The gold futures market of the New York Commodities Exchange is operating very differently…
Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
Friday, November 1, 2019
Since we gathered here a year ago the gold and silver markets feel much stronger.
The central bank-instigated smashdowns that used to depress prices for weeks or even months are failing to keep prices down for more than a few days.
ILLUSTRATION: New York Commodities Exchange building
The gold futures market of the New York Commodities Exchange is operating very differently. Most contracts seeking delivery are now being converted through a rarely used mechanism called “exchange for physicals” whereby they are settled somewhere off the exchange, apparently in London. Until recently the “exchange for physicals” mechanism was said to be used only in emergencies. Now it seems that everything is an emergency. The implication here is that there is little or no gold available immediately in Comex vaults. Whatever it means, there is a huge change here.
The “exchanges for physicals” seem to be rolled over in London every two weeks to escape ordinary reporting requirements. This implies that the sellers are trying to hide something. Of course that the powers in the gold market are trying to hide things is not new, but that they are using new mechanisms of concealment suggests that they are under greater strain.
ILLUSTRATION: European Central Bank announcement
Of course central banks, if you believe their announcements, have turned into big net buyers of gold in the last couple of years and have let the European Central Bank’s longstanding regulatory framework for gold sales expire. That is, central banks are not selling much if any gold anymore, and sales and leases of central bank gold long have provided a big part of supply.
ILLUSTRATION: Bank for International Settlements
The Bank for International Settlements is the major broker for central bank gold trades and for decades has been heavily involved with trading, leasing, and swapping gold and trading its derivatives, though you can discover this only by looking closely at the footnotes in the bank’s monthly reports. But the bank’s recent monthly reports, which are monitored and publicly construed only by GATA consultant Robert Lambourne, show a sharp decline in its gold trading.
ILLUSTRATION: Negative interest rates chart
Many central banks and President Trump himself are clamoring to devalue their currencies. Many European government and private-sector bonds are carrying negative interest rates, which suggests that the world financial system has gone crazy. Negative interest rates essentially proclaim that government-issued money is hardly worth anything anymore, except for paying taxes – that money is free.
ILLUSTRATION: Federal Reserve Bank of New York
Suggesting that some disaster is brewing in the world financial system, in the last few weeks the Federal Reserve Bank of New York has announced plans to create $700 billion or more and distribute it to investment banks for supporting the stock, bond, and derivatives markets. The New York Fed has acknowledged receipt of GATA’s freedom-of-information request for an accounting of the recipients of this money but has failed to provide an answer.
But at least one sovereign power, probably the United States, still has been trying to contain the gold price, while the strength in the gold and silver markets suggests that at least one sovereign power simultaneously has been acquiring whatever physical gold and silver are available, especially in London.
ILLUSTRATION: Swiss gold flow to London
Swiss gold export data recently showed a reversal of the normal flow of gold out of London to Swiss refineries and onward to Asia. Instead gold lately has been flowing back to London as offtake there has increased greatly.
Such developments may be expected as the United States lately has been weaponizing the dollar in foreign affairs and imposing economic sanctions on any country that crosses U.S. policy. Lately there have been serious defections from the dollar system, and the defectors may have nowhere to go except to gold. But as much as central banks and President Trump want to devalue, they may want to devalue only against each other, not against gold, since — if devaluing against gold is done gradually rather than suddenly, as in an international currency revaluation — devaluation risks prompting a flight out of currencies, bonds, and equities and into the monetary metals.
That is, devaluing against gold gradually rather than suddenly risks a comprehensive market crash. But devaluing against gold suddenly makes it too late for investors to switch positions.
ILLUSTRATION: JPMorgan metals desk called criminal organization
Indictments, convictions, and fines against investment banks and their traders for manipulating the monetary metals futures markets are becoming almost too numerous to track. The U.S. Justice Department has obtained confessions and convictions from two former monetary metals traders at JPMorganChase and has indicted three more, including the former head of the bank’s metals desk. The Justice Department has even called the JPMorgan metals desk a criminal organization and alleges that Morgan inherited its “spoofing” tactics in the metals markets from its takeover of Bear Stearns, as silver market rigging critic Ted Butler long mainstained. That is, the Justice Department alleges that manipulation of the monetary metals futures markets has been going on for many years.
Other banks that recently have been incriminated or have confessed include Morgan Stanley, Mitsubishi, Merrill Lynch, and of course Deutsche Bank.
Big as these investment banks are, they often act as brokers for governments, and GATA is more interested in exposing what governments are doing in the markets, particularly the monetary metals markets.
In this respect three simple documents remain dispositive of the monetary metals market rigging issue — and, indeed, dispositive of the issue of the rigging of all markets.
ILLUSTRATION: CME Group Central Bank Incentive Program
The first document describes the “Central Bank Incentive Program” maintained by CME Group, operator of the major futures exchanges in the United States:
That is, the futures exchange operator offers volume trading discounts to governments and central banks for their surreptitious trading in all major futures markets in the United States – not just the gold and silver futures markets but ALL major futures markets.
