Financial Media Wakes Up to 'Physical Tightness' In London Gold Bullion Market

How interesting that the Financial Times has finally noticed 'tentative signs of increased demand for bullion from consumers in emerging markets.'  You know, those obscure places with difficult names such as I-N-D-I-A and C-H-I-N-A.

It's not all that new of a phenomenon, mates.   Our friend Nick has been tracking it, and we have been talking about that here at Le Cafe, for a couple years now.  Well, maybe almost a decade.  See the charts below.

And we have also been hearing about 'physical tightness in the market for gold for immediate delivery.'  While the 'cost of borrowing gold has risen sharply in recent weeks.'

Even while the price of gold was shoved lower on the non-delivery paper markets of The Bucket Shop, helping to crater the deveopment and production of mining companies.

Sounds like borrowing gold for physical delivery is starting to be a dodgy business, a little hard to manage at such high leverage of claims to items.

Wait until people start realizing that there is a diminishing mix of deliverable and of 'borrowed gold' backing up a pyramid of derivatives and paper claims.   Is that the sound of a spoon scraping the bottom of the pot yet?

What happened to the theory of higher prices to relieve demand in excess of supply?

And where is that 'borrowed gold' coming from, by the by?  It must belong to someone, and they may even think it is safely tucked away while it is on its way to Asia via Switzerland.

If the LBMA has been doing what some think they have been doing with demand and available supply, then we haven't seen anything yet.

Never be the last one out of the pool.

But let's see how all this plays out.

Gold Demand from China and India Picks Up

By Henry Sanderson
Financial Times, London
Wednesday, September 2, 2015

London's gold market is showing tentative signs of increased demand for bullion from consumers in emerging markets, after the price of the precious metal fell to its lowest level in five years in July.

The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.

The rise "does indicate there is physical tightness in the market for gold for immediate delivery," said Jon Butler, analyst at Mitsubishi. ...

... For the remainder of the report:

http://www.ft.com/cms/s/0/eae18206-5154-11e5-b029-b9d50a74fd14.html

How the Gold Market Was Crashed - But Most Importantly, Why? Leveraged Default? And Silver?

Many are still sorting through the data to try and figure out what happened, but it is hard to look at the available data and the market action and conclude that the recent 'flash crash' in gold was anything but a calculated takedown.

Some big players had been trying to work the market price of bullion down in stair step fashion for some time.  Their tracks on the tape were big enough to be hard to miss, and any number of people who watch the market structure as it develops were seeing them, and a few were reporting what they saw.

But it just wasn't enough.  The pressures were building, and something had to be done. 

A plan for a market operation to relieve the pressure was made, and then executed ahead of the upcoming option expiration on the Comex on April 25th.  The word was quietly spread so the important monied interests would not make a fuss about losses when the time came, as in the case of MF Global and Cyprus.

And then Goldman gave the signal to the market with their 'short gold' call.

As I said at the time, I was not sure if this was done to try and avert a disaster, or to cover up some longer term corruption. Or perhaps a bit of both.  Motives are never easy to discern where leverage and opaque trading pools are involved.

This could be in advance of a major announcement out of Europe with regard to the Eurozone and also their monetary policy following along the lines of Japan.  Perhaps it is even something regarding US policy.  Obviously one has to have an open mind about that.

But there were persistent rumours of a potential default situation at both the LBMA and the Comex. Well, one has to take those with a skeptical eye.  But there are some data that point to the LBMA in particular, although the drawdown of bullion from the two exchanges could have been more general. 

Linked just below is a report that includes more data and it well worth reading. It tends to concentrate on the Comex.

How the Gold Market Was Crashed.

It seems that the word has gone out to the media and the stories are being spun to protect the system.   And the parrots dutifully pick up the chatter, without knowing why.

The story being spun that there was a speculative excess in gold being held by pension funds that panicked.   Foolish people, outsiders really, got over their heads and caused this regrettable incident.

There is probably a grain of truth in that, but I think it is more likely that they were forced out of their positions by a market operation designed to do just that.  And market insider knew exactly what they were holding.

