Bill Murphy on Gold Suppression, Part I


"U.S. government suppression of gold is why it hasn't kept up with inflation and why interest rates have remained low."

Q: Why do you think gold and silver are being suppressed?

A: It all started with the strong dollar policy under Robert Rubin, when he was at Goldman Sachs. He had his London operation borrow gold from central banks for three quarters of a percent interest when interest rates were at 8%, 9%, 10%. This was back in the late 1980s. It was like free money to fund their operation, just as long as the price of gold stayed the same or went down. It was just a bonanza.

When Rubin became Treasury Secretary, gold suppression became the lynchpin of his strong dollar policy. Larry Summers, who took over for Rubin as Treasury Secretary, when he was at Harvard was co-author of a paper called " Gibson's Paradox and the Gold Standard," in which he talks about the relationship between gold and interest rates. Then Long-Term Capital Management blew up and almost destroyed the whole thing because they were short something like 300 or 400 tons of gold. They had to get out of all their positions, and the banks got together and made sure that gold did not get above $300. They kept it down for a year or two to protect their short positions. It's been going on and on, and it's the most obvious thing in history if you watch the markets everyday like I do (I'm a former futures trader).

Gold, Investing, Kevin Michael Grace

Just the other day is a perfect example, gold drops 35 bucks in hours; it's just ludicrous. U.S. government suppression of gold is why it hasn't kept up with inflation and why interest rates have remained low. Gold should probably be about $2,400, 2,500 an ounce now, according to other people, not just me; but it's only $1,500. At GATA, we've put together 12 years of evidence. It's not a conspiracy theory at all. We have the public information to support it. Just yesterday, there was a hearing at the U.S. Treasury that Ron Paul instigated. We went down and met Congressmen Paul a month ago, Chris Powell and myself. We asked him about what question to ask about gold becoming encumbered, and the Treasury official said, "I am told there are no encumbrances." He didn't say there were no encumbrances, he said, "I am told." By who?! Then a congressman from Missouri asked him, "Well what about the IMF gold; isn't U.S. gold pledged to the IMF? Wouldn't that be an encumbrance?" And he said, "Oh jeez, I don't know anything about that. I'll have to get back to you."

Q: What are the technical means whereby gold and silver are suppressed?

A: Two ways. First, the establishment will tell you the central banks have close to 29,000 to 30,000 tons of gold in their vaults; we think it's closer to 12,000 tons. The rest of it is gone; it's been lent out. Belgium just announced the other day that 41% of its gold is out on loan. Nobody knew that. Governments have surreptitiously sent central bank gold into the market place; it's gone to meet the supply demand deficit. Two, they raid the markets using the futures markets and derivatives and options and all kinds of things in a coordinated effort to slam the price down. Like they did in silver when it dropped hugely in minutes when nobody was trading. They know exactly what they're doing, and they know how to go after the speculators. At strategic times they bomb the price. In essence what you have in this 11-year bull market is a managed retreat. They can't stop gold from going up, but they don't want too much excitement. They just want gold to be sort of a non-issue if they can, because it's really the barometer of the health of the U.S. financial system.

Q: Isn't this like King Canute trying to hold back the tide?

A: That's it. It's hopeless. Each year it gets worse. The supply keeps going down, and with the Chinese demand for gold and the Indian demand for gold and Russian, every time they knock the price down, they say, "Thank you very much," and they buy more. The situation is getting more dire by the year; that's the reason these raids never last.

Q: Max Keiser says that if enough people keep buying silver, they could knock JP Morgan right out of the box. Do you think this is true?

A: No question about it. When I testified in front of Congress on March 25 of last year, the price of silver was $16. We showed what Morgan's position was. We had a whistleblower, Andrew Maguire, who was talking to Commodity Futures Trading Commission, and sent emails ahead of time as to when Morgan was going to raid the markets. We caught them red handed. CFTC wouldn't do anything about it, so I made a big presentation; it was broadcast all over the world. Ever since then silver has exploded. The raid that we had many weeks ago now was basically an effort to calm the whole situation down because it's going to happen again. Silver is going to go absolutely ballistic, and Morgan is in the deepest of trouble.

Q: Can you explain how silver went from $50 to $38 in a very short period of time?

A: And then down to $32. Basically they orchestrated with the establishment, with the exchanges, and they raised margins something like five or six times in a row. They bombed it quickly, so anyone who had made money just got killed. Then the margin calls from the speculators kicked in. The increases in the margin combined with the losses made it untenable for any of the speculators to stay long. They were forced out of the market. Then the market gets so demoralized it takes some time to recover. It gets too expensive to play the game, and people are too scared of what the government can do to them.

Q: What's the legality of these suppression efforts?

A: Well that's what GATA stands for: Gold Anti-Trust Action Committee. Their coordinated actions are against antitrust laws. It's ripping off the public, and they've made fortunes at times by weighing in like they just did on the short side, even though we've been in a bull market all these years. JP Morgan and other big banks are doing it in a coordinated activity to fleece the speculators. It's wrong. They ought to be in jail. If we had our way they would be.

Q: Hasn't an agency of the U.S. government taken up the question of silver suppression?

A: I have met with Bart Chilton, one of the commissioners of the CFTC. He's a really good man, trying to do the right thing. But the rest of the people on the CFTC are useless. They've spent three years investigating JP Morgan and their silver suppression scheme. Bart Chilton was on TV today talking about silver dropping $8 an ounce in minutes, when no one was trading. We're hoping that something will happen with the CFTC, but it just seems to go on forever.

Bill Murphy is the co-founder and Chairman of the Gold Anti-Trust Action Committee. A graduate of Cornell, he played wide receiver for the Boston Patriots and then trained on Wall Street with Merrill Lynch. He worked for Shearson Hayden Stone and Drexel Burnham before founding his own brokerage firm. He is the Patron of Le Metropole Café, a website for gold investors, which offers a two-week free introductory membership. GATA will host Gold Rush 2011, a conference at the Savoy Hotel, London, August 4 to 6. Speakers will include Eric Sprott, James Turk, Hugo Salinas Price, John Brimelow and Peter Grandich.

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