Gold
is the most maligned asset, if you listen to the Fed, the ECB, and
other central banks. This was driven home again in a variety of ways,
including what transpired before the Swiss gold referendum and Mario Draghi’s
“all assets but gold” declaration. So I asked a man who knows, Fabrice Drouin Ristori, Founder and CEO
of Goldbroker.com, why the heck central banks react toward gold in that
bizarre manner.
WOLF: On November 30, the Swiss voted down
the proposal presented in the “gold referendum.” Was there anything peculiar
about the process?
FABRICE: The Swiss National Bank and most
Swiss media campaigned for the NO side, which is quite unexpected in a
democratic process. There are two lessons to be learned from this referendum:
One, this campaign clearly shows that gold is the banking and financial
system’s enemy #1 in Western countries, since a return to a gold standard
would limit their money creating capacity, thus their power. And
two, people in Western countries have lost awareness of what a monetary
system based on true money is. The Swiss have now joined this category
despite their long experience with the gold standard.
WOLF: Following the ECB’s decision to
delay any QE till next year, Mario Draghi said that in terms of asset
purchases, the ECB had discussed “all assets but gold.” Why would the
ECB consider buying all assets – including “old bicycles,” as German
politician Frank Schäffler had said so poignantly in July 2012 – but not
gold?
FABRICE: The central bankers’
discourse is systematically anti-gold. Draghi’s announcement just confirms
the fact that the ECB along with other Western central banks consider
gold as their main enemy. In a gold-standard environment, they would lose the
capacity of printing money, and they don’t want to give up this power.
Over
the last few months, it has gotten quite difficult to purchase physical gold
in large quantities, as proven by the backwardation phenomenon, when the Gold
Forward Offer Rate is negative [GOFO
is the interest rate at which participants are willing to lend gold on a swap
against US dollars]. If the ECB were to buy physical gold in the markets it
would create havoc on spot prices. And a rising gold price brings investors
and economic agents to seriously question the stability of paper currencies.
They might even abandon paper currencies in favor of tangible
assets. To avoid that whole chain reaction, the ECB refuses to buy
gold as part of its QE program.
WOLF: There have been a slew of
countries trying to repatriate some of their gold, among them Venezuela,
Germany, and the Netherlands. Seems easy enough, but some of these countries
have a hard time repatriating their gold. What’s the deal?
FABRICE: Gold has been stored mainly
in the United States and London in order to protect the gold reserves during
times of conflicts – the Cold War, for example – and/or to improve the
liquidity of their gold reserves by moving them closer to the large
trading centers.
[...]
> Read the full interview here
