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Bullion Desk and 321Gold refuse to post reply to ''open letter''
10:42p ET Wednesday, December 8, 2004
Dear Friend of GATA and Gold:
TheBullionDesk.com today more or less accused
GATA of causing today's smashing of the gold
price. The accusation came in a brief market
note by the site's proprietor, Ross Norman,
suggesting that the World Gold Council's new
exchange-traded bullion fund had been forced
on Tuesday to sell 15 percent of its gold
holdings on account of "a foul attempt by a
rival to raise ill-founded concerns about the
product" -- that is, GATA's call this week for
the council to explain the duplicate serial
numbers on some of its gold bars and to answer
several questions about the fund's operation.
Reuters and Dow Jones Newswires distributed
reports about the huge dishoarding by the EFT.
Here's the Dow Jones story.
* * *
Fall in StreetTRACKS' Stock
Encouraged Gold Slide: Trade
By David Elliott
Dow Jones Newswires
Wednesday, December 8, 2004
LONDON -- The 3.5 percent fall in the price of
spot gold Wednesday may have been encouraged by
the sale of 15 percent of the gold held by the
StreetTRACKS exchange-traded fund, or ETF,
analysts in London said. The total net asset
value of gold in the trust stood at 88.02
metric tons Wednesday against 103.56 tons
Tuesday.
Gold fell to $436.90 a troy ounce at the London
fix Wednesday afternoon against $451.80/oz
Tuesday afternoon.
While most participants agree the market was
primed for a slide -- in light of an overbought
technical picture and a bounce for the dollar --
they also believe the fall in tonnage in the
StreetTRACKS trust was responsible for some
of the selling.
The fall in the StreetTRACKS tonnage highlights
the expectation by holders of the shares that the
share price and price of gold is set to fall,
said an analyst.
"It hasn't helped sentiment," said Kamal Naqvi,
precious metals analyst at Barclays Capital.
StreetTRACKS gold shares were launched Nov.
18 on the New York Stock Exchange to track
the price of gold. Each share represents
one-tenth an ounce of gold.
In the first week of trade to Nov. 26 the trust
built up a total net asset value of just over
100 tons, but since then this remained virtually
unchanged until the decline Tuesday.
Over the same period the share price for the fund
has also remained steady, closing Tuesday at
$45.11 compared with the close on the first day
of trade at $44.38. At 1626 GMT Wednesday the
shares were trading at $43.62.
"Gold was primed for a correction but it seems to
me an interesting correlation that the
StreetTRACKS tonnage fell at the same time,"
said Philip Klapwijk, managing director of GFMS
Ltd.
The StreetTRACKS Web site says the tonnage in the
trust for Wednesday will be updated between 1615
and 1630 EST.
* * *
The Bullion Desk's blaming GATA for the
gold crash was followed there by the
unusual posting of an open letter to your
secretary/treasurer by a Bullion Desk
reader, David Walker. The open letter
carried a preface declaring that the
Bullion Desk fully endorsed its views.
Walker's letter at the Bullion Desk can
be found here:
http://www.thebulliondesk.com/content/reports/temp/AnOpenLettertoGATA
.pdf
Walker echoed the Bullion Desk's own
complaint that GATA had wrecked the gold
market by criticizing the gold council's
ETF, and he attempted to answer the
questions GATA had directed to the gold
council.
As authority of one of his answers,
Walker wrote that he had spoken with a
representative of the ETF, but when I
briefly engaged him by e-mail and asked
him if he was speaking for the fund or
the World Gold Council, he did not reply.
So it may be suspected that Walker's
letter was more or less ghosted for him
or that he is serving as an intermediary
for the fund or the council so that the
council might not have to engage directly
with people who press inconvenient
questions.
Later Walker's open letter was posted at
321Gold.com here:
http://www.321gold.com/editorials/walker/walker120804.html
While GATA's questions about the ETF's
operations are still compelling -- and will
be reviewed again below -- the most remarkable
thing here is the old pattern of gold-news
Internet sites to avoid at any cost doing
real reporting on the gold market. For all
the space devoted to bashing GATA today
at the Bullion Desk and 321Gold, neither
of those sites, nor any other gold sites
to GATA's knowledge, has ever directed a
single question to the biggest participants
in the gold market, the central banks. Nor
do these sites seem inclined to question the
gold council directly even though its ETF
has been heavily publicized for months.
The Bullion Desk said today that it fully
endorsed Walker's letter about the ETF, but
how could the Bullion Desk do so without
doing or referring to any original reporting
on the fund? Would a Q&A with the gold council
or the fund's managers be so out of line for
the Bullion Desk? To most people it might
look like basic journalism.
Indeed, the greatest deficiency of the gold
market and the financial markets generally
may be the lack of basic journalism --
journalism that goes beyond the recycling
of press releases and government statements.
