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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Alan Whirlwind who wrote (36875)	7/10/1999 12:31:00 AM
From: Bill Murphy	Respond to of 116753

Alan, You know when it happens, it will happen very quickly and leave most market participants speechless. Bill

To: Alan Whirlwind who wrote (36875)	7/10/1999 3:42:00 AM
From: Alex	Read Replies (3) \| Respond to of 116753

Good read from Kitco.............. farfel (@SAUL...it's NOT only a Superb Read...IT'S A MUST READ! REPOST:) ID#341226: Copyright © 1999 farfel/Kitco Inc. All rights reserved Whoever this guy is, he has answered questions that have bugged me ever since I first took a close look at the gold carry trade. The fundamental question in my mind has always been this: WHY THE FCK DOES ANY CENTRAL BANK WANT TO MAKE GOLD LOANS FOR A LOUSY 1% INTEREST, KNOWING DAMN WELL THAT GOLDMAN, JP MORGAN, CHASE, LEHMAN, DEUTSCHE ET AL CAN TURN AROUND AND INVEST THE PROCEEDS OF THEIR SALES AT 5% OR BETTER?? The central banks are providing de facto free gold to these scamsters...gold that belongs to THE PEOPLE! It is total, unmitigated criminality in its most obscene form. The public should be SCREAMING about this...it is nothing less than government acting on behalf of special Wall Street interests and dereliction of responsibilities to the People. At the same time, it is a complete subversion of the alleged level playing field in the gold market. There is NONE. ZERO. Gold technicians, you can throw away your charts because they are pointless. Until this CB/Wall Street partnership-in-crime is dissolved, it is absurd to go long in the gold market. Period. Gold bulls have been conned and ripped off by their inability to fully comprehend the many years of collusion occurring between central banks, Wall Street, and special privileged gold producers. THIS IS THE ARTICLE THAT EVERY GOLDBUG SHOULD DISSEMINATE FAR AND WIDE...to every politician...to every media institution. This is the one, guys. Thanks F ---------------- DEFINING THE GOAL OF THE COLLUDERS AGAINST GOLD By Vincent Cook In dismissing the claims made by GATA, Martin Armstrong of Princeton Economics International has expressed some puzzlement as to the motives of central banks in participating in the gold market manipulation alleged by GATA. In his latest essay, his reply to Professor Von Braun ( posted to the GATA egroups forum July 1 ) , Armstrong wrote: "The word 'manipulation' implies that there is some goal to be achieved. No one seems to have defined that goal, and the assumption that a conspiracy has been in motion among the central banks for some time shows the lack of understanding that governments themselves have no memory beyond the current administration.... It does not make sense that the central banks, including Germany, would try to drive down the price of gold. What purpose does this serve? Surely, if the goal is to fight inflation, governments have already manipulated the consumer price index statistics to achieve that goal." While I can't speak for GATA, it is not difficult at all to infer what the goal of the colluders against gold might be. If factors such as inflation, default risk, etc., don't justify the considerable interest rate spread between gold loans and currency loans, then any economist worth his credentials has to ask why arbitrageurs haven't moved in to bid up gold loan rates over the last few years. The answer appears to be that there is no real free market in gold loans; gold is not being competitively lent to high bidders. Instead, gold is being lent to a few selected institutions, comprising a group of low bidders who happen to be politically connected. The implication of this is that central banks are in on the scam and are coordinating it. If GATA is correct, central banks must be deliberately serving the interests of certain investment banks and cooperative mine operators by giving them credit at a discount. GATA doesn't have to make grandiose assumptions about the memory of public institutions or the integrity of consumer price indices; it is enough to assume that central bankers and treasury officials are willing to collude with influential constituents ( and in many cases their former and future employers as well ) by generating a political rent for their constituents' benefit in the short run. While it isn't strictly necessary to have a price decline for privileged short sellers to profit from this kind of interest rate spread, even subsidized short sales carry with them the risk of losses due to gold price increases. Accordingly, this scheme also requires that gold price increases be stifled by strategically timed injections of additional gold supplies into the marketplace, which is accomplished by the concerted action of central banks ( by increasing the volume of gold loans ) and cooperative mines ( by making forward sales triggered by the price increases ) . As gold rallies keep getting stomped by timely intervention by central banks and cooperative mines, bullish speculators get driven out of the market. The only remaining long positions are then held by people who intend to take physical delivery. Of course it also helps to have a torrent of anti-gold propaganda being manufactured by the media to dampen any pro-gold speculation. Eventually the central banks will eventually run out of gold reserves to feed the market and keep prices depressed, and the cooperative mines will grow less cooperative as the prospects for profiting from an enormous short squeeze begin to outweigh the benefits of continued borrowing at discounted interest rates. Thus, this scheme can't go on forever. But it can continue in the short run, and that may well be enough for people whose memory doesn't precede the last election and whose powers of anticipation do not stretch beyond the next one. Mr. Armstrong's argument that gold is a "dead asset" that simply eats up storage and insurance costs by no means justifies the discounted interest rates being charged for gold. If a central bank truly believed that gold no longer had any useful role as an alternative source of liquidity, it might reasonably seek to convert its gold holdings into income-producing assets. Why would a central bank want to earn a trivial rate of return on a gold loan when it could sell its gold, invest the proceeds, and get a much higher real return? Why should investment banks be allowed to capture the interest rate differential between gold loans and currency loans when the central banks could capture this differential for themselves? Of course the truth is that gold hasn't ceased to be liquid. The physical demand for all forms of gold is at or near record highs, and its purchasing power isn't significantly different from what it has been for hundreds of years. When compared to the sorry long-run performance of fiat money throughout history, gold has always been a far more reliable as a monetary reserve. Likewise, it isn't likely that gold loan rates fairly reflect free-market time preferences when you have persistent interest rate differentials without a correspondingly higher risk or higher depreciation of the currency loans. The rate differential isn't compensating the gold short sellers for anything; it is just a gift to them from the central banks. The de facto issue the central bankers are confronting isn't whether central bank gold should be kept as a reserve asset or even how it can best serve as a source of income in lieu of being a reserve asset. The issue is how their gold reserves can best serve the interests of the privileged constituents of the central banks. The point is precisely that central banks are willing to be looted for the benefit of a few elite private institutions. The central banks don't care about anything as noble as fighting inflation. From that perspective, GATA's scenario makes a lot of sense, even if hammering down the price of one's reserve assets and lending them at discounted rates is irrational otherwise. -END- 207.96.251.131