Guess Who is
Pushing Gold Lower?
By By Patrick A. Heller
reported in the mainstream financial headlines
is often contradicted by the details behind the
For instance, there is no sensible reason why
anyone would want to lease precious metals at a
negative rate. That is, in addition to the risk
of not getting back any metal at all, the lessor
gets back less metal than they originally loaned
Yet, the one-month lease rates for gold and
silver have been negative since June 2. I find
it hard to believe that a profit-seeking owner
of gold or silver would enter into a contract
that guarantees a loss. After all, the owner
would simply stay even if he did not lease the
metal at all.
The only sensible explanation for such an action
is that there is something else going on behind
the scenes to compensate the gold and silver
lessors for their losses at dumping physical
metals on the market at a negative rate of
As I have explained in past columns, the U.S.
government has a lot to gain from suppressing
the prices of gold and silver - such as propping
up the value of the U.S. dollar - and appears to
have long subsidized the dumping of physical
precious metals on the market.
So, right now physical gold and silver is being
dumped on the market unrelated to supply or
demand factors. It seems obvious to me that the
only reason for the temporary bump in supply
(leases have to be eventually paid back) is to
suppress precious metals prices.
Trading in the gold and silver markets is
frequently opaque, meaning that much of the
activity occurs without being public knowledge.
As a result, inside knowledge can often be used
profitably by short-term traders who detect
which way the market is headed before it
actually goes there. The most profitable
information tends to be the kind that cannot be
easily double-checked because, by the time it
can be verified, so many other parties are in on
the story and have already placed their trades.
In consequence, traders learn which unverifiable
sources tend to be accurate over the long haul.
Bill Murphy, the chairman of the Gold Anti-Trust
Action Committee (GATA) is a veteran commodity
trader who receives all kinds of inside tips as
to what is really happening. He has enough
experience that he can sort out the real from
the imaginary stories with a high degree of
accuracy. When Bill Murphy has something to say,
I pay attention.
In his daily subscription commentary last
Wednesday, he revealed, "Early this morning I
received a phone call from someone in the gold
industry whom I have met previously. He has a
friend at the Chicago Mercantile Exchange, which
is affiliated with the Comex. This 'friend' has
been at the Merc for 35 years and is a pro's
pro, having been around the trading block a few
"He told my source on Friday [June 12] that the
U.S. government told Goldman Sachs on Thursday
afternoon to take the price of gold down. Note
the Thursday evening MIDAS (Murphy's) comments
after gold closed at $960.70 during the Comex
trading hours ...
"All of that AND THE GOLD CARTEL HAS THE
AUDACITY TO TAKE GOLD DOWN $6 ON NOTHING in the
Access Market. If you want to appreciate just
how important GOLD is, please take in the above
comments. Gold SHOULD HAVE upticked $4 in the
Access Market, not downticked ...
"The takedown in the Access Market was a prelude
for Friday when Goldman orchestrated a further
hit to $939.50, or down $21.40 from the Thursday
Comex close, with more selling to come on
The headlines that were reported referred to the
U.S. dollar getting stronger and to oil prices
falling, and that was why the prices of gold and
silver declined. Well, from the time that gold
touched $990 two weeks ago, the value of the
U.S. dollar index has increased from 79.5 to
80.5. During the past two weeks, through
Monday's Comex close, the price of gold has
fallen about 7 percent, entirely out of
proportion to being a response to a stronger
dollar. At the same time, through Monday's Comex
close, silver had fallen more than 15 percent
from its peak two weeks earlier.
Actually the current headlines crediting a
strong dollar causing the price of gold to
decline are contradicted by recent history. When
the price of gold topped $1,000 in February, the
U.S. dollar index was 87.5. As the dollar index
is now lower than 87.5, that theory would
indicate that the price of gold should be even
higher over $1,000 today.
It has become more obvious that the prices of
gold and silver do not trade either in
conjunction with or opposite to changes in the
stock market indices, U.S. dollar index, the
price of oil, long-term U.S. Treasury debt
interest rates, or other financial statistics.
Rather, for more than the past decade, the most
important factor has been whether there was
active price suppression activity.
Since 2002, the threat of an International
Monetary Fund gold sale of about 400 tons has
been trotted out repeatedly, but it seemed that
it was only brought up when the price of gold
threatened to make a major move upwards.
Finally, a few weeks ago, it was reported that
the U.S. Congress was on the verge of approving
this sale (for such a sale to take place it must
have support from 85 percent of the voting
membership, with the U.S. holding a 16.9 percent
Last week, a war funding bill passed Congress
and was sent to President Obama for signature.
This bill contained the approval for the IMF
gold sale. Although the bill received
significant news coverage for other provisions,
the approval of the IMF gold sale did not get
the major headlines that previous discussion of
such a possible step garnered. It was almost as
if the impact from the actual event was no
longer relevant to the gold market. Perhaps
someone in the U.S. government was so upset that
the price of gold didn't fall in conjunction
with this bill passing that he or she ordered
gold and silver to be knocked down this Monday
just to make a point.
Perhaps the most intriguing recent story is that
of the two men with Japanese passports who were
stopped at the Italian border on a trip to
Switzerland. The false bottom in one of their
briefcases hid $134 billion of supposed U.S.
government bearer bonds. As best I can learn
(the story has almost a total news blackout in
the U.S.). Most of the bonds were of the $500
million value plus a few $1 billion bonds.
Apparently the bonds looked good enough to seem
genuine except that the $500 million bonds were
dated 1934, before the U.S. government ever
issued bonds of that large a denomination.
There has been any number of conspiracy theories
about the source of these counterfeit bonds. One
attributes them to the Italian mafia. Another
has the Italian mafia and the Venezuelan
government working together (the Venezuelan
government has denied any involvement, which
they would do even if they were involved).
Another theory considered the bonds to be
genuine and represented an attempt by the
Japanese government to try to secretly unload
some of their U.S. dollar-denominated debt.
Perhaps the most interesting theory points out
that the bonds were of such high quality that
they could have passed inspection except for the
flaw of the 1934 date. The means of smuggling
them virtually guaranteed that the couriers
would be caught carrying them and the
counterfeit bonds discovered. It is possible
that one or more parties is signaling that it
has the capability of producing counterfeit U.S.
bearer bonds of such high quality that they
cannot be detected. However, rather than produce
actual counterfeits, this party wants to
advertise that it is risky to accept any U.S.
government bonds as being genuine. If this was
the intention of whoever made these fakes, that
could easily hurt the value of the U.S. dollar
as investors become afraid to purchase such
While gold and silver prices have declined from
two weeks ago, they are still up significantly
from the beginning of the year. The reasons for
the recent lower prices seem to come more from
artificial manipulations rather than free market
trading activity. As such, I consider it more of
a sign that we are getting ever closer to the
day when precious metals prices will rise by
leaps and bounds. The more people know about the
real news stories, and not just the headlines,
the sooner that gold and silver price
suppression schemes will completely fail.