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Ask The Expert - Andrew Maguire - April 27, 2015

Ask The Expert - Andrew Maguire - April 27, 2015
By Geoffrey Rutherford 4 years ago 2721 Views

In this exclusive interview recorded on April 17th, 2015, Andew Maguire shares his views on precious metals, personal investments, the Shanghai Gold Exchange and more.

Andrew Maguire is an Independent London Metals Trader and Analyst, internationally renowned for his unique ability to read the precious metals market with the knowledge and experience gained over 35 years trading in financial and commodity markets. Andrew sits on the advisory board of a global physical bullion exchange and is a consultant advisor to many international hedge fund managers, bullion banks, directors and metal traders globally. In 2009, Andrew decided to go public and provided evidence to United States regulators relating to fraud and price manipulation that was being committed globally in the international gold and silver markets. This put him at the epicentre of global controversy for exposing what could be the largest fraud in history involving countries, banks and government leaders, which is still an ongoing investigation.



Geoff: Hello, and welcome back to this month's "Ask the Expert" here on Sprott Money News. I'm your host, Geoff Rutherford, and on the line with me today, we have Mr. Andrew Maguire. Andrew Maguire is an independent London metals trader and analyst, internationally renowned for his unique ability to read the precious metals market with the knowledge and experience he's gained over 35 years of trading in financial and commodity markets. Andrew sits on the advisory board of a global physical bullion exchange and is a consultant adviser to many international hedge fund managers, bullion banks, directors, and metal traders globally. His website is andrewmaguiregoldtrading.com. And with that, we'd like to welcome Mr. Andrew Maguire. Andrew, thank you for joining us here today.

Andrew: Great to be with you, Geoffrey.

Geoff: So, Andrew, before we get into the questions from our listeners, I think it's important for those who are not familiar with your story to hear how you've gotten to this point in your life and your career. So if you wouldn't mind, if you can please give us a little bit of your background and the key events that have brought you the global attention that you've received in the last few years.

Andrew: Yeah, Geoffrey, I will do. Essentially, I've been a specialist gold trader for a long time. And I think the first time I noticed that there were some odd events in the market was around about the time of what we call the Brown's Bottom, which was, of course, Gordon Brown selling half of the Bank of England's gold, which was 400 tons. And it was just the very odd way that that was conducted. And I started to really look at how these markets were manipulated.

And I think I came across some very good people in my time, Ted Butler being one of them. Especially, he brought to light some of the silver manipulations. And what I did was when that particular time in 2008, March 2008, when Bear Stearns went down, and JP Morgan took over the Bear Stearns company, there was some really, really odd stuff going on. And we obviously understand that there was a takeover, and we understand that there was a huge short position being held by Bear Stearns, which could have been one of the reasons that they did go under.

But essentially, what happened after that really, really got my attention. And I think the fact is that when silver was taken down from $21 down to 8.50 in a matter of a few months, and yet, the concentrated silver short position actually grew in that time. If there was a mandate, a fed mandate or some mandate that, yes, take it over, but work it off, that wasn't happening.

And I think what really, really got me to the point where I actually had to complain to the CFTC was I had so much evidence of manipulation at that time, banks colluding and being able to read ahead of time what they were going to do. And I started to share that with the CFTC. And one of the reasons was was that at the time, I had one of the "Panorama," which is pretty much like "60 Minutes" that you have over there. They came and interviewed me and started to watch some of the things that I was talking about. And when they realized that this was something that was actually occurring and that it had a real world effect, they went over and they filmed, spent a lot of money and filmed miners in Bolivia, and to the point where there was even . . . Gold, silver was, at this point, down into the 12s or the 8s. And there was mines being shuttered, real-world people being put out of work, people not being able to feed their families. And I think that's really what got me.

I thought, "You know what? This is just not right." And sure, we can trade this market, and we can all think we're being clever chasing a dot on a screen. But ultimately, they filmed somebody who had committed suicide. So at that point there, I thought it's time to actually draw the evidence together and make a complaint and make it so, so strong that the CFTC couldn't ignore it.

Geoff: So that being said, Andrew, how did you go about, A, making the complaint with the CFTC? And moreover, what was your experience in terms of finally arriving in America and having to face this commission, this board? And likewise, what was the reactions as far as people around you as well, too, as you're going through that entire process?

