Barrick Gold Corp. and J.P. Morgan Chase & Co. Accused of Illegal Gold Market Manipulation

Press Release ^ | 18 December 2002 | Unknown

[LSUfan]

An anti-trust lawsuit filed today accuses Barrick Gold Corp., Toronto, and J.P. Morgan Chase & Co., New York City, of "unlawfully combining to actively manipulate the price of gold" and making (US) $2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.

[monkeyshine]

ping

[Cuttnhorse]

"Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"

I have been to several of Barrick's operations and they are well-run and low cost operations...producing between 6 million and 7 million ounces per year.

Anyone who thinks Barrick is a hedge fund with a mine out back is an idiot.

[Poohbah]

Better hurry! The word on the street is that the gold derivatives market blow up when gold gets to $348

The word on the street used to be that the gold derivatives market would blow up at $340. And before that, $330.

An ever-moving target...just the sort of thing to get the clueless to buy lots and lots of gold.

[snopercod]

flag

[rohry]

"The word on the street used to be that the gold derivatives market would blow up at $340. And before that, $330."

I guess that you are not paying attention. The fire is already raging in the plane and is working its way to the fuel tanks:

Your analysis is welcome...

By the way the chart is not up to date. The price of gold is currently $345. What is your dog in this fight?

[Poohbah]

I guess that you are not paying attention.

Oh, I am paying attention.

I've been paying attention to these claims for years. Too bad you haven't.

So far, gold has popped through two price levels that would supposedly trigger a catastrophic meltdown of JP Morgan and the other investment banks.

So when is the catastrophe supposed to engulf JP Morgan?

[arete]

The word on the street used to be that the gold derivatives market would blow up at $340

How do you know that it isn't? If the POG stays at these levels for a couple of weeks, you are going to see a bunch of other financial problem coming to the surface. Just be happy that we are finally being set free and that the fiat dollar is going into the toilet where it belongs.

Richard W.

[Cuttnhorse]

Pooh,

It's impossible to reason with the tinfoil hat types.

[Poohbah]

How do you know that it isn't?

Because the people who hold the derivatives would cash in as soon as possible under your scenario.

If the POG stays at these levels for a couple of weeks, you are going to see a bunch of other financial problem coming to the surface.

Your ilk has been saying this for years.

Just be happy that we are finally being set free and that the fiat dollar is going into the toilet where it belongs.

Well, if you're right about that claim, your gold holdings will do you no good. You can't eat it, and you can at least use worthless Federal Reserve notes as toilet paper.

[Poohbah]

I know. But it's fun to yank their chains :o)

[arete]

You can yank my gold chain all you want. I'm making some very good money on this move. :-)

[rohry]

"I've been paying attention to these claims for years. Too bad you haven't."

And for years the claims were bogus. There was a bear market in gold and silver for 20 years. The smart people look for the bottom and buy. That bottom was put in during April 2001. I bought in June 2001. I am not a goldbug, I was totally invested in stocks (100%) until January 2000

The Dow fell about 35% from its peak to its low (10/9/2002). The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” It has risen 15% (and currently declining) since its low.


The S&P 500 fell 45% from its peak to its low (10/9/2002). The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” It has risen 15% (and currently declining) since its low.


Gold fell about 70% from its peak (Jan 1980) to its low ($253 in 7/1999). It has since risen over 30% since then. The bulls have been crowing that “the bottom has been reached and we are in a new bull market.” Which of these bulls is more likely to be right?


Again I ask, what dog are you betting on?

[rohry]

"Because the people who hold the derivatives would cash in as soon as possible under your scenario."

And how, exactly, would that happen?

There are more (short) derivatives on gold than all the gold mines in the world produce in 7 years. Where are the shorts going to buy gold without raising the price to the stratosphere? Your understanding of what is happening seems to be lacking...

[billybudd]

It's amusing how Blanchard pines for a "free market", yet resorts to government power to curtail activities which occurred in the free market. Why aren't Barrick and JPM part of the market? Does strategizing destroy the "normal" laws of supply and demand? Of course not! The free market is manipulation and strategic trading. The "pure and perfect competition" in those Econ 101 textbooks is a myth.

[rohry]

"It's amusing how Blanchard pines for a "free market", yet resorts to government power to curtail activities which occurred in the free market."

