Antitrust suit threatens US dollar, which is being sustained by conspiracy to devalue gold.

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 Date: Wed, 09 May 2001 21:46:12 -0700


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Justice for Gold! Central banks have supported illegal gold price fixing and now face gold losses, a Boston court is told.

By Boudewijn Wegerif


14 March 2001

Monetary Studies Programme Folkhögskola Vårdinge 150 21 Mölnbo, Sweden Tel: +46.158 23315


Central banks may be forced to make public that they have loaned out a good deal of their gold holdings and that they may not get all of it back. Evidence in an anti-trust lawsuit, which opened in a Boston Court on 15 March, points that way.   

The banking establishment could be shaken to its foundations by the revelation. There have been two years of build-up to the lawsuit, centered on the efforts of the small Gold Anti-Trust Action Committee, GATA, to expose and put a stop to the way in

which central bank gold holdings have been loaned to gold bullion banks and then sold by the bullion banks in a massive price fixing operation.  

The plaintiff in the lawsuit is a private individual, Reginald Howe. Howe is a member of GATA and the owner of the internationally renowned  financial website, . 

He is bringing the case as one of the private shareholders in the Bank  for International Settlements in Basle, and he is handling the lawsuit himself as an experienced attorney and long time member of one of the  foremost legal firms in Boston. Through the lawsuit, Reginald Howe is seeking damages arising out of manipulative activities in the gold market from 1994 to the present time. 

He bases his complaint on the U.S. Sherman Act, which forbids the fixing of prices in international trade. The complaint alleges a manipulative scheme directed at three objectives:

(1) to prevent rising gold prices from sounding a warning on U.S. inflation;

(2) to prevent rising gold prices from signaling weakness in the international value of the dollar; and

(3) to prevent banks and others who have funded themselves by borrowing gold at low interest rates and are thus short physical gold from suffering huge losses as a consequence of rising gold prices.  

The defendants in the case are the Bank for International Settlements, the U.S. Federal Reserve Chairman Alan Greenspan, the President of the Federal Reserve Bank of New York, the former secretary of the U.S. Treasury Lawrence Summers, and the world's top bullion banks Goldman Sachs, Deutsche Bank, J.P.  Morgan, Chase Manhattan and Citigroup.  

Reginald Howe has been likened to David taking on Goliath. You can read the full text of his complaint at GATA's website, There is also an Adobe PDF version available for free download at .

Price fixing by the gold cartel has crippled the gold industry and bolstered the over-rated dollar at the expense of almost all other currencies, and commodities. Even if Howe's lawsuit does not succeed on technical grounds, the exposure could well remove the gold price fixing mainstay to the contemptible $2 trillion dollar a day currency speculations by which the economies of the world are being destroyed.

I had a small part to play in the formation of the Gold Anti-Trust Action Committee (GATA), in January 1999. In this article, I explain how and why the price of gold has been suppressed and how the banking system is now trapped into maintaining the suppression, at great risk.  

I also share the story of GATA. I was drawn to learning about the gold price fixing out of a gut feeling that it underpins the dollar speculations by which the wealth of nations is being siphoned off into just a few accounts.  


The Central banks are like political parties. They tend to pay more heed to the interests of big money and power than to the people they are meant to serve. Thus whereas most people may imagine that the central  banks value and take good care of their gold holdings, the banks, by and large, have shown more interest in devaluing gold relative to the dollar.  

Even though no longer officially linked to the dollar, gold remains the most sensitive, and when not manipulated the most accurate inflation barometer. Thus when the price of gold reached a realistic $385 an ounce in the early 1990s central bankers were not too pleased about the implications for the dollar.  

The market was saying that gold was now worth almost ten times more dollars than before August 1971, when President Nixon null and voided the dollar to gold link that the US, Britain and several other countries agreed upon in 1944. After the delinking, the US banks were free to create vast amounts of dollar credits, with no backing other than promises of an on-going US market for world goods and continued dollar dominance over other currencies. Neither promise could be kept except through the impossible formula of a  continuously expanding supply of highly valued dollars.

