GATA uses FOIA to gain U.S. gold holdings data access

GATA has begun a campaign to force federal agencies to publicly disclose U.S. gold reserve loans and gold swaps.

Author: Dorothy Kosich
Posted:  Monday , 10 Dec 2007

RENO, NV - 

The Gold Anti-Trust Action Committee (GATA) is using the Federal Freedom of Information Act to force the Federal Reserve Board and the Treasury Department to reveal the disposition of U.S. gold reserves.

GATA is seeking all records in the possession or control of the Federal Government pertaining to, explaining, denying or otherwise mentioned gold swaps involving the U.S. Government or their agent from January 1, 1990, to December 6, 2007.

Attorney John S. Miles, who is representing GATA, seeks not only gold swaps but also any documents identifying the legal authority for the swaps and any documents describing the U.S. government's policy regarding gold swaps. GATA Chairman William Murphy said, the requests are "only the first we plan to make seeking a full accounting of the U.S. gold reserve."

The group will also request documents involving gold loans and leases "and any other possible impairments of the gold reserve."

Murphy said the reserve has not been audited in 60 years "even as intervention by governments in the currency and gold markets has been increasing dramatically. Investors have the right to know exactly what the U.S. government is doing to affect what is supposed to be free markets."

Neal Ryan, former Vice President of Research for Blanchard and Company, explained in a report published a year ago that "central banks are far and away the largest holders of gold bullion on the planet, making up roughly 18% of the available stock." Central banks loan bullion banks gold with a lease rate and length of loan term attached to the contract. The bullion bank sells the gold into the market and invests their profit in securities with a higher rate of return, such as long-term government bonds.

The World Gold Council says that some central banks report their purchases and sales of gold with a lag ranging from three to nine months, making the statistics in their reports stale information. Ryan also suggested that "there are numerous market analysts who believe that some governments obscure their gold purchases in the market and use various entities to dodge reporting the increase of official gold reserves."

According to Ryan, there isn't much of a different between gold swaps and gold loans except that the swaps "are more often transacted between central banks for currency. ...They occur when gold is exchanged for foreign exchange at a specified price with a commitment to repurchase the gold at a fixed price on a specified future date so that the original party remains exposed to the gold market."

Ryan concluded that "swapped gold hits the market and either party has to make changes to accounting, despite the fact that the asset in question has been moved into the market. One thing that is certain, gold loans and swaps are made from the same source of gold that is held in reserve by central banks. We believe that gold swaps between banks have just as large an impact on the market as gold loans, and even less is known about them in the marketplace."

Early this year, the IMF adopted an accounting change to the way central banks account for gold loans, "giving this sector of the commodities market more transparency than it has ever had," according to Blanchard and Company. "A transparent market is a healthy market and the gold market just got a lot healthier."

In March, Mineweb London Contributing Specialist Rhona O'Connell noted that the IMF guidelines for a data template provide increased transparency, "but the market will still need to comb through the figures for the devil will lie in the detail."