Monday, April 09, 2012

COMEX we have a problem - by Allan Flynn

Two Simple Questions for Lawmakers

  1. Is it lawful, as they advertise, for the Bank of International Settlements to undertake joint efforts to influence gold asset prices through intervention in the gold market? And
  2. Is it acceptableas they advertise, for the Bank of International Settlements to undertake joint efforts to influence gold asset prices by intervention in the gold market, where citizens and institutions otherwise are led to believe they are investing in free and fair markets?
During the third quarter of 2011, in the midst of the European banking crisis, with the Swiss Franc soaring to new safe haven heights, the Swiss National Bank came under increasing pressure to ease the burden of a too strong a currency on the swiss economy. Following ineffective actions in August, the SNB finally bit the bullet on September 6th, selling a reportedly 40-50 billion Euro to significantly devalue the Swiss Franc, which was otherwise becoming a much sought after alternative to the faltering Euro. Jeremy Cook, Chief Economist at currency brokers World First described the action on that calamatous day, in The Guardian, as:
the single largest foreign exchange move I have ever seen … The Swiss franc has lost close on 9% in the past 15 minutes. This dwarfs moves seen post-Lehman brothers, 7/7, and other major geo-political events in the past decade

Intuitively, the largest currency devaluation witnessed by any chief economist, should be wildly bullish for gold, since gold, like the Swiss franc is historically recognized as one of THE safe haven financial instruments. Strangely, in this case no. A cool five minutes before the SNB intervention, the gold price mysteriously plunged $50. This particular event begs the question of just who has undertaken obviously, such a joint gold and foreign exchange intervention? 

Rewind to Basel Switzerland, where in his 28th June 2005 opening remarks to the Bank of International Settlements BIS Fourth Annual Conference; Past and Future of Central Bank Cooperation, Economic Adviser and Head of the Monetary and Economic Department, William R. White listed the intermediate objectives of central bank cooperation as including the following:

the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.


Then in 2008, in an introductory presentation by Jean-François Rigaudy, BIS Head of Treasury at a Basel Switzerland, a slide on page 17. indicating the range of BIS Products available for members says:

Gold & Forex Services - Intervention

A copy of the slide from the presentation can be found here: https://docs.google.com/file/d/0B4fgY-hWNdmgSS1zQ0JLbWFUNXk5MENiUnRiWnEwdw/edit . The complete presentation can be found here: http://www.gata.org/files/BISAdvertisesGoldInterventions.pdf

How on earth would an agency comprising disparate central banks from around the world, operate to reduce prices in precious metals markets without anyone knowing? A clue was found in the Wall St Journal on February 7th this year, in an article indicating the preferred method for Bank of Japan to facilitate secret currency interventions: 

On Oct. 31, the BOJ -- acting at the behest of the Ministry of Finance, which sets currency policy -- entered markets to sell yen after it surged to a record high against the dollar. But analysts were caught off guard by MOF's admission that between Nov. 1 and Nov. 4, it conducted an additional $13.3 billion worth of "stealth intervention" by using a limited number of commercial banks sworn to secrecyhttp://online.wsj.com/article/BT-CO-20120207-719675.html
A recent article by Paul Mylchreest titled:  Thunder Road Report - 28 March 2012, details astonishing patterns of gold trading, including on page 32. graphic representation of the dual actions of last September 6th, in what an increasing number of investors fear as manipulated precious metals markets: http://www.mineweb.com/mineweb/action/media/downloadFile?media_fileid=1718.


Euro/CHF 5 Minute Chart - Sept. 6th

Gold 24 Hour Chart - Sept. 6th

By themselves, the BIS admission and Wall St Journal article are surprising, however read together with the graphs from September 6th 2011, one may conclude it is probable that as GATA have been claiming for years, and as Barrick once asked a court to consider in their defense, that central banks are using the services of commercial banks to undertake interventions in precious metals markets on their behalf.

On 27th February last, I wrote to the BIS asking about the purpose, nature, and frequency of gold market interventions as touted in their documentation. Rather than answering my question however, they replied on the 29th February, providing only a link to their latest Annual Report, which contains no information about the interventions. I therefore refer the issue to you, the reader, with the following two simple questions:
  1. Is it lawful, as they advertise, for the Bank of International Settlements to undertake joint efforts to influence gold asset prices through intervention in the gold market? And
  2. Is it acceptable, as they advertise, for the Bank of International Settlements to undertake joint efforts to influence gold asset prices by intervention in the gold market, where citizens and institutions otherwise are led to believe they are investing in free and fair markets?

2 comments:

  1. Hi Angelo, thanks for posting the article. May I request you either reference either the blog or cite the author also?

    ReplyDelete
    Replies
    1. Oops! Sorry Allan, Human error. I had put "source" with a link and have now added your name (slap wrist) to the title.

      Thank you for the message and ideas.

      Delete