Price declines caused by legitimate selling and panicked longs are not marked by increasing open interest. That is the hallmark of short selling with a purpose.

This is a big deal, and it was writ large across the media.  And that suggests that there is an equally big problem that had to be dealt with quickly and brutally.  Ordinarily market operations are more adept and protracted.

Something was close to breaking, and it most likely still is. 

And if it broke, it would prove to be embarrassing to quite a few very important people.  At least, that is what this situation suggests to me. 

Even the endlessly levitating stock markets seem a bit 'edgy' with a tension on the tape.

I cannot possibly know what is at the root of this.  Can't find Germany's gold, and can't buy enough at the LBMA to deliver it, because the market is leveraged 100 to 1?

Maybe not that but something of that magnitude.  A major TBTF tottering on the brink of a derivatives domino collapse? There are rumours out of Switzerland about Italy and France.

Most eyes are on the States, but how quickly we forget that ABN/Amro declared a force majeure and stopped all physical delivery of bullion, forcing settlement in cash.  The soft default of a major bullion bank is no joke, especially when it appears they could not obtain suitable goods at any price. 

This tends to point towards problems in Europe and the LBMA.  And one of the big sources of LBMA 400 oz. qualified gold is the big SPDR Gold ETF, GLD which is stored by HSBC in London.  I have included a chart of who tends to use 400 oz. bars below.  The COMEX does not.

As you may recall, Andrew Maguire reported early on that there were indications of problems on the LBMA with regard to gold inventory.  It is said to be leveraged 100 to 1.

“Entities went to the LBMA and said, ‘We don’t trust anybody anymore. We want our physical metal.’ They were told they would be cash settled instead by a bullion bank. The Western governments have been trying to plug holes, and the reason for it has to do with the default that was taking place at the LBMA.

This is why this smash has been orchestrated because of the run that has been taking place on physical metal. So Western governments had to do this because of an imminent run on the unallocated LBMA system. The LBMA bullion banks had become so mismatched at one point on their trading positions vs real world demand that they had to orchestrate this smash."

The 'entities' in question are again just rumour, but they are most likely to be from the Mideast or Asia.    They could be a central bank, or even an ETF for that matter.  But the size was said to have been substantial, and untenable for withdrawal without a severe market disruption given the leverage on which the LBMA operates.  100 to 1 leverage is no joke when the drawdown is physical and available supplies are tight.

If you have not picked it up, the implication in this theory is that the big price declines allowed some non-allocated repositories, like GLD for example, to disgorge delivery ready bullion to the LBMA for delivery to the entity that had demanded delivery.

And something like this might not be a singular event.  People talk, and if one entity got nervous and took delivery that information cannot be kept from other sizable players in the same circles.  And so others step up and ask, and there is the threat of a run.  And it could be happening in more than one place, ie not just the LBMA.  Hence the decline in inventories at the Comex referenced above.

JP Morgan holds enormous derivatives positions in the precious metals not reported anywhere in detail except occasionally in the OCC report.  If something were to perturb the markets, it would almost certainly affect them. 

And recall that the outrageous excesses of the 'London Whale' were not uncovered by regulators, but rather by market participants who reported JPM to be distorting the market because of the size of their position.  And the OCC is having a bit of recent notoriety from overlooking irregularities (some say crimes) to protect the banks.  So keep that in mind.

Changing the subject, if you wish to get a bit more baroque, gold may have been a necessary misdirection with the real target being silver, which hardly anyone is talking about, even the house economists and spokesmodels for the status quo. 

Keep an eye on stocks and the markets.  The big money always moves first, because they get to know what is happening first.

But I have to remind you, your guess is as good as mine.   It is an opaque market, and it has gotten worse and not better, despite all the show of 'reform.'

When the tide goes out, you not only get to see who is naked, you see who they are naked with.  And so the smokescreens go up.

I suspect that this is going to get ugly.

Related: Update to the Update: The Attack On Gold - Paul Craig Roberts (this gets more into the general government-business-as-usual theory rather than something that was incidentally related, ie a major impending default.  As I pointed out I think those sort of antics tend to be a more elegantly executed and gradual.  The recent gold/silver smack down was sheer brute force.  Could have been shock and awe but it really was over the top and probably called far too much attention to itself to have been a 'policy thing.')

