Bill Murphy explains exactly why silver is now the cheapest asset on the planet. He also shares what is in store for silver in the future…
Remarks by Bill Murphy, Chairman
Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Friday, November 2, 2018
GATA’s past and the future of gold and silver
Thanks for taking the time to come by on a bustling Friday night in New Orleans.
What to bring your way of new interest this year was the most puzzling for me than at any other time over the past two decades when first preparing this presentation. Very little has changed over the past year for the precious metals camp except that The Gold Cartel has stepped up their lockdown of the gold and silver markets in the most forceful of fashions. So I thought it might be best to go over the past years and what it ought to portend in the future for gold/silver investors.
But first a bit of a GATA recap as The Gold Anti-Trust Action Committee was set into motion 20 years ago just about now when my colleague Chris Powell responded to my constant complaining about the manipulation of the gold market by various bullion banks.
Jefferson Financial, promoters of this very conference, had published The Gold Book by my long time friend Frank Veneroso, a consultant to the World Bank and other prestigious organizations. In his book Frank explained that the bullion banks of the world had secretly lent out many thousands of tonnes of physical gold in order to control the gold price. One of his sources for this information was the Bank of England.
Soon after opening my LeMetropoleCafe 20 years ago this past September, the famed hedge fund, Long Term Capital Management, went belly up. They were such a big deal back then their demise threatened the financial system. Mostly because they were short some three or four hundred tonnes of gold (which were lent out to finance other investments) and would have to be covered as part of the liquidation of assets on their books. It then came to my attention that the major bullion banks were collectively selling gold on the Comex to prevent the price from going through $300 an ounce. In essence they were taking the Long Term’s gold liability off their books and were making sure they didn’t lose money on their new positions. Interestingly enough, the now famous Jim Rickards of the gold world was Long Term’s lawyer back then and knows full well what occurred at the time. In addition there were other coinciding events which confirmed the manipulation … Enough to raise a big stink for anyone who could put two and two together.
Anyway, that was two decades ago and my colleague here, Chris Powell, who had become a subscriber to my website, suggested we do something about it. That was how GATA came into being in January of 1999.
What a journey it has been!
We came out of the box on fire.
In February of 1999 I was interviewed by CNBC’s Ron Insanna. Course once they heard what GATA had to say that would be the last time we would be on CNBC in the US. In April Dow Jones wrote an extensive story on GATA and presented our views. That was unacceptable to the establishment. How dare they give GATA’s discoveries of foul play coverage! Eighteen years later the Wall Street Journal wrote a lengthy front page story about the Fed’s gold, but purposely cut GATA completely out of the article, despite lengthy interviews with us.
Then in May of that year I met Congressman James Saxton, head of the Joint Economic Committee, in Washington, who listened intensely. Since then, we met with Speaker of the House at the time, Dennis Hastert. Ironically, he certainly developed a great deal more problems as time passed by than GATA ever had.
Speaker Hastert quickly arranged a meeting with the Subcommittee on Domestic and International Monetary Policy. Over the years ahead we met with very pro-gold advocate Congressman Ron Paul and contacted many other politicians by mail. They all listened intensely. But that is all they did.
Yes, we were off to a very enthusiastic start. Around that time the GATA camp began to contact the gold mining executives to raise funds and garner support. The CEO of Goldcorp, Chris Thompson, sent us $20,000 and we were off to the races. Bobby Godsell, CEO of Anglo-Gold and a major hedger akin to Barrick Gold, was soon shamed to do the same by an ardent GATA follower.
But we soon realized, the task at hand would not be an easy one. We would be taking on the richest and most powerful people in the world. THEY don’t like to be messed with and very few people or entities would be willing to take them on. Actually, phrasing it that way is an understatement.
To begin with we soon came to understand the manipulation of the gold market was far larger and more complex than we originally thought. We realized that included in this nefarious activity were other central banks, The Fed, The US Treasury, Exchange Stabilization Fund, and the Bank for International Settlements. AND it included the silver market as well.
How tough would it be to get the gold industry behind GATA to end the price suppression scheme which was hurting THEM so badly?
As far as the gold companies go, this little recap says it all…
* I flew to Vancouver for an arranged meeting Robert Champion de Crespigny, the chairman of Normandy Mining in Australia. After going all that way, he refused to see me.
* The secretary for Newmont Mining’s CEO Wayne Murdy returned my email to him saying Newmont never received it. HUH?
* Chris Thompson was to become the CEO of the World Gold Council. When I met him in South Africa at a conference years later, he would not even talk to me.
* And finally Chris, John Embry, and I went to London and met up with the World Gold Council and their new CEO. When we arrived, we had to sign a document that said we were never there. HUH again!
You get the drill. It was going to be an uphill battle recruiting the management of the major gold companies. That said we are very grateful for the financial support we have received from some of the junior/exploration firms.
And, not to be deterred, my colleague CP is making another valiant effort to gain the attention and support of some major gold companies at this very moment.
