By Rob Kirby
Abstract: Back in October, 2009 I penned an article titled, A Blight on Humanity, where I reported that, in an Asian depository there had been found 60 metric tonnes of “Good Delivery” gold bricks that had been gutted and filled with tungsten. That article was followed up with, On Doing God’s Work, where additional information on the fake gold bricks was presented. This lengthy report has been written to provide the background and genesis of who was involved, why the fake gold was produced and how it was fed into the international gold market.
Background of the London Gold Pool: Cause and Effect
According to Wapedia:
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.
The central banks coordinated concerted methods of gold sales to balance spikes in the market price of gold as determined by the London morning gold fixing while buying gold on price weaknesses. The United States provided 50% of the required gold supply for sale. The price controls were successful for six years when the system became no longer workable because the world’s supply of gold was insufficient, runs on gold, the British pound, and the US dollar occurred, and France decided to withdraw from the pool. The pool collapsed in March 1968.
The London Gold Pool controls were followed with an effort to suppress the gold price with a two-tier system of official exchange and open market transactions, but this gold window closed in 1971 with the Nixon Shock, and resulted in the onset of the gold bull market which saw the price of gold appreciate rapidly to US$850 in 1980
So the London Gold Pool was an amalgamation of 8 countries “pooling” their gold reserves so that coordinated sales could be undertaken to defend a global gold price of US$35 per ounce. The problem with selling ANY physical asset to maintain an artificial price is preserving an adequate physical supply of the asset to continue the price fixing. The London Gold Pool failed because the U.S. Federal Reserve was printing too much fiat money – which informed individuals were redeeming for increasing amounts of sovereign U.S. gold bullion. In August 1971, President Nixon finally told the rest of the world, NO MORE GOLD BULLION FOR DOLLARS. The point to take away from this is that price-capping creates a constant drain or stress on supply of the commodity being suppressed in price.
Observable or Believable Physical Supply Must Back Paper Promises
That issues are emerging regarding the sanctity of the global gold bullion supply should not surprise anyone and, in fact, make intuitive sense. As the chart below supplied by the St. Louis Federal Reserve attests – a MASSIVE amount of fiat money has been printed in recent years. Using history of the London Gold Pool as our guide, we know from experience that physical supply of gold is MATERIALLY impacted when money is printed in excess. In this light, it makes a ton of sense that ANY deficiency or abnormality in the underlying physical stock of gold would be more susceptible or likely of being discovered during such time of monetary stress.