Despite rig by Barclays trader, Lassonde still thinks the London gold fix is just fine

GATA

Gold Fix Under Scrutiny as Regulators Probe Archaic System

By Rachel Younglai
The Globe and Mail, Toronto
Sunday, June 8, 2014

http://www.theglobeandmail.com/report-on-business/industry-news/energy-a…

The cozy little world of gold trading is getting less comfortable.

A handful of bankers in London currently set the world standard for gold prices, a practice that started in 1919 and is widely used by governments, miners and brokers to buy and sell the precious metal and its financial derivatives.

But regulatory probes have shone an unwanted spotlight on the benchmark known as the London gold fix, and prompted calls for change.

The five banks that set the standard – Barclays, Bank of Nova Scotia, Societe Generale, Deutsche Bank, and HSBC — have been hit by multiple lawsuits from investors alleging they colluded to rig the price for their own benefit. Deutsche Bank, which gave up its seat on the gold-ixing panel, said the lawsuits had no merit. Barclays, SocGen, and HSBC had no comment, and Scotiabank could not be reached.

“This is a setting that is very easy to be manipulated either by one individual bank or by a group of them,” said Rosa Abrantes-Metz, an associate professor with New York University’s business school, whose research identified a series of unusual trades before the gold benchmark was announced.

“It completely lacks oversight and involves a very small group of competitors, so it is easy to co-ordinate behaviour,” she said.

After accusations of interest rate rigging surfaced two years ago, regulators and investors started questioning the integrity of all benchmarks, including those used for oil, silver and foreign exchange prices.

Because spot gold is traded around the clock, the London gold fix is used as a benchmark similar to a publicly traded company’s closing price on a stock exchange. But it appears woefully out of date in a world where material information is disseminated on Twitter and retail investors can monitor stock prices online.

Not much has changed since the early 1900s, when five bankers from the largest bullion houses used to convene at the Rothschild headquarters in London at 10:30 a.m. and 3 p.m. to determine the benchmark.

The bankers still get orders to sell and buy gold bars from their clients and their own accounts. They then try to match orders until there is an agreed upon price and that becomes the global benchmark.

The banks are now different than the original five bullion houses and their representatives dial into a conference call instead of meeting in person.

But there are still no transparency, no oversight, and no public record of the orders. And that has raised red flags for regulators and investors, including concerns of collusion and front running.

“There are serious reasons to be suspicious about manipulation,” said one European-based financial supervisor, who requested anonymity because regulatory probes are ongoing.

British regulator the Financial Conduct Authority has been reviewing the five banks’ internal controls, one person familiar with the matter said.

It recently fined Barclays L26 million for failing to control a trader who created fake orders to lower the benchmark.

The other four banks have not been charged with any wrongdoing.

The unrelenting scrutiny impeded the search for a replacement for Deutsche Bank, which relinquished its spot on the benchmark setting panels when it scaled back its commodity business this year.

That forced the fixing operator to kill the “London silver fix,” another century-old tradition that uses the same process as the gold fix.

The industry is now racing to find a substitute to the London silver and gold benchmarks.

“Recent events accelerate the need for either a wholesale reform of the current benchmark or its replacement by a suitable alternative in order to maintain investor confidence,” said the World Gold Council, an industry group that tracks the supply and demand in gold.

It is unknown whether the alternatives will usher in more transparency or get rid of the conflicts of interest.

The London Bullion Market Association, a trade group for precious metal dealers and banks, is asking the public for input.

A number of exchanges are angling for a piece of the action, including the U.S.-based CME Group, a futures exchange that allows contracts for gold to be traded nearly 24 hours a day, and the London Metal Exchange, which trades industrial metals like nickel and copper.

Some have proposed using the U.S. futures prices as a replacement. Others have suggested more reliance on the Shanghai Gold Exchange or the Dubai Gold and Commodities Exchange, though their contracts are too thinly traded to garner market confidence.

Regardless, the precious metal industry is preparing for changes.