Andrew: Well, first of all, at that time, I think you'll remember that there was very few people who believed there was any form of a gold or silver manipulation. In fact, the general consensus out there was, "Well, how can that possibly be happening? It's too wide a conspiracy. Somebody would have spilled the beans by now."

Well, fast-forward to right now and everyone and their brother fully, fully gets the fact that there is gold and silver manipulation. Well, there's manipulation in every single market. So you have to wind back to the point where you're fighting a battle where nobody other than a few people like Ted Butler and, obviously, people that followed that were in the know that followed that thing. Really, you're fighting an uphill battle.

So the CFTC weren't responding. I know they weren't responding to a single complaint that anyone had sent them before. So what I did was actually provide them information of what was going to happen within two days. And I provided them, ultimately, 85 examples of what was going to happen ahead of time, what had happened, and how that was collusive behavior.

So it was really, really straightforward, simple stuff. And of course, at the time, I was amazed at how little interest they showed. If you remember the March 2010 CFTC metals meeting, and that was basically to discuss the metals markets. It was at that point there that because the CFTC had uninvited me from that meeting, I was originally invited by Bart Chilton. And three or four days before, I was uninvited.

So essentially, I then dropped my bombshell that I had been dealing with the CFTC and made it public. Obviously, when you're dealing with the CFTC, you're supposed to be keeping this stuff under the covers. And I went and made it public. It really peeved them off, obviously. And I had to have Adrian Douglas provide that information to Bill Murphy. And Bill Murphy provided that into the meeting. It ended up with the industry apologies, Jeffrey Christian admitting to the fact that gold and silver were leveraged 100 to 1.

It really opened up, made public something that people didn't believe. And I think that to me was the point that awareness came to the fact that gold and silver are traded on a fractional basis and that there may be a problem if you think you own physical and, perhaps, you don't. So essentially, that's how it all evolved. And it was because real-world people were being affected by something that to me was disgusting.

Geoff: Excellent, Andrew. So firstly, I guess getting back to the questions from our listeners here now. So whatever happened to the two other whistleblowers who put you in contact with the CFTC? Is it true the day after their contact, the CFTC abruptly ended its investigation and said there was no manipulation?

Andrew: Yeah, well, the first thing to note about this, there was the closed five-year investigation, and that related to the investigation that commenced in 2008. Now, at the time, it was closed. I was personally informed by Commissioner Bart Chilton that this was technically closed, because the statutes of limitations . . . Then that was the sole reason was because it did expired on the statute of limitations. And no charges had actually been laid in that time period. And this is why the specific silver investigation was closed in 2013. Now, that does not mean there was no compelling evidence of manipulation. As we know, it's an absolute matter of public record that Commissioner Chilton, on several occasions, stated, and I quote, this is obviously burned in the mind of many people, "that there were fraudulent efforts to persuade and deviously control that price." And he's referring to the silver market at that point.

Now, the fact that no charges were laid in the time to beat this statute was highly suspicious. But what it was was the test for manipulation was, at the time, just far too rigorous. It's a benchmark where you have to prove five particular things. Unless they all jive, it's not called "manipulation."

But after this investigation was closed, the definitions for manipulation were made less onerous. Now, however, there are other ongoing investigations into both gold and silver, and there has been no such public announcement. And people believe that there is no investigation. There is. There's no announcement ending these subsequent investigations dealing with much later evidence relating to both gold and silver. And also he refers to the two JPM employees. And they most definitely . . . I'm 100% certain. I directed them through a law firm to the CFTC. They also submitted evidence in the period which I had also submitted evidence, in between 2009 all the way through to 2014. So as far as I'm concerned, in my opinion, these investigations are still active or at least forms some part of an ongoing inquiry.

Now, prior to his leaving the CFTC in 2014, and this is just to illustrate how strange an agency the CFTC is, on three occasions, I asked Commissioner Bart Chilton to request absolute confirmation that this was an ongoing investigation or not. And it was relating directly to my submissions. Now, it wasn't relating to the . . . Obviously, he wasn't going to discuss anything about the JP Morgan submissions. But he absolutely got the runaround on three separate occasions. And he expressed his frustration to me that he would not even respond to his requests for the information from the enforcement division.

