(Chris Powell, Money Metals News Service) If reports this week are correct — there is a severe shortage of gold — the metallic kind rather than the paper kind — in the London market, caused by the desire of bullion banks to ship a lot of metal to the United States before President Trump imposes tariffs on imports of the monetary metals.
There are several problems with this scenario.
First is that gold is not a commodity or consumer good, the things Trump has been talking about subjecting to tariffs, but money in its highest form. Trump wants money to come to the United States for investment and purchase of U.S. production. Tariffs on imports of money make no sense.
If, as seems likely, the U.S. government has gold loan and swap obligations to meet, it would have another reason not to impede imports of monetary metal.
The second problem with the tariff scare scenario is that U.S. bullion banks and traders lately have had no trouble using New York Commodities Exchange futures contracts to obtain gold in London via the “exchange for physical” and “exchange for risk” mechanisms of fulfilling futures obligations. The bullion banks do gold business in both cities and gold can be sold for cash in London and the cash wired back to the United States.
Third, the reports say the Bank of England has been desperately lending metal from its vaults — presumably its own metal and the metal of other central banks — to help the bullion banks get metal for shipping to New York. But typically gold lending is a paper transaction in which IOUs, not actual metal, change hands. The IOUs are treated as the real thing but ordinarily the underlying metal never leaves the vault.
For several years gold’s big trend in central banking has been the repatriation of metal out of London and New York as nations don’t want to risk having their foreign-exchange assets frozen or confiscated by the United States or its allies. What central banks vaulting gold at the Bank of England these days would be giving permission for their metal to be moved even more distant from their control?
These considerations suggest another explanation for the gold shortage in London.
That is, what if the tariff panic stories are just more disinformation?
After all, both the Financial Times and Reuters reports were based on anonymous sources, precluding any accountability.
What if there really is just an ordinary shortage of gold? Or, to be more precise, what if there is a shortage of gold under U.S. and U.K. control relative to rising international demand for the safe-haven metal?
Meanwhile, news reports and research by Jan Nieuwenhuijs of Money Metals Exchange and others — even the feckless World Gold Council — have long been telling of rising demand for metal, particularly in Asia. Russia, China, and the BRICS countries have been openly contemplating building gold into a new international trade currency system to escape from the seemingly infinite financial derivatives with which the United States has been rigging markets and creating infinite imaginary supplies of gold and silver.
These countries may not be seeking to destroy the U.S. dollar but they are looking for a hedge against it.
If the fraudulent, derivatives-based Western gold market was breaking down at last, would it look much different than the situation reported in London this week?
And if gold were to be revalued by agreement among the major central banks — including the big recent acquirers of the metal — mightn’t revaluation be precipitated by a shortage of the metal in a major market?
Your secretary/treasurer long has thought that a revaluation would have to be accomplished in a flash — that is, on a Sunday night before the Asian markets opened — and that all major central banks would have to be participating in it. Nieuwenhuijs has produced evidence of official preparations for revaluation.
The record of central bank involvement in gold since the United States repudiated the Bretton Woods gold exchange standard in 1971 shows central banks striving to prevent the gold market from getting ahead of them — that is, to prevent a genuinely free market in the monetary metal from developing at all:
But lately gold does seem to have been getting ahead of them, rising about 35% in dollar terms over the past year, and more in other currencies.
Meanwhile, government and private debt has exploded in the United States, China, and other nations. China may already be in a depression.
Devaluing currencies is what governments do to inflate away debt.
The economists Paul Brodsky and Lee Quaintance hypothesized 13 years ago that central banks already were planning redistribution of official gold reserves as the prerequisite for devaluing their currencies, inflating their debts away, and coming out ahead with gold revaluation:
London metals trader Andrew Maguire has presented gold price charts suggesting that a revaluation has been underway in the open for many months now, with steady “stair step” increases in price, not the “disorderly” increases central bankers are said to hate, perhaps because they also hate free markets generally and free markets aren’t free if they aren’t sometimes “disorderly.” The stairsteps charted by Maguire indicate steady price management by central banks.
If the unidentified sources in this week’s FT and Reuters reports are telling the truth, the Bank of England has been trying desperately to keep managing the gold price by leasing large amounts of metal, which would be an indication that the central banks aren’t quite ready for revaluation. Of course, maybe they’re only waiting for this Sunday night, or next.
Maybe they need a little more time for their bullion bank brokers to cover any remaining short positions so there will be no need for another messy bailout mechanism like the Bank of England’s gold sales in 1999, which brought great suspicion to the bank and prompted complaints of gold market manipulation.
In any case, the bank’s reported intervention via gold leasing this week was a proclamation that the bank and probably the Federal Reserve and U.S. Treasury are still engaged in gold price suppression.
How dishonest do those who denied such suppression look now?
Chris Powell is a journalist in Connecticut, where he worked for the Journal Inquirer, a daily newspaper in Manchester, for 56 years, 44 of them as managing editor. He continues to write political columns for that paper and many others in the state. He frequently appears on talk radio programs on four Connecticut stations.
Powell is also secretary/treasurer of the Gold Anti-Trust Action Committee Inc. (GATA), which he co-founded in 1999 to expose and oppose the rigging of the gold market by Western central banks and their investment bank agents. He edits the GATA Dispatch, that organization’s daily electronic newsletter, and speaks on behalf of the organization at financial conferences in the United States and abroad.
He is a member of the Board of Directors of the Connecticut Council on Freedom of Information and was its state legislative chairman from 2004-2010.
