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XMFSinchiruna (27.51)

A Useful Discussion of GATA and Gold

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October 10, 2010 – Comments (22) | RELATED TICKERS: CEF , GLD , SLV

After watching with dismay as a recent post regarding GATA deteriorated into a decidedly useless waste of time, I will set out here to discuss the precise topics in question in an open-minded and carefully reasoned fashion.

At the outset, it is imperative to state for the record that I can report on portions of GATA's enormous body of evidence without granting the right of any reader to presume that I therefore must agree with everything stated or claimed by the group. As with any topic, I approach the subject of gold and silver price suppression with a critical eye and an open-minded search for truth. The faulty logic that leads to presumptions of 100% subscription based upon findings of merit on particular segments of a body of evidence is indeed an unfortunate one, and is precisely what permits a discussion of GATA to deteriorate in the way that it did in the offending thread. The primary casualty, in such instances, is none other than rational discourse.

Secondly, I feel it crucial at this stage to clarify that no portion of my own conservative price targets for $2,000 gold and $50 silver hinge in any way, shape, or form upon the existence, discovery, or disruption of any scheme to suppress metal prices. Those projections are purely the result of fundamental macroeconomic analysis without any consideration whatsoever of the suppression topic. Therefore, the conclusions one draws with respect to GATA's claims have no reason whatsoever to intersect with one's consideration of my commentary and outlook on the sector.

When you're dealing with markets as systemically opaque as are those for gold and silver, it goes without saying that acquiring slam-dunk blockbusters of irrefutable evidence represents a highly unlikely outcome of a citizen-led investigation. Although GATA has unearthed many eyebrow-raising excerpts of quotes from the public record, I have never opined that the evidence constitutes irrefutable proof of price suppression activity on the part of the central banks. Rather, I have characterized the body of evidence as something of a jigsaw puzzle ... once you piece enough of them together, a compelling (though still ultimately circumstantial) case emerges. What I can state is my own opinion on the matter, and I consider it highly ulikely that Western central banks would resist the opportunity and incentive that they clearly have to intervene in the currency markets using gold and silver as two among several tools at their disposal.

There are, however, portions of GATA's body of evidence that do constitute, in my opinion, proof of foul play in the precious metals market. Adrian Douglas' 2009 report "Pirates of the COMEX" is one particularly laudable effort within GATA's evidentiary record, and one which I believe utilized a sound methodology to deduce the identity of the two principle bullion banks that were maintaining market-dominating net short positions on COMEX gold and silver. The identity of those two bullion banks is extremely relevant to any due diligence conducted with respect to common bullion proxies like GLD and SLV ... which list as bullion "custodians" HSBC and JPM, respectively. There is much confusion about what is and what is not claimed about those investment vehicles by GATA, and I will seek to clarify some of that below. Having spoken at length with both of GATA's co-founders on the topic, I am qualified to offer some clarity where little presently exists.

The next most solid piece of evidence that I have encountered of foul play in the gold market is a more recent report from Adiran Douglas from his August report: "Gold Market is not Fixed; it's Rigged". In it, he offers a empirical statistical analysis of a phenomenon that longstanding observers of the market like myself have long-observed: the uncanny consitency of the relationship between am and pm spot prices, day in and day out, in such a way that the net daily price action actually moves counter to the massive prevailing bull market trend. Those who appreciate the scale of this bull market move to date may be surprised to learn that a trader who purchased gold at every successive am fix and sold it at each successive pm fix since April 2001 would have lost a cumulative $500 per ounce over the 9-year period!. Daily movements can diverge substantially from a prevailing trend, but a disparity of this magnitude (and consistency) constitutes extremely compelling evidence of foul play. Also in August, Douglas published a follow-up piece entitled "The Failure of the Second London Gold Pool", in which he discusses his interpretation of the data as indicating an emerging failure (breakdown) of the ability of strategic suppressive gold sales to have the desired effect and thus contain or diminish the scope of gold's ascent. Although speculation creeps into that discussion, I find his interpretation an entirely reasonable hypothesis on which to base further investigation.

Speaking of investigations, the CFTC has been conducting an investigation into alleged foul play in the silver market for two years. Clearly bothered by the snail's pace of the agency's response, CFTC commissioner Bart Chilton himself has come out and said that if the agency does not release its findings in a timely manner, that he himself will speak out in the topic.

