- Signs of Panic: LBMA and COMEX Try to Reassure the Market – Twice in One Week
by Ronan Manly, https://www.bullionstar.com/
In the space of a week, the London Bullion Market Association (LBMA) and CME’s Commodity Exchange (COMEX) in an air of panic, have issued not one, but two statements to try to placate the gold market. This is of concern because the LBMA and COMEX jointly establish the global ‘gold price’ through the trading of enormous volumes of unallocated gold and cash-settled gold futures, respectively.
Last week, as the contango between the higher COMEX futures price and the far lower London spot gold price blew up to a nearly $100 differential, and London market maker bid-ask spot spreads blew out to $100 between bid and ask, the LBMA in a rush to deflect attention, issued a statement claiming that:
“The London gold market continues to be open for business. There has, however, been some impact on liquidity arising from price volatility in Comex 100oz futures contracts. LBMA has offered its support to CME Group to facilitate physical delivery in New York and is working closely with COMEX and other key stakeholders to ensure the efficient running of the global gold market.”
As we asked at the time last week in a BullionStar article:
– Why is the LBMA colluding with the COMEX?
– How can the London gold market be open for business if LBMA market makers are not providing liquidity in spot gold
– Why is the LBMA deflecting attention from the London market and pinning the focus on the COMEX?
– Why does the LBMA want to facilitate physical delivery in New York when its remit is the London Gold Market (loco London)?
– Who are the other key stakeholders that the LBMA and COMEX are colluding with?
London Gold Pool
Rewind to 1968, and the parallels between the modern bullion banking cartel dominating the LBMA and COMEX, and the central bank gold cartel of that era, are striking. Between late 1961 and March 1968, a cartel of central banks from the US and Europe ran a price manipulation scheme in London, aiming to keep the price of gold at $35 per ounce. They did this by constant intervention into the market, pooling their gold reserves to push down the gold price.
Conceived and coordinated at the Bank for International Settlements (BIS) in Switzerland by the G10 central bank governors of that time, the dirty work of actual gold market intervention was done by the Pool’s agent, the Bank of England gold trading desk in London.
The syndicate, known as the London Gold Pool, was successful until it wasn’t, with the beginning of the end in early March 1968 as the huge run on gold became a tidal wave in the presence of sterling and US dollar weakness. On 10 March 1968, a Sunday, the consortium released a statement claiming that: “the London Gold Pool reaffirm their determination to support the pool at a fixed price of $35 per ounce”. At the same time, Fed chairman William McChesney Martin even vowed that the US would defend the Pool “to the last ingot”.
The Pool then continued to airlift hundreds of tonnes of gold bars from the US Treasury’s Fort Knox in Kentucky to RAF Mildenhall, as they had been doing since the previous November which they dumped into the London market for the rest of the week (March 11 -14). With all the Good Delivery Gold from Fort Knox siphoned off to the market (the buyers of the gold were actually a consortium of European merchant banks), it was left to NM Rothschild to feign surprise and convince the Bank of England and NY fed to pull the plug, and the London Gold Pool collapsed on the evening of 14 March 1968, ushering in an era of free market gold prices.
The moral of that story and the lessons that we can learn are simple – don’t believe the pronouncements of the powers that be in the London and US gold markets, especially during a crisis. In March 1968, during the last days of the London Gold Pool, as the central bank cartel ship began to sink, theystodd steadfast in denials that anything was amiss, brazenly saying that “the London Gold Pool reaffirm their determination to support the pool.“
This time around, with their hollow claims about “healthy stocks of gold in London and New York”, and that the “LBMA has offered its support to CME Group”, the names may have changed but the denial strategy remains the same. It therefore seems that while history doesn’t repeat itself, it still often rhymes.