As far as the politicians go, it is very difficult for them to do anything about the gold price suppression scheme when it is their own government who is responsible for what is going on. The same government which espouses free markets and freedom of speech. Surely part of the rigging scheme is conducted by The Exchange Stabilization Fund. This secretive operation reports only to the President and Secretary of the Treasury and has full, legal authority to do whatever it wishes in the gold and currency markets.
Even the most pro-gold political advocate of all, Congressman Ron Paul will not press very hard about the rigging of the gold price. Chris and I have met him and he is a great guy. But, I will never forget how much work we put into formulating key questions to be asked to a monetary committee way back when, one which was televised. He and his staff requested questions from GATA to be asked. The outspoken congressman just backed down and did not ask one of them.
Then you have the CFTC, the regulatory agency in charge of oversight for the commodities markets. What a farce they are, as most of you know. We have been to Washington and met with them too and then I was able to make a presentation in front of a televised CFTC inquiry into the markets. There were various presentations, all of which were seen by the public. Except mine, which was mysteriously blacked out. You can’t make this stuff up, especially when it is all tied together.
The bottom line is this: one of the great lines ever was by Chris when he said the US would rather reveal their nuclear secrets than what they are doing in the gold market. It is that big a deal.
Now, while this has been as frustrating as anything I have taken on in my life, it has been one of the most rewarding experiences imaginable. The people we have met on this journey are the best, some of whom are here now. We have held four international conferences: in Durban, South Africa; Dawson City in the Yukon: right outside of Washington, D.C.; and in London. They all were very successful and the speakers/attendees were awesome.
Yes, while exposing the gold price suppression scheme and making progress to end this rigged farce has been more than aggravating, what we have learned will pay off big time for those who are paying attention. The gold and silver prices have been sent to incredibly low artificial prices. In my opinion the most important thing to know about those prices is that because of what The Gold Cartel has done, they are going to explode in the years ahead.
As a result of The Gold Cartel’s antics, numerous investors have fled the sector. Other assets have soared these past many years, while gold and silver have faded and gone nowhere. What should have meant higher prices due to rising budget deficits, surging government debt and zero interest rates have meant nothing.
While gold and silver prices should have taken off, they were battered, and now are incredibly cheap. They should not be here, but they are.
Here is what I think happened over the last 7 plus years.
The Gold Cartel had a plan and this is how they carried it out.
In late 2010 silver began to make its move … from $16 an ounce to right below $50 at the beginning of May 2011. It was SOME move and IMO engineered by JP Morgan. My colleague CP astutely believes The Gold Cartel wanted to take a more elevated position in the rigging business, but had no physical silver left to help them get the job done. To be fully effective a lousy silver price was needed to confirm a lousy gold price, which is widely regarded as the barometer of US financial market health. As former Fed Chairman Paul Volcker said about gold. “Up is bad, down is good.”
So JP Morgan began to buy physical silver, all the way up to the $50 mark. Yes, they were eventually buying high, but that would be insignificant compared to the amount of shorting of derivatives they put on their books as silver was to peak out.
Ted Butler, who covers the silver market thoroughly, is constantly pointing out how JPM took over the short positions of Bear Stearns when that firm blew up. The silver open interest back then in 2008 was around 162,000 contracts. When the silver price began its mega move years later that open interest had fallen to around 133,000 contracts and it was about that level until the very end of the silver move in 2011. It came to my attention after the move that JPM was out of the market. They probably had no short positions, having rid themselves of the Bear Stearns’ shorts. Have not heard Ted ever deal with that issue.
So JPM began to sell silver derivatives in size as silver began its approach to $50.
And then they blasted silver for $7 in a day. Stunning. It was some blow to the bull move and it has been downhill ever since. JPM has made a fortune. Yes they bought some now relatively expensive physical silver, but have cleaned up by shorting derivatives at the top of the move in 2011 and ever since then … many times over their physical holdings. And NOW they had physical silver to belt the price any time they wanted for The Gold Cartel.
That was critical. Mission accomplished.
With JPM (the US Government) having the ability to sell physical silver at will, the price fell below $14 an ounce, below where JPM first took over their short positions from Bear Stearns. And this is key. The silver open interest (the number of longs and shorts in the futures market on the Comex) soared … to a high of 193,000 for years and then recently it went even more bonkers to 243,000 contracts earlier this year despite the price going into oblivion. This just does not occur in other commodity markets. The norm would be for the open interest to collapse as hedgers on the short side disappear because the prices are too low to hedge and spec longs flee the scene due to lack of interest and expectations. The extraordinarily high silver open interest has been like an anchor around silver’s neck for many years now and THE constant sign of excessive suppression.
Interestingly enough, gold did not top out for another six months after silver when it moved above $1900 one month after GATA’s London gold conference in August of 2011. A US debt downgrade was the cause for the move of over $250 after our conference. Gold was then blasted lower in the early days of September of that year.
It has been downhill for both metals ever since. Gold and silver could be punished lower in sync now. It seems to me The Gold Cartel forces knew what had to be done to revitalize the US economy and gold and silver had to be put in their place and negate all the fundamental reasons for them to keep going higher by the price action. To repeat, those reasons included enormous budget deficits, soaring government debt, and zero interest rates.