Now, with respect to the original post that spawned the present discussion, I wish to offer some specific retorts.

The allegation he makes that GATA's credibility is compromised by its members' long exposure to gold is beyond ridiculous. First of all, the man on the other side of the debate (Jeffrey Christian of CPM) could similarly be ascribed with an equal or greater interest in preserving the status quo functioning of the metals markets so that a market for his consultation on bullion derivatives persists. Although the same reasoning could be used to render that allegation, I would not issue such a claim because I do not know Mr. Christian nor his true agenda. I do, however, know Bill Murphy and Adrian Douglas. I find them to be well-intentioned individuals who have willingly subjected themselves to a decade of personal attacks and public ridicule solely because they feel confident that the markets they study are frought with fraud. Believe me, there are easier ways to make money. It is ludicrous and illogical to suggest that this entire decade-long GATA campaign is an exercise in self-enrichment. GATA is a non-profit organization. They spent $264,000 on a full-page ad in the Wall Street Journal. If that were intended solely for financial gain, then that constitutes the most roundabout path to riches that I've ever encountered. It's a baseless, empty accusation that lowers the tenor of discussion from one of debating the facts to one of malicious character assassination. For a blog post claiming to reveal truth, I find it interesting that it employed such an unsavory tactic.

With respect to the allegation that TMF members have claimed that the bullion vaults at ScotiaMoccata are empty, I have encountered no such claims being made here at TMF. Perhaps the member in question would like to provide a link to a post where such a claim is made? Now, if he happens to be referring to my own writings on the topic, perhaps I can use this opportunity to set him straight on the facts. The claim in question refers to a specific day: September 3, 2008. On that day, during the height of a supply shortage that I and other precious metal observers were documenting at the time, Lenny Organ reports that he and his family's broker were granted access to the bullion vault. First, there are two sections of that vault, and the observations made refer only to the portion of the vault reserved for unallocated storage. Secondly, it is incorrect to state that anyone claimed the vault was empty. In point of fact, Lenny reports having seen a quantity of bullion: just that it was a very small quantity as compared with the scale of unallocated gold and silver certificates outstanding from the bank. He reports having counted up the bullion he saw, and estimates that it carried a market value of less than $100 million. The author of the blog post in question conveys considerable confidence in alleging that "this is a lie", and yet it is he that has imprecisely characterized the claim being made on several counts. Even the article he cites as supposedly debunking the story misrepresents the claim, stating it was Harvey himself who claimed to have visited the vault. Now that is a lie, or at best a careless falsehood. I wonder what other exhaustive research Mr. Deepfryer conducted to arrive at this bold conclusion. I wonder if he spent an hour on the phone with Harvey Organ discussing in detail what his son reported seeing and the nature of his resulting testimony to (by invitation of the CFTC) the March 2010 CFTC hearing. Can I state with absolute certainty that the unallocated portion of the bullion vault was indeed holding less that $100 million in bullion on September 3, 2008? Of course I can not -- I was not there -- but I certainly conducted plentiful research into the claims and reported them accurately and faithfully ... far more than I can say for the content of the challenging post. When Deepfryer claims "this is a lie", he fails to concede the impossibility that he could know that to be the case.

As to the question of the paper gold to physical gold relationship within the structure of the precious metals market, here again the blogger in question conveys a surprising degree of confidence in his understanding of the matter despite offering no meaningful evidence to support his contention. He states that it is a "false, fear-mongering claim" to suggest that a problem exists when huge numbers of investors may not hold what they think they hold. Holders of unallocated gold certificates, for example, may have had no reason to suspect that a fractional reserve structure exists in the bullion markets such that widespread claims for physical delivery could easily and abruptly overwhelm the available physical supply. Mr Christian contends that mechanisms exist to handle such situations (with respect to the LBMA) ... of course they do, and they involve cash settlement. If holders of unallocated bullion certificates would be happy to receive cash settlement in lieu of bullion in the event of a widespread physical demand, then indeed there would be no problem. Holders of such certificates, on the contrary, have every right to expect that they can receive upon redemption: precisely what the contract states. 

