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"We looked into the abyss if the
gold price rose further. A further rise would have taken down one or several
trading houses, which might have taken down all the rest in their wake.
Therefore at any price, at any cost, the central banks had to quell the gold
price, manage it. It was very difficult to get the gold price under control
but we have now succeeded.
The US Fed was very active in getting the gold price down. So was the
U.K."
Sir Eddie George, Bank of England,
September 1999
"That day the U.S. announced that
the dollar would be devalued by 10 percent. By switching the yen to a floating
exchange rate, the Japanese currency appreciated, and a sufficient
realignment in exchange rates was realized. Joint intervention in gold sales
to prevent a steep rise in the price of gold, however, was not undertaken.
That was a mistake."
Paul Volcker, Nikkei Weekly 2004
“Central banks stand ready to
lease gold in increasing quantities should the price rise.”
Alan Greenspan, US Federal Reserve Bank, 24 July 1998
As an aside, the lease rates for gold went negative about four days
before the recent bear raids in the metals markets began. This was most
likely due to an excess of fresh supply being offered on the markets by the
Western central banks. The bullion banks saw this and dropped their bids to
take full advantage of the knowledge of this operation, or more properly,
subsidy.
The central bank gold is leased to the bullion banks, like the market makers
at the LBMA. Among these are JPM, GS, HBSC, BofA,
DB, and Barclays. The gold is then sold into the bullion markets in London,
or used as collateral for leveraged paper transactions. With a lag, this
additional supply affects the futures and ETF trades with additional leverage
in New York.
The week of Nov 21 may be one of particular interest to US investors in
precious metals. The cross currents may make it even more volatile than this
August with its 'Night of the Long Knives.' Or perhaps the banking metals
bears have their eyes to the future and are pre-emptively striking now.
If this theory is correct, at some point this market operation will fail, and
the price reaction, not to speak of the political scandal, may be memorable.
It is not clear to me that we will see it coming on the charts, but one can
hope. Personally I think China and Russia will use this as a bargaining tool
if they are not doing so already. What's the old line about selling them the
rope? Brought to the brink for the sake of a relatively few bankers' bonuses.
There is a an option expiration for December 2011
contracts that week, on November 22. December is a big delivery month, so
fireworks are always expected. And we are entering a seasonally strong period
for the precious metals.
The US 'Super-Committee' to resolve the debt crisis will be facing a November
23 deadline to vote on a plan which they will present to the Congress and the
President on Dec 2. This will avoid triggering 'automatic cuts' to take place
in 2013.
November will be the real kick off month for the US presidential elections.
On November 22 the US will release its first estimate of 4Q GDP.
On November 23 the Fed will release its latest FOMC Minutes.
The November Jobs Report will be released the following Friday on December 2.
And of course, November 24 begins a four day holiday weekend for
Thanksgiving, including the famous 'Black Friday' for US retailers.
Super-Committee
Timeline
Oct. 14: House and Senate committees must submit recommendations to the
committee by this date.
Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion
in deficit reduction.
Dec. 2: Deadline for the committee to submit report and legislative language
to the president and Congress.
Dec. 23: Deadline for both houses to vote on the committee bill.
Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion
of future spending cuts goes into effect, if the committee’s
legislation has not been enacted.
 
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