“I understand that in this day and age we need more transparency and we need an audit trail that you can rely on,” said Pierre Lassonde, a Canadian mining veteran whose company Franco-Nevada Corp. relies on the benchmark to settle contracts. But Mr. Lassonde said: “I have never been concerned about the gold fix and still don’t have any concerns about it.”

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GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney’s low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:

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GATA consultant Speck interviewed about gold and silver price suppression

GATA

8:344 ET Saturday, June 7, 2014

Dear Friend of GATA and Gold:

Market analyst, statistician, author, and GATA consultant Dimitri Speck is interviewed about gold and silver price suppression by Claudio Grass, managing director of Global Gold AG in Rapperswil, Switzerland, in the June edition of the firm’s newsletter:

https://www.globalgold.ch/fileadmin/user_upload/Newletters/Global_Gold_O…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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Commodity price suppression goes far beyond silver fix, Steer tells Sprott Money

GATA

5:35p ET Friday, June 6, 2014

Dear Friend of GATA and Gold:

GATA board member Ed Steer, interviewed by Sprott Money News during the Canadian Investment Conference in Vancouver last weekend, said that while the end of the daily London silver fix is welcome, commodity price suppression remains pervasive and intrinsic to futures markets that are controlled by the U.S. government. The interview is six minutes long and can be heard at the Sprott Money Internet site here:

http://www.sprottmoney.com/sprott-money-weekly-wrap-up

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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Former Greek leader says nations mull new gold-linked SDR

GATA

5:25p ET Friday, June 6, 2014

Dear Friend of GATA and Gold:

Interviewed by King World News, London gold fund manager Ben Davies reports a conversation in which a former prime minister of Greece acknowledged that world leaders have seriously discussed creating a reserve currency combining the International Monetary Fund’s “special drawing right” with gold:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/6/6_For…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

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U.S. Hyperinflation Warning, Part II

By Jeff Nielson, Bullion Bulls Canada

Readers of Part I may still be somewhat confused, or at least less-than-convinced. They saw the chart showing the Federal Reserve’s (official) money-printing. It is an extreme, absurd, and totally out-of-control exponential curve: a classic representation of a hyperinflation-in-progress.

They may have also delved into the references provided which indicate how/why the U.S. dollar is already worthless, according to several different metrics of analysis. However, “hyperinflation” means a currency literally plunging to zero in value, while the (official) inflation statistics indicate ‘mere’ double-digit numbers. There is (to put it mildly) a large, mathematical gulf here.

But it was also explained to readers how hyperinflationary episodes are “confidence events”, not economic events – which explains why the (worthless) dollar still has an exchange-rate above zero. In fact, the currencies of the Western bloc are now all nothing but paper scams (or “cons”), and in any “con”, confidence is an extremely frail entity.

Those knowing their history will know that the term “con man” derives from the original vernacular “confidence man”. The reason? Success or failure of the “con” was wholly/entirely dependent on acquiring and maintaining the confidence of the Chump(s). And Western currencies are very clumsy, transparent cons, indeed.

Even apart from the abysmal economic fundamentals of these Western, paper currencies; the monetary fundamentals of these paper currencies dictate their worthlessness. There are only two ways for any money/currency to have (real) value.

The legitimate way for a currency to acquire value is to be “backed” (by gold or silver, our only monetary metals), in which case its status is elevated to (real) “money”. It can be backed directly, such as with gold and silver coins, where the metal is literally in the money. It can also be indirectly backed: paper notes, backed by physical (audited) gold or silver “reserves”. In this case our money/currency would be units of value.

The illegitimate way for a (paper) currency to acquire value is to attach cost to it, i.e. to “borrow it” into existence. In this case, as essentially IOU’s, our currencies are mere units of obligation. The paper retains value only as long as the issuer of the currency remains solvent, and can thus (theoretically) redeem those IOU’s. This is the way the now-fraudulent Western currencies used to be created – but no longer.