As far as GATA can determine, no mainstream financial news organization has ever reported that governments and central banks are surreptitiously trading U.S. futures markets and getting trading discounts for doing so, though GATA has alerted many news organizations about this.
This document is posted at the CME Group’s internet site and is referenced in the CME Group’s filings with the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission. This document is not mere “conspiracy theory.” It is conspiracy fact. CME Group conspires with governments and central banks to assist their secret futures trading.
ILLUSTRATION: Mooney letter to Treasury and Fed
The second document is the letter sent in July 2018 to U.S. Treasury Secretary Steven Mnuchin and the Federal Reserve Board Chairman Jerome Powell by U.S. Rep. Alex Mooney, Republican of West Virginia, asking them to identify which markets the U.S. government is trading in, to explain U.S. government records that suggest secret transactions in gold, and to explain U.S. government policy toward gold generally:
Neither the Fed nor the Treasury have replied to Representative Mooney here.
ILLUSTRATION: Mooney letter to CFTC
The third document is the letter sent by Representative Mooney in February this year to the Commodity Futures Trading Commission asking whether the commission has enforcement jurisdiction over manipulative trading by the U.S. government or brokers acting for the government, or whether such manipulative trading by the government or its brokers is authorized by the Gold Reserve Act of 1934, which established the Treasury Department’s Exchange Stabilization Fund:
The CFTC also has failed to reply to Representative Mooney here.
Mooney’s letters to the Treasury, Fed, and CFTC repeat questions GATA long has put to those agencies without getting a response.
Since the Treasury, Fed, and CFTC refuse to answer the questions of a member of Congress about whether the U.S. government is surreptitiously manipulating markets, I think you can guess where the truth lies – that is, you can guess where the truth lies if you’re not a mainstream financial news organization or a market analyst who would like to continue being quoted by mainstream financial news organizations.
With negative interest rates, near infinite creation of government money, and greatly increased offtake of gold and silver in the physical markets, today’s circumstances might seem hugely favorable to the monetary metals. Since there is now division among central banks in regard to gold, with many central banks acquiring it instead of selling or leasing it to suppress its price, today’s circumstances may resemble those of the last months of the London Gold Pool in late 1967 and early 1968.
Back then the gold that major central banks were prepared to lose from their reserves in an effort to support their own currencies and particularly the U.S. dollar, the world reserve currency, ran out, and the United States, having lost two-thirds of its gold reserves in maintaining the pool, had to ask the British government to close the pool abruptly. Whereupon the gold price began rising substantially until a new mechanism of price suppression was created in 1974 – the gold futures market.
ILLUSTRATION: Wikileaks cable
Lest you have any doubt about the price-suppressive purpose of modern futures markets, please read the cable sent from the deputy chief of staff of the U.S. embassy in London to the State Department in Washington in December 1974. The cable reported that London bullion dealers expected that the imminent creation of a gold futures market in the United States would allow bullion banks to inject so much volatility into the market as to scare ordinary investors away from gold:
ILLUSTRATION: Coindesk story
Little has changed since then about the government-instigated objective of futures markets. A few days ago Christopher Giancarlo, the former chairman of the Commodity Futures Trading Commission, the CFTC chairman to whom Representative Mooney wrote in February asking if the commission has jurisdiction over market manipulation by U.S. government agencies or brokers, made a sensational revelation. Giancarlo admitted that the U.S. government facilitated creation of a futures market in bitcoin two years ago precisely to knock down the cryptocurrency’s price. That was when bitcoin was starting to compete with the dollar and other financial assets:
ILLUSTRATION: Netherlands Central Bank
Yes, the age of infinite money would seem very promising for the monetary metals. The other day even the central bank of the Netherlands called gold “the perfect piggy bank” and the basis for rebuilding a financial system:
But those who would invest in the monetary metals and their miners should remember something not as encouraging.
ILLUSTRATION: Text excerpt
That is, the success of a system of infinite money requires infinite gold, silver, and commodity price suppression to help conceal currency devaluation and keep people within the system.
For decades we have been operating under the principles of Modern Monetary Theory. There is nothing remarkable about MMT. It is more like a truism than a mere theory. Yes, governments can create and dispense infinite amounts of money that is not directly convertible into gold or some other commodity, restrained only by evidence of currency debasement. That’s why commodity price suppression in the futures markets is the prerequisite of MMT.
Market-rigging governments and central banks are not going to give up easily, and their power to create infinite money and disburse it secretly, great as it is, is not even their greatest power.
No, the greatest power of market-rigging governments and central banks is their ability to intimidate news organizations and market analysts out of investigating and telling the truth about what governments are doing in the markets. If the truth of those market interventions was ever reported, the markets might be very different. They might become actual markets again.
GATA Chairman Bill Murphy and I will hold a workshop tonight at 8:20 in the Churchill Room upstairs. You’re all invited.
And if you’d like more information about GATA, please write to me at [email protected].
Thanks for your kind attention.
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