Ned Naylor-Leyland: Silver Smoke Signals at the LBMA

Gold Daily and Silver Weekly Charts - Night Bombing Raid - Silver +4.50 from Low - LBMA

Gold December futures fell to 1535 and Silver to 26.15 in the overnight session as a determined night bombing raid took them down in the least liquid period of the 24 hour trading day, with the low being reached around 2 AM New York time.

Silver Dec futures are now at 30.78 in New York, virtually unchanged from their open at 30.85, or up over $4.50 from the low.

Gold is at 1623 now, or up $88 from its overnight low.

The December SP 500 Futures had bottomed at 1116 around the same early morning hours, and are now at 1158 or about 42 point from the overnight lows.

Gold has NOT yet broken the short term downtrend, marked with a sharply declining blue line on the chart.

Tomorrow is option expiration on the Comex as we might have expected. I would hope that long term investors would take advantage of these price drops by locking in physical bullion purchases when they can.

However, it is hard to do this with the leverage and margin requirements on Comex especially on the overnight globex trading session. How can an average trader hope to maintain a position? And that is the basis of their schemes.

"It is not immediately clear at this juncture who was selling or why - but in placing such a huge order into the market when the least number of market participants were active tells you that they were out for dramatic effect.

Anyone looking to offload significant amounts of metal at the best possible price would have done so when both London and New York were both open - this would have ensured they would have hit the market when it was most liquid and ensured they got the best price for their sale.

Clearly finessing gold into the market was not their motive - they wanted a statement."

Ross Norman, Sharps Fixley

The interplay between the LBMA 'physical market' and the New York 'futures markets' is fairly obvious. The leverage on the LBMA physical market for gold and silver, as opposed to the London Metals Exchange which trades base metals, is reputed to be around 100 - 1. So any 'run' on the metals will stress the system.

According to their website the LBMA market markers are some of the largest Too Big to Fail banks including UBS, Société Générale, Merrill Lynch (BoA), Credit Suisse, Barclays, Goldman Sachs, JPM, HSBC, The Bank of Nova Scotia ScotiaMocatta, Deutsche Bank.

Jim Rickards: Possible Run on the Gold Bank, Fed Insolvent, Currency Endgames in US Debt Crisis

"Somewhere ahead I expect to see a worldwide panic-scramble for gold as it dawns on the world population that they have been hoodwinked by the central banks' creation of so-called paper wealth. No central bank has ever produced a single element of true, sustainable wealth. In their heart of hearts, men know this. Which is why, in experiment after experiment with fiat money, gold has always turned out to be the last man standing." Richard Russell

The interview is refreshing because Mr. Rickards lays his thoughts out clearly and without excessive jargon. I found his rationale for China's desire to increase its gold holdings to be intriguing. The price objective of $5,000 - 10,000 is somewhat arbitrary, but directionally correct if it is not accompanied by a reissuance of the currency, which I think is much more probable. Essentially it works out to be the same, since the new currency is likely to be a factor of 1 for 100 exchange for current dollars. If this seems outlandish, it should be kept in mind that this is not all that far removed from the fairly recent post-empire experience of the Soviet Union.

Jim Rickards audio interview on King World News

Highlights (aka Cliff's Notes):