So this is a really strange agency. As far as I'm concerned, this evidence is still ongoing. I understand the frustration here. It's very few actual charges have been laid. But I believe a lot of this evidence has been absolutely instrumental in assisting with the current official, the multi-bullion bank investigations that are going on right now.

Now, my opinion on this, is that if criminal charges were ever laid against any one of these LBMA bullion banks, the whole daisy chain would unravel. Now, the economic fallout is, in my opinion, the reason we have not seen easily provable, blatant criminal acts acted upon by the CFTC or the Department of Justice.

Now, on a brighter note, the current civil suits are targeting these very same banks. And one thing is for certain, even if partial discovery was granted, you're going to see these banks settle for cash in a heartbeat rather than open their books.

Geoff: So that the battle continues, I guess, is what we're saying here. The battle wages on.

Andrew: It absolutely goes on. But unfortunately, this is a strange agency, and they don't share any public information.

Geoff: Now, switching over to a different question from one of our listeners here. This is more of a question of their own personal investment. So the question is, "I presently hold bullion and gold mining shares in Australia. I believe there will be a severe crash in the stock market in 2015 and want to know, do I leave the shares with the mining company, which has done exceptionally well in the last 12 months? Or do I sell them before the crash and re-purchase them at a lower price when the crash comes and the price falls?" What's your thoughts on this, Andrew?

Andrew: Yeah, I totally agree that there's a stock market crash. It's an absolute given we're going to see that. Now, however, I do have some close ties to the miners. I have to say I specialize in trading gold and silver. So other than keeping track of supply and demand fundamentals, I absolutely keep the focus on trading the metals themselves.

Now, I see the trading of precious metals, really, as a specialized field that really requires a singular focus. So I apologize in that respect. But we do have to factor in the tail-wagging the dog, manipulated, wash-and-rinse cycles in these synthetic markets. And these markets have zero to do with the fundamentals. So even if you have done your due diligence of why a miner should be going up or when it's actually going down, for example, you have to understand that's why. My focus is 100% on extracting alpha from our core long and vaulted positions and for our clients' positions. This is, in my own opinion, a full-time commitment. I do see the miners doing relatively well, though, through a stock market crash, as gold in general is going to be a safe haven. Really, I apologize, I can't answer any better than that.

Geoff: No, not a problem at all, Andrew. We appreciate your candor.

So moving on to another question from our listeners in regards to currency and precious metals. When the talking heads say that precious metals will rise in price per the U.S. dollar, at some point, it won't matter as the dollar will become worthless. Do you agree with this, Andrew?

Andrew: I totally agree that the price of gold measured in dollars will rise significantly. As you know, gold in every other currency is in a bull market. And of course, what we're talking about here is Fiat gold versus every other currency. And it just happens that the U.S. dollar is king of a worthless Fiat heap.

Now, outside of measuring the various foreign exchange crosses in gold, which could be Euro gold, Pound gold, Renminbi gold, it could be any of the crosses. What I find really interesting is that, much closer to home and inside the LBMA system, we have also been seeing extremely strong physical interest in gold denominated in Euro terms, and that's quite understandable. And it's easy to lose sight of the fact that at current low prices, willing sellers of bullion are limited. And given that China and India already consumes all of new mine production, ultimately, there is only one source of available, immediately deliverable, above-ground supply of physical gold, no matter which currency it's delivered in.

Now, in the U.S.-centric world of gold, it's easy to lose sight that this drawdown of physical bars is not just conducted in gold denominated in dollars. And it serves to underpin the global wholesale market. So I think that's the best way to answer that.

Geoff: Excellent, Andrew.

So here's another question here, based around the idea of personal investment, particularly within stocks. So for those who have been stacking silver but are now wondering about possibly buying a recommended mining stock with a bright future, do you have any particular recommendations?"

Andrew: Right, well, as far as stacking silver goes, I say kudos. As far as, again, I did mention a minute ago, I don't trade the miners, specifically. However, what I can say is it's pretty obvious that when gold and silver break out to the upside, I see it raising all the watertight boats.

Geoff: So keeping in line with personal investment, Andrew, the next question is, what percentage of one's portfolio should they invest in precious metals?

Andrew: That's a tough one, Geoffrey. It depends so much on your individual risk/reward profile. Now, if looking medium- or long-term, I can't see why one wouldn't be heavily weighted in gold and silver in one's portfolio. I think all tangible assets are a safe bet in this environment, anything that can't be printed, in other words, or debased, such as obviously gold, silver, land, that kind of thing.

