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AngloGold Ashanti profit hit by higher costs, gold hedging
5:43p ET Saturday, January 29, 2005
Dear Friend of GATA and Gold:
When it sends you news stories and commentaries,
please remember that GATA does not necessarily
endorse them. Sometimes they are dispatched
simply because they seem likely to be of interest,
or they may be like television news -- important
not for anything what they report but rather for
showing what the world is being told.
Having the privilege of holding the key to the
GATA dispatch list, I sometimes will take the
liberty of attaching introductory comments to
these stories and commentaries, or just wisecracks
and sneers, to put GATA's spin on them or to try
to unspin them. Sometimes this may go too far,
and sometimes the omission of comment may be
negligent, as with yesterday's dispatch of the
London Times story about a secret vault at an
"anonymous" building in London occupied by Hong
Kong Shanghai Banking Corp. The vault was said
to hold bullion owned by the new exchange-traded
gold bullion funds.
This was too much for GATA Chairman Bill Murphy,
who replied:
"This is really bugging me. I know I am
prejudiced, but how can it be that we have had
this supposedly massive buying of gold for the
EFTs and the gold price has gone nowhere over
the past couple of months? It makes no sense.
"How can it be that the speculators are leaving
the Comex in droves and yet are supposedly buying
the ETFs like crazy?
"How can it be that even Mitsui's Andy Smith,
GATA's antagonist, smells a rat with the EFTs?
"How do people explain all this gold demand with
no rise in the gold price, on top of the documented
demand in the Middle East and India?
"Why doesn't anyone else ask these questions?"
GATA consultant James Turk, founder of GoldMoney
and editor of the Freemarket Gold & Money Report,
concurred:
"I think this article in The Times is complete
nonsense. The GLD exchange-traded fund does
not disclose where its gold is stored. To assume
that it sits somewhere within HSBC is pure
speculation, just as it is pure speculation that it
even exists at all, given that GLD's gold held by
subcustodians and sub-subcustodians is not audited.
And for all we know, all the gold may be stored
with HSBC.
"Unfortunately, like so many things concerning
gold, we have to appeal to logic, as central banks
make it nearly impossible for us to find the
essential facts. Consequently, ignorance about
gold prevails, because rather than spend some
time thinking and working to analyze gold, the
public swallows stories like this one hook, line,
and sinker."
Also dispatched to you without comment
yesterday was a Reuters story reporting that
a German delegate to the economic conference
in Davos, Switzerland, expressed support for
a vague British proposal to use gold owned by
the International Monetary Fund to finance
debt relief for poor countries. We've been over
this stuff many times but perhaps not lately,
so here goes again:
1) Of course IMF gold sales, leasing, and
revaluation aren't necessary to finance debt
relief; Western governments could simply
cancel any debts without any golden
legerdemain.
2) If the IMF and central banks tire of holding
assets in gold, they can sell them or lease
them at any time; they hardly need to relieve
themselves of their gold under the supposed
pressure of developing-world debt.
3) Most likely the recurring talk by the IMF
and central banks about gold sales is, like
the sales themselves, simply a disguise
for writing off as sold the massive amounts
of gold that already have been leased and have
left central bank vaults and cannot be recovered
in any practical way without triggering a short
squeeze that would collapse the bullion banks
that have been the central banks' eager agents
in the gold carry trade, which is also the
currency support trade.
4) As Turk implied, the whole world financial
system has come to be based on the
concealment of the amount and location of gold
held by central banks and governments. That is,
gold is the secret knowledge of the universe,
and the control of its price is the foremost lever
of political power.
5) While remaining central bank gold reserves
are not known exactly, because of gold leasing
they are vastly smaller than reported reserves.
That is probably why the central banks seem to
be staging a controlled retreat with the gold
price -- allowing it to rise steadily but
gradually lest they exhaust their reserves and
lose their grip on political power.
6) If they have enough gold left and want to
spend enough of it, central banks can drive
the gold price down $50, $100, $200, or all the
way back to $35 per ounce -- for a while, but
not for long. Indeed, the lower they drive it,
the faster they will exhaust their reserves, not
just because of their own spending of gold but
also because their lower gold price will cause
a curtailment in gold production by mines. This
curtailment is already well under way, since an
equilibrium price for gold -- a price that matches
production costs (including exploration costs) with
demand -- is likely to be above $600 per ounce. A
price that restored any sort of realistic ratio
between gold and the volume of fiat money in
circulation would be quite beyond that.
7) GATA doesn't know exactly what is going to
happen. We advocate free markets in the precious
metals and seek to expose the rigging of the
metals markets. We're not investment advisers.
But when the fiat hits the fan, as it always
does, nothing will have changed about the
enduring value of the metals, except that they
will be better appreciated.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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The Moneychanger
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1-888-218-9226, 931-766-6066
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