Debunking gold  and trashing it in the gold market would come to play a more and more important part in maintaining the over-supplied, over-valued dollar. In the process a gold derivatives pyramid has been created, which is now right out of control and a major embarrassment for bankers. 


For several years the yen carry trade had been the prized way of asserting the dollar's dubious worth. It was a winner for currency speculators. This is how it worked: The Japanese banks lent yen to the speculators at one to two percent  ridiculously low interest rates by international standards. The yen were then used to buy, say, US treasury notes, which yielded returns of from four to six percent. To top the windfall, the treasury notes became the security for derivative contracts for currency and other market exchange dealings at many times the value of the underlying security. (NOTE: A financial derivative is a form of credit based on an underlying security, called the margin, which may represent as little as five percent of the value of the derivative  the remainder being the allowed credit.)  

In 'When Transnationals Rule the World', David Korten writes: "When they are employed wisely, derivatives make the world simpler, because they give their buyers the ability to manage and transfer risk. But in the hands of speculators, bumblers and unscrupulous  peddlers they are a powerful, leveraged mechanism for creating RISK."

The yen loans for the yen carry trade had the effect of reducing the value of the yen, and the demand for US treasury notes had the effect of boosting the dollar. Thus, by the time it became necessary to repay the yen loan  there was the real possibility of further profit to be made from the improved exchange rate.  

However, in the summer of 1998 the yen started to improve in value against the dollar. This was because the underlying  economic realities of a growing US trade deficit and national debt stayed the yen surge for dollars. As the dollar weakened relative to the yen, repaying the yen loans became prohibitively expensive. Many currency speculators were badly hurt.

In the meantime, a gold carry trade had been established, with the central banks open  too open, as we shall see  to providing gold loans to the bullion banks at a lease rate of as little as .75 percent.  

In the gold carry trade, gold is borrowed from the central banks by the bullion banks on their own behalf, or on behalf of customers, with derivative contracts. The gold is then sold for treasury notes and other higher yield, dollar-based securities. These in their turn become the underlying security for still more derivatives, with which to speculate on the currency market, or even borrow more gold with!

 When it is time to repay the gold loans, gold is repurchased and delivered to the central banks. Or, more likely, the loan is rolled over for repayment at a later date. Naturally, as with the yen carry trade, the gold carry trade is dependent on the gold repurchase price being in line with or below the earlier purchase price.  

Large sums of derivative credit, relative to gold production, are now tied up in the gold carry trade. "At the end of 1999, the BIS reported $243 billion total notional amount of gold derivatives, which converted at the same year-end price amounts to some 26,000 metric tonnes, ten times annual new mine supply and almost as large as total official reserves [33,500 tonnes].

As of June 30, 2000, the BIS reported that the total national amount of gold derivatives had grown to $262 billion, or by 8%, notwithstanding falling gold prices during the period." (Paragraph 31, Reginald Howe's lawsuit complaint)

Almost half the gold derivatives are to the accounts of just four bullion banks, Deutsche Bank, $51 billion, J.P. Morgan, $38 billion, Chase Manhattan, $22 billion, and Citibank, $12 billion.  

In the J.P. Morgan's case, the derivatives indicate "gold shorts" of from 3,600 to 4,000 tonnes. The bank's risk capital at end 1999 was some $12 billion. Gold shorts is the euphemism for gold that has been borrowed and is owing to the central banks. Howe has calculated that a swift upward move in gold prices to $600 an ounce could result in Morgan suffering a loss of 10 percent on the derivatives  that is, $3.8 billion, which is nearly a third of the bank's capital.  

A swift upward surge to $600 an ounce is by no means unlikely once the grip of the gold cartel is broken. Gold surged to a high of $850 an ounce in 1980 in the volatile trade that followed the delinking of the dollar to gold in 1971. It took over twenty years for the realistic price of around $400 an ounce to establish itself.  

An essential part of preventing upsurges in the price of gold has been to encourage, and sometimes coerce, gold producers to become customers for borrowed gold from the central banks. The gold is borrowed against the delivery of future gold production at an agreed price. The practice is called selling forward and is an aspect of what is called hedging. By it the producer is protected against falling prices.

