October 16, 2007 – I have long suspected that the US Gold Reserve is being used by the gold cartel as a tool to help it try capping the gold price. See for example the April 23, 2001 press release by the Gold Anti-Trust Action Committee [ Press Release ] which refers to my then recently published article, “Behind Closed Doors”.
“Behind Closed Doors” provided compelling evidence that part of the US Gold Reserve had been swapped for gold in the Bundesbank. Gold was then removed from the Bundesbank’s vault and loaned into the market as part of the gold cartel’s price capping scheme.
We now have more evidence that all may not be well in Fort Knox. Many thanks go to Bill Rummel of Charleston, South Carolina for bringing the following to my attention.
The US Treasury quietly made a subtle change to its weekly reports of the US International Reserve Position, which includes the US Gold Reserve. This change was first made on May 14th. The differences can be seen by comparing the report’s old format release on May 8th to the new format used the following week. Here are the links:
Note the additional description of gold provided in the new reporting format. It says the US Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported “including gold deposits and, if appropriate, gold swapped” [emphasis added].
This description provides clear evidence that the US Gold Reserve is in play. Gold has been removed from US Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price capping efforts.
Gold placed on deposit gets loaned out by these bullion banks, and then sold into the spot market to try capping the gold price. The same thing happens with swaps, but the vague language in the note to the Treasury reports makes it uncertain whether they are in fact being used at the moment.
It is noteworthy that this change of accounting occurred in May. Could it be that the gold cartel had to dip into the US Gold Reserve to accommodate the big gold buybacks of hedge books that Lihir and others completed at that time?
The timing is also conspicuous because it occurred about the time GLD, the exchange-traded fund, showed a reduction of 23 tonnes of metal. Did GLD need to borrow gold from the US Treasury to replenish its stock? This was also a period when large deliveries and exchange-for-physicals were taking place on the Comex.
What does it all mean?
My friend Bill Murphy, who is one of the co-founders of GATA and also the proprietor of www.lemetropolecafe.com, has been writing for weeks about the potential for what he calls a “Commercial Signal Failure”. In his last letter yesterday he wrote: “We are getting closer and closer to that Commercial Signal Failure, so long touted here. All that means is at some point various commercial shorts will not be able to hang with their positions due to mark-to-market losses. At that point they will be forced to cover, sending the price of gold even higher, maybe sharply.” I think this Commercial Signal Failure has begun.
This new evidence provided in the US Treasury report as well as the rising gold price itself suggest to me that we are now witnessing the last scramble by the gold cartel to cap the gold price. It is a vain attempt by them, acting under the instructions of the US Treasury, to make the world think the dollar is worthy of being the world’s reserve currency when in fact everyone knows that it is not.
In short, the wheel has fallen off the truck. The dollar is heading for a train wreck. Use whatever metaphor you want, but the message is clear – the dollar is in serious trouble.
Non-US investors already got the message. Bloomberg today reported that foreigners sold a record $69.3 billion in U.S. assets in August. Including short-term securities such as Treasury bills, they sold a net $163 billion. The flight out of dollar denominated assets is gaining momentum, and gold is one of the safest places to be in a currency collapse.
Now all we need to know is how much of the US Gold Reserve has the gold cartel already put at risk? And how much more of the US Gold Reserve will be put at risk before the US Treasury finally acknowledges reality?