Gold Anti-Trust Action Committee
Encyclopedia
The Gold Anti-Trust Action Committee (GATA) is an organization dedicated to investigating and proving its allegation that the quantity of gold
held and traded by the world's central bank
s, international bullion banks and futures exchange
s is significantly overstated and that a scheme analogous to the defunct London Gold Pool
keeps the price of gold
artificially low.
, a former commodities trader, wrote a number of essays about the gold market. Murphy, who worked at Merrill Lynch
, Shearson Hayden Stone and Drexel Burnham before starting his own brokerage firm and Chris Powell, managing editor of the Journal Inquirer
in Manchester, Connecticut
then founded GATA. GATA contends that the price of price of gold has been manipulated by a gold cartel
of central banks and other financial institutions since 1995 and that the quantity of physical gold held and traded by the world's central banks, the London Bullion Market Association (LBMA) and futures exchanges is significantly overstated.
lent new credence to GATA's allegations by producing a series of e-mail exchanges between himself and the Commodity Futures Trading Commission
(CFTC). In an e-mail dated February 3, 2010, he correctly predicted specific price manipulations that would take place two days later, on February 5, 2010. Shortly thereafter, GATA was invited to testify at a CFTC hearing on position
limits. At the March 25, 2010 hearing, GATA was able to present its allegations for the first time.
During the hearing, a former Goldman Sachs
trader, Jeffrey Christian, revealed that LBMA over-the-counter
market trades 100 times its holdings of "physical gold", meaning that for every ounce of gold it sells, only one buyer could actually redeem the certificate in gold; the remaining 99 certificate holders would have to accept a cash settlement
. Christian's testimony confirmed one of GATA's most serious allegations, that fractional reserve practices exist within world's the chief physical gold market
. The existence of massive naked shorts in the estimated $5.4 trillion gold market has been called the world's largest "fraud", a Ponzi scheme
that dwarfs the Bernie Madoff scandal. GATA and some gold investors fear that a sudden surge in demand for physical gold, particularly by holders of large quantities, could trigger "the biggest bank run in history" and cause the U.S. dollar and other currencies
to collapse.
In 2000, GATA member Reginald H. Howe filed a lawsuit against bullion banks (Goldman Sachs, JPMorgan Chase, Citigroup
, Deutsche Bank
), the International Monetary Fund
, the Exchange Stabilization Fund
, and the Bank for International Settlements
; and Alan Greenspan
, William J. McDonough
, Lawrence H. Summers and then United States Secretary of the Treasury
Paul O'Neill
. In March 2002, Howe was denied standing by Judge Reginald Lindsay on the grounds that sovereign immunity
of the United States and other law protected the defendants from suit. GATA alleges that a gold cartel systematically feeds central bank gold into the market place to suppress its price.
Since 2007, GATA has been asking the Federal Reserve and the United States Treasury for an accurate accounting of the physical gold held by the United States government. In 2009, GATA filed a Freedom of Information Act
(FOIA) request in the U.S. District Court for the District of Columbia to force the government to how much gold is held in the United States Bullion Depository
at Fort Knox
. , the FOIA suit remains open.
.
As Murphy began to speak at the CFTC hearing, the video camera recording the event began to malfunction. The technical problem ended the moment Murphy finished speaking. There were no other instances of technical problems during the hearing, which lasted more than five hours. Within 24 hours after Murphy detailed Maguire's allegations at the CFTC hearing, a series of network television interviews that had been scheduled with Murphy were abruptly cancelled and Maguire and his wife were victims of a hit-and-run accident. The King World News website, after posting an interview with Maguire and Douglas, as well as Maguire's e-mails to the CFTC, was disabled by a distributed denial of service attack.
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
held and traded by the world's central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
s, international bullion banks and futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
s is significantly overstated and that a scheme analogous to the defunct London Gold Pool
London Gold Pool
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per...
keeps the price of gold
Gold as an investment
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises...
artificially low.
Background
From its inception, GATA has been chronicling the lack of free markets. In the mid-1990s, Bill MurphyBill Murphy (GATA chairman)
Bill Murphy is a former American professional football player, financial commentator, and the chairman and director of the Gold Anti-Trust Action Committee , which was founded as a result of Murphy's essays on collusion among large financial institutions to suppress the price of precious metals...
, a former commodities trader, wrote a number of essays about the gold market. Murphy, who worked at Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, Shearson Hayden Stone and Drexel Burnham before starting his own brokerage firm and Chris Powell, managing editor of the Journal Inquirer
Journal Inquirer
The Journal Inquirer is a tabloid-sized newspaper published Monday through Friday afternoons and Saturday mornings in Manchester, Connecticut and serves 17 towns in the north-central part of the state of Connecticut.The regional paper prints in three editions:...
in Manchester, Connecticut
Manchester, Connecticut
Manchester is a township and city in Hartford County, Connecticut, United States. As of the 2010 census, the town had a total population of 58,241.- History :...
then founded GATA. GATA contends that the price of price of gold has been manipulated by a gold cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
of central banks and other financial institutions since 1995 and that the quantity of physical gold held and traded by the world's central banks, the London Bullion Market Association (LBMA) and futures exchanges is significantly overstated.
