The Wall Street Journal has agreed to publish a full-page ad in which the Gold Anti-Trust Action Committee charges the U.S. government surreptitiously utilizes gold reserves to engage in international swaps and other market manipulations.
“Anybody Seen Our Gold?” is the title of the ad, which alleges U.S. gold reserves held at depositories such as Fort Knox and West Point may have been seriously depleted. GATA asserts U.S. gold reserves are being shipped overseas to settle complex transactions utilized by the Federal Reserve and the U.S. Treasury to suppress the price of the precious metal.
“The objective of this manipulation is to conceal the mismanagement of the U.S. dollar so that it might retain its function as the world’s reserve currency,” the ad copy reads in a pre-publication version GATA provided.
The U.S. Treasury denies the claim, insisting the stock is accounted for regularly.
GATA’s chairman, William J. Murphy III, said his group was willing to pay the Wall Street Journal’s cost of $264,000 to run the ad “to get the message out that the U.S. enters world markets without public disclosure to prop up the dollar and depress the price of gold.”
GATA cites as evidence the Federal Reserve Open Market Committee reports dating back to Jan. 31, 1995, showing the U.S. Treasury Department’s Exchange Stabilization Fund had undertaken gold swaps.
GATA, a non-profit 501 headquartered in Manchester, Conn., further asserts the federal government strategy to manipulate the price of gold has begun to fail.
“Gold’s recent rise toward $900 per ounce shows that the price suppression scheme is faltering,” the GATA ad reads. “When it is widely understood how central banks have been suppressing gold, its price may rise to $3,000 or $5,000 an ounce or more.”
“The gold reserves of the United States have not been independently audited for half a century,” the ad charges.
The U.S. Treasury disagrees.
“While the entire gold stock is not physically re-counted in any one year, over a period of years, by our continuous sampling process, the entire stock has been counted, and is effectively re-inventoried,” Rich Delmar, counsel to Treasury’s inspector general said.
Delmar explained that the annual Office of Inspector General audits of mint facilities involves a physical inspection of certain vaults, which are subject to a 100-percent bar count and assaying. At the end of the inspection, each vault is sealed.
“During each visit, all previously sealed vaults are checked to ensure that the seals have not been compromised or tampered with,” he wrote. “This process is the basis for the conclusion that there has been a complete physical inventory.”
Delmar said the OIG’s work consists of more than reviewing documents.
“Our auditors physically observe the inventory work done at the mint facilities, and we are responsible for the assay sampling process,” he said.
The Treasury was asked if there is a comprehensive listing and accounting of any encumbrances or other restrictions on the gold in the U.S. Mint that may affect ownership.
“This is not within OIG’s purview,” Delmar responded. “You may want to ask the mint directly.”
‘Dodging the question’
Murphy called the response “ridiculous.”
“The mint does not make complex gold transactions with other countries,” he said. “That is the role for the U.S. Treasury. The mint just houses the gold. The Treasury is dodging the question.”
GATA has filed a Freedom of Information Request asking the Fed and Treasury to disclose information on encumbrances and swapping or leasing of U.S. gold.
“The Fed and Treasury have not even acknowledged receiving our FOIA request,” Murphy said. “It’s idiotic to tell you that the mint would have that knowledge.”
Murphy asked, “Is the gold in the mint truly U.S. gold reserves or is it just ‘custodial gold’ held for some other country? That’s why we need to know what encumbrances there are on the gold as well as whether any U.S. gold has been shipped overseas to fulfill swap obligations.”
The 2006 annual report published on the website of the U.S. Mint lists KPMG as outside auditor.
The KPMG signed audit report in the 2006 Annual Report of the U.S. Mint takes full responsibility for auditing the balance sheets and includes a statement of the custodial activity of U.S. gold reserves.
According to the balance sheets, custodial gold and silver reserves make up 90 percent of the U.S. Mint’s total assets.
Still, there is no specific statement in the U.S. Mint’s annual report or the KPMG audit report describing any KPMG involvement in a physical inspection of the gold reserves.
KPMG’s role as independent auditor for the U.S. Mint is also confirmed in the 2006 audit report prepared by the Office of Inspector General of the Treasury.
Dan Ginsburg, a KPMG spokesman, declined to provide any detail concerning his company’s audit procedures for the U.S. Mint, citing client confidentiality.
Craig R. Smith, founder of Swiss America Trading Corp., said he accepts the GATA arguments because “there has to be a force greater than normal market conditions that has repressed the price of gold.”
Smith noted any number of financial crises since the late 1980s that “should have propelled gold way beyond the 1980 high of $850,” including the savings and loan debacle and the birth of the Resolution Trust Corporation, as well as the on-going devaluation of the U.S. dollar against virtually all major foreign currencies.
“Gold has been playing catch-up with current world economic conditions, and future movements should easily prove gold to be a great value at $900 an ounce. That price will look cheap going forward as the world starts to turn its back on debt-laden currencies and returns to money with a real value.”
But the U.S. Treasury, in a statement on its website, denies the Exchange Stabilization Fund has been used to manipulate gold prices.
“The ESF does not engage in any transactions in the market for any metal such as gold, either in spot markets or in any of its derivative forms,” the Treasury statement declares. “We would like to emphasize that the Treasury Department does not seek to manipulate the price of gold or any other metal by intervening in or otherwise interfering with the market.”
Yvanka Wallner, advertising sales representative for the Wall Street Journal in New York City, said the GATA ad has been approved by the Journal’s lawyers and is being prepared to be run next week.
Gold yesterday closed at an all-time high of $911 an ounce, up $28, on a weaker dollar and higher oil prices.