>From Borsa & Finanza, Italy May 2001 The U.S. Treasury is accused of manipulating the free market. Risks for the international bourses. By Guido Bellosta A trial that starts in Boston affects the interest of hundreds of thousand of savers, financiers, and miners. On the bench is the Treasury Department of the United States, accused of having manipulated the international price of gold with sophisticated financial operations for many years. The accusation is also directed straight at Alan Greenspan, who declared on July 24, 1998, in front of the House Banking Committee, that the central banks "stand ready to lease gold in increasing quantities." The same phrase was repeated six days afterward by the same illustrious official to the Senate Agriculture Committee. For many years observers have noticed that the price of gold goes down with implacable regularity. The price of the yellow metal, after hitting a maximum of $860 20 years ago began a slow, regular descent. Currently the price sits around $265. At this level a lot of mines have been forced to close. Hundreds of thousand of South Africa, Canadian, and Australian miners have been laid off. Suspicion of possible manipulation in the price has pushed investors and miners to combine forces through GATA, the Gold Anti-Trust Action Committee, a non- profit organization (www.gata.org). Donations by Americans to GATA are deductible from income taxes. According to GATA. the economic laws of supply and demand for gold are being trampled on continually. The annual demand for gold exceeds the supply by more than 1,500 tons. The continuous sale of gold possessed by the central banks has made up for this deficit since the beginning of the 1990s. With such sales, however, the central banks have sunk the price even more. For this reason, on September 26, 1999, 15 European central banks decided to limit the transfer of the metal possessed to a maximum of 400 tons a year. This accord will continue for five years. The gold market reacted to the announcement with a strong rise in price. But it was like a fire of straw. The sales returned to get the upper hand again. The price of the gold, sunken with the clear use of derivatives, continued to go down. The cause of this continuous descent, not justified by the physical trading of metal, is imputed to the speculation effected with the derivatives from international banks. The use of such tools, according to the Office of the Controller of the Currency, could have exceeded $87 billion in 1999, more than the value of the American gold reserves. American reserves are estimated to be around 8,140 tons. Veneroso Associates estimates that the loans against gold amounted to between 9,000 and 10,000 tonnes at the end of 1999. All this while the gold mined is only 2,579 tons annually. The decrease in the price has allowed the large bullion banks to get loans at low rates, often less than 1 percent. The gold loaned by the central banks is then sold. The equivalent value for 20 years has been employed with profit on the financial markets. The decrease in the price of the metal allowed the repurchase at a lower price. This practice has been pursued with success from noted financial institutions. Such low rates were possible as the price of the gold continued to decrease. The profits of these institutions meant, however, the loss of tens of thousand of jobs in the mining sector, where the marginal mines were closed. Standard Equities of Johannesburg has predicted a collapse of 35 percent of gold mining production by 2008 if the prices remain at these depressed levels. The descent of the price of the gold, according to GATA, gives the false impression of a super dollar, shielding against inflation. Chairman Alan Greenspan and former Treasury Secretary Lawrence Summers have responded to inquiries by GATA by denying intervention in the market. But they have not clarified if such denial also pertains to the very suspicious Exchange Stabilization Fund, controlled directly by the secretary of the treasury. GATA is not limited to bringing into court the highest American authorities with the accusation of manipulating the price of the gold; it also points to the risk of a "crisis from the epic proportions" caused by the enormous use of derivatives in the market. The speculative bubble would burst, fed from the huge quantity of derivatives in circulation. This bubble threatens the solidity of the largest international banks and the strength of the dollar. Bill Murphy, chairman of GATA, has asked Alan Greenspan, in an open letter, to identify the exact quantity of the gold possessed by the United States. The last audit goes back to the time of Eisenhower. The market hovers on the rumor of a possible decrease in the gold possessed by the United States. Whatever the result of the trial, public opinion now knows the inherent explosive risks in the possible manipulation of the price of the yellow metal. A devastating financial crisis could surprise the markets. The possibility of a positive result of the trial already has produced the first consequences in the American stock market. The largest mining compaines (Barrick, Newmont, Placer Dome, Homestake) have seen substantial rises in their share price. The gold bugs will smile after 20 years. -END- Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/