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A dubious theory about 'gold pukes': Banks desperate for dollar liquidity

Section: Daily Dispatches

This elaborates on the original dispatch, adding clarifying detail. / cp

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10:30p ET Sunday, March 4, 2018

Dear Friend of GATA and Gold:

Zero Hedge tonight calls attention to an interview done with Jeffrey Snider, chief investment strategist and head of global research at Alhambra Investment Partners in Palmetto Bay, Florida, by hedge fund manager Erik Townsend at his MacroVoices internet site. Snider acknowledges that central banks are active in the gold market through leases and swaps but argues that their primary objective is not to suppress the gold price in defense of government currencies but to provide emergency liquidity and collateral to investment and commercial banks at times of market stress.

"Gold pukes," Snider says, are desperate grabs for dollar liquidity by the private-sector banks selling collateral that happens to be handy.

This theory is similar to the suggestion of a report in the Financial Times on July 29, 2010, to which GATA's consultant about the Bank for International Settlements, Robert Lambourne, has called attention:

Of course Snider's theory does not match the accounts provided by central bank records themselves, which emphasize currency defense as the objective of intervention in the gold market. Nor does Snider's theory explain the suddenness of the "gold pukes," since no one who was more interested in getting a decent price for gold than in driving gold's price down would sell so much in a few minutes. He would spread his sales out over a much longer period.

Further, it seems highly unlikely that any investment or commercial bank ordinarily would have as much gold lying around, or as much gold credit, as has been disgorged in some of these "gold pukes" without the aggressive assistance of central banks. Indeed, the gold being "puked" very well could be central bank gold that has been leased to investment or commercial banks precisely for emergency "puking" purposes.

At least Snider faults the surreptitiousness of central bank activity in the gold market and the dishonesty of central bank balance sheets in regard to gold. That's more than readers will ever get from the Financial Times and Wall Street Journal.

A transcript of Townsend's interview with Snider is posted at MacroVoices here:

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


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