By the same token, the quantity of bullion traded on the LBMA is indeed indicative of leverage. If a quantity of financial instruments tied to a particular good exceeds the global supply by many multiples, then the result is a leveraged market ... pure and simple. It is beside the point that in practice most of those financial instruments (OTC derivatives) are settled in cash. Structurally speaking, they remain tethered to an underlying asset, and to the extent that net volume exceeds available supply, then those instruments represent competing claims against individual bars of gold. There is no magic in OTC derivatives (far from it, as we now know!). You can't magically divorce them from the physical market by stating that the underlying asset has somehow evolved into a theoretical abstract that is unconnected to the actual physical supply. Settlement for cash under conditions of market duress is, by any reasonable definition, a default when the presumption of an interest in physical gold lies behind the contract in question. Under the present structure of the bullion markets, bullion banks like those mentioned abive do indeed have the ability to leverage their underlying supply while building those market-making positions on various exchanges. If the blogger wishes to discuss conflicts of interest as he did in his original post, perhaps he would like to examine that which would appear to exist between the custodianship role that the major bullion banks play within the bullion ETFs, and the persistent net short commercial positions on the COMEX that have been documented for those very metals. 

Before I close, I need to help set the record straight with respect to the ETF issue. This is a very complex topic, and one that has been repeatedly misconstrued and misrepresented through multiple iterations. The well-informed voices on the topic are not making a claim that the metal to back the ETFs is not there. Short of being a fly on the wall for a vault audit, there is simply no way to discern that with confidence. There are, however, ample red flags for investors within the structure of the markets and the prospectus documents of these ETFs that are worthy of long and careful consideration. Most investors, unfortunately, lack the breadth of knowledge in these markets to adequately comprehend the implications of these red flags.

Fools may wish to ponder some of these excerpts from the GLD prospectus:

The Trustee may, in its discretion, and will when directed by the Sponsor, suspend the right of redemption or
postpone the redemption settlement date, (1) for any period during which the NYSE Arca is closed other than
customary weekend or holiday closings, or trading on the NYSE Arca is suspended or restricted, (2) for any
period during which an emergency exists as a result of which the delivery, disposal or evaluation of gold is not reasonably practicable, or (3) for such other period as the Sponsor determines to be necessary for the protection of Shareholders
.

There is a risk that some or all of the Trust’s gold bars held by the Custodian or any subcustodian on behalf of
the Trust could be lost, damaged or stolen. Access to the Trust’s gold bars could also be restricted by natural
events (such as an earthquake) or human actions (such as a terrorist attack). Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.
The Trust may not have adequate sources of recovery if its gold is lost, damaged, stolen or destroyed and recovery may be limited, even in the event of fraud, to the market value of the gold at the time the fraud is discovered.

Shareholders’ recourse against the Trust, the Trustee and the Sponsor, under New York law, the Custodian,
under English law, and any subcustodians under the law governing their custody operations is limited. The
Trust does not insure its gold
. The Custodian maintains insurance with regard to its business on such terms
and conditions as it considers appropriate. The Trust is not a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. Therefore, the Custodian may not
maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the
Trust. In addition, the Custodian and the Trustee do not require any direct or indirect subcustodians to be nsured or bonded with respect to their custodial activities or in respect of the gold held by them on behalf of he Trust. Consequently, a loss may be suffered with respect to the Trust’s gold which is not covered by insurance and for which no person is liable in damages
.

Still think GLD is as good as gold??

I would need many pages to spell out in detail the full nature of these red flags, and that's a topic for another day. Since simplistic notions of "the gold is not there" is commonly ascribed as being the GATA position in this topic, however, I find it necessary to set the record straight. That is not even close to describing the nature of their aversion to instruments like the GLD. Here again, I have spoken at length with both Adrian Douglas and Bill Murphy on the topic, and therefore I am in a position to speak to this.

..........

To be sure, these topics are inherently complex in nature, and do not lend themselves to cursory treatments based upon empty conjecture. I have labored for countless thousands of hours to help Fools understand these markets for gold and silver in a comprehensive way on the basis of exhaustive and disciplined research. Although I am not personally affiliated with GATA -- and I certainly do not patently endorse every claim they make without forming my own independent opinions and conclusions from the verifiable portions of the evidence they present -- I have respect for what I maintain is a selfless and courageous effort to shed some much needed light upon one of the most oddly opaque markets in the world. They may not get everything 100% right in the process, and it would probably be my style to refrain from the more speculative segments of their claims, but they have contributed significant and valuable perspective on the market through their various avenues of inquiry. 