But the hedge also represents a bet against rising prices. By selling forward the producer is, in fact, registering a lack of faith in the future of gold and thus contributing to a fall in price.  

In fairness, even though it is against their long-term interests, many producers have adopted hedging strategies for the short-term financial benefits, and to remain in the good books of the bullion banks, on whom they depend for credit and other financial services.  

As the price of gold has been driven down and down, from an average $387 an ounce in 1995 to as low as $253, producers have been increasingly tempted to become players in the gold carry trade. This has been disastrous for the gold industry as a whole.  The lower price of gold  that some producers have helped to establish has meant the closure of several mines. In South where mining is relatively expensive, production is down to 400 tonnes a year from once 1,000 tonnes with a loss of jobs for tens of thousands of mine workers.   

There is a strong suspicion that Anglo Gold, Barrick have been for the gold carry trade because the falling gold price has given them the opportunity to buy up the mines and gold stocks of smaller producers, which have not been able to hold their own in the worsening financial climate.  

For the bullion banks the gold carry  trade has been an easy money-maker. They have dismissed the impact on the mining industry as being good for needed rationalization. And in the first years of the trade, they seem to have been blind to the fact that the same could happen to this money-spinner as happened to the yen carry trade.

In the financial  euphoria of the eighties and nineties, bullion dealers and central bankers seem to have talked themselves, and even most gold producers, into believing that gold's monetary role is finished. The word was that gold was finding its new, lower price level in the free  market; as just another commodity, nice for jewelry and with some high tech worth.  

It was even said that the central banks would sooner or later sell all their gold  holdings for dollars. Like Augustus Caesar, who had the word aeternitas inscribed on the silver denarii of his Roman Empire, the dollar imperialists have acted as if their money currency will last forever. They have been and remain in denial about just how much the " In God We Trust" dollar relies for its worth on gold price suppression. 


 I have had a small part to play in the drama of bringing the truth about the gold price fixing to bear, after picking up on the scent of lies surrounding gold (and the dollar) in 1998, mainly through the good reporting in the financial websites Gold Eagle.  and le Metropole Cafe .

I was so interested in what I read there, I was soon in correspondence with the owner/editor of the Cafe, Bill Murphy.  

On 20 January 1999, Bill posted a now famous essay, Scandal Gold at the Cafe's James  Joyce Table, under the pseudonym Midas. Could Goldman Sachs  Secretary of the Treasury, Rubin's, former firm  really be part of a cabal that has been holding down the price of gold? Midas asked.  

Midas, alias Bill, then went on to reveal that Goldman Sachs was running  around offering credit terms to gold producers, with forward sales in mind, at previously unheard of credit terms.  Practically no restrictions at times, at all. Just do it.

He also described how Alan Greenspan, the chairman of the Federal Reserve, had told the House Banking Committee of Congress in June 1998 that central banks stand ready to lease gold in increasing quantities should the price (of gold) rise.

Clearly the House Banking Committee was expressing some concern about the "gold carry trade". And when the huge Long Term Capital Management hedge fund collapsed a few months later, in the autumn of 1998, with a rumored 300 tonnes of gold shorts on its books it will have become obvious, alarmingly obvious, that there was good cause for concern.  

The FED chairman and fellow financial institution elders now organized for a number of big banks to take over the failed LTCM debts, including the 300 tonnes, $3 billion gold obligation. This was to prevent a 'systemic' financial crisisin clearer words, to prevent a Wall Street crash.  

As usually happens when trouble strikes in the family, daddy wants to know, in detail, what has been going on. What daddy Greenspan learnt about the wider ramifications of the LTCM collapse will have alarmed him. I guess he will have known then that the central banks were trapped. 

The bullion banks had by then already sold enormous quantities of borrowed gold into the market in their determination to keep the gold price under $300 an ounce.

 Most central banks do not disclose the amount of gold that they have on lease. Bullion banks are even more secretive about the amounts of gold that they have borrowed. Accordingly, there is considerable controversy. Informed estimates at the time ranged from under 5000 tonnes to a figure of 8,000 tonnes, from Frank Venerosa of Veneroso Associates, perhaps the most knowledgeable, independent gold market researcher.

