Gold breaks through resistance; funds said to be ''monster buyers''

By Sean Corrigan
a href=http://www.capital-insight.comhttp://www.capital-insight.com/a
sean@capitalinsight.co.uk
Wednesday, August 27, 2003

Though vehemently denied by all and sundry in officialdom,
there are many in financial markets who will tell you that the
decision taken suddenly in 1999 by Culpability Brown, with
the endorsement of Sir Eddie the Unready George to dump
roughly 400 tonnes of Britain's precious reserves of gold at
what was then a 20-year (and is now a 24-year) low of just
under 157/oz, was not some rational act of quot;portfolio
managementquot; but rather a deliberate attempt to cap prices
until enough metal could be transferred to bullion banks --
and their central bank backers -- holding wildly overstretched
short positions.

As Reg Howe of www.GoldenSextant.com put it in his legal
complaint against the Bank for International Settlements for
this very act of price fixing, a case never defeated but only
dismissed on the technicality that Howe was not the party
who had been damaged by any such operation and so was
not eligible to file the suit:

quot;Edward A. J. George, governor of the Bank of England and
a director of the BIS, to Nicholas J. Morrell, Chief Executive of
Lonmin Plc: 'We looked into the abyss if the gold price rose
further. A further rise would have taken down one or several
trading houses, which might have taken down all the rest in
their wake. Therefore, at any price, at any cost, the central
banks had to quell the gold price, manage it. It was very
difficult to get the gold price under control but we have now
succeeded. The U.S. Fed was very active in getting the gold
price down. So was the U.K.'quot;

In an infamous remark made the year before this alleged
exchange -- and ironically just before Long-Term Capital
Management nearly blew up the whole of Wall Street --
Fed Chairman Alan Greenspan also assured his listeners
tha no harm could eventuate from the swelling numbers of
unregulated derivatives in existence and that neither could
quot;private counterparties restrict supplies of gold where
central banks stand ready to lease gold in increasing
quantities should the price rise.quot;

Moreover, in February of this year Antonio Fazio, head
of the Banc d'Italia, told a London audience: quot;In a system
that rests basically on fiduciary money, the principles of
free trade and comparative advantage typical of trade in
manufactures have sometimes been extended
unquestioningly to movements of financial capital.quot;

Which, in English, means it's all very well opening borders
to trade, but not to unlimited quantities of hot paper money
all chasing the latest vogue.

quot;Reflection on the mistakes made and the need to limit
and rectify the adverse effects on the stability of
intermediaries, to protect savings and to restore conditions
for a recovery in output, have prompted the monetary
authorities of the industrial countries to establish more
extensive and closer cooperation among themselvesand
with the developing countries,quot; Fazio continued.

A particularlybold assertion of the truth of widespread
collusion, you will perforce agree -- and who was the driving
force behind this, do you think?

quot;The governor of the Bank of England, Sir Edward George,
plays a leading role in this new phase of international monetary
cooperation that we could say began with the meeting of the
Group of Seven leading industrial countries in Toronto in
February 1995, shortly after the Mexican crisis erupted.quot;

It should be noted that the rescue of those caught in this
so-called Tequila Crisis is increasingly recognized as
being the event that induced financial market participants
-- knowing this quot;monetary co-operationquot; could be relied
upon to bail them out from any penalties of their future
excesses -- to unleash the mania which was to become the
Bubble upon us.

In fact, so wondrously successful has this heroic co-operation
been that it has seen most of Asia, Russia, Poland, Turkey,
and Latin America blow up since, together with most of the
developed world's media, telecom, technology, and power
industries, while stripping the heart out of pensions and
insurance companies everywhere and fostering a near-global
property and consumer credit boom of dangerous proportions.

Not a bad legacy for the now-retired Sir Eddy and his
can't-be-shifted-with-a stick-of-dynamite buddy quot;Sirquot; Alan
Greenspan!

But what is the point of all these ruminations and why
bring all this up now?

Well, it's just that today saw the sterling price of gold hit
236.50/oz -- some 50 percent above the lowest price the
Bank of England achieved in its crash sales programme
and nearly 30 percent above the average price of roughly
184/oz achieved in the course of the 17 auctions
subsequently held.

That means that Brown and George between them managed
to sell a decent chink of Britain's patrimony for a cool 660
million less than it would have fetched today -- enough for,
say 30,000-odd teachers' annual salaries, or around
nine-tenths of a Millennium Dome!

By printing money themselves, and by alternately inveigling
and turning a blind eye to the financial big guns' drive to
distort prices and to force capital where it has no business
going, the central bankers can keep the plates spinning for
what seems like a very long time indeed, but, eventually,
gravity wins -- and they fall.

Mister Market may be bound, gagged, and chained to a
radiator for long years at a stretch, but eventually he comes
stumbling out into the sunlight, turning his captors' dreams
to dust.

Gold -- and silver and platinum too, if today's price action is
any guide -- may be about to show up the hollowness of the
bankers' schemes and to reveal finally the vast scope of the
hitherto partly hidden inflation they have engineered into the
bargain.

And if that happens, be under no illusions: It will dramatically
change the outlook for us all.