The willfully ignorant sneering about gold in
the mainstream financial news media never stops. The latest example comes
from The Wall Street Journal's Liam Denning, who snickers in commentary
appended here that support for gold now should be coming from central
bankers, the scourge of gold bugs. Denning writes that "central bank
buying masks the impact of weak jewelry demand, slowing increases in investment
flows, and higher supply."
But in sneering that gold, "as an
investment, yields nothing," Denning conveniently neglects to note that all
major currencies now yield nothing as well, failing to pay a real rate of
interest. Where's the sneering about them?
And Denning doesn't grasp the implications of
a detail he acknowledges -- that the official buying of gold is coming from
central banks in "emerging markets." That is, there are two groups
of central banks -- the Western central banks, which long have been, both
openly and surreptitiously, part of a gold price suppression scheme, and the
Eastern central banks, particularly Russia's and China's, which now strive
anxiously to hedge their dollar surpluses with the monetary metal and which
have admitted their awareness of the gold price suppression efforts of the
Western central banks:
"For gold bugs used to vilifying central
bankers," Denning writes, "it must be discomfiting to rely on them
Not really. Up against the totalitarian
tactics of most of the power and money in the world, gold bugs and other
adherents of free markets may be glad of support wherever they can find it.
That support is far less discomfiting than relying on The Wall Street Journal
to tell the truth about gold -- or relying on that newspaper to report
anything contrary to a Western central bank's interest.
Here's a recent example
from the Journal. On December 6 last year that newspaper published an essay
by a member of the Federal Reserve Board of Governors who resigned last year,
Kevin M. Warsh, and who wrote that "policy
makers are finding it tempting to pursue 'financial repression' --
suppressing market prices that they don't like." Warsh
added, "Efforts to manage and manipulate asset prices are not new."
Warsh's disclosure might have been stunning to any
financial journalists paying attention and so might have piqued their
curiosity. Which policy makers are trying to suppress which
market prices, and how does Warsh know? Does
he know from his experience at the Fed? Just what are they doing over there
these days? Just how do they "manage and manipulate asset prices"
and how long have they been doing it and exactly how?
Your secretary/treasurer reached Warsh by e-mail through the Hoover Institution at
Stanford University, with which, the identifier at the bottom of his essay
said, he had become associated. He declined a request to elaborate. Then your
secretary/treasurer brought Warsh's essay to the
attention of a couple of reporters at the Journal and urged them to press the
questions. While Warsh's essay appeared in their
own newspaper, there is as yet no evidence that they have pursued the story
behind it, nor that they are discomfited by letting
it slip through their pages.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Central Bankers Rub Gold Bugs the Right Way
By Liam Denning
The Wall Street Journal
Friday, February 17, 2012
Fondlers, as Warren Buffett might call them,
now wander the corridors of the world's central banks. Show them some love, gold bugs.
The identity of who buys gold has changed
radically, as the latest report from the World Gold Council confirms. Just
five years ago, jewelry accounted for two-thirds of gold demand. Last year,
it represented less than half. Yet gold demand increased 13 percent overall
in that time, and the price more than doubled.
Beyond dental crowns and those fancy cables
that electronics retailers are always pushing on you, gold's utility is
limited largely, paraphrasing the Oracle of Omaha, to fondling. As an
investment, it yields nothing.
But if bridegrooms and rappers aren't buying,
then who is? Fearful investors are one critical group. Between 2009 and 2011
demand for physical gold and exchange-traded funds jumped by 9.4 million troy
ounces, more than offsetting the 6.6-million-ounce drop in jewelry
Most of that surge in investment demand
happened in 2009, however. Flows into ETFs, in metal terms, slumped in 2011.
Increasingly, central banks, especially in
emerging markets, have been the marginal buyers of gold. In 2011, an incremental
6.2 million ounces of supply came from miners and recycling. Demand for
jewelry and industrial and dental applications, however, dropped by 1.8
Investors bought just 2.4 million ounces extra
-- enough to offset the drop in demand elsewhere, but nowhere near enough to
absorb growing supply. Enter the central bankers, who purchased an extra 11.7
million ounces. Having bolstered gold by debasing the paper money they print,
they now help by buying the metal itself.
For gold bugs used to vilifying central
bankers, it must be discomfiting to rely on them for support. And given how
central-bank buying masks the impact of weak jewelry demand, slowing
increases in investment flows, and higher supply, it probably should.
* * *
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