CMRE audience wonders why gold falls hard on bad news for dollar

12:14a ET Friday, May 11, 2007

Dear Friend of GATA and Gold:

The spring dinner meeting of the Committee for Monetary Research and Education was held in New York City on Thursday evening and a few good words were offered for gold, since GoldMoney's James Turk and your secretary/treasurer were among the speakers. This group is far more aware of gold than most but there seemed to be much perplexity as to how gold could have fallen so far Thursday when the economic news seemed so bad for the U.S. economy and the dollar.

Your secretary/treasurer got the opportunity to respond to that question during the speaking program and explained that the main determinant of the gold price on any particular day is usually the amount of dishoarding central banks are willing to do and the amount of futures and options they are willing to sell against their reserves; that the counterintuitive action in gold has been going on for years and may have been noted first by the South African gold advocate Peter George, who is quoted on the point in the DVD of GATA's Gold Rush 21 conference; and that if a worldwide nuclear war broke out and there was only one gold market still operating in a city that had escaped destruction, what was left of the U.S. Treasury and Federal Reserve would find it and gold would go down, at least for that day, lest any financial market people who had survived the cataclysm begin to suspect that anything was wrong with the world.

This explanation seemed a bit too revolutionary for most in the CMRE audience but at least your secretary/treasurer enjoyed making it, the more so as he was sitting next to the official historian of the Bank of England, whose account of the bank's recent massive gold dishoarding is eagerly awaited.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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