HardAssetsInvestor

Written by Lara Crigger  |

June 05, 2009

Bill Murphy: Manipulation Of The Gold Market

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Crigger: How so?

Murphy: Think of it simplistically: If gold were to shoot up $250 in the next few weeks, what would everyone talk about? They'd talk about too much inflation, the dollar falling apart; they might talk about a crisis. It would be all negative for the politicians in power, the banks and Wall Street. Gold is a barometer of U.S. financial market health, which is why they try to control it.

Crigger: Can you walk me through how such a price manipulation would work? You said banks let out gold "surreptitiously" - how do they do it without attracting notice?

Murphy: Basically what happens is J.P. Morgan goes to a central bank and borrows gold, leases it at, say, a 1% interest rate. Then they take the physical gold and they dump it into the marketplace, which adds to the supply. That supply helps to meet demand; without that supply, demand would overpower the dwindling stuff coming out of mines and scrap supply.

Gold has gone up nine years in a row. It's way up this year. Now they're in what we call a "managed retreat," because they can only stop the excitement so much, and they're just trying to manage it. They don't want it to get out of control. But it's coming, and it's so strong that they're in deep, deep trouble.

Crigger: What evidence is there suggesting price manipulation?

Murphy: Well, we have nothing but evidence that we've collected for 10 years. We haven't found anything in 10 years that shows us we were wrong, and we're always looking.

A lot of it is on the public record, such as Alan Greenspan saying "Central banks stand ready to lease gold in increasing quantities should the price go up." Well, that's what they did.

Crigger: Right, but rather than what officials have said or not said, is there any evidence in the market itself that you could point to and say, "That means manipulation?"

Murphy: Look at the concentrated position of JPMorgan Chase in the gold and silver markets. Their percentage of the shorts - theirs and HSBC's - are almost the entire short position in the silver market. That's far more of a concentrated position than you see in oil, corn or any other commodity. Nothing else shows anything like it.

In fact, J.P. Morgan is short more silver than Nelson Bunker Hunt was long. But they allow that to occur. It's just ridiculous. They're not supposed to be having such concentrated positions. That's one of the mandates of the CFTC [Commodity Futures Trading Commission], to make sure these things don't occur, because that's how manipulations can happen.

Crigger: Is the fact that two or three banks have a majority in these short positions necessarily indicative of manipulation?

Murphy: They told Nelson Bunker Hunt that his concentrated long position was not to be allowed, and they forced him out. Well, why do they allow J.P. Morgan to do the same thing on the short side?

They said that Bunker Hunt manipulated the silver market. We're saying that J.P. Morgan is part of the manipulation of the gold and silver market.

This all developed from Robert Rubin to Lawrence Summers, from the Clinton administration to the Bush administration and now Obama - who, by the way, is going through with the same policies. When Geithner as treasury secretary was the head of the Fed [Federal Reserve Bank of New York], he carried out the manipulation of the gold market. The guy who helped originate it, Lawrence Summers, is now the top economic guy for President Obama. It's very entrenched. But the difference is now they're running out of available central bank gold to carry it out.