by Chris Powell, Gold Seek:
At long last complaints of gold price manipulation and suppression got some respect this week from the Official Monetary and Financial Institutions Forum, a snooty group based in London.
The group published a long paper heralding gold’s restoration to the center of the world financial system, “Gold and the New World Disorder,” and the paper’s chapter titled “Market Disruption — The Short Squeeze” has this to say:
“With record demand for gold, much of it from BRICs-related countries, the risks of a squeeze are increasing. This could have several catalysts.
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“‘Bullion banks’ holding concentrated gold short positions might need to buy back the metal during another price run.
“Analysts have long argued that these short positions suggest market manipulation, citing the disproportionate control held by a few entities.
“Lawsuits against banks for manipulating the precious metals markets have yielded some success in recent years. During these lawsuits, some former ‘bullion bank’ traders have commented about how these gold market
strategies might make the market vulnerable to a short squeeze — either by accident or design.
“Academic and other studies provide evidence that ‘shorting gold’ has historically been used to suppress the gold price, often linked to central bank sales and futures contracts on commodity exchanges.
“There is also room for market disruption from imbalances stemming from allocated and unallocated gold accounts when market participants own just a claim on gold rather than specific bars. Recent analysis suggests that the unallocated-to-allocated gold ratio at the London Bullion Market Association could range from 20:1 to even 100:1. For every ounce of physical gold backing these accounts, there might be 20 to 100 ounces of unallocated paper gold claims.
“This indicates a fractional-reserve system where future claims may far exceed the physical gold available. Predicting the timing of such a squeeze is speculative, given the size of some of these positions and growing world financial and economic tensions. However, with suspicions rising that some BRIC countries could be considered ‘weaponizing’ gold against the West, financial markets could be in for a bumpy ride.”