Today, in our era of “quantitative easing” (which is a euphemism derived from a euphemism), our worthless paper currencies are simply conjured into existence, neither backed nor borrowed. They are not “units of value” (money). They are not “units of obligation” (quasi-legitimate currency). They are simply units, with no possible fundamental basis for value.

Compounding this worthlessness; the major Western economies are now all insolvent, and thus no longer able to back the (previously issued) units of obligation. All of their paper is now worthless. However, this is only the beginning of the U.S. dollar’s problems.

As noted in Part I, (in theory, at least) the Federal Reserve could ‘pull the plug’ on its money-printing, but this would trigger a devastating collapse of almost unimaginable proportions (also detailed in Part I). The point is that those Armageddon-like consequences are so catastrophic that they would undoubtedly shatter confidence in the dollar, and thus cause the very collapse-in-value of the dollar that the Fed would be trying to prevent.

The Federal Reserve (and the U.S. government) is already well past the point-of-no-return. The monetary/economic damage already caused by their past crimes/fraud has made any form of economic salvation impossible. This is what makes any significant official inflation (and the erosion of confidence which comes with it) so dangerous. The U.S. dollar is perched upon the ultimate “slippery slope”.

More articles from Bullion Bulls Canada….

U.S. Hyperinflation Warning, Part I

By Jeff Nielson, Bullion Bulls Canada

Hyperinflation (i.e. the U.S. dollar going to zero) is not a “possibility” for the U.S. economy. Rather, it is an absolute certainty. Indeed, as was clearly demonstrated in a previous commentary, the U.S. dollar is already worthless, based upon three, distinct analyses of the dollar’s fundamentals.

This future destiny of the dollar is also graphically depicted, in one of the Federal Reserve’s own charts:

The mere shape and magnitude of this extreme, exponential function is a classic/obvious representation of a hyperinflation-in-progress. Any exponential function this extreme is a mathematical definition of the phrase “out of control”. Not only can this money-printing never be undone, there is no way to reverse/alter the consequence: hyperinflation.

Even if the U.S. government or Federal Reserve simply “pulls the plug” on their ultra-insane/ultra-extreme money-printing, the deflationary collapse which would be triggered would necessitate a new wave of hyperinflationary money-printing (to “bail out” the U.S. economy), unless the government – and the bankers – were willing to accept all of the following, catastrophic consequences:

1) Complete debt-default of the U.S. economy, and thus the instant vaporization of the U.S. Treasuries market

2) Total collapse of U.S. equities markets

3) Total collapse of the “derivatives market”

4) A domino-like collapse of most/all of the bankers’ other, fraudulent currencies

5) A Soviet Union-style disintegration of the U.S. war-machine

6) The Mother of All Depressions in the U.S., along with all the civil unrest and political upheavel which such an economic catastrophe implies.

Because it is extremely unlikely that either the One Bank or its servants in the U.S. government would ever be willing to (voluntarily) accept the consequences of “pulling the plug” on this Ponzi-scheme economy; it is reasonable to conclude that hyperinflation is the only, possible economic outcome for the United States.

More articles from Bullion Bulls Canada….

New Bubble-Highs In U.S. Markets Prove No Tapering

By Jeff Nielson, Bullion Bulls Canada

Previous commentaries have remained consistent to a central theme. The U.S. Federal Reserve would never/could never reduce its hyperinflationary money-printing, unless its intent was to detonate the myriad (fraudulent) U.S. asset-bubbles, which it was largely responsible for inflating.

First readers were provided with detailed reasons (and evidence) as to why the Fed could never “taper” its money-printing (let alone deliver the “exit strategy” which B.S. Bernanke promised would take place in 2009). The Fed’s money-printing – which has now degenerated to simple counterfeiting – was (is) the only thing propping-up the U.S. Treasuries market.

In turn; this Treasuries market fraud was/is the only thing delaying the debt-default of the bankrupt U.S. economy. And it is only this illusion of solvency which makes it possible to prop-up the U.S. dollar – the world’s “new Tulip”. But the dollar, itself, is the primary instrument of all the U.S.’s (i.e. the One Bank’s) economic crimes and market-manipulation. Thus the bankers’ entire paper empire of fraud/crime is wholly-and-completely dependent on not simply maintaining, but endlessly increasing U.S. money-printing.