 

 

 

 

 

 

 

22 Comments – Post Your Own

#1) On October 10, 2010 at 4:25 PM, MoneyWorksforMe (< 20) wrote:

Excellent post! You're one of the main reasons I visit this website on a daily basis. I hope other fools are taking notes. Thank you for the great insight.

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#2) On October 10, 2010 at 6:10 PM, Deepfryer (27.70) wrote:

"GATA is a non-profit organization. They spent $264,000 on a full-page ad in the Wall Street Journal. If that were intended solely for financial gain, then that constitutes the most roundabout path to riches that I've ever encountered."

Wow it's so nice of those guys to spend $264,000 of their own hard-earned money to help the American public. Golly gosh, they must be some super-swell folks.

I noticed that you conveniently failed to address the fact that GATA is funded by gold companies. I wonder if they take money from the same "gold cartels" that allegedly manipulate the price of gold? Nah, I'm sure they only take money from the nice, charitable gold companies.

"Secondly, it is incorrect to state that anyone claimed the vault was empty."

Oh, my bad. The exact words that I came across were:

"...the vault is practically empty."

No one said it was empty - just practically empty. Huge difference.

Not to mention the fact that in your fearmongering article titled Everybody Out of the Gold Pool!  you used the phrase, "Empty vaults mean empty promises".

Which "empty vaults" were you referring to?

Anyway, I have better things to do than wade through your endless campaign of propaganda and misinformation. I have exposed TMF's readers to both sides of the issue. That's all I wanted to do.

"Of course I can not -- I was not there -- but I certainly conducted plentiful research into the claims and reported them accurately and faithfully ... far more than I can say for the content of the challenging post."

So by your definition, "research" consists of accepting the account of one man, with no supporting evidence whatsoever? Nice research.

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#3) On October 10, 2010 at 8:57 PM, whereaminow (21.14) wrote:

So by your definition, "research" consists of accepting the account of one man, with no supporting evidence whatsoever? Nice research.

This poor response sums up your entire commentary at Motley Fool.  He clearly stated that he accepted nothing about prices suppression at face value. 

I am glad BillyTG and Alex turned your post into a 9/11 p*ssing war.  It was funny and entertaining.  In other words, unlike your commentary, it actually had some value.

David in Qatar

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#4) On October 10, 2010 at 9:26 PM, catoismymotor (35.54) wrote:

Chris,

You need to put those fingers in a bowl of ice. Mine ache after reading this. As always I appreciate your efforts. 

 

DF,

Ever hear of Miralax?

 

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#5) On October 10, 2010 at 10:25 PM, XMFSinchiruna (27.51) wrote:

Deepfryer

Anyway, I have better things to do than wade through your endless campaign of propaganda and misinformation. I have exposed TMF's readers to both sides of the issue. That's all I wanted to do.

The only thing you have exposed TMF's readers to is a barrage of baseless conjecture and uninformed dribble. Move along.

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#6) On October 10, 2010 at 11:46 PM, TMFAleph1 (95.09) wrote:

@Deepfryer

I appreciated your last blog post, which I broadly agreed with (in terms of the general conclusion, I don't know whether or not I agree with every specific point).

It appears that you took some of the comments Chris made in this post personally; unfortunately, your last comment is not a particularly helpful response.

I think Chris took great pains to approach his topic in a fair-minded manner. I may not agree with him on every point, and we may even have some fundamental areas of disagreement, but I am forced to recognize that he is knowledgeable and civil -- great assets for a participant in a discussion on a topic as confounding as what one might want to pay for gold.

I think you overreacted and that is entirely human. The best course for you now would be to recognize this and "come back to the table" in order to continue the discussion in a constructive manner. Even if you never agree with him regarding the risks pertaining to gold ETFs -- I don't think I agree with Chris on this topic, either -- there is much you can learn from him regarding other aspects of the gold market.

Alex Dumortier

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#7) On October 11, 2010 at 12:31 AM, BillyTG (29.21) wrote:

I am one of the primary offending @-holes in the recent blog that TMFSinch mentions. This will be my one and only post in this thread so I don't mess up again, and I'm only posting because I think I have relevant information in which others might find value.