But right now, given the current circumstances, I think leaving or depositing cash in the bank is actually the highest risk trade I can think of. Now, not only is cash being debased, but you're at risk of a bail in there. And if one thinks about it, simply making a cash deposit at a bank is an actual risk/reward trade that you're making. You are actually loaning that money to the bank. And that is, by association, this bank is caught up in what? In a quadrillion dollar of derivative bets? Where is their balance sheet for you to assess their risk?

Having less than 10% in physical is actually, in my opinion, being extremely underweight in these circumstances. Now, with 5,000 years of history versus this whole Fiat experience, it leaves me fully 80% invested in physical, just leaving enough cash for normal, everyday events.

Geoff: So then, likewise, I think you touched upon this already in terms of the question in relation to a stock market collapse. But I guess in an overall sense, do you predict a coming global economic collapse? And if so, when?

Andrew: Yes, I do. But I prefer to look at this economic collapse in relationship to how it's going to relate to gold and silver. Now, as far as the timing of this collapse, there are people eminently more qualified than me to predict when this may be. But however, when I want to be ready, I want to be ready for a black swan event. And this could sneak up at any time.

Given the quadrillions of derivative exposure, it might just be one more straw that tips this balance and not necessarily a cataclysmic event that everyone's waiting for. Now, my only question would be, are you positioned ready for this? And as far as gold's concerned, if you don't have physical or land or an unencumbered home, in my opinion, have nothing but risk.

Geoff: Now, Andrew, you've touched upon derivatives. And I just want to know, perhaps, if you can elaborate on that. So how dangerous are derivatives? And, yeah, I think you touched upon this already. So you do see this playing a key role in the coming economic collapse, do you not?

Andrew: Yeah, I do. And bottom line, any one of this daisy chain of banks exposed to this quadrillion of derivative bets, if they default, then they all go down. And this whole paper experiment goes down in the history books for students to study. The countries that have gold assets will be the dominant world powers in the future. And we don't have time to go, obviously, into the full detail here. But I see China as the dominant global power. And we can see them openly structuring for this event right now.

Geoff: I agree with you. We interviewed Jim Rogers last month. And he was talking about the same thing in terms of China becoming a leading global power in economics, but likewise, as far as just preparing, living in Asia, having his children learn fluent Mandarin as well, too, for this pending change.

So that being said, Andrew, I guess this flows into our next question. How are you personally preparing for economic uncertainty?

Andrew: Geoffrey, as I mentioned, all but my immediate cash needs and for trading needs are invested in physical metal, vaulted outside the LBMA system. Gold has held its value for 5,000 years and endured all of man's mistakes. And it still buys what it did back then. It's sad to say, I have no faith in anything else.

Geoff: So it seems we're all in agreement that we're not really dealing with real markets these days as everything is being manipulated. So given the absence of any meaningful regulation in precious metal markets, do you think anything other than some formal default event can put an end to the serial manipulation? If so, what other triggers could bring about this result?

Andrew: Well, I am absolutely on record warning the regulators that even if they don't close the loop on market manipulation, that the physical market will do their job for them. And the only difference is is the situation is now exponentially worse than if they had acted on it on very clear evidence, and I can speak from personal experience, five years ago.

Now, there is a back door, though, and I think that is to bail out these too-big-to-fail taxpayer-supported bullion banks. And there's going to be a cash settlement of unallocated gold accounts. And as we know, this is not going to be called a default as the LBMA unallocated account agreement provides this cash settlement option, which very few people I've talked to even realize. The trigger for this is very close. In fact, I see an absolute perfect storm. It's already unsettling, this house of cards. I'm certain that this trigger is going to be the imminent launch of the game-changing, international-facing, allocated bullion exchange that I'm going to have a seat on.

Now, I'm pleased to be associated with this. For the first time in gold-trading history, this international-facing exchange provides the global investors and traders direct access to the wholesale global markets through a totally secure platform. And they can buy and sell and vault their wholesale physical bullion in any size, completely independently outside of this closed loop, the LBMA system.