Price action makes market commentary and investors follow suit.
As the years have gone by, interest in the west in the precious metals slowly evaporated.
So here we are, years later, in the weeds. But boy this ought to change in a major league way sometime in the near future.
While gold and silver have remained as dull as dishwater over the past year, the efforts by The Gold Cartel to bury their prices has been as blatant as it could be, or ever has been.
Perhaps the most obvious of all this past year was when gold was blasted done below key support right above $1300 for no apparent reason at all. The whole drill was ludicrous, but fits right into the way The Gold Cartel operates … one that the financial world refuses to deal with.
Gold fell close to $1160 and then has recovered these last weeks to $1230, which is a ludicrous price relative to the debasement of currencies and financial trauma in the world.
What they have done to the gold price to accomplish their mission is a true farce. Yet what they have done to silver is beyond comprehension and their never-ending capping of any silver price advance has been hideously blatant.
For silver bulls like myself, this is a BIG problem. All the money and power in the world, backed by JP Morgan, says clearly they do not want the price of silver to exhibit any sort of life of other than looking like a nearly dead animal.
Silver is now the cheapest asset on the planet as a result of its manipulation by JP Morgan and The Gold Cartel. What they have done is incredibly obscene and it will end badly for them if they stay the course.
Just recently, GATA supporter James McShirley, a prominent speaker at GATA’s 2011 conference in London; lumber company CEO; and highly regarded futures trader, recently noted the following three scenarios for silver:
* If the silver price control is part of a mutually agreed contractual obligation the buyers of physical are getting the deal of a lifetime.
* If the silver price control isn’t mutually agreed upon the buyers of physical are still getting the deal of a lifetime, however under hostile circumstances.
* If the silver price control is because of the cartel’s total terror of silver getting away from them, and hence gold too then somebody is still getting the deal of a lifetime.
He went on to say. …
The only question is, whose lifetime? At what point does a massive buyer of silver make their move, and clean up the billions currently there for the taking? In a short squeeze there’s no earthly reason why silver couldn’t be priced closer to platinum, or even palladium. Daily moves of $10 or more would be more probable that these 1 cent daily comas.
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So well put.
Dealing with the constantly suppressed gold/silver prices while other assets have soared has been tiresome to put it mildly. There was a phrase growing up, “The Seven Year Itch.” That is what dealing with the precious metals has felt like the past seven years. Now, after all this time, enough is enough.
The pressures seem to be building within the gold/silver markets to take their prices to much higher levels. Based on what we have seen of late, The Gold Cartel has been as aggressive as ever in stopping price rises. They have pulled out all stops to prevent gold from taking out resistance at $1235 and staying above that key technical level. What they have done to keep silver below the pitifully low $14.70 level is a joke, reported on over and over again in my commentary. Taking out $15 is pivotal for silver, but JP Morgan won’t even let it get close to that level.
So why should things change? Increasing inflation pressures due to monetary debasement and stock market turmoil around the world are suddenly attracting investors to the precious metals in the west because they are so artificially cheap, thanks to what The Gold Cartel has done.
The likelihood this Cartel is going to be overpowered by investment demand from around the world is growing … enough to enforce a major retreat. They certainly are not going away quietly. Over the past months the Commitment of Traders Reports put out by the CFTC revealed the commercials (which includes the Cartel forces) to be as long the futures markets as they have been for decades. Due to the constant interference in the market, the large specs were as short as they ever get. The internet was ripe with calls for short covering squeezes of those spec shorts. Didn’t happen. Gold had one unusual 3% rally and then was stuffed. Silver was not allowed to do anything on the upside. It was kept in a tomb, like rarely ever seen in markets. And now the so-called commercials are going heavily short yet again as the specs go long.
For long-suffering and patient precious metals investors this Gold Cartel is going to have to be overpowered, which is just what I believe will occur. Seems to me it is an accident waiting to happen. The tide is going to turn. But the tide ought to look quite a bit different than it did in the years leading up to 2011.
Gold rose 12 years in a row. The Gold Cartel constantly flushed out spec longs in the process, raking in the dough, but the price gradually went higher and higher. But now, after all these years of suppression, we are probably looking at a typhoon instead of a rising tide. The gold price is more than likely going to explode like it did in its blow off top in September of 2011 and keep on going. And it is likely to make new all-time highs sooner than most people think.
The real surprise ought to be moribund silver. I am a big fan of Newton’s Law of Equal and Opposite Reactions. As poorly as silver has traded these past years, which has the gold/silver ratio above 84, it should suddenly act that surprisingly well over the coming months. Short term it has to clear $15 to begin its move. But the real key is for its price to take out $21. When done it will be off to the races in a move to $100 an ounce. Seems like a pipe dream after all these crummy years, but it is coming.
As far as GATA goes, we will continue to fight the good fight. Eventually, following severe market turmoil and soaring precious metals prices, the price suppression scandal will break wide open. A decimated investing public will want to know how such a debacle developed the way it did. And the GATA camp will lay it out for them … in hopes it is not allowed to happen ever again.
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