I emailed Mr. Adrian Douglas about some of these allegations, and he was gracious enough to take his time responding to my amateur questions. They are of course not proof of anything, but confirm what TMFSinch said about Mr. Organ testifying before the CFTC. Additionally, he provides data, direct from Nova Scotia Bank, that there is an accounting difference between assets and liabilities that supports Mr. Organ's testified claims. Here's what he wrote back, which is congruent with his public statements, so I strongly doubt he would object to its posting here:

After Harvey Organ had difficulty getting his metal and seeing so little in the Scotia vault he complained to the CFTC. This resulted in Mr Organ being interviewed by the enforcement division of the CFTC under oath. He recounted the experience that you heard in the interview. You may well be aware that lying to Federal agents is a crime and I can assure you that knowing Mr Organ this is not something he would do. What Barisheff and Puplava and Erik Townsend have said does not in any way refute what Mr. Organ has said and in contrast to Mr. Organ their views have not been offered under oath to the CFTC. But you don’t have to take any one’s word for it. You can simply look at the Bank of Nova Scotia 2008 Annual Report.

BANK OF NOVA SCOTIA ANNUAL REPORT http://scotiabank.com/images/en/filesaboutscotia/19578.pdf

Here is an extract from the Bank of Nova Scotia 2009 Annual report. Look at the 2008 column. Liabilities for gold and silver certificates 5.619B$ and Precious Metal assets 2.426B$...in other words naked short 3.18B$ by their own accounting! The price of precious metals would be very different if this 3.2 B$ of customer money paid to them for buying precious metals had actually gone to making real purchases of physical metal. They were 1.94 B$ net short of PM’s in 2007 also. If a bank is net short 3.2B$ one can expect the vault to be fairly empty!

[Mr. Douglas's balance sheet assets and liabilities screen prints don't display on MF, but can be found in the scotiabank linked report]

I would like to point out that GATA nor KWN have heard one single word from Scotia with respect to Harvey Organ’s experience with their bank nor his assertions that there was very little inventory in the vault. Barisheff and Puplava are talking about having seen allocated gold. So what? Mr. Organ was referring to unallocated. This is where the huge problem is with all the bullion banks. They have sold at least 45 times the bullion they have in their vaults.

I urge you to read information at the www.gata.org.

Also read my latest article

https://marketforceanalysis.com/article/latest_article092110.html

This is irrefutable evidence that the gold market is suppressed.

Regards

Adrian Douglas

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#8) On October 11, 2010 at 12:33 AM, TMFAleph1 (95.09) wrote:

I should add that Chris is also very measured -- he is nearly always careful to couch his statements in terms of probability rather than certainty and he has a healthy respect for the limits of knowledge. This is a useful trait in all aspects of investing, but it is critical in regard to the gold market. I'm not alluding here to any notion of cover-ups or conspiracy theories, but rather to the fact that gold has no intrinsic value (I know this will set off some of the gold bugs, but perhaps we can agree to say that even assuming gold does have an intrinsic value, it is much more difficult to estimate than for cash-producing asset).

Alex Dumortier

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#9) On October 11, 2010 at 12:16 PM, StatsGeek (29.26) wrote:

Chris,

There are a lot more PM naysayers and "BUBBLE" shouters than there are believers.

I won't become a PM bear until a bunch of these folks jump on board the train, when gold is at $3,000.  I remember a bunch of Wall Street analysts who were bears on internet stocks from 1996 to 1998.  They turned into bulls in 1999.  Just in time to get their heads lopped off.  Bear capitulation is the signal to wait for, and we're years away from that.  What % of people own actual physical gold?  I tried to do a search on this and know one seems to know.  I would be willing to bet, however, that it is less than 2%.

I've been trying to teach myself to stop bashing my head at the inability of the majority to see what I see so clearly.  Instead, I will just smile and buy more PMs.  After all, if the majority believed as I do, I wouldn't have been able to buy gold starting at $770/oz, as I did in 2008.

 

 

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#10) On October 11, 2010 at 12:20 PM, Deepfryer (27.70) wrote:

TMFMarathonMan (93.65) wrote: 

"The best course for you now would be to recognize this and "come back to the table" in order to continue the discussion in a constructive manner."

Agreed. I shouldn't have allowed myself to get so worked up, and I would be happy to rejoin the table. Regardless of the misplaced tone of my previous post, I still stand by the fact that there were people on TMF claiming that the vault was empty. Therefore, I didn't appreciate Sinch's insinuation that I was making these things up. Moving on...

