Gold Price Manipulation: Bullion, Gold Stocks Undervalued [ibtimes]

By MORAN ZHANG

Some industry experts believe the gold price has been artificially suppressed due to its strong impact on interest rates and government bond values, leaving many gold equities “significantly” undervalued.

One such expert is Bill Murphy, chairman of the Gold Anti-Trust Action Committee (GATA).

“It’s been an ongoing maneuver especially of late,” Murphy told the International Business Times. “There has never been an asset class that’s been going up 12 years in a row.”

Murphy believes the price of gold has been “artificially low for the past 12 years” as it has been manipulated by bullion trading banks, central banks with large gold holdings and the U.S. government.

“This gold cartel only allows gold to advance so much in a year,” Murphy said.

“When you own gold, you’re fighting every central bank in the world,” geopolitical analyst James G. Rickards told CNBC during a September 2009 interview.

Echoing Rickards’ view, Chris Powell, GATA’s secretary and treasurer, said last year, “Gold is a currency that competes with government currencies and has a powerful influence on interest rates and the value of government bonds.”

To support his remarks, Powell cited an academic study published in 1988 in the Journal of Political Economy by Lawrence Summers, then professor of economics at Harvard and since then a U.S. treasury secretary, and Robert Barsky, professor of economics at the University of Michigan. The study is entitled “Gibson’s Paradox and the Gold Standard.”

“This close correlation among gold, interest rates, and government bond values is why central banks long have tried to control — usually suppress — the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power,” Powell said.

“As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it,” Powell added. “Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.”

Paul Mylchreest, in his most recent issue of Thunder Road Report, offered a detailed analysis of what he sees as technically illegal and large scale manipulation of the gold market since the U.S. sovereign debt lost its “AAA” credit rating on Aug. 5, 2011.

Mylchreest, a former resource industry analyst, claims to show absolute proof of the existence of manipulation and how it is taking place. He used a succession of Kito daily gold price charts to back up his argument.

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Tungsten-Filled 1 Kilo Gold Bar Found In The UK [Zerohedge]

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Submitted by Tyler Durden on 03/24/2012 16:50 -0400

The last time a story of Tungsten-filled gold appeared on the scene was just two years ago, and involved a 500  gram bar of gold full of tungsten, at the W.C. Heraeus foundry, the world’s largest metal refiner and fabricator. It also became known that said “gold” bar originated from an unnamed bank. It is now time to rekindle the Tungsten Spirits with a report from ABC Bullion of Australia, which provides photographic evidence of a new gold bar that has been drilled out and filled with tungsten rods, this time not in Germany but in an unnamed city in the UK, where it was intercepted by a scrap metals dealer, and was supplied with its original certificate. The reason the bar attracted attention is that it was 2 grams underweight. Upon cropping it was uncovered that about 30-40% of the bar weight was tungsten. So two documented incidents in two years: isolated? Or indication of the same phenomonenon of precious metal debasement that marked the declining phase of the Roman empire. Only then it was relatively public for anyone who cared to find out on their own. Now, with the bulk of popular physical gold held in top secret, private warehouses around the world, where it allegedly backs the balance sheets of the world’s central banks, yet nobody can confirm its existence, nor audit the actual gold content, it is understandable why increasingly more are wondering: just how much gold is there? And alongside that – while gold, (or is it GLD?), can be rehypothecated, can one do the same with tungsten?

From ABC Bullion:

ABC Bullion received the following email from one of our trusted suppliers this week.

Note:

  • It was not ABC Bullion that purchased this bar, the email and photos were sent to us as a general warning.
  • I xxxx’ed out the city’s name to avoid any second guessing as to the name of the dealer.

19/03/2012:

Attached are photographs of a legitimate Metalor 1000gm Au bar that has been drilled out and filled with Tungsten (W).

This bar was purchased by staff of a scrap dealer in xxxxx, UK yesterday. The bar appeared to be perfect other than the fact that it was 2gms underweight. It was checked by hand-held xrf and showed 99.98% Au. Being Tungsten, it would not be ferro-magnetic. The bar was supplied with the original certificate.

The owner of the business that purchased the bar only became suspicious when he realized the weight discrepancy and had the bar cropped. He estimates between 30-40% of the weight of the bar to be Tungsten.

This is very worrying and reinforces the lengths that people are willing to go to profit from the current high metal prices. Please be careful.

Photos of the cropped bars: 1000g Gold bar cut showing inserted tungsten rods

Two halves of the cropped bar:

Finally, some observations from Paul Mylchreest on debasement:

Let’s consider the run-up to Rome’s hyperinflation. I think this comment from jaysromanhistory.com “Good Money, Bad Money, and Runaway Inflation” resonates with what’s happening in the US today:

 

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Antal Fekete Responds To Ben Bernanke On The Gold Standard

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Submitted by Tyler Durden on 03/21/2012 12:04 -0400

Yesterday, Ben Bernanke dedicated his entire first propaganda lecture to college student to the bashing of the gold standard. Of course, he has his prerogatives: he has to validate a crumbling monetary system and the legitimacy of the Fed, first to schoolchildrden and then to soon to be college grads encumbered in massive amounts of non-dischargeable student loans. While it is decidedly arguable that the gold standard may or may not have led to the first Great Depression, there is no debate at all that it was sheer modern monetary insanity and bubble blowing (by the very same professor!) that brought us to the verge of collapse in the Second Great Depression in 2008, which had nothing to do with the gold standard. And as usual there is always an other side to the story. Presenting that here today, is Antal Fekete with “The Gold Problem Revisited.”

THE GOLD PROBLEM REVISITED (pdf)

Antal E. Fekete

The article The Gold Problem of Ludwig von Mises, published 47 years ago in 1965, just six years before he died (the gold standard died with him in the same year) has some breath-taking thoughts, for example, “the gold standard alone can make the determination of money’s purchasing power independent of the ambitions and machinations of governments, of dictators, of political parties, and of pressure groups”, or: “the gold standard did not fail: governments deliberately sabotaged it, and still go on sabotaging it.” But for all our admiration we would be amiss if we did not point out certain errors in his article. These are all errors of omission, and correcting them would hopefully make the Mises article even more helpful to the discriminating reader.

Mises fails to answer his own question why gold is the best choice to serve as money. Indeed, why not another commodity, or a basket of commodities? The reason is that the marginal utility of gold is unique in that it declines at a rate slower than that of any other substance on Earth. Various assets have various marginal utilities which determine their value. All of them decline, albeit at various rates. In other words, economic actors accumulate assets increasingly reluctantly, up to their satiation point that will be reached sooner or later. For gold, this point is removed farther, so far indeed that for all practical purposes it is beyond reach.

Therefore if you substituted another commodity, or basket of commodities for gold, then you would end up with a unit of value the marginal utility of which was inferior. It would decline at a rate faster than that of gold. It would be akin to substituting a yardstick made of rubber for one made of metal.

1. The futility of inflationary policies

Mises ignores the fact that newly created money can be spent not only on goods and services, but also on financial assets. This is the proverbial fly in the ointment of the inflationary argument. It is also a subtle one, so much so that the government as the would-be perpetrator of inflation often falls victim to it. It may think that it is promoting inflation while, in fact, it acts as quartermaster for deflation.

By restricting the circulation of gold money or by other means, the government can make financial speculation more attractive. In doing so it wants to reduce the amount of money available for buying goods and services. This strategy of the government and its pseudo-economists consists precisely in channeling enough of the newly created money into speculative ventures so that the untoward consequences of price and wage rises will not occur, or they will occur later, so that the causality relation is obscured.

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