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IN THE NEWS
A great example
today of the children’s
game Chinese whispers (or Telephone for our America friends) and poor journalism in the gold blogosphere (thinking the
internet is about journalism
is idealistic of me, I
know). I’ll focus on Zero
Hedge as the example because they are a high profile
website from which many other
bloggers and commentators
pick up stories. Knowing
how influential they are,
you’d expect them to at least apply some basic journalism fact checking before breaking news.
Yesterday
Zero Hedge posted the following
heading “Meet The Latest Converted Gold Bug: The
IMF”. Its key “news” is this republished
quote from a Commodity Online post, also dated
the 14th:
“The International Monetary Fund (IMF) is planning to purchase more than $2 billion worth of gold on account of rising global risks.”
Rather than being the source, Commodity Online’s story is just a rehash of a May 12th
Bloomberg story. Note that the above quote is
Commodity Online’s take on the Bloomberg story, not a direct quote from the IMF.
Zero Hedge were aware of this, because they also quote
directly from the
Bloomberg story, but that is
where they left what is
quite significant news.
As Zero Hedge themselves noted, the IMF had previously been selling its gold. You would think such
a major policy shift would
at least warrant some
more investigative work. Apparently not.
What I found interesting in the Commodity
Online story is this
line: “Bloomberg quotes a
report by an IMF staff while also
adding that a $2.3 billion gold purchase is in the planning.” So this is Commodity
Online’s take on
the Bloomberg story but they don’t
provide any more details on why the IMF has made
such a dramatic policy shift.
I want to know more, so I go to the Bloomberg story. However,
there is no mention of
the IMF planning to buy gold in that
story. The only mention of gold is
“a profit of about $4.9 billion from
gold sales”. Sales, not purchases.
So where did Commodity Online get the purchase idea from? I’m aware Commodity Online is an Indian based operation, so I’m starting to think there may
have been some language misinterpretation going on. But
maybe they got it directly
from the IMF.
The Bloomberg article doesn’t provide any direct link for their IMF quotes, just saying that “IMF
staff wrote in a report released
today.” So off to the IMFs press release page for something
prior to May 12th. There we find “IMF
Executive Board Reviews Fund's Income Position and Sets Margin
for Lending Rate for Financial Years
2013-14” which makes
reference to the “estimated net income of $2.3 billion” as reported in the Bloomberg article. There is no mention of gold in the press
release, but two links are provided
at the bottom, the key
one being the 39 page “Review of the Fund’s Income Position for FY 2012 and FY 2013‒14”. A text search finds
the direct IMF quotes Bloomberg used
in its article on page 13, so
I know this is the report
that Bloomberg based their story on.
So I eagerly type in
“gold” into the text
search box, anticipating
a revelatory explanation
by the IMF for this significant
policy shift in respect of gold, from which I will write today’
Blog Watch
post. There are 46 references to gold, but alas, not one about gold purchases.
The only references to
gold are about gold sales, specifically:
“Gold profits portfolio. A separate
work program is underway, in the context of the
work on the new Rules and
Regulations for the expanded
investment authority of
the IA, to establish an endowment
of SDR 4.4 billion funded with
gold sale profits. The IA currently also includes gold windfall profits of SDR 2.45 billion, pending
a partial distribution of the general reserve to the membership of
SDR 0.7 billion to be funded
with these resources and further
discussions later this year on the use of the remaining
gold windfall profits.10 Staff proposes that, consistent with the approach taken last year, the earnings from this portfolio (about SDR
31 million) be retained
in the IA pending further
discussions by the Executive Board.
No Board decision is required for reinvestment of the earnings.”
Did your eyes just glaze
over? And that’s the most
exciting bit.
So what we
have here is a dry
Bloomberg story about the IMF and precautionary reserves with a side reference to gold, which is picked
up and misinterpreted by Commodity
Online, which is blindly picked up by Zero Hedge who
doesn’t investigate
it further because it confirms
their pro-gold editorial
position.
I’ll let Wikipedia make the final
point “how easily information can become corrupted
by indirect communication. The game has been used in schools to simulate the spread of gossip and its supposed harmful effects
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