I would be interested in hearing your thoughts on the funding of GATA. I am not trying to throw out accusations here, but, in general, when there is a potential conflict of interest in the investing world, it should be taken seriously. The Wall Street Journal has reported that GATA is funded (at least partially) by gold companies. This was certainly one of the factors that initially led to my skepticism of GATA.

It seems that if GATA is successful, their efforts would likely cause an increase in the price of gold, which would also result in higher profits for the gold companies. So there could potentially be ulterior motives for some of the groups that are funding GATA. Do you view this as a serious conflict of interest, or am I making something out of nothing here?

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#11) On October 11, 2010 at 5:59 PM, XMFSinchiruna (27.51) wrote:

Deepfryer

Thanks for coming back to the table.

Permit me to put the question regarding GATA's funding directly to founder Bill Murphy himself, and see what he has to say.

What I will say is very much like what I said before: that having gotten to know these guys a little through telephone conversations and frequent e-mails, I find them to be very genuinely engaged in a well-intentioned search for truth and transparency in a market where I maintain that little of either exists. They have devoted a decade of their lives to this effort, received mostly insults and ridicule in return from an unappreciative mainstream public ... the very public that I believe they are striving to shield from being hapless victims of a massive fraud. The issue, of course, has implications far beyond the scope of the gold and silver markets, and strikes to the heart of our broader economic predicament. 

I am resolutely bullish on gold and silver in my articles, and significantly exposed to the metals within my investment portfolio. One could just as easily raise the same concerns with respect to me ... and there too they would be barking up the wrong tree. I write what I write because I am confident in the veracity of my broader outlook, and I seek to help people safeguard their families' hard-earned capital. I have been consistently correct in my outlook over the past several years, and I sleep well knowing that I have helped people to build important protections into their portfolios against the extreme likelihood of further currency debasement. The idea of promoting my own self-interest has not, and will not, ever cross my mind.

In fact, I have stated on countless occasions that I would rather lose every cent I've invested in these metals if it meant that I could end up being wrong about this entire macroeconomic outlook of mine. As a patriotic American, it pains me to no end to witness this poor stewardship of our economy, our currency, and our future. I find this subject matter quite a drain, and there are times when after writing about currencies and the economic outlook for days on end, I need to stand up and remove myself from the computer for a day or so because I need to recharge myself with positivity. I have profited nicely from the precious metals bull market, but that doesn't mean you'd want to walk a mile in my shoes.

Keep in mind, if you will, just how completely ill-founded and illogical Charlie Munger's claim is that gold investors are "jerks". As with any demographic, certainly there are unsavory characters out there, but Fools are encouraged to question the default stigma associated with gold investors.

On the flip side, how many countless incidents of criminal activity and unsavory practices have we as a society uncovered within the banking industry of late. The banks have shown through their actions that where a conflict of interest can be perceived to exist, efforts to game the system for their profit will likely follow. Since JPMorganChase and HSBC having held dominant, market-making short positions in the bullion markets represents a clear-cut conflict of interest vis-a-vis the investors in the ETFs to which they serve as custodian, I think questions of that nature are better posed to the banks than to GATA. And yet, despite everything I have seen in recent years, you won't find me making blanket statements about all bankers with associated aspersions against their character as individuals. Blanket stereotypes of that nature are never helpful to reasoned discourse, and I continue to ask that Fools of all macroeconomic persuasions bury the stigmas and stereotypes on both sides of the philosophical divide. In this way, we will promote wisdom by raising the level of discussion collectively. The whole point of The Motley Fool, as I see it, is that it is a place where people of diverse backgrounds and opinions can come together and discuss ideas in an open and respectful forum. That is why I'm here, and nowhere else.

As to the 'empty vault' detail, I'm sorry you took offense. I did not mean to insinuate that you made it up, but rather was stating that I hadn't come across such a claim (as you can bet I would have corrected it). :) I understand that my headline in that article could give the wrong impression, and perhaps should have chosen "nearly empty vaults mean nearly empty promises".  :) In the future, may I recommend that you provide links to specific posts to which reference is being made ... I've found that it helps avoid miscommunication. 

