It’s yellow, it’s malleable and its price is soaring.
An ounce of Gold yesterday moved above $725. That’s up about 40% so far this year, and double the price from about three years ago. The precious metal, in short, is enjoying its greatest bull market in a quarter century.
The general assumption for the ascent is that inflation fears are stoking demand for the metal. Gold, after all, has a long history of proving itself as an inflation hedge, and a few thousand years of pricing aren’t easily dismissed. But one fiercely independent gold bug says there are other forces pushing the price of gold upward. In particular, gold’s price has taken wing because of the unwinding of the so-called gold cartel, which rigged the price of gold over the past ten years. This according to Bill Murphy, a former commodities trader who’s now chairman of the Gold Anti-Trust Action Committee (GATA).
Murphy and GATA have been called extremists, even by other gold bugs. Indeed, GATA spins a heavy tale of a government and Wall Street conspiracy, charging that the Federal Reserve and powerful banks have been manipulating gold for years, keeping its price lower than it otherwise would be. This is strong stuff, and even some card-carrying gold bugs are inclined to distance themselves from the theory. Euro Pacific’s Peter Schiff, for instance, yesterday told The Wall Street Journal (subscription required) that GATA is “a little conspiratorial, for me even. I don’t know if there was any real orchestrated event.”
Nonetheless, the fact that the Journal is writing about GATA and its theories suggests the world is coming around to taking Murphy’s conspiracy talk seriously. Or so says GATA’s chairman in the following interview. Another example he cites of the rising respect for GATA’s message: a gold report published in January by European bank Cheuvreux that references GATA’s research.
The Capital Spectator talked with Murphy yesterday by phone to learn more. With gold prices soaring, the time is ripe for a chat with a gold bug’s gold bug. Indeed, Murphy thinks a run in the metal to as much as $3,000 or more isn’t beyond the pale.
In any case, we can’t confirm or deny Murphy’s assertions, but given the strength in gold prices of late we’re not ruling anything out at this point.
WHAT’S DRIVING THE GOLD BULL MARKET THESE DAYS?
There’s a short squeeze of epic proportions going on.
HOW SO?
The gold cartel–the United States government, some other central banks and the bullion banks like Goldman Sachs and J.P. Morgan Chase–rigged the price of gold in the mid-1990s. It started with [former Treasury Secretary] Robert Rubin and the strong dollar policy. To help rig the price, in clandestine fashion, [several large banks] borrowed gold from the central bank and leased it into the marketplace without telling anybody–this was the gold cartel.
What happened was that the bullion banks could borrow gold at, say, 3/4% to 1% from a central bank, and then they would sell it. And that sold [shorted] supply would keep the price down. They would invest the proceeds [elsewhere], and for years they were trading in a rigged market, which allowed them to make money [at the expense] of the speculators who were unaware of what was going on.