Lawrence Williams: Is China manipulating gold UP?

4:02p ET Friday, June 25, 2010

Dear Friend of GATA and Gold:

MineWeb's Lawrence Williams today has posted excellent and incisive commentary about China's agreement to buy gold concentrates from a Coeur d'Alene mine in Alaska, seeing it as evidence that China cannot obtain all the gold it wants from domestic production and wants to build its gold reserves without the market-exploding publicity that might result from buying gold from the International Monetary Fund.

But Williams concludes with a puzzling reference to GATA: "The move has to be seen as long-term bullish for the gold price and is yet another way of limiting downside risk for gold investors. GATA has for a long time been railing against what it sees as gold price suppression by the gold banks and governments, but probably none of this has the potential impact for control of the gold market which can be and probably is being exerted by the Chinese. But because this is broadly positive for gold it may not be in that organisation's interests to comment. Yet it is an equally manipulative policy if indeed it is in effect!"

In the context of its work, GATA would define "manipulative" as involving interference against a free market -- like the coordinated dishoarding of gold by central banks at strategic moments to knock gold's price down, or the sale of more promises of gold than can realistically be delivered or more gold than even exists. GATA has documented this sort of market manipulation:

http://www.gata.org/taxonomy/term/21

Is it "manipulative" for a buyer to try to arrange his buying so it doesn't proclaim the danger of shortages and invite front-running by other buyers? Not in the sense of what GATA has complained about. As Williams notes, China's careful acquisition of gold is hugely bullish for the long term and spells doom for the Western central bank gold price suppression scheme -- eventually, when China thinks it has adequately hedged its huge dollar reserve exposure, but not necessarily soon. But if China means to get all the gold it can and has decided to stagger its purchases to minimize their market impact, such a policy just as easily can be said to be manipulatively suppressive.

In any case China's gold policy seems somewhat more transparent than that of the U.S. Treasury and Federal Reserve, whose determined secrecy in gold matters probably secures for them for all time the prize for gold market manipulation.

Williams' commentary is headlined "Now China Sources Newly Mined Gold from the USA" and you can find it at MineWeb here:

http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=106850&sn=De...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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