During the third quarter of 2011, in the midst of the European banking crisis, with the Swiss Franc soaring to new safe haven heights, the Swiss National Bank felt increasing pressure to ease the burden of too strong a currency on the economy. Following ineffective actions in August, the SNB finally bit the bullet on September 6th, spending a reported 40-50 billion Euro to significantly devalue the Franc, which was otherwise becoming a much sought after alternative to the faltering Euro. Jeremy Cook, Chief Economist at currency brokers World First described the action on that calamatous day, in The Guardian, as:
the single largest foreign exchange move I have ever seen … The Swiss franc has lost close on 9% in the past 15 minutes. This dwarfs moves seen post-Lehman brothers, 7/7, and other major geo-political events in the past decade
Intuitively, the largest currency devaluation witnessed by any chief economist should be wildly bullish for gold, since gold is even more than the Swiss franc, historically recognized as one of THE safe haven financial instruments. Strangely, in this case no. A cool five minutes before the SNB intervention, the gold price mysteriously plunged $50. This particular event begs the question of just who has undertaken obviously, such a successful joint gold and foreign exchange intervention?
Rewind to Basel Switzerland, where in his 28th June, 2005, opening remarks to the Bank for International Settlements, BIS Fourth Annual Conference; Past and Future of Central Bank Cooperation, Economic Adviser and Head of the Monetary and Economic Department, William R. White listed the intermediate objectives of central bank cooperation as including the following:
the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.
A copy of the remarks can be found here: https://docs.google.com/file/d/0B4fgY-hWNdmgLV94QWN5Rk5TeXVBSDYtNlh0MUVwUQ/edit
Then in 2008, in an introductory presentation by Jean-François Rigaudy, BIS Head of Treasury at a Basel Switzerland, a slide on page 17. indicating the range of BIS products available for members says:
Gold & Forex Services - Intervention
A copy of the slide from the presentation can be found here: https://docs.google.com/file/d/0B4fgY-hWNdmgSS1zQ0JLbWFUNXk5MENiUnRiWnEwdw/edit. The complete presentation can be found here: http://www.gata.org/files/BISAdvertisesGoldInterventions.pdf
As for the nuts and bolts of such an operation, the Swiss National Bank could be selling gold in the markets themselves, through the BIS as above or as The Wall St Journal reported on February 7th, this year, by another method adopted by the Bank of Japan to facilitate secret currency interventions:
On Oct. 31, the BOJ -- acting at the behest of the Ministry of Finance, which sets currency policy -- entered markets to sell yen after it surged to a record high against the dollar. But analysts were caught off guard by MOF's admission that between Nov. 1 and Nov. 4, it conducted an additional $13.3 billion worth of "stealth intervention" by using a limited number of commercial banks sworn to secrecy. http://online.wsj.com/article/BT-CO-20120207-719675.html
A recent article by Paul Mylchreest titled: Thunder Road Report - 28 March 2012, details astonishing patterns of gold trading, including on page 32. graphic representation of the dual actions of last September 6th, in what an increasing number of investors fear as manipulated precious metals markets: http://www.mineweb.com/mineweb/action/media/downloadFile?media_fileid=1718.
By themselves, the BIS discussions and Wall St Journal article are surprising, however read together with the charts from September 6th, 2011, one may conclude it is probable that as GATA have been claiming for years, and as Barrick once asked a court to consider in their defense, that central banks are intervening in the gold markets and, possibly using the services of commercial banks to undertake interventions in precious metals markets on their behalf.
Euro/CHF 5 Minute Chart - Sept. 6th
Gold 24 Hour Chart - Sept. 6th
On 27th February last, I wrote to the BIS asking about the purpose, nature, and frequency of gold market interventions as touted in their documentation. Rather than answering the question, they replied on the 29th, February, providing a link to their latest annual report which contains no information about gold interventions. I therefore refer the issue to you, the reader, with the following two simple questions:
- Is it lawful, as they advertise, for the Bank for International Settlements to undertake joint efforts to influence gold asset prices through intervention in the gold market? and
- Is it acceptable, as they advertise, for the Bank for International Settlements to undertake joint efforts to influence gold asset prices by intervention in the gold market, where citizens and institutions otherwise are led to believe they are investing in free and fair markets?