Activities
On March 23, 2010, London gold trader Andrew MaguireAndrew Maguire (whistleblower)
Andrew Maguire is an independent bullion trader and a whistleblower. He notified United States regulators that fraud had been committed, manipulating prices in the international gold and silver markets...
lent new credence to GATA's allegations by producing a series of e-mail exchanges between himself and the Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
(CFTC). In an e-mail dated February 3, 2010, he correctly predicted specific price manipulations that would take place two days later, on February 5, 2010. Shortly thereafter, GATA was invited to testify at a CFTC hearing on position
Position (finance)
In financial trading, a position is a binding commitment to buy or sell a given amount of financial instruments, such as securities, currencies or commodities, for a given price....
limits. At the March 25, 2010 hearing, GATA was able to present its allegations for the first time.
During the hearing, a former Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
trader, Jeffrey Christian, revealed that LBMA over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
market trades 100 times its holdings of "physical gold", meaning that for every ounce of gold it sells, only one buyer could actually redeem the certificate in gold; the remaining 99 certificate holders would have to accept a cash settlement
Settlement (finance)
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against payment of money, to fulfill contractual obligations, such as those arising under securities trades....
. Christian's testimony confirmed one of GATA's most serious allegations, that fractional reserve practices exist within world's the chief physical gold market
London bullion market
The London bullion market is a wholesale over-the-counter market for the trading of gold and silver. Trading is conducted amongst members of the London Bullion Market Association , loosely overseen by the Bank of England...
. The existence of massive naked shorts in the estimated $5.4 trillion gold market has been called the world's largest "fraud", a Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
that dwarfs the Bernie Madoff scandal. GATA and some gold investors fear that a sudden surge in demand for physical gold, particularly by holders of large quantities, could trigger "the biggest bank run in history" and cause the U.S. dollar and other currencies
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
to collapse.
In 2000, GATA member Reginald H. Howe filed a lawsuit against bullion banks (Goldman Sachs, JPMorgan Chase, Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
), the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
, the Exchange Stabilization Fund
Exchange Stabilization Fund
The Exchange Stabilization Fund is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention...
, and the Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
; and Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
, William J. McDonough
William J. McDonough
William Joseph McDonough is vice chairman and special advisor to the chairman at Merrill Lynch & Co. Inc., responsible for assisting senior management in the company's business development efforts with governments and financial institutions.-Biography:From 2003 to 2005, he was chairman of the...
, Lawrence H. Summers and then United States Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
Paul O'Neill
Paul O'Neill
Paul Henry O'Neill served as the 72nd United States Secretary of the Treasury for part of President George W. Bush's first term. He was fired in December 2002 for his public disagreement with the administration and became a harsh critic...
. In March 2002, Howe was denied standing by Judge Reginald Lindsay on the grounds that sovereign immunity
Sovereign immunity
Sovereign immunity, or crown immunity, is a legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil suit or criminal prosecution....
of the United States and other law protected the defendants from suit. GATA alleges that a gold cartel systematically feeds central bank gold into the market place to suppress its price.
Since 2007, GATA has been asking the Federal Reserve and the United States Treasury for an accurate accounting of the physical gold held by the United States government. In 2009, GATA filed a Freedom of Information Act
Freedom of Information Act (United States)
The Freedom of Information Act is a federal freedom of information law that allows for the full or partial disclosure of previously unreleased information and documents controlled by the United States government. The Act defines agency records subject to disclosure, outlines mandatory disclosure...
(FOIA) request in the U.S. District Court for the District of Columbia to force the government to how much gold is held in the United States Bullion Depository
United States Bullion Depository
The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government.The...
at Fort Knox
Fort Knox
Fort Knox is a United States Army post in Kentucky south of Louisville and north of Elizabethtown. The base covers parts of Bullitt, Hardin, and Meade counties. It currently holds the Army Human Resources Center of Excellence to include the Army Human Resources Command, United States Army Cadet...
. , the FOIA suit remains open.
Criticism and suspicious circumstances
GATA's allegations have been called "fringe" and "conspiracy theories" by some analysts, the conclusions considered "far fetched" and derided GATA as a "one-man show", despite the activities of other GATA members. Board member Adrian Douglas, who also spoke at the CFTC position limits hearing in March 2010, has appeared on Fox News and King World NewsKing World News
King World News is a web portal that produces radio-like interviews and information about financial topics, especially the precious metals markets. Created by financial writer Eric King, the site presents interviews with individuals and weekly wrap-ups about the financial sector The website also...
.
As Murphy began to speak at the CFTC hearing, the video camera recording the event began to malfunction. The technical problem ended the moment Murphy finished speaking. There were no other instances of technical problems during the hearing, which lasted more than five hours. Within 24 hours after Murphy detailed Maguire's allegations at the CFTC hearing, a series of network television interviews that had been scheduled with Murphy were abruptly cancelled and Maguire and his wife were victims of a hit-and-run accident. The King World News website, after posting an interview with Maguire and Douglas, as well as Maguire's e-mails to the CFTC, was disabled by a distributed denial of service attack.
External links
- GATA website
- GATA Special Issue of DGCmagazine (April 2010)
- E-mails from Andrew Maguire detailing fraud to the CFTC King World News (January 26, 2010 - February 9, 2010). Retrieved May 4, 2011