Eight thousand tonnes of gold represents about 25 percent of reported central bank gold holdings and over three years of world gold production. How could such a large quantity of gold ever possibly be repurchased at the price at which it was borrowed?

Any attempt to do so would immediately undo the gold carry  trade and unleash market forces that could easily drive the price of gold up to $600 an ounce, and break the banks, so to speak. Naturally it would have been decided to keep the lid on the gold price, even though this would mean borrowing and buying still more gold from the central banks to feed into the market. 

To make good the decision, the twelve leading bullion banks came together to form a "Counterparty Risk Management Group", to be chaired by J.P. Morgan and Goldman Sachs. The stated purpose of the CRMG was to enhance best practices in credit and market risk management.

Is this not a 'cabal planner' of sorts? asked Bill Murphy, writing as Midas, in 'Scandale Gold'. It looks like a duck to me.  His commentary drew an immediate response from Cafe members, and an Invitation to a Lawsuit, from Chris Powell, the managing editor of a Connecticut daily newspaper.  If Midas is right, wrote Chris, we have a vast criminal conspiracy that is breaking antitrust law.

 We of the Gold Party should be suing to stop them. Whenever two or more parties cooperate in limiting practices or supplies of a product or service, the free market is defeated and antitrust law is broken. (There is an exception for labor unions). My guess is that the announcement of the "Counterparty Risk Management Group" would of itself be more than sufficient for a price fixing complaint.  And just imagine what might be uncovered by a lawsuit.

Chris' Invitation to a Lawsuit ended on the punch-line: I'm a nobody, but I pledge $500 to underwrite such a lawsuit.  Within two days $10,000 was pledged for an anti-trust legal action by Le Metropole Cafe members  free market activists all.

I came in with the suggestion that the organization for this be called GATA, for Gold Anti-Trust Action. Go GATA, go Gold!  I wrote.  The name GATA was adopted and I was invited to be chairperson of the GATA Committee that was promptly instituted under Delaware laws. GATA was administered through an executive committee of four for a couple of months till it became clear that it would be best run by Bill Murphy and Chris Powell, as sole executives.  

And this has proved to be right. Bill and Chris have made a wonderful team through over two years of lobbying and painstaking research, through a growing network of supporters and expert advisers. 


There has been a good deal of opposition along with support for GATA. Many financial commentators have accepted the trashing of gold by bankers at face value, as a market reality to live with. This is the line taken by John Hathaway, for example, in an essay The US Dollar: Over Owned and Over Valued at

Conspiracy, he writes is too strong a word for what is going on in the gold market. However, it should surprise no one that some form of manipulation is taking place. Governments routinely intervene in the currency markets. Gold is a form of currency. As stated by Professor Robert Mundell, Nobel Price Winner, 'gold is subject to a lot of elements of instability, not the least of which is the attempt on the part of several big governments to make it unstable.' 

" Hathaway cites the activity of the London Gold Pool from the 1950s to 1968. Tis was a joint effort by the US and several European governments to depress the free market price of gold so as to disguise the growing weakness of the US dollar. The suggestion is that what is happening now is no different.

 Since the early days of the Clinton administration, the tradition of manipulating the free market gold price has been honored, he writes. This is neat apologetics. However, it will not do. The manipulative activities of the London Gold Pool were as nothing compared to the carry on of today's gold cartel. Reginald Howe is closer to the mark when he writes, "The gold cabal has declared war on free markets, free governments and the (US) Constitution itself."

 Besides, we are not living in the 1950s and 60s. In this new millennium, to make life worthwhile and worth surviving for, open, free, honest exchanges are called for as never before. So back to seeking justice for gold. According to official sources, about 125,000 tonnes of gold have been mined and panned since the beginning of history, of which the central banks officially hold about a quarter. Most of the gold has been worked into jewelry, ornamentation, religious icons and statues, and, of course, coins and small bars for hoarding.

 About 10 percent has been used in industry and by dentists for gold fillings. Over the last three years there has been an annual demand for some 4,000 tonnes of gold and new gold production has been only 2,500 tonnes a year. Much of the demand for gold has come from the East and Middle East.  

