Earlier this month, Gold Anti-Trust Action Committee (GATA) secretary/treasurer Chris Powell commented on a feature article ("Gold Manipulation Redux") I authored dealing with allegations of gold market manipulation. Powell made a number of unwarranted assertions and assumptions about my views and opinions in his commentary.

Nonfiction authors should always be circumspect in their writings to ensure clarity of thought and firm grounding in the facts. Perhaps I wasn't clear enough in my article. To rectify matters, allow me to go point by point through Powell's commentary:

Real-time Monetary Inflation (per annum): 4.5%*

Earlier this month, Gold Anti-Trust Action Committee (GATA) secretary/treasurer Chris Powell commented on a feature article ("Gold Manipulation Redux") I authored dealing with allegations of gold market manipulation. Powell made a number of unwarranted assertions and assumptions about my views and opinions in his commentary.

Nonfiction authors should always be circumspect in their writings to ensure clarity of thought and firm grounding in the facts. Perhaps I wasn't clear enough in my article. To rectify matters, allow me to go point by point through Powell's commentary:

Dear Friend of GATA and Gold:

In [a recent] commentary, Brad Zigler, managing editor of the Hard Assets Investor Internet site, has done GATA the service of taking us seriously enough to answer us specifically in some respects. Zigler's commentary is headlined "Gold Manipulation Redux."

Zigler seems to accept that central banks intervene in the gold market, openly and surreptitiously. He seems interested mainly in asserting the integrity of the futures markets.

Counterpoint: Why, yes, I do accept the fact that central banks intervene in the gold market. In addition to outright sales, banks lease gold. That's precisely what I meant when I said:

"Central banks have, indeed, leased gold in the past and they're likely to continue leasing as a tool to manage their currencies. That, like it or not, is a central bank's mandate: to deploy its reserves - of foreign exchange and metal - to tweak and fiddle with the value of the legal tender."

Powell, however, misconstrues my acknowledgment of central bank lease activity as blanket acceptance of surreptitious machinations in the gold market. I've uttered no such tolerance in my writings.

He [Zigler] writes that since gold has been rising for quite a while now, any gold price suppression scheme could not be working. GATA argues that the scheme indeed is working by substantially slowing gold's rise.

Counterpoint: Among the elements required to establish manipulation under the Commodity Exchange Act is a showing that an artificial price was created by the alleged manipulator.

To posit an artificial price, a natural or unmanipulated price must necessarily be known. That triggers this question: "What would the current price of metal be if the alleged manipulation hadn't occurred? To what degree has the price supposedly been changed by bank action?"

I traced the history of the standardized basis of London cash gold and COMEX futures (the alleged venue for the manipulation) and found no appreciable skew in gold prices while bank short interest was growing. Where's the evidence, then, of a "slowing in gold's rise?"

Zigler acknowledges that a few U.S. banks have hugely disproportionate short positions in the futures markets in gold and silver but he does not consider these positions manipulative.

Counterpoint: That's right. Lopsided though these short positions may be in relation to the banks' long futures positions, so too is the metals exposure undertaken by the banks through swaps. That's reflected in the regulatory call reports. The long exposure in these derivatives necessitates short futures hedges to mitigate market risk.

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