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Bloomberg''s weekly survey finds Gartman thinking gold may go ''way up''
12:50p ET Sunday, February 20, 2005
Dear Friend of GATA and Gold:
The news story appended here from The Observer in
London reports suggestions that Britain's
obsession with getting the International Monetary
Fund to sell its gold in the name of debt relief for
poor nations could be fulfilled without disrupting
the gold market by persuading China to buy the gold.
The story echoes the prediction of gold market
analyst Martin Murenbeeld, reported to you here
two weeks ago, that central banks with large
surpluses of U.S. dollars -- particularly the central
banks of China and Japan -- could absorb any IMF gold
"without so much as a hiccup":
http://groups.yahoo.com/group/gata/message/2827
Of course since central banks are involved, no one
connected with the IMF gold business is being candid.
And since central banks can create money out of
nothing, the very premise that some countervailing
transaction is essential to the forgiveness of the
unpayable debts of developing nations is fraudulent.
To replenish the IMF's balance sheet, the central
banks of IMF-member countries could simply issue
the IMF more paper credits equal to the debts being
forgiven. A real asset -- the gold -- need not be
liquidated in the name of obtaining something that
the sellers of that asset can always create with a
few computer keystrokes or runs of the banknote
presses.
So other agendas are operating here. One already has
been suggested several times -- that the Bank of
England or other British banks remain particularly
on the hook for short gold positions that can be
relieved only by tapping into the IMF's gold hoard.
Now the China connection suggests a device by which
the hardest of the West's hard assets would be
transferred eastward to induce the biggest holders
of depreciating U.S. dollars and U.S. government
bonds to keep holding them rather than sell them and
thereby pop the bubbles in which Americans
particularly and Westerners generally have been
living.
In any case, whatever its precise purposes, a great
game is on, and the game is for gold.
The nice thing is that everyone who understands it
can play, in a small way, just as China is being
invited to play in a big way -- by exchanging a
depreciating illusion for an appreciating reality.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Chancellor Urged to Sell Gold to China
Heather Stewart
The Observer, London
Sunday, February 20, 2005
http://observer.guardian.co.uk/business/story/0,6903,1418353,00.html
Gordon Brown should use his trip to China this week
to urge Beijing on a gold-buying spree if he wants to
achieve his debt relief plans, analysts say.
A buyer with deep pockets, suggests Kamal Naqvi,
precious metals analyst at Barclays, could be the best
route to persuading Washington to back the
Chancellor's proposal for an International Monetary
Fund gold reserves sale to help the world's poorest
countries.
"If you can find a big buyer, you can do the sale
without affecting the market. China and Japan are the
potential white knights, because their gold reserves
are so small," said Naqvi.
Fears that a selloff could send the gold price plunging
have provoked fury among US senators, 20 of whom
last week wrote to the Treasury Secretary, John Snow,
urging him to reject the plan, which the IMF had been
asked to investigate following a summit meeting of G7
finance ministers in London earlier this month.
But Naqvi says a sale could aid gold prices if Brown
could drum up rich, new customers. The Chinese
government holds only 1 percent of its vast reserves in
gold, compared to a global average of around 10
percent.
"The basic feeling is that they need to diversify out of
dollars, and the full 3,000 tonnes of IMF reserves allows
them a one-time opportunity to do that," Naqvi said.
The gold reserves plan is the first stage in Brown's
year-long campaign to use Britain's chairmanship of the
G7 club of rich nations to introduce a "Marshall plan" for
Africa.
Proceeds from a gold sale would be used to pay for
complete cancellation of the debts, worth $6 billion,
owed to the IMF by poor countries. At current gold prices
only 420 tonnes (about 14 percent of the total) would
need to be sold to achieve that. "This stockpile of gold
is no use to anyone, and it could be used to help some
of the poorest countries in the world," said a
spokeswoman for Oxfam.
Without US backing, Britain will be unable to get the 85
percent support it needs on the IMF's decision-making
committee for the selloff to go ahead. The alternative is
to revalue the reserves -- which are written into the Fund's
accounts at only $9 billion but are thought to be worth up
to $44 billion.
However, a straightforward sale is thought to be the Fund's
preferred option.
A Treasury spokesman denied that Washington would
scupper the plan, insisting that Britain hoped to strike a
deal on a gold sale or revaluation as soon as April. "We are
waiting for the IMF to produce its report," he said.
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