GATA has struck paydirt once again. The following is an exchange between a supporter in our GATA army and Rainer Widera, head of international financial statistics for the Bank for International Settlements.

Dear Sir:

I am looking for some information on the gold market.

It has been noted by some gold market observers that for the fourth quarter of 2001, Gold Fields Mineral Services reported that the delta-adjusted hedge book for gold stood at 2,924 tonnes. At this point, the notional value of gold derivatives reported to the Bank for International Settlements was $231 billion. But as of December 31, 2003, the BIS reports gold derivatives of $344 billion. Meanwhile, producer hedging declined from 2001 to reach 2,166 tonnes at the end of 2003.

How is this possible?

It has always been claimed that the derivative position reflects the hedging of physical gold by the producers. How then can the derivatives position increase while the physical hedge position decreases? Can this be explained by an increase in speculative short positions unrelated to mining hedge books?

Sincerely,

(Name Withheld)

This is the key to understanding the real gold market, what GATA has discovered over the years, how the Gold Cartel has suppressed the gold price for years. It is the key to understanding what the gold fraud is all about.

It seems that GFMS and the World Gold Council are really fronts for the Gold Cartel. They have refused to deal with the gold price suppression scheme -- refused to acknowledge that the central banks have surreptitiously dumped more than 13,000 tonnes of gold to keep the price far lower than it would have been if allowed to trade freely.

How else to explain the silence and unwillingness of GFMS and the World Gold Council to confront such blatant contradictions to their year-after-year reporting?

Here are some comments on what makes the specifics of this BIS statement so significant:

"Please note that the BIS data are collected from banks and that their open gold derivative contracts reflect trading in the forward gold market not only with producers of gold but with other commercial banks and central banks as well."

This statement confirms what GATA has been saying all along. GATA's conclusion has now been validated not only by the market (outstanding derivatives are growing even as producer hedge books are being reduced) but now by the BIS, which is telling us that banks are using derivatives and that they are using them for their own books -- their own proprietary trading and position taking.

GMFS numbers are flawed because they do not account for the banks that are short gold -- that is, the gold liabilities of the banks.

"It is therefore not possible to establish a 1:1 relationship between the BIS data and the hedge book of producers for gold published by GFMS."

So the gold industry has it wrong. They can't explain the derivatives numbers. They can't explain the huge amounts of gold mobilized from the Federal Reserve Bank of New York and the United Kingdom, which by themselves dwarf the industry consensus and don't even take into consideration the gold mobilized from Switzerland and other financial centers from which hard numbers are not available.

That GFMS and the World Gold Council refuse to deal with this blatant contradiction reveals their lack of intellectual integrity. Both these organizations have done incalculable harm to gold investors, gold companies and their shareholders, and the poor people of sub-Saharan gold-producing countries. Both these disgraceful operations should be disbanded.

Any company supporting these organizations should be ashamed of itself for contributing to a shallow hoax. Why aren't gold producers up in arms over the scam perpetuated by the World Gold Council and Gold Fields Mineral Services?

© 2004 Bill Murphy
www.lemetropolecafe.com 
Archives