You are here
IMF study acknowledges risk of double-counting leased central bank gold
By John Dizard
Financial Times
Monday, June 5, 2006
http://news.ft.com/cms/s/9286fa74-f4a1-11da-86f6-0000779e2340.html
For all the fireworks in the gold price last month, including a 25-
year high, the metal that drives men mad ended down by slightly less
than 2 percent from the end of April. To me and some of the more
sober chart watchers, the bell has been rung. Last month's highs
($728 on the June Comex contract on May 12) probably won't be
exceeded for a year or so. The hyperbolic frenzy that seized the
metals people has to be worked off.
That doesn't mean the long-term bull market in gold -- what the
technicians call the "secular" trend -- is over. That's a multi-
decade trend, and this bull market really only started in 1999;
about the time of the International Monetary Fund meetings in
September and October of that year. The four-figure dollar numbers
that are now only a gleam in the gold bugs' eyes could well be hit.
But just not yet.
The uptrend in gold was a byproduct of simultaneously strong
economies in the developed and the emerging economies, and the
commodities price rises that followed. The commodities price
increases formed by real-world activity were then levered up by
investment managers looking for one more asset play ... just one
more before the next carried interest was calculated.
It may not entirely be a coincidence that the cyclical gold peak was
just past when Hank Paulson was appointed U.S. treasury secretary.
This, one can be sure, was not the president's idea. There is a
range of opinions of Mr. Paulson, but nobody thinks of him as only
another front man, which is what the political world was expecting.
Someone -- or, rather, a lot of people -- grimly informed the White
House that it was time to get serious. Forget the cheerleaders.
A fiscally more conservative, militarily less adventurous,
monetarily tight world is not conducive to a higher gold price, and,
for now, that is what we're probably going to get.
How can we be sure this isn't a long-term peak for gold?
Well, the public really didn't get as caught up in this gold frenzy
as it did in the dot-com stock boom, or anywhere near as involved as
it did in real estate speculation.
For example, take the reception that John Hathaway, the manager of
the Tocqueville Gold Fund, had at the Money Show in Las Vegas this
month. Hathaway's fund was up more than 45 percent when he gave his
pitch to a roomful of investors at the show on May 16. The fund's
assets under management had risen to more than $1 billion. It was,
Hathaway recalls, somewhat painful. "I had 50 people or so in the
room, which could have held four times that number. We'd been given
one of the smaller rooms. It had emptied out after the previous
speaker." And this was at his all-time high point.
Actually, to someone with a long-term interest in gold, that was a
good sign. Clearly, there are a lot of potential buyers left to be
found out there, which can't be said, for example, about Phoenix or
Las Vegas real estate. As Hathaway says: "At least we know that this
time, it wasn't the public" pushing up prices. "It was the momentum
guys and the trend players. After Las Vegas I flew to Geneva to see
potential clients for our offshore fund. They were better than the
(American) retail (investors) in Las Vegas, but not much better. It
was a very hard sell."
If this were a long-term peak in gold, Hathaway would have at least
$50 billion in his fund. He would have had investors throwing their
room keys at him on the stage.
Martin Pring of the eponymous technical analysis firm is fairly
certain that May's price action in gold means that "for all intents
and purposes the game is over for now. There could be a sharp
downside and then a trading range, or we could work off (the
overexcitement) with a slow Chinese torture. I think $490 is the
logical retracement level. When it gets there, I'll start thinking
about what the new secular highs will be.
"For me the proof that we'd passed a top was the story in a weekly
financial newspaper about gold going to $8,000 an ounce."
The man interviewed in that story is James Turk, author of "The
Coming Collapse of the Dollar" and founder of Goldmoney.com. I had a
chance to talk to Mr. Turk last week when he passed through New
York. He's much lower-key in person than in his press releases,
appearing more like the banker he once was rather than what you
think of when you hear the word "goldbug."
It's hard to pinpoint the difference between someone who is just
bullish about gold and a goldbug, since both share a high level of
scepticism about most countries' monetary policy and the markets'
present valuation of financial assets.
The most significant difference would be the goldbugs' firm
conviction that the gold price has been manipulated by a cabal of
Western governments, gold dealers, and bankers.
I've heard and read their arguments and I don't buy it. But Jim Turk
does. He and his confreres believe that through the 1990s and up to
the present time, Western governments have used the gold leasing
market, along with central bank gold sales, to push the price below
where it should be by all rights. As he says: "Manipulation of the
gold price is done to maintain the illusion that the dollar is
worthy of being the world's reserve currency."
Mr. Turk and the other goldbugs have an alternative reserve currency
in mind, of course.
You don't, however, need to believe in the resurrection of the gold
standard to conclude that gold is a very useful investment -- or at
least savings -- medium.
There are too many overleveraged financial markets in the important
currencies, and the prices of these currencies need to be marked
down to meet people's ability to support them with real income.
That doesn't mean timing isn't still very important. You probably
have $100- or $150-worth of correction to go before you should go
back into gold. And I'll be examining one of the goldbugs' theories
about the Clinton administration and gold market manipulation in a
future column.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
Caution: America Online prohibits delivery of GATA
dispatches to AOL e-mailboxes.
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
Box 460009
Denver, Colorado 80246-0009
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
MRCS Canada
12303-118 Ave. NW
Edmonton, Alberta T5L 2K2
Canada
http://www.mrcscanada.com
Michael Riedel, Proprietor
1-877-TRY-MRCS
1-877-879-6727
mrcscanada@shaw.ca
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com
Richard Nachbar Rare Coins
5820 Main St., Suite 601
Williamsville, N.Y. 14221-8232
877-622-4227
http://www.CoinExpert.com
nachbar@coinexpert.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
