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Are Global Central Banks Manipulating Gold?

Roshan Vaswani, Senior Producer, CNBC Asia Squawk Box
Thursday, 14 Mar 2013 | 4:17 AM ET
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Gold prices are being kept artificially low by Western Central Banks and "no one alive" has ever seen the true price of gold, according to Chris Powell, Secretary of the Gold Anti-Trust Action Committee (GATA).

GATA, an organization co-founded by Powells in 1998, claims that central bankers have been manipulating markets for decades, by overstating the amount of gold they hold in reserves to give the impression that there's abundant supply of bullion in order to depress prices. It argues that central banks are trying to control the price of gold because of bullion's influence on financial instruments, including currencies, government bonds and interest rates.

(Read More: Think Gold Slump Is Bad? Bullion Stocks Fared Way Worse)

According to World Gold Council (WGC), an industry body, official reserves of global central banks have grown to more than $12 trillion in 2012 from $2 trillion in 2000. But Powell argues that at least 70 percent to 75 percent of the gold central banks say they keep in reserves does not exist.

"There's a vast imaginary supply of gold that's been created by Western central banks," Powell told Squawk Box Asia on Thursday. "It is simply just a paper claim on metal that's not there."

(Read More: Gold Rises, Yet Traders Can't Agree on Its Next Move)

In response to a query from CNBC on GATA's views, the WGC said, "GATA has its own views on the factors driving the gold price and the influence of gold market participants. The World Gold Council respects the right of GATA to hold these views but does not share them."

GATA: Central Banks Are Manipulating the Gold Price
Chris Powell, Secretary at Gold Anti-Trust Action Committee, claims that Western central banks are manipulating gold markets in order to rig currency markets.

In a report released on Wednesday the WGC, which is funded by the gold industry, says the yellow metal continues to be the asset of choice for central banks as they look to diversify away from the US dollar.

"Building gold reserves in tandem with new alternatives is an optimal strategy as central banks remain under-allocated to gold," Ashish Bhatia, Manager for Government Affairs at the WGC said in a statement.

Jeffery Christian, founder and managing director of commodities research firm CPM Group, was a lot more blunt about GATA saying, "I think they're outright liars... pretty much what they do is nonsense."

(Read More: Paulson's Gold Fund Tumbles 18% in February)

Christian added that he believed there was no conspiracy among global central banks to collude over the gold prices, and that central banks are "very transparent" about their monetary gold reserves.

CPM Group is a well-known critic of GATA and published a power presentation on their website in 2010 called 'GATA you lie' where they refute GATA's premise point by point.