lorne: In response to the article about gold as a standard of stability, I wrote the author the following letter.
Jerry:
Thanks for the article but you seem mystified by the low gold price when there is a simple explanation for it.
The Central Banks of the world have sponsored a massive leasing program of late which has allowed hedge funds and other institutions the opportunity to obtain low interest financing for their derivative positions. It is a well know, documented fact that there is a 1500 ton annual supply gap between demand of 4000 tons and mine production of 2500 tons. Where do you think this extra gold comes from? What do you think the effect of this extra gold on the market price is?
It should become apparent to those who read Frank Veneroso's "Gold Book Annual" that the case of the missing gold is already solved. There is an outstanding short position in the gold market of some 8,000 tons or more, absent from the vaults of Central Bank coffers.
When the US engaged itself in the 60's during the London Gold Pool and in the 70's during the Gold Auctions, to pin down the price of gold, it was doing so overtly. Today, it may be reasoned, the same interests are apparently doing the same thing, only now they can do so "Sub Rosa", or under the table, through the shadowy world of derivative trades.
Bob Dobbs bob_dobbs@hotmail.com
in reference to your article "Gold as a Standard of Stability"
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