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Early renewal of central bank gold agreement seen to be supportive of price
Excerpted from quot;Midasquot; commentary for January 28, 2004
Copyright 2004, LeMetropoleCafe.com
Used by permission
By Bill Murphy
LeMetropoleCafe.com
January 18, 2004
Yesterday I distributed this Bloomberg story in a Caf email:
* * *
The board of Germany's Bundesbank opposes a plan by its
president, Ernst Welteke, to sell some of the central bank's
gold reserves to fund research in Europe's largest economy,
Der Spiegel said.
quot;Welteke won't get a majority for his proposal,quot; the magazine
cited an unidentified board member as saying. Only three of
the board's eight members are in favor of the proposal, Der
Spiegel said, citing the board member.
The Bundesbank's board will vote on the proposal in February,
the magazine said.
The Bild am Sonntag Sunday newspaper said this month that
the Frankfurt-based Bundesbank and the German government
have agreed to sell up to 600 tons of the central bank's gold to
raise as much as 7 billion euros ($8.7 billion) for a fund to
promote education and research. The government expects the
fund to generate interest income of between 250 million euros
and 300 million euros a year, the paper said.
* * *
In my opinion the importance of this brief news story cannot
be overstated. Here's why:
* Fed Chairman Alan Greenspan had just made a big splash
in Berlin.
* This story contradicts a planted and false story the Germans
were committed to sell up to 600 tonnes of their gold, which
has been Welteke's plan all along. GATA believes Welteke
has been a stooge of the Gold Cartel for a long time.
* Most importantly, this is the first positive gold story from any
Western central bank since GATA was formed five years ago,
and it reveals serious German concern over all this multi-year
gold selling by the West.
* The Der Spiegel article suggests that its source has been in
contact with all members of the Bundesbank board. It is not
just one man's opinion. It is a consensus. The story was leaked
to send a message.
* Perhaps a group of German central bankers is looking at the
low prices received by the Swiss and British for their gold and
are making a stand that they will not be drawn further into this
U.S.-inspired folly.
* More and more Germans can see the foolishness of the
United States regarding our horrendous current account and
budget deficits and know what the result is going to be: a
soaring gold price and a troubled dollar for years to come.
Why sell gold cheap to invest in a depreciating dollar?
* The Germans have an historic fear of hyperinflation. They can
see commodity prices on the move, led by oil above $35 per
barrel. They see the United States following in their footsteps
of yesteryear. Now is a time to BUY gold, not get rid of it on the
cheap to the Chinese, Russians, Arabs, and Indians.
* For years there has been a pro-gold faction in Germany that
might have been held in abeyance. Perhaps, with the sharp rise
in the gold price, the pro-gold faction believes that it is time to
make its move. As GATA consultant James Turk has repeatedly
pointed out over the years, there is a very serious question
whether half of Germany's gold is already gone through leasing
and swapping schemes. Bundesbank gold sales now may be
nothing more than an accounting gimmick to write off the gold
the bank knows it cannot retrieve without sending the price
through the roof. It could just be that the five recalcitrant
Bundesbank board members are outraged that Germany could
its valuable gold be given away and want to put an end to the
matter. We will hear a lot more about Bundesbank gold in the
months to come.
* If Bundesbank's pro-gold faction wins out (and it appears to
be in the lead), it should have an effect on other Western central
bankers and cause them to rethink their gold sale and lending
policies. Many of these bankers are like sheep. Turn one of the
leaders and many more could follow.
* There is a good chance that the brilliant efforts of GATA
supporter Ferdinand Lips are paying off dramatically. Just before
Christmas Lips distributed 500 copies of his book, quot;The Gold
Conspiracyquot; -- the German text of what has been published
in the United States as quot;Gold Warsquot; -- with a personal letter
to the most important political and financial leaders in
Switzerland. Lips has worked for years to expose the
manipulation of the gold price and the folly of Western central
bankers who are dumping gold.
* And yes, GATA's five-year effort to do what Lips has been
doing may be paying off in Germany too. We have received
much feedback over the years that our message has been
heard by a number of influential Germans.
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