Thanks Bill for accepting this interview.
-Maybe most of people in the gold world know about you and GATA. Nevertheless, for those who don’t know: Who is Bill Murphy? Where do you come from a financial point of view and what did motivate you to found the Gold Anti- Trust Action Committee (GATA)?
Thanks so much for your interest in what GATA has to say. I have a Wall Street background and worked for Shearson Hayden Stone and Drexel Burnham Lambert in Manhattan in the late 1970’s and early 80’s. At one point I became a limit position trader in the copper market after forming my own company, so I am very versed in how the futures market works in the US. In 1998 I realized the Internet was going to be a big deal and opened up www.LeMetropoleCafe.com as a subscription website which would focus on the gold/silver markets, as well as provide coverage of the US and world economies. Soon after opening up for business, the famed hedge fund Long Term Capital Management blew up. They were known to be short hundreds of tonnes of gold and that would have to be covered. However, it was clear that bullion banks such as Goldman Sachs, JP Morgan, and Deutsche Bank were capping the price around $300 in a collusive manner. My future colleague Chris Powell had anti-trust experience via his newspaper business. He suggested we try and stop it, so GATA was formed.
-In our last interview, Hugo Salinas Price told us that only a blind or a Harvard economist with a doctorate would not see the gold market is being manipulated. Do you agree? As I understand it, one of the main purposes of GATA is to communicate this fact to as many people as possible, and end this manipulation, but, Bill, isn´t it a lost war? Aren’t the manipulators “too strong to be stopped”?
Yes, Hugo is right on the money. It could not be more obvious. So much so that James McShirley, a speaker at GATA’s London conference in 2011, has written in advance at times what the gold will do on a given day. From a bigger picture someone only need to appreciate what the price of gold did last year compared to the DOW on the same quantitative easing news. The DOW went up 3,000 points and the gold price went down $600. That would have made no sense to anyone ahead of time. Gold went lower as it did because “The Gold Cartel” forced the price down with massive raids in the derivatives paper market, often when few traders were around.
Yes, this Gold Cartel is extremely powerful. But, they have an Achilles heel, and that is the physical gold market. The Chinese demand for physical gold is so massive, it is eating up the available central bank gold supply needed to suppress the price. The Gold Cartel’s raids haven’t gained any traction on the downside this year. Thus, the manipulators are being forced to retreat again as they did for 12 years in a row. They won the battle for 2013, but will lose their Gold War in the years ahead.
-As you know, many pundits like CPM Group’s Jeff Christian and famous investors like Jim Rogers say that they ignore allegations on gold market manipulation because those are mere “conspiracy theories”, what would you answer to them?
Hugo already said it best. Those who deny the manipulation are either working for the other side, suffer from cognitive dissonance, or have a “not invented here syndrome complex.” Three points to make:
*The Gold price was rigged for many years in times past, in the open, as in the London Gold Pool in the 1960’s. Why should now be any different? It is just surreptitious intervention this time around.
*It is recognized these days that most financial markets are manipulated. What, so gold and silver are two of the only markets not manipulated these days. JP Morgan alone was just fined some $20 billion dollars for rigging, or interfering, in eight different markets.
*As my colleague Chris Powell says, “GATA is a fact finding organization,” and we have 15 years worth of documentation to back that up. Here is just one of them which confirms what GATA has known all along: Secret IMF report: Hide gold loans and swaps for market manipulation (http://www.gata.org/node/12016)
-Bill, could you explain who does this manipulation? Why and more important how do they do it? What’s the ultimate purpose of the manipulators?
The Gold Cartel, as we call it, has the BIS, The Fed, The US Treasury, The Exchange Stabilization Fund, and various bullion banks such as JP Morgan Chase, as its main operators. Other central banks are called upon to supply physical gold into the marketplace from time to time. They conduct their operations by feeding central bank gold into the market in surreptitious fashion and using derivatives to bomb the paper price. For the time being the paper price greatly influences the physical market and the PM Fix in London, the price at which 90% of the physical deals of any given day is used to conduct business. The good news is Chinese demand is so immense, the physical market is beginning to take over in terms of determining the physical price. This is a main reason The Gold Cartel has been so ineffective this year … and they have tried to keep the price down, believe me.
They do what they do because gold is viewed as a barometer of US financial market health. Think of what the media says whenever the gold price is screaming higher. This Gold Cartel wants the gold price as subdued as possible so that it does not affect the US dollar and our interest rates negatively.
-By the way, China is now the largest consumer of gold by any measure. Do you think China has any interest on ending the dollar supremacy anytime soon? Or, do you think China and Asia in general would prefer to wait more time to keep buying bullion at today’s depressed prices?
The Chinese know what GATA knows about gold being suppressed. We know this because of communiqués made public and I have had three conference calls with the Chinese Investment Corporation, one of their Sovereign Wealth Funds. They are buying all they can at these artificially low prices. There are reports they have bought most of the gold mined over the last year. This gold is being bought by their public and the government.