• There is obviously not enough gold and silver to cover the physical demand if holders of paper certificates in unallocated accounts demand delivery, and most likely only a small fraction could be covered with the practical supply available. Cash settlement will be enforced in the majority of cases.
• Cash settlements would be for a price as of a 'record date' which is likely to be much less than the current physical price which would continue to run higher
• There is more here than meets the eye - if you holding metal in an unallocated account you are likely to be considered an unsecured creditor
• 100:1 leverage is reckless no matter commodity or asset it involves - little room for error
• There is no way to pay off the existing real US debt without inflating the currency in which the debt is held, to the point of hyperinflation
• If the Fed's mortgage assets were marked to market the Fed itself would be insolvent
• Anything involving paper claims payable in dollars (stocks, bonds) are a 'rope of sand,' a complete illusion that is fraught with risk
• $5,500 per ounce of gold would be sufficient to back up the money supply (M1) as an alternative to hyperinflation and a reissuance of the currency. Target price is 5,000 - 10,000 per troy ounce in current issue US dollars
• The break point will be when the US debt can no longer be rolled over. US will not be able to finance its debt without taking drastic action on the backing or nature of the currency
• China needs to have about 4,000 tonnes of gold, and only has 1,000 tonnes today
• China cannot fulfill this goal by taking even all of its domestic production for the next 10 years. The Chinese people are showing a strong preference to hold gold themselves.
• From 1950 to 1980 the US gold supply declined from 20,000 to 8,000 tonnes, basically moving from the US mostly to Europe.
• The Chinese are frustrated that they cannot obtain sufficient gold at reasonable prices as Europe did, to withstand the currency wars and the reworking of international finance
• Holding your gold in a bank correlates you to the banking system, the very risks which you are trying to avoid

I was gratified to see that Mr. Rickards has come to the same conclusion as I had that the limiting factor on the Fed's ability to monetize debt will be the value and acceptance of the bond and the dollar.

I should add that although it is possible that some event might precipitate a series of events that could accelerate this, the scenario will otherwise take some years to play out. These types of changes happen slowly. The rally in precious metals has been going on for almost ten years now, and it might take another five to ten years for the resolution of these imbalances into a new equilibrium barring some precipitant, or 'trigger event.'

Mr. James G. Rickards is Senior Managing Director for Market Intelligence at Omnis, an applied research organization. He is also co-head of the firm's practice in Threat Finance & Market Intelligence and a member of the Board of Directors. Mr. Rickards is a senior counselor, investment banker and risk manager with extensive experience in capital markets including portfolio and risk management, product structure, financing and operations.

Prior to Omnis, Mr. Rickards held senior executive positions at "sell side" firms (Citibank and RBS Greenwich Capital Markets) and "buy side" firms (Long-Term Capital Management and Caxton Associates). Mr. Rickards has been a direct participant in many significant financial events including the 1981 release of U.S. hostages in Iran, the 1987 Stock Market Crash, the 1990 collapse of Drexel and the LTCM financial crisis of 1998 in which he was the principal negotiator of the government-sponsored rescue. He has been involved in the formation and successful launch of several hedge funds and fund-of-funds. His advisory clients have included private investment funds, investment banks and government directorates. Since 2001, Mr. Rickards has applied his financial expertise to a variety of tasks for the benefit of the national security community.

Mr. Rickards holds an LL.M. (Taxation) from the New York University School of Law; a J.D. from the University of Pennsylvania Law School; an M.A. in international economics from the JHU /SAIS, and a B.A. degree with honors from The Johns Hopkins University.

NY Post: Trader Blows Whistle On Gold and Silver Price Manipulation

"Every society gets the kind of criminal it deserves. What is equally true is that every community gets the kind of law enforcement it insists on." Robert Kennedy

The CFTC hearing in Washington was about safeguards against, and limits on, naked short selling at the COMEX. The LBMA in London is a 'cash market' and while short selling is accepted, large leverage and blatant naked short selling is not. The crux of the scandal is that the Banks and hedge funds have been selling what they do not have in order to manipulate the price and cheat investors, in this market as they have been shown repeatedly to have done in other markets.

The story gets sticky in the States because, as disclosed in the motions in a New Orleans trial, the players filed a motion claiming immunity because they were acting in partnership with the Treasury and the Federal Reserve, and other central banks who were not within the Court's jurisdiction.

Watch this story unfold, and then make up your own minds. But be prepared for smears, diversions, misconceptions, and false denials. The accused parties will consistently try to ignore this, and change the subject. The attempts to pressure the media to ignore tihs altogether are a 'tell' if there ever was one.

I am shocked at the extent to which the Banks influence and control the American media. This was testimony at a public hearing, and it has been largely squashed. Judging by history, this is going to get ugly.

