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Veteran traders and gold mining companies say the price of gold is
being artificially held down to prevent huge losses by key lending
Chairmen and chief executives at Canada’s Placer Dome, U.S. miners
Newmont Gold and Homestake Mining, South Africans Anglogold and Gold
Fields and Ghana’s Ashanti Goldfields have been seeking answers
primarily from British Prime Minister Tony Blair on the Bank of
England’s May 7 decision to sell over half of the country’s 750 tons of
They charge that the sales were prompted by the desire to bail out
lending firms running short positions in gold, but so far neither Blair
nor anyone in the Clinton administration — which supported the Bank of
England’s decision — is addressing the questions.
Worse, the International Monetary Fund is contemplating a
British-style sell-out that will, say critics of the plan, further erode
the trading value of gold, despite gold’s traditional economic prowess.
Great Britain and the U.S. also support the IMF sell-off plan, which is
ostensibly being contemplated to raise money to cover the debt of poor
nations that have not been able to repay the IMF.
While few experts are openly charging U.S. and British leaders with a
conspiracy, they do say these and other actions have resulted in a 10
percent fall in gold prices since spring. And because of the manner in
which the sales have been handled, they amount to de facto manipulation
of the gold market at a time when prices don’t equal demand.
Last year gold production amounted to some 2,550 tons but gold
borrowings were over three times as high at around 8,000 tons. While
production has remained steady, short-term borrowing on gold has
increased since then.
Critics say at issue is the practice of key lending institutions
allowing gold bullion dealers to borrow inflated amounts of gold, which
they then sell onto the market at a profit. If prices rise unexpectedly
or before dealers sell the borrowed gold, both lender and borrower stand
to lose billions of dollars. That’s because deals are being made with
gold that has not yet been mined out of the ground and, if prices remain
low, may never be.
Earlier this year, after months of depressed prices, gold began
making a comeback and reached nearly $300 an ounce. But when the Bank
of England announced a plan to sell most of Great Britain’s gold
reserves, prices froze and then plummeted to their current level —
about $250 an ounce.
The pre-sale announcement by the British bank was seen as irregular
and “set off alarm bells around the world,” according to one source.
“No other central bank has announced a gold sale prior to its
completion in more than 20 years,” wrote Gold Anti-Trust Action
Committee Chairman Bill Murphy in a letter
to Sen. Phil Gramm, R-Texas,
July 20. “And the Bank of England’s announcement was made as the gold
price was storming past a key gold loan borrowing point and interest in
the gold market was finally rising again.”
Murphy also wrote, “Because of the way the Bank of England sale was
announced, we also suspect that the current administration (perhaps the
Federal Reserve or U.S. Treasury) may be active in the gold market
through a trading account at Goldman Sachs. … Therefore,” he added,
“(they) may have some role in the orchestration of a lower gold price.”
Britain’s Prime Minister Blair has defended his country’s gold sale,
saying it was necessary because the “price of gold has been falling for
over two years.” He defended it as a “prudent measure” designed to
“save the taxpayers” from suffering huge losses.
Murphy, in his letter to Sen. Gramm, refuted Blair’s explanation,
adding that if England wanted to “get the best deal” for British
taxpayers they would not have announced the sale in advance — a move
that was sure to make the price of gold fall.
“The best deal the Bank of England could have gotten would have been
$30-$40 more per ounce by carrying out the sale as all the other major
countries have done for 20 years,” he said.
Ironically, Murphy said, no one is taking direct responsibility for
the Bank of England’s plan to sell the country’s gold reserves. Murphy
noted in his letter that Blair, the Bank of England, and the nation’s
agency equivalent to the U.S. Treasury Department have all indicated the
idea did not originate with them.
Meanwhile the U.S. Mint reported that gold sales continued to be
brisk in 1999, with more than 67 percent of the maximum mintage of proof
gold Eagles already sold to the public since April 30.
“Total sales of the proof gold Eagles are up 16 percent over the
first 12 weeks of the program last year,” said Mint Director Philip N.
Diehl, “with sales of the one ounce and quarter ounce coins up 45
percent and 33 percent, respectively.”
Diehl said, “These are the highest totals at this stage of the
program since 1996, so we want to let customers know that the strong
early sales we announced in mid-June are continuing at a very high
A spokesman for the mint declined to comment about why the price of
gold continues to be low despite the increased demand.
“We’re a government agency and because of that I can’t comment on
that,” he told WorldNetDaily.
Robby Noel, a spokesman for Patriot Trading Group, a U.S. gold wholesaler, said the reason
for the proposed IMF sell-off is dubious at best.
“The IMF said they want to sell their gold reserves to relieve the
debts of poor countries,” he said. “If that’s the case, then they’re
going about it all wrong because many African countries will be hit the
hardest if they do, and supposedly those are the countries they are
claiming to be trying to help.”
Noel said many Africans, especially in South Africa, face lay-offs in
the tens of thousands if the IMF sells their gold. The sell-off would
likely cause gold prices to fall even further and thus, force mining
companies to lay off more workers in order to remain viable. Currently,
he said, gold is selling for less money per ounce than it takes to
actually mine it out of the ground.
As to why the IMF would consider such a move that is obviously
destined to hurt, rather than help, the economies they are allegedly
trying to save, Noel had no answer.
“Maybe it’s because gold is honest money and these are immoral men,”
he told WorldNetDaily. “Outside of that, I have no idea why they
(Britain and the IMF) would do what they’ve done or are planning to do.”
“I do believe when ‘the panic’ hits there will likely be little
physical gold to go around,” he added.