The Grand LBMA Exposé: A Collective-Mind Analysis

This writer will present the entire situation via a chronicle of all the news publications about the subject, providing dates sources and authors - where possible. Nearly all available information was researched from Internet sources. Most comments are verbatim from respective authors. Occasionally, this writer added comments of clarification and/or conclusions where the research leaves off.

The Original LBMA Announcement -

Research since last week has turned up the very original public announcement of the London Bullion Marketing Association's (LBMA) EXPOSÉ: it was exactly 07:05 AM on Monday July 14, 1997 -- perhaps in poetic recognition of the Bastille Day anniversary, celebrating the French historic social revolution. Here it is verbatim. Please notice the very conspicuous absence of any adjectives or superlatives in the announcement. It is stated as simply a "matter of fact" -- as if it were a mundane daily weather report of dull-continuing conditions. SOMETHING IS DRAMATICALLY WRONG HERE! This is mind-boggling news. Why no journalistic commentary nor opinion?

Writer's note: Can anyone with just a smidgen of knowledge about gold, honestly say this seemingly innocuous announcement does not have monumental import and significance?

It is relevant to notice gold's average trading size per transaction, which was 29,140 ounces -- nearly one tonne per trade (32,150 oz. equivalent to a tonne). This is approximately $10 million per trade. This suggests (at least to me) the trades are non-Central Bank transactions - and more probable commercial operations related to CURRENCY TRADING. Interestingly, the average trading volume for ALL INTERNATIONAL CURRENCIES IS ABOUT $1.2 TRILLION PER DAY.

Continuation of the LBMA Chronicle of Publications

Internet Commentary #6 -

Posted on the Internet January 30, 1997 by "amused"

Your comments (SELBY) fit right into my kind of thinking. NO ONE or ENTITY can control or manipulate ANY market. I'm in the Elliott camp that markets movements are based on the psychology of the masses. That's the mania we are witnessing nowadays in the stock market overall and will see in the gold market in the near future.

Internet Commentary #7 -

Posted on the Internet February 1, 1997 by Milhouse

Recent events have me confused - hoping someone can answer a few "simple" questions for me:

1. If we are to believe the London daily volume figures for gold (30m oz??), why is anybody the slightest bit concerned about the much discussed IMF threat to sell a lousy 5m oz?
2. Based on the fact that CB sales do seem to be significantly impacting the gold price, and also based on our knowledge of the total above ground stock of gold, does anyone really believe the volumes announced by London ? Something doesn't make sense here! There must be some smoke and mirrors involved somewhere.
3. If there is actually some sort of conspiracy by CBs to keep the price of gold down, then why is it only the financially weaker countries that are selling ? Why not Germany, US, Switzerland ? I find any sort of conspiracy theory difficult to believe because the over-riding concern of any modern government is re-election. Politicians and their pet Central Bankers act to create the best possible short term picture of their economies to attract votes.
4. We all know how cheap gold currently is in real terms. Therefore, why is there so much selling at current prices ? Why would anyone sell now, unless of course they think the price is going much lower.
5. Why has the price of platinum been hammered to the same extent as gold ? Have Central Banks been selling any platinum ?

Sorry - lots of questions, no answers.

Internet Commentary #9 -

Posted on the Internet February 1, 1997 by vronsky

@ LBMA Gold Trading: 30 vs 7 Million Ounces Per Day??

I have a problem with your posting today (Richard Burke)! You say the LBMA made a clarification on January 31, 1997 via Bridge News - that average daily gold trading volume was only 7 million troy ounces per day. I checked the archives of Bridge News - and am UNABLE TO LOCATE SAID ARTICLE. Also, I would point out something that appears very strange to me. On January 22 the LBMA announced via the Financial Times that it would begin reporting daily gold trading volume for the express purpose of providing transparency to this market. Then On January 30 - again via the Financial Times - the LBMA produced the report in unequivocal and unambiguous terms that the daily gold trading volume was "30m troy ounces, or 930 tonnes... a daily volume of gold which represented twice the production from South African mines in a year."

Furthermore, the article ended by stating:

"It also published the results of a Bank of England survey that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7m ounces of gold, worth $3bn, was traded daily by these market-makers." Clearly they were referring to the gold volume of NINE MONTHS AGO, NOT TODAY'S VOLUME.

Moreover, since the publications of the two articles about LBMA gold trading volume APPEARED IN THE FINANCIAL TIMES, CONVENTION FOLLOWS A CORRECTION SHOULD BE MADE IN THE SAME NEWSPAPER. Strangely, THERE has been absolutely NO correction nor retraction of any part of these articles via the FINANCIAL TIMES.

