Chris Powell picks apart a recent article touting LBMA gold transparency as largely propaganda and disinformation…
Dear Friend of GATA and Gold:
Writing in the October edition of The Alchemist, the magazine of the London Bullion Market Association, former French central bank official Isabelle Strauss-Kahn acknowledges that central bank officials notice and are sensitive to complaints that they are manipulating the gold market. She also claims that central bank operations in the gold market have become more transparent, as if she doesn’t know how secretive those operations remain, even at her own former employer.
Strauss-Kahn, who joined the Banque de France in 1995 and was its director of market operations from 2003 to 2008, writes: “In 1995 I was invited to speak at a conference in New York organized by an investment bank. The price of gold was around $380 per ounce at the time and the market was quite bearish. My speech was not controversial and presented the stance of the Banque de France as a big and conservative holder of gold, but it triggered passionate reactions and debates within the audience.
“I could feel the anxiety and opposing views of producers and investment banks, which were all scrutinizing central banks’ behavior. Some were even accusing the authorities of manipulating the market.
“In 1998 Frank Venoroso published the ‘Gold Book Annual,’ questioning the accuracy of the widely respected and independent Gold Fields Mineral Service gold statistics. Rumors abounded — even those of conspiracy. Needless to say, these irrational times made for a very interesting start for me in the international gold market.”
She continues: “In 2000 the European System of Central Banks set up a working group to write a report on the gold market. I chaired that panel. The debates we had were very lively: The question of whether gold lending by central banks had a negative impact on the spot gold price divided us. I was among those arguing that, in the context of the gold market at that time, gold lending by central banks did have a depressive impact on the gold price.
“This concern explains why the Central Bank Gold Agreement specifically stated that there was to be a block on increasing gold leasing and the usage of futures and options. The second reason behind the agreement was the recognition of the unique position of central banks in the market as a major player and, more importantly, as a significant holder of gold. Being transparent as to their intentions would stabilize the market by reducing uncertainty. But in no way, as some intimated, was there an intention to manipulate the gold price. The initial Central Bank Gold Agreement and the subsequent versions fully achieved these objectives, in my opinion.”
The first Central Bank Gold Agreement was announced in September 1999 —
— and if transparency was among its objectives, it nevertheless co-existed cheerfully with the policy of obfuscation outlined secretly by the International Monetary Fund just six months earlier, which was to permit central banks not to distinguish their gold swaps and leases from their ordinary gold reserves, lest honest accounting disclose their surreptitious interventions in the gold and currency markets:
Strauss-Kahn adds: “Transparency remains vital for markets. Interest in central banks’ reserve operations in gold surges from time to time, especially when China and Russia are supposed to be active. The various rounds of central bank gold agreements have been quite helpful in promoting an increasing transparency of central banks’ activity in the gold market and in dispelling rumors that central banks are somehow interested in manipulating its price. Furthermore, more and more central banks are subscribing to the IMF Special Data Dissemination Scheme template where they declare their gold holdings. (The People’s Bank of China is one of these.)”
In fact the People’s Bank of China has been extraordinarily secretive about its gold reserves, reporting them as unchanged for more than two years even as huge amounts of the metal have flowed into the country, and the bank has not responded to requests for elaboration:
Strauss-Kahn concludes: “While central banks may not disclose everything and must preserve some mystique … they should be as open and transparent as possible, and should not seek to be shrouded in mystery just for the sake of it.”
She should send her appeal for transparency to her successor as director of market operations for the Banque de France, Alexandre Gautier, who three years ago summarily dismissed a request from a friend of GATA for an explanation of the objectives of the bank’s admittedly almost daily trading in gold:
“The Banque de France,” Gautier replied, “does not make public the management of its foreign exchange reserves. Furthermore, we very seldom give interviews.”
Even so the bank’s former director of operations is permitted to write articles celebrating central banking’s supposed transparency in the gold market.
Of course the Bank for International Settlements, of which the Banque de France is a member, also trades gold secretly on a nearly daily basis and refuses to explain its objectives:
Thus Strauss-Kahn’s article is largely propaganda and disinformation.
While the London Bullion Market Association’s magazine is named The Alchemist, its alchemy is of a different sort, the sort of alchemy undertaken by modern central banking itself: not to turn lead into gold, as the alchemists of old sought to do, but to turn gold into mere paper.
Strauss-Kahn’s article is headlined “Removing the Cloak from Central Bank Gold Operations” and the October edition of The Alchemist is posted in PDF format at the LBMA’s internet site here —
— and, for safety’s sake, at GATA’s internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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