I will bury the hatchet and continue this dialogue for the benefit of all, even if I wasn't as appreciative of the content of your original post as TMFMarathonMan was. :)

I'll contact Bill and see if he has a comment on the funding issue.

Thanks to all Fools for keeping your minds open and your discussions respectful. 

Fool on!

 

 

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#12) On October 11, 2010 at 6:48 PM, rfaramir (29.31) wrote:

Higher prices as a final outcome would be a decidedly mixed blessing.  Since (in retirement accounts) I own gold and silver miners, my accounts would go up in value (yay!).  But since I also hope to accumulate a small amount of physical gold and silver, I am a net buyer (as well as a continuing buyer in my retirement accounts), so I would be dismayed by a rise in prices.

 

The real outcome I want, is confidence in the free market.  This requires that it be free of undue influence, and that contracts will be honored.

Unfortunately, I have no faith in government watchdogs to achieve a good result.  Regulators are notoriously corruptable, coming as they must from the industry regulated (who else is sufficiently knowledgable to regulate them?).  On a broader view, anti-trust legislation has not brought about more competition, but rather has been used almost exclusively to hurt competitors.  It ought to be scrapped. 

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#13) On October 11, 2010 at 7:56 PM, TMFAleph1 (95.09) wrote:

@Deepfryer

I can't much comment much on GATA's funding because I have absolutely no knowledge regarding this topic. I will simply say that, in many ways, I would be very surprised if they weren't funded or partially funded by people or companies who have some interest in the gold market. This would not bother me very much except it they were trying to hide that fact. Such funding, if it exists, could be a conflict of interest with regard to the organization's stated aims, but I'm not sure I would enter a discussion with GATA assuming anything concerning the organization's true aims. 

Finally, it seems to me we can't rule out the idea that people within an organization like GATA have different aims, some of which may be consistent, others contradictory, some public, others private.

This is why, as I alluded to in the previous thread, I prefer to focus on the content of what people say in any forum, rather than what may or not be their motivations -- which can be much harder to ascertain.

@Chris,

When you write:

Keep in mind, if you will, just how completely ill-founded and illogical Charlie Munger's claim is that gold investors are "jerks". As with any demographic, certainly there are unsavory characters out there, but Fools are encouraged to question the default stigma associated with gold investors.

I think you are here misinterpreting Charlie Munger or taking his remarks too personally.

Strictly speaking, he is accusing gold investors of being "unsavory", but one must understand his moral framework to understand how different this is from what most people would associate with this word.

Charlie prides himself on being a rational individual, something he considers as a fundamental guiding principle in life. In fact, as he clearly states, he considers it a moral principle, suggesting that if one has the capacity to act rationally, one has a moral obligation to do so. This is a very defensible position, but it is also uncompromising

Charlie doesn't think gold is a rational choice for investment. In his moral framework, gold investors are therefore "jerks" -- it's pretty cut-and-dried. I don't agree with him, but I think his position is consistent and it doesn't shock me.

Alex Dumortier

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#14) On October 11, 2010 at 8:08 PM, TMFAleph1 (95.09) wrote:

This would not bother me very much except it they were trying to hide that fact.

Let me rectify that: I'm not even sure it would bother me even if they were trying to hide that fact.

Alex Dumortier

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#15) On October 11, 2010 at 8:10 PM, XMFSinchiruna (27.51) wrote:

Alex, he used the word "jerks"... not me. I don't care to reframe his comment within the rubric of a moral contruct ... his words speak for themselves.

"And I don't see how you become rational hoarding gold. Even if it works, you're a jerk."

You're darn right I took it personally.

But please, let's save that discussion for another time if you feel strongly enough about it ... I don't wish to see another thread diverge hopelessly from the point at hand.

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#16) On October 11, 2010 at 8:19 PM, XMFSinchiruna (27.51) wrote:

Deepfryer,

I have a response from GATA founder Bill Murphy, which I will post below. And if you reply, perhaps you could find a link to the WSJ article you were referring to? I'd be curious to see it, especially after hearing Bill say it's the first he's heard of an allegation of conflict of interest based upon funding from the mining industry. Here again, I'm not insinuating anything ... just curious to see the article if you can find it. Thanks for following up.

Here is your reply; straight from the source:

GATA will have been in existence nearly 12 years soon. That is the first time anyone has come up with a goofy notion that getting support from the gold mining industry is a conflict of interest. You have to be kidding me. What lobbyist group, or public interest group, doesn't receive support from those interested in the subject or who can gain benefit from the truth being exposed? 

