One of Canada's most successful money managers, Royal Bank of Canada's John Embry, has become the poster boy for gold bugs after endorsing the concept of a long-term central bank conspiracy to depress bullion prices.
In an eight-page report published on bank letterhead, and distributed yesterday by U.S. conspiracy theorists, Mr. Embry set out the case of a further rise in gold prices, a prediction made in part on "increasing evidence of unsustainable gold price manipulation."
The successful gold fund manager said "statistics suggest that real manipulation" of bullion prices began in 1995. Mr. Embry wrote: "Those with a vested interest in containing the price of gold -- central banks, bullion banks, heavily hedged gold companies -- will not die easily, but the tide is moving strongly against them."
Like most central banks, the Bank of Canada has been a consistent seller of gold in the past decade. Bank of Nova Scotia is among the world's largest bullion banks, and Barrick Gold Corp. is the world's largest hedger.
Mark Arthur, head of Royal Bank Investment Management Inc., said Mr. Embry's report was done for internal use and "in no way reflects the views of Royal Bank."
Mr. Arthur described the paper as "a collection of various arguments for gold stocks" that was part of a larger discussion on asset allocation at the money manager.
Mr. Embry runs the Royal Precious Metals fund, which boasts $329-million in assets and a stellar one-year return of 156 per cent, compared with a 90-per-cent average performance by its peers. He was not available yesterday.
The eight-year RBC veteran also helps to manage four other large funds. And as chairman of the bank's Canadian equity and stock selection committee, Mr. Embry sets strategy for the $38-billion mutual fund family.
The theories endorsed by Mr. Embry have been pushed for years by groups such as Gold Anti-Trust Action Committee Inc. (GATA) of Dallas.
The premise is that central banks -- mainly the U.S. Federal Reserve Board -- stamp out any surge in gold prices to preserve confidence in the U.S. dollar. The idea is that rising gold prices mean a lack of confidence in the greenback, which they believe is the engine of U.S. economic imperialism.
Yesterday, GATA members trumpeted Mr. Embry's report as validation of their claims, and said it showed that mainstream organizations are starting to acknowledge that central banks have rigged gold sales to depress the price of bullion.
"The establishment in the gold world is coming around to our central premise: That central banks and particularly the U.S. Treasury Department have been colluding surreptitiously and desperately to suppress the gold price and manipulate the gold market," Chris Powell, secretary and treasurer of GATA, told his members yesterday.
"Royal Bank has written a report that COMPLETELY ENDORSES all the GOLD PRICE-FIXING allegations of GATA," GATA member Ed Steers said in an e-mail. "I cannot overemphasize how huge a story this is!!!!"
GATA chairman Bill Murphy said RBC used information that his organization has been collecting for the past three years.
"As far as we're concerned, it's tremendous credibility," Mr. Murphy said in an interview. "It's fabulous. It explains the gold industry in a way that you don't hear from most established organizations."
When told that the views of Mr. Embry don't necessarily reflect that of RBC, Mr. Murphy said: "When you have a report, you can be sure that the report can't go out without the approval of Royal Bank itself. This is one of the most important reports ever written on the gold market. They understand the dynamics being played out."
Mr. Embry's report, he said, gives "credibility" to gold bugs like himself, who believe the price of gold has been manipulated. Mr. Murphy added: "Most of the gold world thought we were idiots. It turns out we're right."
Gold changed hands yesterday at $324.60 (U.S.) an ounce, up $1.40 cents on the day.
The price has risen steadily from around $260 a year ago, after spending the better part of four years below $300.
© 2007 The Globe and Mail. All rights reserved.
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