But to return to GATA's questions, and to
assume that Walker is acting as intermediary
for the ETF and the gold council:
1) Why does the bullion fund list ownership
of duplicate gold bars?
Tim Wood's admirable reporting last night
at ResourceInvestor.com, notice of which
was dispatched to you, seems to have
resolved this question, if only
unofficially, since the gold council still
does not speak directly. Different bars
refined by Johnson Matthey apparently carry
the same serial numbers and the ETF listed
the duplicate numbers without explanation,
thus erroneously suggesting double counting.
That is, the fund's practice was deficient,
was fairly questioned, and required
explanation.
2) Why have all the custodians and potential
custodians of the fund's gold not been
identified?
Walker contends that they all HAVE been
identified and quotes the fund's prospectus:
"The subcustodians selected and used by the
Custodian as of the date of this prospectus
are: the Bank of England, The Bank of Nova
Scotia (ScotiaMocatta), Deutsche Bank AG,
JPMorgan Chase Bank, and UBS AG. The
Allocated Bullion Account Agreement provides
that the Custodian will notify the Trustee
if it selects any additional subcustodians
or stops using any subcustodian it has
previously selected."
But note that to notify the trustee is not
necessarily to notify the investing public
as well. Is it possible that ETF gold could
be stored with other custodians without
immediate notice to investors?
3) Why is the fund refusing to let its gold
holdings be fully and publicly audited?
Walker denies that the fund is refusing full
and public audits. But then he writes that
there indeed might not be audits if gold is
placed with certain subcustodians:
"If 100 percent of the gold bars are held
directly by the Custodian, which is the
current situation, then there is provision
provided for a 100 percent audit by the
trust as found in the SEC filings:
"'The Trustee may, upon reasonable notice,
visit the Custodian's premises up to twice
a year and examine the Trust's gold held
there and the Custodian's records concerning
the Trust Allocated Account and the Trust
Unallocated Account.'"
"However in the event a subcustodian is used
it would be up to the Custodian to audit
subcustodians per any audit provisions between
the Custodian and the subcustodian. Any gold
held would be in allocated form, thus property
rights to the gold have been established. Since
it is intended that HSBC has 100 percent control,
all gold would be subject to 100 percent audit
directly by the Trust's auditors."
4) Is any of the fund's gold being leased, made
available for leasing, or encumbered in any way?
The best Walker can do here is assume that since
no risks of leasing are cited in the fund's
prospectus, there won't be any leasing. That's
a big assumption. How much more persuasive it
would be to get a simple, straightforward yes
or no directly from the fund rather than a guess
from an intermediary. Why should such a simple
question be so difficult?
5) Exactly what is the fund's relationship with
the Bank of England, a major lessor of gold?
Walker's answer is contradictory and
disingenuous and only validates GATA's concern:
"The Fund has no relationship with the Bank of
England. The Bank of England was listed as a
POTENTIAL subcustodian that the Custodian
MIGHT use in the normal course of business.
Certainly HSBC, being the largest LBMA
member, would more than likely have dealings
with the BoE from time to time. During my
conversation with the Fund representative, Mr.
David Smith, he mentioned that there has been
talk of discontinuing the BoE as a POTENTIAL
subcustodian."
That is, there is no relationship but the fund
prepared for a relationship and now that people
are concerned about it, the fund might not go
through with it.
* * *
Let it be said again: The mystery and
deception carefully woven around the world's
gold reserves are the foundation of gold
leasing, the suppression of the gold price,
and the manipulation of the gold market.
GATA favors anything that democratizes
and clarifies gold ownership -- which could
include an exchange-traded fund -- provided
that there is every assurance of the security
and custodianship of the gold involved and
the fund doesn't become just another
derivative for market manipulation.
So far the World Gold Council and its
associates in the ETF have not provided that
assurance, and intermediaries making arguments
for them will not be good enough. Indeed, the
use of intermediaries by the council and the
ETF can only tend to confirm suspicions that
the true answers are not good ones.
If the World Gold Council wants to speak for
gold, it will have to speak. It should speak
not only about its ETF but, more importantly,
about the open and surreptitious intervention
of central banks in the gold market, a subject
about which the council long has been
deliberately and disgracefully silent.
In the council's silence, GATA will do its
best to speak for gold.
Since the last two weeks have been full of
anguished public statements by central
bankers about currency intervention and
commentary by gold market analysts about
the likelihood of a sharp decline in the
gold price, it is absurd for the Bullion
Desk or anyone to attribute to GATA the
power to crash the gold market or any
market. Surely if we had such power we
would not have just crashed the gold
market down on our own toes. (More than
our toes, actually.)
But let's see if the Bullion Desk is right.
Here's fair notice: Once we get positioned,
we're going to see if we can do it again on
Friday, this time to the bond market, and,
if that works, on Monday to the South
African rand!
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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Ted Butler silver commentary archive:
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