Thanks to the NY Post for breaking ranks with the mainstream media. Despite some significant behind the scenes pressure, the Post is actually publishing some words that the Banks do not wish the American people to hear. And many Americans to not wish to hear it, because it shakes their faith in the system, and threatens them with the unknown. And too many, including economists and even bloggers, are only too willing to 'go along to get along' and be invited to the posh gatherings of the famous, and receive some sinecure from the monied interests.

I do not know if this is true or not, or what the truth may be. But I do have a strong passion for bringing the light of day to shine on this, and for these markets to be much more transparent, as a reform, to prevent frauds which we do know have occurred and most likely are still occurring. For me the light of day is not smearing the messenger and making their life dangerously miserable, but that is what too often passes for journalism in the US today, as is seen in the case of other whistleblowers, most famously in the Plame affair.

Naked short selling in size is a cancer in the financial markets. And the way in which the Banks are obstinately fighting against any and all reforms that attempt to limit naked short selling shows the objective observer that they are firmly committed to a status quo that is designed to distort the markets and the real economy for their short term advantage.

Let's be clear about this: naked short selling in size is not a trading strategy, it is a means to a fraud.

This may be the Madoff ponzi scheme writ large, the heart of the darkness in the financial fraud that is the US financial system. The crowning achievement of the financial engineers at the Fed, who have built a Ponzi economy and an empire of fraud.

NY Post
Metal$ are in the pits
By MICHAEL GRAY
4:33 AM, April 11, 2010

Trader blows whistle on gold & silver price manipulation

There is no silver lining to the activities of JPMorgan Chase and HSBC in the precious-metals market here and in London, says a 40-year veteran of the metal pits.

The banks, which do the Federal Reserve's bidding in the metals markets, have long been the government's lead actors in keeping down the prices of gold and silver, according to a former Goldman Sachs trader working at the London Bullion Market Association.

Maguire was scheduled to testify last week before the Commodities Futures Trade Commission, which is looking into the activities of large banks in the metals market, but was knocked off the list at the last moment. So, he went public.

Maguire -- in an exclusive interview with The Post -- explained JPMorgan's role in the metals pits in both London and here, and how they can generate a profit either way the market moves.

"JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the US dollar. JPMorgan is insulated from potential losses [on their short positions] by the Fed and/or the US taxpayer," Maguire said.

In the gold pits, Maguire sees HSBC betting against the precious metal's price without having any skin in the game in the form of a naked short.

"HSBC conducts an ongoing manipulative concentrated naked short position in gold. Silver is much easier to manipulate due to its much smaller [market] size," Maguire added.

"No one at JPMorgan is familiar with Andrew Maguire," said Brian Marchiony, a company spokesman. HSBC declined to comment. (Maguire seems to be creeping into the corporate consciousness. Earlier, JPM tried to deny that he even existed. Now they admit he exists but no one there knows him, despite his have traded alongside them for 40 years, and traded at a sister firm, Goldman. HSBC has at least enough conscience to simply sulk. - Jesse)

Also during the CFTC hearing, Jeff Christian, founder of the commodities firm CPM Group, said that the LBMA, the physical delivery market for gold and silver in the UK, has been using leverage, which is another way to depress the price of gold and silver.

Christian said that the LBMA -- the same market Maguire trades in -- has leverage of about 100-1 on the gold bars settled on the exchange. In layman's terms, that means if 100 clients requested their bullion bars be delivered, the exchange could only give one client the precious metal. (Note: the LBMA is not a 'futures' market like the COMEX where naked short selling is an accepted, if not entirely explicit, practice. The CFTC hearing was essentially about safeguards against and limits on naked short selling on the COMEX, despite the noise and distractions surrounding it. - Jesse)

The remaining requests would have to be settled for cash equivalent. "That is tantamount to a default on the trade," says Bill Murphy, chairman of the Gold Antitrust Action committee...

Read the rest here.

Whistleblower to CFTC in JPM Silver Manipulation Struck by Hit and Run Car In London

I am glad that although Mr. Maguire and his wife are shaken they will apparently be all right.

The related story on his allegations regarding manipulation in the silver market is here.

