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OK, Globe and Mail, why do central banks intervene in gold instead of beaver pelts?

By: Chris Powell, Secretary/Treasurer, GATA

 -- Published: Friday, 29 April 2016 | Print  | Disqus 

Dear Friend of GATA and Gold:

In an interview on CNBC seven years ago, the soon-to-be-ubiquitous James G. Rickards made an observation for the ages, an observation that could be the preface for Chapter 1 of every economics textbook that aspired to be more than disinformation for the financial class.

"When you own gold," Rickards said, "you're fighting every central bank in the world":

Back then Rickards enjoyed U.S. government security clearance and was even participating in Defense Department war games, so he was already pretty well informed, but even he didn't know the half of it. For when you own gold -- or even when you pursue the truth about government monetary policy -- you're also fighting nearly every mainstream news organization in the world.

The latest evidence of the second aspect of this fight comes today from the Toronto Globe & Mail, which has published commentary by the newspaper's mining reporter, Ian McGugan, headlined "Gold Bugs and the Inflation Dilemma":

"Gold bugs," McGugan writes, "insist bullion is a currency, and they argue that it's superior to any government-backed paper bill as a store of value because nobody can fiddle with its inherent worth. ... Sure, gold has been around for a long time, but then so have salt and beaver pelts, both of which have also been used as money at times.

"Gold may be a currency in the same limited sense that any valuable raw material, from oil to coffee beans, can function as a quasi-currency under the right conditions. However, you'll note that chief executives of gold firms still insist on being paid in dollars, not bullion. ... Gold's price is driven by gusts of emotion."

But "gold bugs" are not alone in insisting that gold is a currency. Also insisting on gold's currency function, at least when they don't think anyone else is paying attention, are central banks, which surreptitiously trade the monetary metal every day, confident that McGugan, among others, will never call attention to this.

Indeed, to cite just a few of dozens of examples:

-- In 2003 the Reserve Bank of Australia candidly acknowledged in its annual report that "foreign currency reserve assets and gold are held primarily to support intervention in the foreign exchange market":

In its most recent annual report --

-- the Reserve Bank of Australia puts it this way:

"Australia's official reserve assets include foreign currency assets, gold, Special Drawing Rights (SDRs -- a liability of the IMF), and Australia's reserve position in the IMF. Reserve assets are held primarily to facilitate policy operations in the foreign exchange market."

-- The Bank for International Settlements, the central bank of the central banks, acknowledges in its annual reports that it is the gold broker for its members, constantly trading for their accounts not just gold but gold options and other derivatives:

-- The BIS even advertises that its services to its central bank members include secret interventions in the gold market:

-- The director of market operations for the Banque de France, Alexandre Gautier, recently admitted that the bank is trading gold for its own account and the accounts of other central banks "nearly on a daily basis":

-- And a few months ago the executive director of the Austrian central bank, Peter Mooslechner, disclosed, if inadvertently, that Asian central banks are secretly trading and intervening in the gold market while trying to acquire more of the monetary metal. There is even video of this admission:

So if gold is not a currency as good as any other, why all this secret activity with it by central banks, especially when the salt and beaver pelts cited by McGugan remain available?

McGugan overlooks all this when he asserts that "gold's price is driven by gusts of emotion." Well, maybe the emotion of central banks, or, more likely, their policy purpose, which the government archives show usually has been to suppress gold's price but every few decades has been to raise it so as to devalue their currencies and the debts denominated in them.

All the major documents of surreptitious intervention in the gold market and the deception of investors by central banks, including those compiled by GATA here --

-- and here --

-- long have been provided to the Globe & Mail, and the newspaper has been urged to try putting to central banks even one critical, specific question about their involvement in the gold market. That is, the Globe & Mail has been urged to attempt actual journalism. But this week McGugan's column was the best the newspaper could do, and the best he could do was to liken gold to beaver pelts.

* * *

Also overlooking the documentation, though he is increasingly alone in the gold world, is 321Gold's Bob Moriarty, whose chest thumping this week, headlined "The Two Best Calls Ever on a Gold Bottom" --

-- declares: "While the manipulation and flat-earth crowd doesn't ever mention it, platinum went down more than gold and no one is screeching about how platinum is suppressed. All commodities went down, including gold and silver. Most commodities went down more than silver and gold but that is never mentioned."

Not quite. Actually, that central bank policy, exercised through the trading of derivatives, has aimed at the suppression of commodity prices generally was perhaps first explained in detail in 2001 by the British economist Peter Warburton, whose seminal essay, "The Debasement of World Currency -- It's Inflation, But Not as We Know It," has been cited by GATA many times over the years:

Further, GATA often has publicized the discovery by Eric Scott Hunsader, founder of the market data firm Nanex in Winnetka, Illinois, of the documents filed with the U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission showing that central banks and governments are secretly trading all the U.S. commodity futures markets:

A week ago GATA called attention to speculation at Zero Hedge that central bank intervention in the commodity markets has shifted to raising prices to avert deflation:

Moriarty continues: "Early this year gold was higher in relative terms against oil, platinum, and commodities in general than ever in history. But that doesn't fit the manipulation mantra so none of the permabulls will ever mention that any more than they will discuss perfectly normal corrections."

But there is no inconsistency in complaints about market manipulation and price suppression if, as GATA has maintained, central banks are surreptitiously intervening in all markets. Of course GATA doesn't know exactly what trades central banks are placing in these markets every day and cannot always distinguish central bank interventions from "normal corrections," if, given the pervasiveness of interventions lately, any market can be trading normally. But at least GATA acknowledges this intervention and would like to know the details. Moriarty merely denies it while declining to dispute any of the documentation -- presumably because his main business is resource stock promotion and recognition of government intervention in the resource markets would make that promotion more difficult.

GATA hopes that the resource stocks Moriarty is promoting go up as the truth helps markets break free of surreptitious intervention and the producing class prevails in its seemingly eternal struggle with the financial class. Moriarty seems to hope that his resource stocks go up just because he's promoting them.

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

* * *

Support GATA by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006:

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

To contribute to GATA, please visit:

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