The irony is we have FOUGHT the industry the entire way up, including The World Gold Council, which is supported entirely by mining companies in league with the bullion banks. Their two largest contributors have been AngloGold and Barrick, the two largest hedgers. How ironic that these two firms covered the last of their massive hedges (future sold production) at $1300 and $1,000 respectively. Both of these firms were putting on many of their ill-advised hedges below $300 per ounce ... at a time the GATA camp was a bunch of raving bulls. 

To conclude, most of GATA's contributions come from individuals around the world, including a number of coin dealers and investment managers. We have the support of some mining companies, staunch support in some cases. However, a major GATA complaint is that we don't receive enough support from them. Companies like Newmont won't even accept our emails. It appears they are too tied to the big banks for financing and heavy regulation from the US Government. 

All the best, 

Bill Murphy

Chairman

Gold Anti-Trust Action Committee

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#17) On October 11, 2010 at 9:29 PM, Deepfryer (27.70) wrote:

I don't see how it's goofy.

conflict of interest–noun 1. the circumstance of a public officeholder, business executive, or the like, whose personal interests might benefit from his or her official actions or influence: The senator placed his stocks in trust to avoid possible conflict of interest.

I think it matches the definition 100%. The source for GATA being funded by gold companies was apparently from this article. Although, yes, I'm too cheap to actually sign up and read it (you'll notice, I never said that the WSJ called it a conflict of interest - just that they reported on the source of GATA's funding).

The person who called it a conflict of interest was none other than Jeffrey Christian, in one of the links that I put up earlier.

Alright, hatched buried. I'm ready for some football...

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#18) On October 11, 2010 at 10:03 PM, TMFAleph1 (95.09) wrote:

Here is the full text of the WSJ article for non-subscribers. Unfortunately, it doesn't go into any detail on the sources of GATA funding. This is the relevant passage:

"Historically, people would tell you that any time gold is trading at a price less than 12-to-1 to the price of oil, it's a bargain," says Bill Murphy, chairman of the Gold Anti-Trust Action Committee, an investor group that communicates online and gets some funding from gold companies. "Right now we're at less than 10-to-1, and no one's saying anything" about the phenomenon.

Mr. Murphy's organization has been lobbying the federal government to investigate whether major gold borrowers, including some gold companies, are manipulating the metal's price so they can use leased gold to make other investments, then repay their loans with cheap metal later.

Alex Dumortier

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#19) On October 12, 2010 at 2:57 AM, jesusfreakinco (28.90) wrote:

Epic battle between Alex and Chris. My bets are with Chris (Sinchy)... I'd hate to be betting with Alex and be wrong...

JFC

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#20) On October 12, 2010 at 7:24 AM, XMFSinchiruna (27.51) wrote:

jesusfreakinco

I don't see an epic battle there. Alex and I agree on a large swath of issues with respect to gold, and both or us are targeting further strength going forward. As I mentioned, my own $2,000 price target, which I consider quite conservative in nature, is not dependent upon the existence of price suppression or the breakdown thereof in order for the price to be attained.

If you're referring to the ETFs issue in particular, then perhaps I understand your comment better. :) Those bullion bank ETFs stink to high heaven.

[There's no 'y' in Sinchi.]  :)

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#21) On October 14, 2010 at 9:22 AM, XMFSinchiruna (27.51) wrote:

So, I just discovered that Deepfryer = ETFsRule.

That explains a lot.

So, he burns bridges with me as ETFsRule, and when I subsequently determine that I will therefore cease communication with him on the basis of his disrespect, what does he do?

Of course, he comes back and attacks once again under a new moniker without disclosure. I wonder how many more iterations of ETFsRule I'll have to endure between now and $2,000 gold.

And to think I went so far as to contact Bill Murphy to answer his question. I was willing to give Deepfryer a second chance when I thought he was just Deepfryer, but now that I know he is ETFsRule, there will be no further patience from me.

My patience and good nature has been taken advantage of. I am angry.

Sinch

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#22) On October 25, 2010 at 4:14 PM, richthegeek (< 20) wrote:

Sinch,

 Take heart, at least, that your well thought out comments enlightened the rest of us. Thanks for that.

 Rich

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