It appears they have 'the perp in hand' as the say. This should provide some light. I am prepared to accept this as an accident, of course, but it is one hell of a coincidence if so. It could also be the act of some trader who had a bit too much to drink, and a grudge to bear after the testimony the day before. Or something else altogether.

I hesitate to say anything more at this point, except curiouser and curiouser.

As reported by Adrian Douglas, the Director of GATA who has been the contact for Mr. Andrew T. Maguire, and on the GATA website

"On March 25th at the CFTC Public Hearing on Precious Metals GATA made a dramatic revelation of a whistleblower source, Andrew Maguire, who has first hand evidence of gold and silver market manipulation by JPMorganChase, and who had tipped off the CFTC in advance of manipulation in gold and silver some months ago.

On March 26th while out shopping with his wife in the London area, Mr. Maguire's car was hit by a car careening out of a side road. The driver of the vehicle then tried to escape.

When a pedestrian eye-witness attempted to block the driver's escape he accelerated at him and would have hit him had the pedestrian not jumped out of the way. The car then hit two other cars in escaping. The driver was apprehended by the police after police helicopters were used in a high speed chase.

Andrew and his wife were hospitalized with minor injuries. They were discharged from hospital today and should make a full recovery."

Brown's Bottom: Was This a Bailout of the Multinational Bullion Banks Involving the NY Fed?

The bottom referred to, of course, is the bottom of the gold price, and the sale of approximately 400 tonnes of the UK's gold at the bottom of the market.

The sticky issue is not so much the actual sale itself, but the method under which the sale was taken and who benefited.
There has been widespread speculation that the manner in which the sale was conducted and announced was in support of the nascent euro, which Brown favored. This does not seem to hold together however.

There is also a credible speculation that the sale was designed to benefit a few of the London based bullion banks which were heavily short the precious metals, and were looking for a push down in price and a boost in supply to cover their positions and avoid a default. The unlikely names mentioned were AIG, which was trading heavily in precious metals, and the House of Rothschild. The terms of the bailout was that once their positions were covered, they were to leave the LBMA, the largest physical bullion market in the world.

"LONDON, June 1, 2004 (Reuters) -- AIG International Ltd., part of American International Group Inc., will no longer be a London Bullion Market Association (LBMA) market maker in gold and silver, the LBMA said on Tuesday."

LONDON, April 14, 2004 (Reuters) — NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild, will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.

The manner in which the sale was conducted, and the speed at which it was undertaken, without consultation of the Bank of England, made many of the City of London's financiers a bit uneasy. The sale as bailout was given impetus by this revelation which surfaced some years later.

"In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.
Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K."

So it appears that long before AIG crafted its enormous positions in CDS with the likes of Goldman Sachs, requiring a bailout by young Tim and the NY Fed, it may have been engaging in short positions in the metals markets, especially silver, and may have required a bailout by England to preserve the integrity of the LBMA.

There are also some who think that the gold sale provided a front-running opportunity for that most rapaciously well-connected of Wall Street Banks, Goldman Sachs. Gold, Goldman, and Gordon

This is the undercurrent of the inquiries in England today, and the controversy surrounding Brown's Bottom. There is thought that the information disclosed on the London sales will be heavily redacted to protect the involvement of the US Federal Reserve bank, which is said to have engaged in gold swaps to further depress the price, in conjunction with a major producer and a NY based money center bank. The people of the UK deserve answers.
.

UK Telegraph
Explain why you sold Britain's gold, Gordon Brown told
By Holly Watt and Robert Winnett11:55AM GMT 24 Mar 2010

Gordon Brown has been ordered to release information before the general election about his controversial decision to sell Britain's gold reserves.

The decision to sell the gold – taken by Mr Brown when he was Chancellor – is regarded as one of the Treasury's worst financial mistakes and has cost taxpayers almost £7 billion.

Mr Brown and the Treasury have repeatedly refused to disclose information about the gold sale amid allegations that warnings were ignored.

Following a series of freedom of information requests from The Daily Telegraph over the past four years, the Information Commissioner has ordered the Treasury to release some details. The Treasury must publish the information demanded within 35 calendar days – by the end of April.