In conclusion I submit that the 30 million ounces of gold traded DAILY IS CORRECT. Anything to the contrary is just subterfuge in an attempt to confuse the public in regard to a very controversial statement that has caused embarrassment in some circles who would for personal reasons maintain secrecy about daily London gold trading volume.

If and unless the LBMA itself states to the contrary, the real daily gold trading volume in LONDON must necessarily be accepted as originally stated at 30 million troy ounces, or 930 tonnes valued at more than $10 billion DAILY! Interestingly, the LBMA also emphatically stated the "LONDON MARKET CLEARED DAILY ROUGHLY 250 MILLION OUNCES OF SILVER VALUED AT MORE THAN $1 BILLION. BTW, these figures also gel.

The original articles referred to above may be seen at Gold Eagle's Global News page - CNN Financial - Bridge News ( search "LBMA") -- https://www.gold-eagle.com

Internet Commentary #10 -

Posted on the Internet February 4, 1997 by GFD

A secular change reflects some fundamental shift in the markets - the ecology, if you will, of gold. For instance, the rise of gold prices during the 70's did not reflect a change in gold production statistics (as far as I know) but reflected strong inflation in most of the major currencies.

You have raised THE question for gold at this time. Are the fundamentals - the "ecology" - of gold changing at this time? Certainly consumption is outpacing production by ever increasing margins. ( See Vronsky's page: https://www.gold-eagle.com/analysis/supply_demand.html This bodes well for gold as a commodity.

Viewing gold as a commodity may be mistaken, however. The LMBA revelations show that gold is a global currency of some substance and liquidity. So what affects the fundamentals of a currency? Usually Central Bank monetary policy. However, gold does not have a CB - it has it's own intrinsic worth. Changes in the price of gold relative to other currencies reflect the strengths and weaknesses of those other currencies relative to gold.

James Grant has made the observation that price rises in gold reflect the mismanagement of Central Banks. In essence gold is a hedge against CB mismanagement. Another way of looking at it is that when CB's mismanage a currency it will drop in value when compared with the gold currency - hence the price of gold "rises" in that currency.

In this day and age it seems you have to substitute the word "marketing" for management of currencies. When you look at the blatant manipulation - spin doctoring - of economic and market indexes it is clear that the value of modern currencies is in "mind share" and not based on intrinsic value. (BTW is this one - inadvertent? - implication of the LBMA revelations: capturing more mind share for the "gold currency"??)

In a nutshell, if there is a change in the secular trend in gold it most likely is reflecting (predicting?) a secular change in the ability of CB's to "manage" their currencies. The "commodity" story has been very strong for years, as can be seen in Vronsky's page, for instance. But that has done nothing for gold relative to any of the major currencies, particularly the US$.

A secular change at this time may reflect a fundamental societal change towards intrinsic values. If and when this does happen, it will really be quite something to see what a society does when it realises that the emperor is not the only one without any clothes!! It is dangerous to underestimate the power of ideas. But a system of ideas (society) based on fluff could have quite a catastrophic ending....

Internet Commentary #11 -

Posted on the Internet February 5, 1997 by Orpailleur

I was late in my readings and it was only yesterday I got to your excellent message (from Cmax) of Fri Jan 31 1997 07:28. As it is not as easy as before on Bart's new server to scroll back over several days (Bart: I miss the possibility of saving comments over a whole week for archiving!), let me summarize your questions:

Why is gold so cheap,

Who prompted LBMA to go public, and

What are the underlying or "real" motivations for their move.

Though the official reason of need for more transparency is indeed of highest interest for the public, one may wonder if the Sumitomo copper scandal is the real reason for the changing of the course. Copper is a commodity, gold is quite a bit more than a commodity as illustrated by the very figures published by the LBMA.

The 3 major protagonists of this market are the producers, the central banks, and the mainly London- and Zurich-based merchant banks. The merchant banks borrowed gold from the central banks and rented it to the producers, herewith making money by allowing forward sales, spot deferred sales, and gold loans in order to fill the market gap between offer and demand, all this for many years, and accounting for tremendous amounts of gold. Gold price remained controlled: gold was very cheap. This "tripartite party" went on for years to the benefit of all ( with the exception of us few goldbugs hidden in their kitcoan catacombs... ).

Now the merchant banks have broken the ties. Has it happened because the central banks have no more gold to lend, or because gold price is too low for many producers to survive, or because over the years the merchant banks were able to accumulate such amounts of money & gold, and such power in market making that the central banks ( which within their capital structure are controlled to some extent by the merchant banks themselves ) are left with no clothes?

 

THE RED BARON

(September 15, 1997)

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(Coming in a few days Part - 3)