree that global gold derivative figures contrasted
with net producer dehedging indicate that central banks continue to lend
their gold so that the associated carry trade dwarfs mine hedging.

Conclusions

Not Free, Not Fair concludes that there can be no other explanation for the
apparently erratic behaviour of gold but ³severe long-term manipulation.²

³We find troubling the consistent unwillingness by mainstream gold analysts
to debate, or even acknowledge, the manipulation viewpoint in any depth.
Such market watchers pretend, not convincingly, that the people marshalling
the price management thesis do not possess either the knowledge or research
with which to make a strong case for price-fixing in the gold market,² the
authors write.

They are confident that when the scheme unravels, as it would have to, the
gold price will explode. ³Until then, we urge the news media, gold industry
and relevant arms of government to further investigate and expose what
appears to be price-fixing on a scale of truly epic proportions.²