The sale is expected to be become a major election issue, casting light on Mr Brown's decisions while at the Treasury.

Last night, George Osborne, the shadow chancellor, demanded that the information was published immediately. "Gordon Brown's decision to sell off our gold reserves at the bottom of the market cost the British taxpayer billions of pounds," he said. "It was one of the worst economic judgements ever made by a chancellor.

"The British public have a right to know what happened and why so much of their money was lost. The documents should be published immediately."

Between 1999 and 2002, Mr Brown ordered the sale of almost 400 tons of the gold reserves when the price was at a 20-year low. Since then, the price has more than quadrupled, meaning the decision cost taxpayers an estimated £7 billion, according to Mike Warburton of the accountants Grant Thornton.

It is understood that Mr Brown pushed ahead with the sale despite serious misgivings at the Bank of England. It is not thought that senior Bank experts were even consulted about the decision, which was driven through by a small group of senior Treasury aides close to Mr Brown.

The Treasury has been officially censured by the Information Commissioner over its attempts to block the release of information about the gold sales.

The Information Commissioner's decision itself is set to become the subject of criticism. The commissioner has taken four years to rule on the release of the documents, despite intense political and public interest in the sales. Officials have missed a series of their own deadlines to order the information's release, which will now prevent a proper parliamentary analysis of the disclosures.

It can also be disclosed that the commissioner has held a series of private meetings with the Treasury and has agreed for much of the paperwork to remain hidden from the public. The Treasury was allowed to review the decision notice when it was in draft form – and may have been permitted to make numerous changes.

In the official notice, the Information Commissioner makes it clear that only a "limited" release of information has been ordered.

Ed Balls, who is now the Schools Secretary, Ed Miliband, now the Climate Change Secretary, and Baroness Vadera, another former minister, were all close aides to the chancellor during the relevant period.

If the information is not released by the end of April, the Treasury will be in "contempt of court" and will face legal action. A spokesman said last night that the Treasury was not preparing to appeal against the ruling.

How auctions cost taxpayer £7bn

The price of gold has quadrupled since Gordon Brown sold more than half of Britain’s reserves.

The Treasury pre-announced its plans to sell 395 tons of the 715 tons held by the Bank of England, which caused prices to fall.

The bullion was sold in 17 auctions between 1999 and 2002, with dealers paying between $256 and $296 an ounce. Since then, the price has increased rapidly. Yesterday, it stood at $1,100 an ounce.

The taxpayer lost an estimated £7 billion, twice the amount lost when Britain left the Exchange Rate Mechanism in 1992.

The proceeds from the sales were invested in dollars, euros and yen. In recent years, most other countries have begun buying gold again in large quantities.

Max Keiser Reports

Sprott Has Purchased About 9 Tonnes of Gold Bullion This Week

The Sprott Physical Bullion Trust (PHYS) is now holding 286,870 ounces of gold, with a market value of $327,003,510. The estimated net proceeds of their IPO are approximately $390,000,000, possibly higher depending on total fees for the IPO and initial bullion purchases.

They have now purchased 8.923 tonnes of gold bullion since last Friday (at 32,150.746 Troy ounces per metric tonne).

The total units outstanding are 40,000,000 for a Net Asset Value of 9.50 including cash and bullion. With the price of the Trust closing at 9.96 today, it is at about 4.85% premium according to their website.

By way of comparison, the Central Gold Trust (GTU) closed at a premium of 8.2%. This is on the high side, reflecting gold's recent run higher, and a flight to safety over recent concerns regarding sovereign debt. Gold has reached record prices in the euro and the British pound.

It will be interesting if we can see identify the drawdowns in the inventories that sourced this gold, wherever they may be. There are those who contend that the supply is coming from the unallocated inventories of bullion banks who are engaging in a kind of 'fractional reserve' gold selling to their customers.
If Your Gold Is at an LBMA Bank, You May Be Just an Unsecured Creditor by Adrian Douglas.

Let's see if the price of spot holds its levels after this unusual level of bullion purchasing in what is reputed to be a tight market.