What Was The Role of J.Aron & Co. And Goldman Sachs In Gold Market Price Suppression Over Past Decades?

Will J.Aron and Goldman Tell Us?

A high gold (and silver) price provides an essential warning signal of loose central bank monetary policy that, if it is continued, can ultimately result in high goods price inflation and suddenly higher interest rates.

Gold and silver have served as tools of discipline that ultimately limit loose central bank monetary policy.

There is mounting evidence that the collapse in gold prices from the 1980 high price of $850 /oz. to the 1999 low of $250 /oz. was orchestrated by market intervention both through 1) the Bank of England’s oversight of the conversion of London’s cash gold market to trading and holding promissory notes for gold in lieu of allocated physical bars and also 2) through gold sales and silent leasing of gold by central banks in the 1990s swamping the global physical gold market.

Central Bank Gold Leasing

Ferdinand Lips was a Swiss banker and a founder and, until 1987, a Managing Director of Rothschild Bank AG in Zurich after which he started his own bank, Bank Lips AG, in Zurich.

In 2001, Lips published the must read book GOLD WARS - The Battle Against Sound Money as Seen From a Swiss Perspective - see here and here - that served as a warning of a catastrophic war against gold by the financial industry, that hated the limiting role of gold in stopping loose central bank monetary policy that otherwise could create financial bubbles, and by central banks themselves.

As background, J.Aron & Co. LLC is a commodity trading firm that was purchased by Goldman Sachs Group, Inc. in 1981. Subsequent to this purchase by Goldman, employees of J.Aron ultimately became the senior management at Goldman including Lloyd Blankfein (CEO) and Gary Cohn (CEO, then later US Treasury Secretary).

In his book on pg. 123, Lips gave the following recollection of encountering employees of J. Araon & Co. advising central banks on their gold holdings:

“Was it the Central Banks?

On February 6, 1996, I visited J. Aron & Co., a well-established bullion firm in London. It is a subsidiary of the prestigious Wall Street firm Goldman, Sachs and Company. Robert Rubin, its former CEO, was serving as U.S. Secretary of the Treasury at the time. Rubin has since resigned from his post. A Johannesburg stockbroker, Merton Black of Ivor Roy Jones, now owned by Deutsche Bank group, introduced me to J.Aron & Co. I had a meeting that day with Neil R. Newitt, Managing Director, and Philip Culliford, Executive Director.

Although I had never met these gentlemen before, they knew my name and were very open with me. Culliford saw a strong demand for bullion on the part of US funds, but little demand from the Middle East. Newitt was outright bearish on gold and said that the central banks would stop any increase in the price of gold. (emphasis added - ed.) Having been active in the gold market since 1968, he was in regular contact with central banks and seemed to know what he was talking about. However, he thought that of the 35,000 tonnes of central bank gold holdings only a small portion, approximately 3,500 tonnes, could be loaned out or sold. The conclusion drawn from the discussion was that there could be no doubt that the central banks were controlling the price.

I left quite puzzled and still wondering why central banks would have an interest in keeping down the price of their only asset of value? Afterwards, I visited Deutsche Morgan Grenfell, where Robert Weinberg told me that the firm of J.Aron was very active in the gold lending business. For this reason they were very interested in forward sales by gold mining companies. Weinberg also mention that Newitt was known for being notoriously bearish about the price of gold. This was understandable since he knew what was happening.

After leaving the Goldman Sachs subsidiary, it was still not clear to me why the central banks should want to keep the price of gold low. As sellers, it would appear to be normal to try to sell at the highest possible price. In the business world, it is the buyer who is interested in a low price for goods he wants to acquire.

Because central banks are responsible for managing assets belonging to the people of their respective countries, such irresponsible behavior is hard to understand. One result of my visit, however, was, that I realized that the gentlemen at J. Aron, who were acting for central banks, undoubtedly had better information and advanced knowledge that easily could be exploited. What I did not yet realize was that these were the people who actually advised the central banks. (emphasis added - ed.)

It is Not Only the Central Banks!

And so I found out, unfortunately belatedly, who had the biggest interest in keeping the gold price down, or at least unchanged. It was not the central banks - it was the bullion banks. ”

What Lips finds and states in his book is that J.Aron employees were advising banks on selling and leasing gold with a view to suppressing the price of gold. Lips also mentions J.P.Morgan Bank, Chase Bank, Swiss bank UBS, and others as being involved in this gold leasing operation to silently oversupply the world’s markets.

Others Noticed, Too

In October 1997, Richard Pomboy made a presentation at Grant’s Interest Rate Observer Fall Conference in New York that can still be found here. Pomboy estimated that 1,500 tonnes per year of central bank gold would need to be sold and leased into the gold market or risk a rising gold price. At that time, gold mines globally were producing roughly 2,500 tonnes per year.

In the late 1990’s, analysts James Turk, Reg Howe, and Frank Veneroso, each working independently and using different methods, published estimates that the central planners at our central banks were leasing up to 1,500 tonnes per year of the public’s gold reserves into the market using deceptive off-balance-sheet operations in order to manipulate down the price of gold. Veneroso estimated that Western central banks had leased-out up to 25% of their gold holdings in this manner.

What We Never Seem To Hear From J.Aron or Goldman Sachs

What J.Aron, parent Goldman Sachs, other bullion banks and their alumni never discuss, that this writer has observed, is detailed analysis of this silent gold leasing scheme by central banks or the impact of London’s promissory note cash/spot gold system that trades a massive $382B daily in these immediate ownership cash gold notes creating a supply of virtual digital gold, that does not exist allocated in cash market vaults, to be held by investors.

It is estimated that today between 10,000 tonnes and 14,000 tonnes (320M to 450M oz.) of gold claims exist in the London immediate ownership cash market with very little metal backing.

Invariably over decades, it seems we have heard from these sources about retail coin demand, jewelry demand, the BRICS, or discussion of market generalities along with predictions of moderate gold and silver price rises or declines but never what goes directly to the reactor core - artificial supply of paper metal standing claims in London and central bank efforts to manipulate down the price working with bullion banks.

The end result is that central banks, coordinated by The Bank for International Settlements, have been running loose monetary policy for several decades that have inflated asset prices and speculation in assets to unheard of levels - until now.

Figure 1 - M2 Money Stock (red) vs S&P500 Stock Index 1980 to Present; source: TradingView.com

Physical Gold & Silver Demand Now Ends Their Price Setting

It appears that the demand for physical gold and silver is now stressing the gold and silver markets with a silent run on these physical assets over the past two years to the point that price suppression and containment, that has worked so well for decades, is starting to fail and risks rapid-onset failure especially in London’s gold and silver markets.

When we see the coming catastrophe of the declining real value of currency, stocks, bonds, and real estate after decades of loose monetary policy speculation, what will J.Aron and Goldman Sachs say? And what will they say about gold and silver spiraling higher in price as gold and silver price manipulation and containment fails? War with Russia did it?

Best regards,

David Jensen