Rigged Gold Market, a Secret Payoff to China

By Dominique de Kevelioc de Bailleul

As Italian and Spanish 10-year note yields breakout to ‘engine light’ levels of more than 6 and 7 percent, respectively, the China-led BRICS announced at the G-20 in Mexico an additional $95.5 billion ‘contribution’ to the IMF’s emergency bailout fund, with China signing off to $43 billion of the total package.

As renowned historian of economics Niall Ferguson put it on the eve of the Greek election, Sunday, “If there’s going to be a Lehman moment in the crisis it’s going to be next week.”  Well . . . that’s this week.

But, so far, the Lehman-like moment hasn’t arrived and won’t.

Granted, no nation gains from a sudden collapse of the eurozone.   However, China, the biggest creditor of them all, with approximately $3.2 trillion of Western fiat on its books, won’t come to the financial aid of the hopeless European Union (from its own making) without some form of collateral—or maybe a deal, instead, in which something of tangible value could be acquired very cheaply in return for its ‘altruism’.

That tangible central bank asset can only be the coveted asset, most dear as a hedge against the endgame for the dollar—gold!

Though the Fed and its high-profile cheerleaders (billionaire icons Warren Buffett, Charlie Munger and Bill Gates) poo-poo gold’s intrinsic value to dupe/contain the awesome collective purchasing power of the American and European people from entering the tiny gold market in force, the reality of its price rise against every currency for the last 12 years tells quite a different tale.

“Gold is a reserve currency, as far as the market is concerned,” Sprott Asset Management’s Eric Sprott told FinancialSense Newshour’s Jim Puplava in an Oct. 2011 interview.  Sprott went on to say that central banks and the shrewd money know the endgame for the dollar will include gold as the backbone of a new global monetary system—a system that presently finds China sorely lagging in gold reserves when compared with the core EU nations and the U.S.

According to IMF data of 2010, China is way behind, though estimates of China’s real gold reserves reach as high as much as more than 3,000 tons—a still meager amount considering China’s deep central bank reserves.

China, 1,054 tons, 1.8 percent of reserves

United States, 8,133.5 tons, 76.6 percent of reserves

Germany, 3,396.3 tons, 73.7 percent of reserves

France, 2,435 tons, 71.8 percent of reserves

Netherlands, 612.5 tons, 61.9 percent of reserves

Italy, 2,435.8 tons, 73.4 percent of reserves

Spain, 281.6 tons, or 39.2 percent of reserves

Portugal, 382.5 tons, or 89.2 percent of reserves

Greece, 111.7 tons, or 81.3 percent of reserves

And here’s how JP Morgan’s gold suppression scheme works for the Chinese but not the American people (or Europeans).

A rising gold price, or better still, a soaring gold price crashes the dollar (all G-8 currencies) and China’s $3.2 trillion of reserves.  No one wins under that dire scenario except those holding privately-held gold—the castigated tiny group referred to as ‘preppers’.

Moreover, an overt announcement issued by the West to transfer gold to settle payment (the scheme devised under Bretton Woods) after multiple decades of trade deficits would not work either, as years of artificially low gold prices would create immediate and furious front-running by the market, thereby drastically reducing the number of gold-tons China would receive for its fiat, and causing rapid runaway inflation, globally.

Additionally, public outcry of the overt and sudden transfer of wealth from the West to the East would be political suicide to those in power at the time.  For example, the protests among the overall prosperous German people at the thought of Germany pledging its gold to back the EFSF last year was fierce and has caused its president Angela Merkel dearly in the polls.

Therefore, the solution is to covertly transfer gold to China through the LBMA, the Comex or any backdoor available to Western central banks in a gradual manner.  JP Morgan’s trading desk is the mechanism, while the CFTC pretends to investigate the gold manipulation matter to delay further the day of reckoning.

On Mar. 8, Jim Sinclair brilliantly observed that Western central banks know the jig is up for any hope of maintaining the current financial system and plan to prop-up a seriously listing global economic ship for as long as possible before the inevitable revaluation of gold is announced.  In the meantime, China stockpiles gold in preparation of a new gold-backed monetary regime.