In India, for example, over a thousand tonnes of gold are gifted as "monetary jewelry" to some 8 million newly-wed couples every year. The gap between new mine supply and demand has had to be met out of recovered gold scrap, some sales of official gold, and most importantly, by leased gold from the central banks.

All told, there is an enormous squeeze on gold, with little chance of substantial increases in production, even given a more economically viable price. According to the respected precious metals commentator Adam Hamilton, in an article at the Kiki Table, Le Metropole Cafe  total known underground gold reserves could be of the order of 12,500 tonnes. He comments, "At today's gold price and today's rate of mining, 2,500 tonnes per year, the world could run out of economically extractable gold within five years!"  

With such hard facts to take into account, the gold cartel's "Counterparty Risk Management Group" will have been very busy brainstorming for ideas to undermine public confidence in gold as security,  or open up new sources of gold supply to the market. 

One suspects that the movement to get the IMF to sell some of its gold holdings of 3,200 tonnes originated with the CRMG. It served its purposes admirably. One wonders, did the ministers and officials in the Clinton and Blair administrations hypocritical proposal they were espousing that the IMF sell 300 tonnes of its gold and use the proceeds to bring debt relief to the most highly indebted countries of the Third World.

 Critics,  GATA included, naturally pointed out that what the Third World really needs are fair commodity prices, starting with justice for gold. Fortunately, this was understood by the public at large. So the gold cartel came up with another strategy, far more dramatic. Just as gold threatened to surge over $300 an ounce in response to doubts about the proposed IMF gold sale, the British announced that the Bank of England would sell 415 tonnes of its gold holdings in a series of public auctions.

 The announcement on 7 May 1999 came with no pre-warning. The media and gold analysts were caught by surprise. But not the gold cartel's favored customers, it seems. On the evening of 6 May Bill Murphy reported in his Midas column at Le Metropole Cafe: 'Deutsche Bank's bullion desk is calling their clients saying that the gold market is stopping at $290'.

 This was a clear case of the world's top bank passing on insider information. Here is what Reginald Howe has to say about the Bank of England announcement, in paragraph 43 of the lawsuit complaint: "British officials have not agreed on who made the decision. However, the timing virtually guarantees not only that it came directly from the prime minister, but also that he must have had extraordinary reasons for making it."

 The complaint continues: "The manner of the British sales  periodic public auctions in which the entire lot is sold at the lowest price accepted for any portion  is so inconsistent with obtaining the best available return for British taxpayers that it has triggered an inquiry by Britain's National Audit Office. "The gold cartel's war against free trade had been declared." 

Officially, in January  1999 the UK had gold holdings of a mere 716 tonnes compared to the 12,574 tonnes of the Euro-system, through the European Central Bank. Thus, by a tortuous argument, one might say that a lower price of gold would work to Britain's advantage in the long term, because of its more adverse impact on the reserves of Britain's European neighbors!

 Whatever the reason for the give away sale offer of 415 tonnes of gold, through a series of auctions, which are still going on, the announcement certainly succeeded in knocking the price of gold for six.

 Within five months the gold price had dropped back from $325 to under $260. Whereas this was great for the dollar, it was bad for the Euro. The price of gold was dropping too fast and too far, so far as the German, French, Italian and other central banks of Europe were concerned. The fall had to be checked.  

On 26 September 1999, following the IMF/World Bank annual meeting in Washington, the European Central Bank and 14 other European central banks announced that they would not sell more than 400 tonnes in any one year for the next five years, nor increase their gold lending or other gold derivatives activities in that time.

 The 2000 tonnes sale limit over five years included the remaining 365 tonnes that The UK had already arranged to sell as well as the then-planned Swiss sales of 1300 tonnes. America and The UK were co-signers of this Washington Agreement, under some duress. The gold cartel was clearly caught off-guard. In two weeks the price of gold rose $60 to over $325.

 This comment by John Hathaway about the panic in government and private circles that was touched off by the Washington Agreement deserves careful attention: Central bank officials appeared to be clueless as to the structure of the gold market, especially as to the size and location of the short position that had been required to keep the gold price locked in a downtrend.