The Chinese know gold ownership is going to be a big deal in the years ahead, as many of the world’s currencies come under pressure. Everyone knows the Chinese are exposed to a serious dollar devaluation because of all the US Treasuries they own. It makes sense they would be buying so much gold at these incredibly low prices. They know the gold price won’t be staying down here too much longer.
-Bill, Banco de México (Bank of Mexico or Banxico) claims to have 120 tons of gold stored at the Bank of England (BoE). Nevertheless, on December last year Banxico told me that the BIS said a physical inspection of its gold at the BoE was “not possible”. Should this be seen as an alert sign for investors and other central banks? In your opinion should Mexico repatriate its gold and buy more?
On the other hand, Comex registered gold inventories are at historic lows; the Germans got only five tones from the Fed last year and most of gold reserves at the Bank of England seem to be an illusion. It looks that most of the gold is gone. Bill, is there any real risk of a default on the gold market in the coming years? If so, what would be the consequences for the common people?
Let me answer both of those questions at the same time, if I may. The fact that Germany only received 5 tonnes of gold last year out of the 300 tonnes of gold they are supposed to get back by 2020 is most telling and is lighting up the scoreboard regarding GATA’s claims that much of the central bank gold has been used up to suppress the price and is no longer there. It is ludicrous that Germany couldn’t get all its gold back in a year, much less a pitiful five tonnes. They are not getting their gold back because it is not there. It is GONE, at least much of it.
There is a strong likelihood there will be gold defaults in the years ahead … whether that be an inability of central banks to get back what they have “swapped” or “lent out,” or from unallocated accounts … the same gold sold by institutions to numerous owners who think it is theirs. All of this is going to lead to the greatest financial market scandal in US history. So yes, Mexico should get its gold back as soon as possible and follow the Chinese example … and buy more.
-Is the silver market manipulated too or only the gold market is? Is there a risk of default on silver too?
When the gold price suppression scheme went into high gear under Treasury Secretary Robert Rubin, a decision was made that the price of silver had to be manipulated also because a dichotomy of a gold price going one way and silver going the other might make the suppression of the gold price too obvious. Thus, they have traded in tandem over the years … ridiculously so at times.
The past many months the silver open interest on the Comex has surged, up nearly 50% off its lows of last year, while the gold open interest remains very low. We don’t know why but it surely has to do with JP Morgan (the major futures short) and The Gold Cartel. Silver completed a major base on Friday and exploded to the upside. The odds are that these massive short positions are in trouble and will have to be covered in the near future. If not, it could lead to some kind of default down the road.
-Much people invest on physical gold and silver as safe havens. Do you think it is a good idea to keep accumulating those metals? Why?
The answer is yes and never more so. Just think of what has transpired in the US over the last years regarding QE and putting money into our financial system. And yet, our economy remains on very shaky ground. The odds are decent we are going to do more of the same for some time to come, with talk of tapering taking a back seat for a while. This money is eventually going to make its way into our economy and put upward pressure on prices. Artificially cheap gold and silver are going to the moon as this all kicks in. They will be the “GO TO” investments over the next few years and provide great financial comfort for those who own them.
-Is the gold bull market over, Bill?
Just the opposite. The prices of gold and silver have just broken out of massive bases. They were forced down to artificially low levels by The Gold Cartel … levels which cannot be sustained. How cheap is gold? A couple of years ago a number of folks said that if the gold price had kept up with inflation, the price would be $2500 an ounce. That is how cheap gold is today and it is all due to the price suppression scheme, which is in the process of unravelling. As far as silver goes, I am a big Eric Sprott fan of Sprott Asset Management in Toronto. He has been pounding the table that silver is going to $100 an ounce, or more. He has made a fortune by being so right with calls like this over his career. He will be right again.
-What’s your forecast for the price of gold in 2014? And what would be gold’s “fair value”?
GATA held a conference in August of 2005 in the Yukon’s Dawson City. The price of gold then was $436. My take back then was that a gold price of $3,000 to $5,000 an ounce would be needed to clear the market. I will stay with that one, with gold making all-time highs above $1900 an ounce within a year. Interesting enough, one of President Putin’s top economic advisors, Andrey Bykov, attended our conference. A quite gold price shot up $12 two days after the conference and hundreds of dollars in the ensuing nine months. Russia has been increasing its gold reserves ever since.
-Bill, is gold money?
Sure it is. It has been that way for 5,000 years or so. Silver is money too. They have been regarded as true stores of value for a very long time, and will only be more so in the years ahead.
Thank you very much again for your time, Bill. We look forward to having you again soon on this blog.
(Thanks to Victor Huerta for his support on preparing this interview)
(Thanks to Victor Huerta for his support on preparing this interview)