“So their [central banks] efforts, in my opinion, are not to depress the price of gold, but to prevent gold from rising into the area where it becomes ballistic,” Sinclair told King World News (KWN).

Sinclair continued by stating that gold will continue to rise enough to prevent a force majeure in the gold market, but the plan by the Fed is for gold to rise in an orderly and stealth manner for as long as possible in the hopes of preventing another post-Plaza Accord (1986) stock market crash of 1987, or an Asian currency crisis of 1997.

“The major players in this game of power need stability for as long as possible,”  Portola Group founder Robert Fitzwilson told KWN, Mar. 19.  “Stability, in this case, is defined as the absence of chaos and absolute panic.”

Commenting on the enlarged pledge by the BRICS out of the G-20 meeting in Mexico, Monday, the US-centric IMF President Christine Laggard told reporters the additional contributions by the BRICS demonstrate “the broad commitment of the membership to ensure the IMF has access to adequate resources to carry out its mandate in the interests of global financial stability.”

She added, “Countries large and small have rallied to our call for action, and more may join. I salute them and their commitment to multilateralism.”

Multilateralism.  Code word for a globally coordinated agenda, which must include a reconciliation of global imbalances and a revaluations of the world’s reserve currencies to achieve that alleged “global financial stability”.

As Western powers dupe its constituencies into holding dollars and euros throughout the crisis, the Chinese have been given red-carpet access to cheap gold through JP Morgan’s price suppression scheme.  As the Chinese buy huge quantities of the yellow metal, JP Morgan helps ‘paint the tape’ for the ‘punters’ and inexperienced money managers, alike, who look for trends to buy into as a momentum trade.  No trend in gold has emerged for nearly one year, giving China that much time to accumulate the gold it needs before the Big Reset.

“Why would the West give China that gold at discounted prices?” KWN’s Anonymous London Trader asks, rhetorically.   “Yes, the bullion banks act on behalf of the central banks to manipulate the price, they act as agents, but the central banks and their agents are also aware that the Chinese are building up their gold reserves. This is the bigger picture which the gold bears do not understand.”

Correct.  But the bears will fully understand the “bigger picture” when the time comes after the Chinese have accumulated enough gold during an orderly bull market in the yellow metal.

U.S. political leaders have outsourced American jobs to China throughout the past two decades, given military technology to China during the Clinton Administration, and now prepare the Chinese for a new global monetary regime at the expense of the American people.  It’s all about “multilateralism,” as globalist Christine Laggard refers to the BRICS’ generosity—and she “salutes them.”

Did German Gold Bailout Europe?

Question surrounding the disposition of German gold held by the NY Fed is gaining traction with the media, both in Germany and the U.S.  Considering the secrecy of central bank operations, German gold could have served as partial collateral (or levered source) for the latest $714 billion bailout of the euro by the ECB on Feb. 29.  Sign-up for my 100% FREE Alerts

The unaudited gold may have made its way into the cash market to suppress the gold price following the announcement by the ECB to extend ‘credit’ to approximately 800 banks in the euorzone.  And the credit extended to these banks by the ECB appear to have come from the Fed’s swaps window, according to Trim Tabs.

“ . . . the Fed’s currency swaps accompany a massive expansion of the ECB’s balance sheet.  In 2011, the ECB’s balance sheet soared $947 billion, or 36%, to a record $3.5 trillion, which includes the $638 billion in low-interest loans doled out to Eurozone banks in December.”

Whether the delay to liquidate German gold was part of the deal made by the Fed and the ECB cannot be known for sure.  Laws, and in some cases, immunity from prosecution, stand in the way of any semblance of transparency at the Bundesbank, which has now become a political matter in Germany.  The Bundesbank missed its gold audit of 2010, raising a red flag with the German people.