 They were horrified by the volatility of the gold price in the following days, and of the potential damage to bullion dealers, many of whom were also major international banks. The crisis galvanized the central banking community into quick action to provide liquidity for the gold market, which was about to vaporize.

 The provision of liquidity in the moment of crisis emboldened dealers to expand positions. After this near death experience, it is likely the official sector's resolve to keep gold in the deep freeze was reinforced. After this near death experience, it is  likely the official sector's resolve to keep gold in the deep freeze was reinforced.

From The US Dollar: Over Owned and Over Valued

 By late October, the price of gold dropped back to under $300. It is known in GATA circles that the Bank for International Settlements worked closely with the Federal Reserve Board, the Bank of England and the leading bullion banks to reverse the tide. Even the International Monetary Fund was drawn in to help. Although the IMF claims neither to lease gold nor to have legal authority to do so, there is nothing to stop it depositing gold with the BIS, or for the BIS to lend out. 

Howe reports this as having happened, in paragraph 41 of the lawsuit complaint. The Exchange Stabilization Fund (ESF), a mysterious US slush fund under the control ofthe secretary of the US Treasury Department, was probably also used.

 In the three months immediately after the Washington Agreement the ESF recorded a trading loss of $1.6 billion. This wiped out a $1.3 billion profit in the previous quarter, following on the Bank of England gold sale announcement.

 In Howe's view, these returns are almost impossible to explain unless the Clinton administration used the Fund to intervene in the gold market. Significantly, in responding to GATA enquiries through members of Congress, Fed Chairman Alan Greenspan and the then Secretary of the Treasury Lawrence Summers denied direct involvement in the gold market by the FED or the Treasury Department, but declined to address whether the Exchange Stabilization Fund is being used to manipulate the price of gold.


The figures in the table below tell some of the story of the concerted effort of the bullion banks to drive the price of gold back down to under $300 after the Wall Street rally, but not all the story.

 The figures are from the records of the US Office of Comptroller and Currency, which has no authority to record the gold derivatives of non-US bullion banks  principally Deutsche Bank. With regard to the Deutsche Bank position, its own accounts show a growth in precious metals derivatives from $5 billion to $51 billion in three years, from end 1996 to 1999. It is known that almost all the derivatives are for gold.

By Howe's estimates, the increase represented some 3,700 tonnes of gold at  the $280 an ounce price of gold at end 1999! Of the banks that are required to submit figures to the OCC, J.P. Morgan stands out as the biggest, with gold derivatives at end-1999 of $38.1 billion, up from $18.4 billion before the Washington Agreement. That represents an increase of some 2,000 tonnes to over 4,000 tonnes.

 Now note from the table how at this point, J.P. Morgan eases off and Chase Manhattan takes up the baton, so to speak. After showing little inclination to get involved in 1999, in the first three months of 2000 Chase increases its gold derivatives from $22.1 billion to 31.5 billion.

 Here is a precis of Reginald Howe's interpretation of the movements: Morgan has a reputation as the FED's bank. Its sudden emergence as a veritable fountain of gold derivatives is consistent with this role. The growth of Chase'' gold derivatives in 2000 is consistent with being pressed into service as gold derivatives threatened to swamp Morgan.

 Remember, Morgan is obliging the gold cartel from a risk capital base of just $12.1 billion. Apologist John Hathaway is too much the honest broker not to share a similar conclusion with investors who value his analyses.


In an essay, J.P. Morgan to the Rescue,   he notes that Morgan has the strongest credit rating among bullion dealers and "might have been called upon, or felt a calling, to shoulder some of the risk of weaker bullion dealer credits rattled by the gold short squeeze", caused by the Washington Agreement.  

Hathaway also comments on the shutdown of Morgan's New York trading desk at year end 1999 to a new address "conveniently near the anti-gold British Exchequer". He asks: "In rescuing its weakling counterparts, was J.P. Morgan acting strictly in its own self-interest or as an agent for the BoE and US Treasury?" Clearly it was acting in collusion with the BoE and  the US Treasury, so far as Reginald Howe and the Gold Anti-trust Action Committee, GATA, are concerned.

