This is a special piece sent to all, free, but not
part of the Gold Forecaster. The
subject is more fully covered in ongoing issue of –
Gold Price really Managed or Suppressed?
absolutely no doubt that the gold price has been and may well be, being
either suppressed or managed.
Just look at the
record of gold sales in the 70’s, 80’s 90’s and in this
century so far. Gold was
sold during these periods, first by the United
States. It was done to discredit gold as
money and to support the U.S.
$ as the prime global reserve currency. President Nixon removed the
convertibility to gold and faced a world that did not want to replace gold
with the $. Tying it to oil
payments made it a globally needed currency. But the gold price rose and in
so doing cried ‘foul’ pointing to the fact that the $ was simply
an American government promise to pay. By discrediting gold it was taken
out as an alternative money and by describing it as a ‘barbarous
relic’, implied that paper money was superior. In fact it allowed the
development of the present banking system with U.S.
bankers very much at the global money helm.
Considered on a
global scale it became clear that ‘paper’ money allowed more
scope for banking systems than gold
[it governed the money system, bankers didn’t]. So gold was shunned to the
distant background of the monetary system.
After the U.S.
gold sales stopped [the demand was just too great], the I.M.F. tried it, but
these too failed. Then the
implied threat that central banks would sell gold deterred investors and the
price steadily fell from a peak of $850 to $275. This fall was supported by
central banks lending gold to gold producers to hedge forward for many years
to maximize income and was repaid when the gold was produced, effectively
‘shorting’ the market.
In 1999, with the
arrival of the €, the Eurozone banks made the “Washington
Agreement”, limiting their gold sales and ensuring their remaining gold
reserves were not devalued.
This agreement, while supporting the arrival of the €, helped to
‘contain’ the gold price and discourage any flights to gold from
the new and untried currency.
Now add to that
far more evidence than we could gather, from GATA and other sources and we
believe the evidence is irrefutable that the gold price has been suppressed
will end gold price suppression and management?
Take a look at
today’s central banks responsible for gold price suppression and look
at their present policies.
The European Central Bank Gold Agreement promises not to increase of
open new leasing or lending of gold.
is not in a position to do so, nor inclined to do so after its gold sales
debacle. The U.S.
could but at heart and with historical evidence will not sell gold [it seems
they may have lent far more gold than they admit to? Don’t expect any new gold
hedging again for there are insufficient gold mining executives who would
want to place their careers in such a toilet, again.
The Third Central
Bank Gold Agreement is a farce with less than a tonne sold since its
inception. So count out
significant future central bank gold sales in support of currencies.
Now look to the
East and we see that central banks are now buyers, not just ‘net
buyers’, but big buyers, having bought over 300 tonnes in 2009. And they are still buying
persistently, quietly each weekday. We point to Russia
let’s not exclude India
[200 tonnes of I.M.F. gold so far – they have indicated they will buy
any leftovers too], and other smaller banks, following their lead.
Why are these
countries and perhaps more in the future buying gold? Simply put, the trust that
existed in the $ is diminishing.
With $ reserves sprinting towards $3 billion in China, they are very
worried that the fall in the value will tumble and they are right to feel
that way, when one looks at the almost imperial attitude of the U.S. money
Lords in Treasury and the Federal Reserves and their attitude to the
international value of the U.S. $.
Reality tells us that it is not a major concern to them. So if you were China,
O.P.E.C. and other $ surplus holders wouldn’t you feel vulnerable? That’s why they want to
reduce that vulnerability through gold and currency diversification.
Yes, $ surplus
holders are in a cleft stick with little way to turn but to the $, at the
moment. But with a
potentially new petro-currency being formed and China
soon to turn to a ‘basket of currencies’ in trade payments rather
than just the $, the signs are there that the days of the $ in international
trade are numbered. It may take
some years but the fact that it is on the way makes all realize that major
currency crises are on the way.
With gold an important ‘counter to the swings of the $’ it
is imperative that gold contents of foreign exchange reserves be increased in
those countries whose reserves are growing, or suffer the damage a falling $
how will this end gold suppression and management?
It takes gold
sales to hold down and manage of gold prices. Lending won’t do it now
will hedging any more, because any large sales of gold will be snapped up
without a really significant and semi permanent lowering of the gold
price. When you find huge
buyers in the market, whose only concern is not to drive the gold price
higher on small purchases, you don’t sell gold to manage or suppress
Right now these
central bank buyers want tonnage, large tonnages, but it is not there at the
moment, so they content themselves with buying small amounts persistently as
it comes onto the market.
It’s a dealers dream to find a big seller and place it with a
big buyer and not move the price.
It’s a buyers dream to buy big quantities and neither move the
price nor be noticed. And
that’s where the market is now. Yes, short-term forays into the
market may happen to even out moves, but not by central banks of note.
So any scheme
from now on to suppress or manage the gold price will face central bank
buyers who will take all gold on offer. Even large quantities could move
with little price movement.
impact on the Gold price of a $ Rally or Fall
Subscribers only - As we at the Gold Forecaster cover
this and all other aspects of the gold market, we will not expand further on
this subject here but will do so on the pages of our newsletter for
subscribers. We will cover the
monetary impact of these developments on the gold price there too.
Julian D. W. Phillips
Gold/Silver Forecaster – Global Watch
by Julian D. W. Phillips
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