Did you read the article? The gold market (like Enron's dealings) is not transparent. Private companies have been borrowing gold from the Treasury (or the Fed) and "leasing" it into the market to suppress the price...

How would you respond if your company made Ford automobiles and the government was buying Chevys and selling them at a huge dicount to force down the price of cars?

[shrinkermd]

I am inclined to agree with you, arete; however, here is an excerpt as an alternative view from Yahoo.

"VANCOUVER -- News of an antitrust lawsuit being brought by U.S. retail gold dealer Blanchard & Co. against Barrick Gold Corp. and JP Morgan Chase & Co. is being dismissed by some equity analysts as a publicity gimmick.

"Shares of Barrick fell in Toronto and New York early Wednesday afternoon after Blanchard & Co. announced its legal action. Barrick recovered from an intraday low of C$23.46 to close at C$24.45, down 0.8%. The Toronto market's gold index was up 2.8%.

"The market impact you already saw," Barry Allan of Research Capital said, adding that he believes the stock market will come to view the lawsuit as opportunistic.

"Why now? Why now, if this has been going on for so long? It's only now that hedging has become unpopular," because the gold price is rising, Mr. Allen said. "It just strikes me as being very sensationalistic."

"As reported, Blanchard & Co. claims that the Toronto-based gold producer and JP Morgan teamed up to manipulate the price of gold. Blanchard, which deals in coins and gold bars, claims that the gold price should actually be at about US$ 740 an ounce -- or US$760 counting inflation -- if the market had been able to respond to the "normal laws of supply and demand."

"In a statement, Barrick called Blanchard's allegations "ludicrous" and " totally without merit."

"JP Morgan Chase hasn't commented on the lawsuit.

The failure of ABX not fall dramatically is alarming if the legal action has merit. I guess it is the same old story--you decide it's time to buy but you cannot buy unless someone else decides to sell. Your optimism is always counterbalance by someone else's pessimism. Ha.

[Poohbah]

There are more (short) derivatives on gold than all the gold mines in the world produce in 7 years. Where are the shorts going to buy gold without raising the price to the stratosphere?

Well, there's the point. Lots of short action out there. On the other side of each short derivative is someone who will profit from an INCREASE in price, and they'll make a LOT of money.

Believe me, the holders of long positions will cash in as soon as they can. ESPECIALLY if you're saying that there's far too much short action out there--because the holders of long positions will seek to turn their positions into cash before anyone else does, lest they be left holding an unsecured loan to an entity in bankruptcy court, so they're just going to race to be the first to pull the trigger.

[Poohbah]

Again I ask, what dog are you betting on?

None of the above, actually.

It's just amusing as hell to read the GATA conspiracy theorists and their ever-moving target for when all hell breaks loose in the gold derivatives market.

That figure used to be $280 back in 1999. Now it's closing on $350. If gold keeps rising, I'm willing to bet that the "magical doomsday price" will stay just ahead of the actual price...because it allows outfits like Blanchard to keep shilling away.

[larrysav]

Because the people who hold the derivatives would cash in as soon as possible under your scenario.

Remember Enron? It's heads they win, tails you lose. If they lose, they hide the loses in off-balance sheet transactions. If those blow up, the counterparties take a bath. JPM and Citi are already in the hole on Enron's natural gas derivatives. They tried to pawn the loss off on the insurance companies but have failed in court. Eventually, the taxpayer will be on the hook. That's the "you lose" part.

Also look up Ashanti and Cambior. It's happened in the gold market before.

Well, if you're right about that claim, your gold holdings will do you no good. You can't eat it, and you can at least use worthless Federal Reserve notes as toilet paper.

I also store two year's worth of food and toilet paper, so no problem there :-)

Seriously, we don't need to see Argentina happen here to have a good trade in gold. And gold holdings do pay off in a rising gold market. Harmony yields 2.6% and has doubled in the last year.

[Woodman]

Don't forget the $320, $315, $310 & $300 levels where JPM Chase was going under by trillions of dollars. They gold bugs will never learn. My own gut tells me I am better off investing greenbacks in Food and Bullets no matter how worthless they are because I will have move of a need for those items whengold become the main means of exchange again.