 In paragraph 90 of the lawsuit complaint Howe points out that the combined gold derivatives position of J.P. Morgan, Chase Manhattan and Citibank, represented an estimated 8,461 tonnes at the then price of $280 an ounce in June, 2000, and that this is slightly greater than the gold holdings of the US.

 Furthermore, the gold derivatives position of Deutsche Bank at end 1999 represents some 5,000 tonnes at the then price of $290 an ounce, and this is 1,500 tonnes more than the gold holdings of the German central Bundesbank. The figures relate to derivative contracts. The conversion to gold tonnage is representative only, not a record of actual physical gold borrowed.

 However, they do give an indication. Howe comments: "Gold derivatives positions of these magnitudes concentrated in four banks are simply too large and too risky to represent normal business done in ordinary course." There can be no doubt that the Washington Agreement has caused a serious gold liquidity crisis. With the sudden rush for gold after the Washington Agreement, lease rates soared from one and two percent to nine percent.

 Then Kuwait announced that it was sending its entire gold stock on loan to London, and the lease rate dropped back again. Bangladesh and Jordan followed Kuwait's example. It is thought that the Vatican and Suriname may also have obliged. The states that have come forward to help keep the price of gold at under $300 are all "in some way clients of the US Treasury", in John Hathaway's wording.



By Frank Veneroso's reckoning, based on years of experience in the gold market, diligent research and insider contacts, there are now some 14,000 tonnes of gold shorts, up from 8,000 tonnes at end 1998 . That means that of the total central bank and financial institution gold holdings of 33,500 tonnes, some 14,000 tonnes could be out on contractual loan to bullion banks.

 The wording in the last sentence is, officially speaking, correct, because the given figure of 33,500 tonnes for all central bank and financial institution gold  holdings may look as if it relates to actual physical gold held in the banks' vaults, but doesn't at all.

Reginald Howe spells out the reality in paragraph 27 of his lawsuit complaint  "during the term of the deposit or loan, the central bank retains the leased gold as an asset on its books and as part of its official gold reserves notwithstanding that the buyer of the leased gold owns it free and clear."

John Hathaway explains what is happening this way in a great essay, The Golden Pyramid "Central bank financial accounts refer to leased gold as 'gold receivable', an item lumped together with gold on hand as if it were one and the same. in reality, gold receivable is a dubious asset . . . A significant percentage of the borrowed gold has already been melted down and sold into the physical markets. It no longer exists in deliverable form.  

Aided by poor information and worse governance, physical gold borrowed from the central banks has been sold over and over again in multiple transactions. Through the magic of derivatives, paper claims have multiplied against a shrinking base of physical gold. The short 'covår' ration rivals the most overvalued Internet shares." The public is being wittingly or unwittingly deceived.

 At the website of the gold industry's representative body, the World Gold Council one is misled to believe that the US has gold holdings of 8,139 tonnes, The Netherlands 1012 tonnes, Sweden 185 tonnes, South Africa 126 tonnes, and so forth. There is no reference WCC website or in any other official records that I know of that the gold holding figures include the gold that is out on loan, with much of it sold.

 Therefore, no citizen anywhere, other than in Switzerland, I believe, can say with any certainty from the official figures open to public scrutiny how much gold the central bank of their country still actually holds in its vaults.   

Now when it dawns on the people of the oh so rich, "developed" world that the official figures for state gold holdings are totally misleading and that much of the gold may be lost to them, what is that going to do for the way people feel about their government?

What is that going to do to the dollar and linked hard currencies of the "developed" world? What is that going to do to the price of gold? Are the central bankers and treasury officials in the US and UK not ashamed to go to Third World countries like Kuwait, Bangladesh and Jordan to put on pressure for gold loans, especially while the Bank of England continues with the gold give away auctions?

 What hope is there of any of the central banks involved in the gold price fixing ever getting back all the gold they have leased to bullion dealers? How is it possible for "free market" forces to organize for gold to be marked at precisely $289 in the last days of December 1998, December 1999 and December 2000, and for the New York daytime and London overnight prices to fluctuate with a marginal precision ideally suited for gold carry trading over many months?

 No doubt, question like these will be raised in court, and will produce interesting answers, which will spill over into the media, during the course of the Howe Gold Anti-Trust Action lawsuit.