Former High-Ranking Treasury Official: Fed Ordered Attack On Gold

Speaking of manipulating the price of gold, there’s been a good deal of suspicion that the yellow metal has come under deliberate attack.

It doesn’t come as a surprise to me that some might think this, considering the following:

• A number of Federal Reserve officials keep blabbing on about how the central bank might dial back quantitative easing soon, helping to shore up the U.S. dollar when they do this while subsequently detracting from gold’s allure
• The seemingly-reformed financial news media (accused of being stock market cheerleaders in the 90s and early 2000s) has bared their true colors and have savaged gold with a barrage of negative press. Of course they fail to mention that “gold is still up by more than 400 percent from the lows in 1999, whereas the S&P is barely up 2 percent from their highs in 2000,” as Marc Faber reminded Yahoo! Finance viewers this morning.
• Then there’s that huge disconnect between the “paper” gold market- where traders are supposedly running for the hills- and the “physical” gold market, where buyers are paying significant premiums over spot to acquire tangible gold and dealers are describing current demand as being a buying frenzy, not seeing anything like this in years- even decades.

Enter Paul Craig Roberts, chairman of the Florida-based Institute for Political Economy. Roberts is a former associate editor and columnist for the Wall Street Journal who President Reagan appointed as Assistant Secretary of the Treasury for Economic Policy.

Roberts thinks the Federal Reserve has been orchestrating an attack on gold.

He wrote on the Institute’s website this past Saturday:

On Friday, April 12, 2013, short sales of gold hit the New York market in an amount estimated to have been somewhere between 124 and 400 tons of gold. This enormous and unprecedented sale implies an illegal conspiracy of sellers intent on rigging the market or action by the Federal Reserve through its agents, the BTBF that are the bullion banks.

The enormous sales of naked shorts drove down the gold price, triggering stop-loss orders and margin calls. The attack continued on Monday, April 15, and has continued since.

Before going further, note that there are position limits imposed on the number of contracts that traders can sell at one time. The 124 tons figure would have required 14 traders with no open interest on the exchange to sell all together in the same few minutes 40,000 futures contracts. The likelihood of so many traders deciding to short at the same moment at the maximum permitted is not believable. This was an attack ordered by the Federal Reserve, which is why there is no investigation of the illegality.

Note also that no seller that wanted out of a position would give himself a low price by dumping an enormous amount all at once unless the goal was not profit but to smash the bullion price.

Since the April 12-15 attack on the gold price, subsequent attacks have occurred at 2pm Hong Kong time and 2 am New York time. At this time activity is light, waiting on London to begin operating. As William S.Kaye has observed, no entity concerned about profits would choose this time to sell 20,000 to 30,000 futures contracts, but this is what has been happening.

Who can be unconcerned with losing money in this way? Only a central bank that can print it.

(Editor’s note: Italics added for emphasis)

Roberts isn’t the only one accusing the Fed of ordering an attack on gold. Back on April 29 I started off a post with the following April 17 statement from Ambrose Evans-Prtichard, international business editor over at The Telegraph (UK):

My view is that the US Federal Reserve and the Bank of Japan ‘caused’ the gold crash. The rest is noise…

The world is still in a contained depression. Sliding commodities tell us global money is if anything too tight. ‘There is a threat of deflation almost everywhere. A lot of central banks will have to follow the Bank of Japan, whatever they say now,’ said Lars Christensen form Danske Bank.

The era of money printing is young yet. Gold will have its day again.

You can read the entire Roberts’ piece on the Institute for Political Economy’s website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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