Now, they're able to trade and vault physical metal in the global hub of their choice. It could be the free trade zone. It could be Singapore. It could be Dubai. It could be anywhere of 11 particular hubs that are in force at the moment. The key thing here is the complete anonymity from the insider bullion banks that you get by trading outside of the LBMA conduit. And no longer will this small group of controlling LBMA bullion banks be able to front-run or have visibility into the book that they have been controlling for so long. And this undoes the whole manipulation story.

This new 23-hour-a-day exchange is even going to negate the need for a twice-a-day, still-manipulated LBMA fix, which currently is just the same thing. Well, I just say, "Same dance, new dress." This is the most exciting technological development since the over-the-counter markets. And if you remember, the over-the-counter markets migrated to an electronic exchange in the 1980s. In a similar way, it's going to change the way physical is traded. This is a tectonic shift. And the reason I'm so excited about this new marketplace is it's going to allow unallocated gold and silver holders to securely allocate their unallocated gold holdings and sidestep this major collapse in the paper markets that is definitely coming. And as this progresses, this leverage unwind of unallocated moving to allocated is going to be the trigger that actually forces a bullion bank cash settlement and a large gap in who move higher in the price of gold and silver.

Geoff: So, Andrew, obviously, you've elaborated greatly upon the new platform. So looking over at what's happening in Shanghai, in China, what effect do you think the increasing importance of the Shanghai Gold Exchange will have on the global gold market?

Andrew: The physical gold market hubs have actually already migrated to Asia as we know, and I'm sure Mr. Rogers was talking about that with you. China is obviously the major global physical hub. And very soon, we're going to see a Shanghai/Beijing gold fix that completely front-runs London. This is incredible stuff. This is nothing that was envisaged by the LBMA.

When you think about it, some 600 tons of paper gold and some 5,000 ton of paper silver get settled amongst the LBMA bullion banks every single day. This is mind-boggling to most people. But this relates to unallocated, fractional reserve, bullion accounts that are connected to billions of dollars of derivative bets. So even though much of this is legitimate bullion banking, there is no visibility into this. And the physical markets are diverging. And it's going to backwash against these synthetic price-setters.

Geoff: Andrew, I guess getting to the end of the interview here, I guess one of the final questions is the overall idea of this ongoing manipulation. What is your prognosis in getting the manipulation of big banks of gold and silver to fess up and pay for their illegal activity? Furthermore, is that even possible or realistic? If so, I guess, when could this possibly happen, if it ever happens in the future?

Andrew: Another good question. As I've indicated, I really doubt any criminal charges will ever be laid against these too-big-to-fail bullion banks. And we've gone through the reasons for that. But, however, the new class action suits, in my opinion, have the wind at their back now, especially after the Barclays admissions, and we all know that story, and other admissions and slaps on the wrist with Deutsche Bank, UBS, and other banks. And there's a current, ongoing, announced investigation into all the bullion banks now.

Now, I see a really real chance of this current class action suit, at least, is going to be granted partial discovery. How can it not be, given that we have provenance for manipulation and lots of good evidence? And the moment that happens, and I guarantee these banks named in this suit are going to settle immediately to avoid opening this can of worms. And I think, bottom line, Geoffrey, I think the jig's up. The non-delivery synthetic markets cannot be allowed to separate from the underlying bullion, real bullion market.

We already see HFT sucking out liquidity on a daily basis, even in the most liquid sessions. We see two, three pips [inaudible 00:27:08] spreads. This shouldn't be happening in the most liquid sessions. Why? It's because after a news event or something, you've got the HFTs literally sucking any real, real, real volume out.

And the global bullion markets have to remember they are centered in Asia now. The paper markets are left holding the bag, in my opinion. And the LBMA has competition that it never envisaged. They are preparing, I guarantee, they are preparing for this non-default reset. And I just asked your listeners, "Are you ready?"

Geoff: We've been speaking to Andrew Maguire. Andrew, I'd really like to thank you for joining us, and we urge our listeners to go to andrewmaguiregoldtrading.com to see what Andrew has to say. Obviously, he's been providing some great insight, but again, look what he's done in terms of affecting the market by being brave enough and standing up for what we believe to be true.

And, Andrew, we really like to thank you for joining us here today on "Ask the Expert."

Andrew: Geoffrey, it's been a pleasure.

Geoff: And to our listeners, thank you for listening. This is Geoff Rutherford for "Ask the Expert" here on Sprott Money News. Have a great day.

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