This reasoning was buttressed with a chart which regular readers have seen on many occasions. It depicts an extreme exponential function, an out-of-control spiral in Federal Reserve money-printing. As a basic principle of mathematics; all such out-of-control exponential functions can only end in explosion (or implosion, if one simply ‘pulls the plug’).

In this case; “explosion” would be represented by hyperinflation: the U.S. dollar (literally) going to zero. Implosion (as previously noted) would mean ceasing or even “tapering” the money-printing, in order to deliberately detonate all of the U.S. economy’s bubbles. The U.S. economy and its equities markets have not imploded, ipso facto Fed money-printing has continued, full-tilt – if not escalated from previously announced levels.

It was also explained to readers how the Federal Reserve is perpetrating its money-printing fraud: via literal counterfeiting. The Federal Reserve has two levers with which it “regulates” (relentlessly increases) its money-printing: a visible lever (“quantitative easing”), and an invisible lever (its so-called “0% loans”).

More articles from Bullion Bulls Canada….

CHARTS OF THE DAY

By Toby Connor, Gold Scents

Toby Connor

GoldScents

A financial blog primarily focused on the analysis of the secular gold bull market.

If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions, email Toby.

Today’s gold price suppression will end as London Gold Pool did, Turk tells KWN

GATA

8:39p ET Tuesday, May 27, 2014

Dear Friend of GATA and Gold:

Recent long periods of backwardation in gold show that central banks are losing their battle against gold as they did when the original London Gold Pool collapsed in 1968, GoldMoney founder and GATA consultant James Turk tells King World News tonight.

“That the gold market has been in backwardation on so many occasions, and in many cases remained in backwardation for extended periods, just shows how unhealthy the market has traded because of paper manipulation,” Turk says. “The Western central planners and their agents at the bullion banks have had an ongoing war against gold for a long time now, and the tide may finally be turning against them, despite today’s downdraft.”

Turk’s interview is excerpted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/27_Ja…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

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To contribute to GATA, please visit:

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Hulbert thinks lousy sentiment, charts drag gold down, not central banks

GATA

8:20p ET Tuesday, May 27, 2014

Dear Friend of GATA and Gold:

Financial letter writer Mark Hulbert, commenting today for MarketWatch.com, says he knows what’s dragging the gold price down — unfavorable sentiment among other financial letter writers and unfavorable charts:

http://www.marketwatch.com/story/heres-the-real-reason-gold-is-falling-2…

It’s no matter to Hulbert that by their own admission central banks are trading in the gold market “nearly every day,” presumably for policy purposes rather than for fun competitions among their foreign exchange desks –

http://www.gata.org/node/13373

http://www.gata.org/node/12717

– nor that, as noted by GATA consultant Rob Kirby of Kirby Analytics in Toronto, the U.S. government’s broker, J.P. Morgan Chase & Co., maintains trillions of dollars’ worth of interest rate derivatives that cannot possibly be hedged, cannot be anything other than government intervention in the bond markets:

http://news.goldseek.com/GoldSeek/1249407911.php

No, to hear Hulbert tell it, it’s all lousy sentiment and charts — as if that surreptitious trading by central banks might not be creating the lousy sentiment and charts.

Maybe technical analysts like Hulbert shouldn’t be scorned too much. They can’t want to believe in or even know about central bank intervention in markets because it would nullify their work, their whole careers, revealing that they have been interpreting mere holograms created precisely to deceive them. But the self-importance of these analysts is both ridiculous and insufferable.

In a time of comprehensive market interventions by central banks, technical analysis is no more useful than reading entrails or tea leaves. But there would be plenty of room for technical analysts in another occupation: financial journalism. They would need only to put a few specific questions to central banks about their involvement in the gold and interest rate markets and they would have financial journalism all to themselves.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

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