A New Manipulation Theory

I suppose it has to happen. Using a little-known report, Form FR Y-9C which contains gross commodity exposure of banks in its listing of off-balance-sheet items, Peter Krauth of Global Resource Alert has concluded that the big banks are manipulating the price of gold upwards.

The basis for Krauth's contention lies in the quarterly reports filed by financial holding companies with federal banking regulators. Krauth's holy grail is the Form FR Y-9C, an analytical tool used to monitor financial institutions between on-site inspections. The manipulation smoking gun, says Krauth, is found in the summary of the banks' off-balance-sheet items.

By poring over the Y-9C forms filed by Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan Chase et al., Krauth claims to have tracked the movement of $4.68 trillion into the commodity sector in what he describes as the "the biggest bank manipulation in generations."...

Krauth backs up his argument by pointing to the banks' forecasts. "In its 2010 forecast, Goldman Sachs called for gold prices to spike to $1350 and up to $1425 an ounce by 2011, " he says. "That price should be easily attainable considering they're buying up gold. According to reports from the COMEX, Goldman Sachs and JPMorgan have begun taking delivery of thousands of ounces of physical gold, instead of settling their futures contracts in cash."

"Hard Assets Investor," the fellow that wrote the article from which this snippet was extracted, points out that Krauth has seized upon gross, not net, exposure to all commodities, not gold. Consequently, there's a lot less to this theory than what's apparent.