What if nobody cares about market rigging? Do you?


by Chris Powell, Gold Seek:

Dear Friend of GATA and Gold:

When GATA got started in January 1999 we figured that the rigging we saw in the gold and silver markets was the work of the big investment banks that heavily traded the monetary metals on the futures exchanges. Our idea was to gather evidence of their collusion and then sue them for triple damages under the Sherman Act, the Clayton Act, and the anti-trust laws of the 50 states.

Before long we realized that the U.S. government and allied governments were heavily involved in this rigging, just they had rigged the gold market in the era of the gold standard and the London Gold Pool of the 1960s, and that these governments likely were using the investment banks as brokers for manipulative interventions. So then we aimed to sue these governments as well and we hired a major anti-trust law firm to research the prospect.

The advice from our lawyers was not encouraging. If the U.S. government was the main instigator of the market rigging, the lawyers said, it probably was legal under the Gold Reserve Act of 1934, which created the U.S. Treasury Department’s Exchange Stabilization Fund and authorized it to trade not just gold but anything deemed by the treasury secretary to bear on the stability of the dollar. The act authorized the fund to do such trading in secret, making it reportable only to the president.

Nevertheless, in 2000 our consultant Reginald Howe, a lawyer with a degree from Harvard, thought he saw an opportunity to get the gold manipulation issue into court. Howe happened to own shares of the Bank for International Settlements, which was moving to expropriate those of its shares that were not already owned by governments. Howe knew that the BIS owned a lot of gold and figured that, because of the gold price suppression policy of Western governments, the price being offered by the bank to acquire the privately held shares grossly undervalued them.

Howe also figured that the Gold Reserve Act’s authorization for the U.S. government to trade in gold was not necessarily also authorization for the government to manipulate markets in violation of anti-trust principles.

So with GATA’s endorsement and support, Howe sued the BIS, the Treasury Department, the Federal Reserve, and five big investment banks in U.S. District Court in Boston, accusing them of rigging the gold market and thereby devaluing his shares of the BIS:


A single hearing was held in the case — on November 5, 2001. Your secretary/treasurer attended and reported about it in detail, finding the hearing most notable for eliciting an assertion from an assistant U.S. attorney that the U.S. government claims authority, under the Gold Reserve Act, to trade gold in a way affecting its price — that is, claims the power to rig the gold market:


Of course this was just what our anti-trust law firm had cautioned us about.

The judge evaded the Howe lawsuit’s big issues and dismissed the case on a jurisdictional technicality. (An international arbitration later concluded that Howe was right, that the BIS was paying too little for the shares it was recalling.) But no one in authority had denied the main accusation of Howe’s lawsuit, and, indeed, to the contrary, the lawsuit had compelled the U.S. government to claim, in public, the power and right to rig the gold market.

That was a huge accomplishment. But it required GATA to change tactics from trying to get anti-trust law enforced in court to simple exposure of what the U.S. government and its allies were doing.

As a result GATA began researching the longstanding and continuing policy of gold-market rigging by governments, compiling confirmations from government archives and similar sources and admissions by central bankers themselves, which now are summarized here —


— and detailed here:


Fittingly, the BIS continues to supply a monthly statement of account that, when compared to the previous month’s statement, discloses the bank’s constant if largely surreptitious intervention in the gold market on behalf of its member central banks, an inadvertently helpful monthly contribution to GATA’s documentation file.

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