Not auditing the nation’s gold is “a clear breach of the law,” top Bilanzrechtler Prof. Jörg Baetge told German newspaper BILD on Mar. 6. “At least every three years to control counts the bars are made. [Google translation]”

Bundestag representative, Phillip Missfelder, has discovered that suddenly the Bundesbank has taken on the attitude of the U.S. Federal Reserve.  The 32-year-old chairman of the Junge Union inquired of the German central bank regarding the matter of the unaudited gold and was stonewalled.

“I was shocked,” Missfelder told BILD.  “First they said that there was no list.  Then there were lists that are secret.  Then I was told, demands endanger the trust between alliance bank and the Fed. [Google translation]”

But some analysts wonder how the gold market can be flooded from time to time when there’s no record of any activity at the COMEX or LBMA.   While lease rates at the LBMA don’t suggest individual banks slammed the market with privately-held gold during gold’s recent weakness, one analyst and 50-year veteran of the gold market, Jim Sinclair, suggested that the Fed may be behind the mysterious inventory sale.

“. . . we all ask ourselves the question, ‘Where does the gold come from on these attempts at intervention?’” Sinclair asked rhetorically in his latest interview with King World News on Mar. 15.  “Because it’s not simply paper gold, it’s also in the cash market.  There is a concern that the gold that’s being used to intervene might not be our (U.S.) gold.”

According to the Mar. 6 BILD article, approximately 2,050 tons of gold is held outside of Germany. Where is it? and why is it not stored in Frankfurt with the remainder of the nation’s gold stockpile?  The German people want to know.

“Basically they (Germany, Switzerland and other countries) are now asking the question, where is the gold coming from? . . . ,” Sinclair continued.  “Everybody knows what’s at the Fed, other people’s gold.  The trend that we discussed a long time ago which is really turning into a modest torrent, is to take back gold.  I mean the truth is what do the Germans need the Fed to store their gold for?  Are they afraid France will invade?  It doesn’t make any sense.”

The complexity of the Maastricht Treaty as it relates to the launching of the euro on Jan. 1, 1999 as well as the serious threat the treaty poses to democratic peoples was not widely understood by the majority of Europeans at the time.  The truth, according to founder of Peterson Institute C. Fred Bergsten, is that the 17 member states which make up the euro have had their sovereignty superseded by the ECB.

“The adoption of a common currency is by far the boldest chapter of European integration,” he stated in an Opt-Ed piece for the Washington Post two days after the launch of the euro.  “Money traditionally has been an integral element of national sovereignty …and the decision by Germany and France to give up their mark and franc …represents the most dramatic voluntary surrender of sovereignty in recorded history. The European Central Bank that will manage the euro is a truly supranational institution.”

To complicate matters further, the electorate in Europe and the U.S. is unaware that many central bank chairs are also board members of the Bank of International Settlements in Basel, Switzerland—a body formed in 1930 in response, partly, to German reparations for WWI.

According to the BIS, there are 18 board members, comprising Governors of central banks from Belgium, France, Germany, Italy, the United Kingdom and the United States.

Essentially, each board member serves two masters, one domestically and one internationally.  But the protection of a central bank Governor from ‘unlawful’ acts committed under domestic law is afforded him via the BIS.  In fact, central bankers are immune from prosecution from their country of citizenship while performing BIS business.  The BIS determines if a crime was committed by one of its board members, not an elected or regulatory body.

BIS Article 14, Privileges and immunities granted to all Officials:

The Officials of the Bank, whatever their nationality, shall  (a) enjoy immunity from jurisdiction for acts accomplished in the discharge of their duties, including words spoken and writings, even after such persons have ceased to be Officials of the Bank.

In essence, the Bundesbank represents the BIS, first, Germany second.  Actions taken by the central bank in accordance with BIS wishes fall under its own set of laws in matters of central bank operations.  The Bundesbank doesn’t need to account for its operations with the German people.

Germany’s gold may have been sold and possibly played a part in the latest downdraft in the gold price.  But it appears that there’s nothing the German people can do about it, if it turns out, indeed, that the Bundesbank sold its gold.  Could that be the reason for Bundesbank President Axel Weber’s departure on Apr. 30, 2011, a full year short of his appointed term?  Sign-up for my 100% FREE Alerts