RT: As we were just talking about recently, there was a discrepancy in the amount of gold reported to be held by the Bank of England. One page of the official website reported that the bank held 505,000 gold bars. And another page featuring an interactive web app reported just over 400,000 bars. So Chris Powell, co-founder of the Gold Anti-Trust Action Committee (GATA) e-mailed the Bank of England and he questioned the discrepancies. The Bank of England officially responded, saying ‘The number of bars mentioned in the app cannot be used to infer a change in the amount of custodial gold held by the Bank of England as the figure is deliberately non-specific.’ So, basically the information provided cannot be relied on. Earlier, I spoke with Chris Powell, and here is what he had to say :
Chris Powell: Any transparency in central bank gold activities like this would disclose an enormous effort by Western central banks to rig the market. This is a very sensitive figure. If you know how much gold the central banks have in their custody in their vaults, then you can tell whether they’re intervening in the market. But the Bank of England refuses to account for itself. The Bank of England can tell us in February how much gold they have in custody, but refuses to tell us today. That signifies that they’ve been doing something in the last few months that they don’t want the public to know.
RT: Let me ask you about that, because we saw a huge price drop in April… is it possible that this gold market drop is related to this Bank of England discrepancy?
Chris Powell: But, of course, that’s the suspicion on our side, that there could be a discrepancy of about twelve or thirteen hundred tons of gold, an enormous amount. We have to assume that the smash in April, on the 12th and the 15th, where an enormous amount of gold that had to be gold that was not in private hands, it had to be government hands, was dumped on the market. We have to assume the change in the figures of the Bank of England and, more importantly, their refusal to account for themselves had something to do with this.
RT: Well, you talk about central banks and gold leasing, so I want to get into a little bit of history. Last December, GATA revealed a secret March,1999, report from the IMF (that’s the International Monetary Fund) which basically said that central banks concealed their gold swaps and leases to facilitate secret market intervention. So can you describe for our viewers what swaps are and what gold leasing is?
Chris Powell: … Sure. A swap between central banks is typically a mechanism by which one central bank gets another to intervene in the gold market while keeping the first central bank’s fingerprints off the transactions. The United States, for example, might ask the Bundesbank what we need to dump a hundred tons in London next month to keep the price down, would you please do it from your reserves held at the Bank of England, and we will give you title to gold held here in the United States. That’s an example of a swap. A lease is where physical custody is temporarily transfered from one party to another and the party leasing the gold can do what he wants with it, though often this gold may not leave a vault at all, but it’s a mechanism for intervening in the gold market without having to report the intervention on the books of the central bank.
RT: Yeah, it sounds a lot like rehypothecation, which has been in the markets too. Getting back to the United States and the Federal Reserve, after having talked about the Bank of England… do we have any kind of transparency or discrepancies that you notice at the Federal Reserve?
Chris Powell: Ah… yes. A couple years ago,while the Gold Anti-Trust Action Committee was bringing a Freedom of Information Act action against the Federal Reserve, the letter we got back from the board of governors of the Fed, signed by governor Kevin M. Walsh, disclosed to us that among the documents that the Fed would not let us see were records of gold swap arrangements the Fed has with foreign banks. Well, there’s no point in having gold swap arrangements unless you’re contemplating intervening in the gold market. This document, like all our other documents, areposted on GATA’s internet site in the documentation section. But we have an admission from the Federal Reserve that it has gold swap arrangements with foreign banks. And the only point is intervention in the gold market.
RT: Well, the Federal Reserve has been reconsidering its relationship, or the relationship that Goldman Sachs and Morgan Stanley have with the commodities markets… they’re grand-fathered in, right now, and actually JP Morgan is thinking about exiting, so what does this have in store for the commodities markets in the future?
Chris Powell: This was a giveaway, I think, about the gold price suppression scheme, Bob; Morgan Chase and the other big commodity trading banks were criticized in Congress, the other day, for dominating the commodity markets and possibly manipulating prices, driving them up, exporting the markets, in ways that violate anti-trust laws. After this criticism arose in Congress, JP Morgan Chase announced that it was contemplating getting out of the commodities business, selling its commodities business to some other operation. But Morgan pointedly added that it did not plan to get out of gold and silver trading. This, to us, was a giveaway that Morgan Chase is once again here the agent of the U.S. government. And, in regulating, manipulating the gold and silver markets the United States government needs Morgan Chase as its broker in the gold market to provide cover for the U.S. government, because the U.S. government could not intervene openly in the gold market without giving the whole rigging game away. So Morgan said it would get out of commodities but it would stay in gold… I think you have to assume that that’s because the U.S. government is using Morgan Chase as the agent involved there.
RT: Is it possible that JP Morgan is just going to spin off part of its operation, or are these other banks are going to spin off whatever they’re doing in crude to some other entity, or are we just going to see a fundamental change in the commodities markets themselves because of this?
Chris Powell: It’s a good question, Bob, I don’t know… I think Morgan was spinning off, or planning to spin off, its commodities business in large part to prevent a congressional investigation of the issue, that very well might have exposed the gold price suppression scheme. I think Morgan hopes to prevent such an investigation and hopes that it simply stays in the gold market and the silver market…people will understand implicitly that they’re doing this at the U.S. government’s request, and there will be no investigation.
RT: Isn’t manipulation kind of just baked into the cake, built into the system… what would a sign be if any of that manipulation is abating, or becomes less… is that even possible?
Chris Powell: Yeah, I think it’s possible, Bob… back in 1968 these Western central banks suppressed the gold price openly through something called the London Gold Pool, which was a coordinated scheme of dishoarding of Western central banks gold reserves in order to hold the price at $35 an ounce, and early in 1968 the gold off-take from the gold pool was so rapid that the United States saw that it would be out of gold reserves within a few weeks. And so, for many years, the official gold price maintained through the gold pool in London was $35 an ounce, when the Federal gold reserves were drained to a critical point… it was drained from 25,000 tons to about 8,500 tons… when that threshold was crossed, the United States realized it had only a few weeks left of gold reserves; it called up the British government and asked that the London Gold Pool be closed. And this was after weeks of the Bank of England advancing its own gold into the market to control the price at $35 per ounce, upon a pledge by the United States to fly gold bars over to replace that pledged gold. But the gold drained away too fast, and finally the central banks decided they couldn’t afford to lose anymore, they closed the London Gold Pool, the fixed price was given up for years… $35 was the price, and then the next day there was no market at all… eventually a freer,more private market opened up and the gold price began to rise.
RT: That was my interview with Chris Powell, co-founder and treasurer of GATA.