“Somebody Big Is Sitting On The Gold Price”

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Submitted by PM Fund Manager Dave Kranzler, Investment Research Dynamics:

Arabianmoney.net posted a conversation with Ross Norman, who is the CEO of Sharps Pixley, the London-based bullion broker with roots that go back to the late 1770’s.  What makes this admission astounding, and was overlooked by Arabianmoney, is that Ross Norman was at one time a gold trader for the Rothschild family at NM Rothschild.  In other words, he has access to the “wizard” behind the curtain that controls the London Buliion Marketing Association.

Here’s who it is, Ross, and I’m sure you already knew:

I am on an email distribution list operated by Gijsbert Groenewegen, who many of you may know from his articles posted on 321gold, Goldseek and Gold-Eagle.com.   Interestingly, Gijsbert sent out an email this morning with very interesting analysis from someone on his list who is an expert in the precious metals market.  The reader had just finished pouring over the latest BIS annual report, which was released in June.   Here’s his commentary:

Last week I scanned through the Bank of International Settlement’s 2014/2015 annual report, which came out in late June.  While I don’t have any investable conclusion from what I noted, I was impressed with how important gold is to its operations.   I don’t think the general gold market pays much attention to the BIS, but after going through the report, it was clear to me the BIS has the potential to have a major influence on the gold price, and that would certainly be true relative to the currencies it owns and manages.

If one considers that the BIS is the banker to central bankers  — 60 listed in total – then it is understandable that 95% of its deposits are denominated in currencies (74% USD, 13% euros, and 6% sterling) and the rest is gold (about USD$13.8 bn).  If the BIS role is to facilitate capital flows and smooth out FX, it makes a lot of sense that gold is central to its function.  It certainly appears prevalent in the annual report.

To me, it appears that gold is sort of a relief valve to some of the functions the BIS undertakes.   The BIS owns 108 tonnes of gold and accounts for 443 tonnes as off-balance sheet gold.  Also noteworthy is presence of gold derivatives.  Of the SDR 437.19 billion total notational derivative financial  instruments (1 Special Drawing Right = USD$1.40 ) —  gold related options, forwards, and swaps make up 30%; while interest rate swaps account for about 60%.  Its net gold investment assets account for 16% of its equity.   Gold is about 6.5% of assets and about 5% of liabilities.   I figure about 12% of its profits came from its gold transactions.

If there is one financial institution capable, willing and basically obligated ( per the 60 central banks it represents!) to influence the gold price, it is the BIS.  If they are not influencing the gold price / FX, then the 60 member banks are not getting well served!!

Between the above analysis and Ross Norman’s interesting admission, I think it’s pretty clear who the 800 lb. gorilla is in the gold market.  Which means that the Fed and the U.S. bullion banks are de facto manipulating the gold market on a daily basis, as the they are subservient to the BIS.