Financial Times only pretends to report on gold market

2:36p ET Saturday, March 7, 2009

Dear Friend of GATA and Gold:

Friday's Financial Times story by Javier Blas about the prospects for renewal of the central bank gold sales agreement, appended here, seems to go out of its way to avoid reporting anything worthwhile, even after advertising the reporter's connections to insiders.

Indeed, maybe those connections are why the story avoids doing any real journalism.

While the story purports to be about central bank gold sales, it undertakes no examination of why central banks would want to sell gold and whether such sales might be meant as intervention in various markets.

The story quotes unidentified "traders and officials familiar with central bank thinking" but doesn't wonder why central banks should express their views only to certain traders and not others, as if this isn't grotesque favoritism bordering on insider trading.

The story quotes without challenge another unidentified official as saying "no one wants to disrupt another market," as if market intervention by central banks isn't happening hourly now and is not, by definition, disruption.

The story says central banks are "likely to provide themselves with plenty of room for manoeuvre, with a relatively high ceiling for sales," but declines to explain the purpose of such "manoeuvres."

This negligent and even dishonest approach characterizes so much of Financial Times reporting generally that the paper has to be considered more an agent of central bank propaganda and disinformation than a newspaper -- which is not to say that it shouldn't be read, just to note how it should be read.

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

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Central Banks Take a Fresh Look at Bullion Sales Pact

By Javier Blas
Financial Times, London
Friday, March 6, 2009

http://www.ft.com/cms/s/0/29f73494-09f0-11de-add8-0000779fd2ac.html

When Europe's central banks told the gold market five years ago that they would renew their pact to cap their bullion sales, the sector breathed a sigh of relief. Today gold prices are double their 2004 level and central bank sales far smaller, but the market is still hoping that the Central Bank Gold Agreement will be renewed again.

The current CBGA, which caps sales at 500 tonnes a year, expires in late September, but the banks have in the past announced the terms of a new agreement in March and there is an expectation in the market that a statement could come soon.

Traders and officials familiar with central bank thinking say that a new CBGA is likely, even if some central bankers consider that the market no longer needs the guidance of the pact. Gold prices have recently been above $1,000 an ounce and none of the banks is thought to have plans for major sales.

The central banks are, in any case, aware that in the current climate of financial uncertainty, reassuring markets -- even the gold one -- is positive. "No one wants to disrupt another market," says an official familiar with the conversations.

Another reason for a third CBGA is the likelihood that the International Monetary Fund will sell about 400 tonnes of gold in the next five years, as the body seeks to raise funds. The IMF is unlikely to be a signatory of the pact, but more likely to maintain a "loose association" with it, the official says.

What the central banks do not want, however, is to tie their hands: Even if they renew the pact, something that is still unclear, they are also likely to provide themselves with plenty of room for manoeuvre, with a relatively high ceiling for sales. The current limit is 500 tonnes -- above the 400 tonnes cap of the first CBGA of 1999-2004 -- but banks are likely to sell far less this year. Because of those lower sales, many in the industry consider the ceiling less relevant.

European central banks, including the ECB, the members of the eurozone, and the central banks of Switzerland and Sweden, have sold just 55 tonnes of gold since last September, according to the industry-backed World Gold Council. In the year to September 2008 they sold 358 tonnes, the lowest level since 1999.

The origins of the CBGA go back a decade, when central banks decided to dispose of some of their non-yielding bullion reserves, but wanted to avoid a further drop in prices.

The Bank of England's unilateral announcement in early 1999 that it was selling part of its reserves helped gold prices sink to a 20-year low. They were trading at just above $250 an ounce by the summer of that year. After the pact to cap sales in September 1999, prices surged 30 per cent in two weeks, to more than $320 an ounce. Yesterday spot gold in London was trading at $910 an ounce.

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