-- Published: Monday, 29 August 2016 | Print | Disqus
Dear Friend of GATA and Gold:
Mining stock promoter Bob Moriarty, proprietor of 321Gold.com and author of the new book "Nobody Knows Anything," was at least speaking for himself the other day when he claimed that central banks care a lot about interest rates but not at all about gold.
In commentary headlined "A Zombie Financial System, Black Swans, and a Gold Share Correction" --
-- Moriarty wrote:
"As a measure of just how important gold is to the world financial system in comparison to interest rates, interest rate derivatives are about 1,300 times greater than gold derivatives. We have a lot of me-too parrot websites talking about manipulation and conspiracies but logic tells us central banks worry about interest rates and couldn't care less about the price of gold."
But central banks care about gold precisely because its price has a long historical correlation with interest rates and government bond prices, a correlation studied and documented by central bankers and economists alike, including, in their 1988 study, "Gibson's Paradox and the Gold Standard," Harvard economics professor Lawrence Summers, who went on to become U.S. treasury secretary, and University of Michigan economics professor Robert Barsky:
A few weeks ago another academic paper, written by a professor of accounting and finance at the University of Western Australia in Perth, Dirk Baur, confirmed that the relationship between interest rates and the gold price gives central banks a powerful incentive to influence interest rates by intervening surreptitiously in the gold market:
Baur even quoted from the transcript of the May 1993 meeting of the Federal Reserve's Open Market Committee, which includes an exchange about gold and interest rates between Fed Chairman Alan Greenspan and Fed Board of Governors member Wayne D. Angell, comments that have been cited by GATA many times over the years.
Greenspan: There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology. Now we don't have the legal right to sell gold but I'm just frankly curious about what people's views are on situations of this nature because something unusual is involved in policy here."
Angell: We can hold the price of gold very easily. All we have to do is to cause the opportunity cost in terms of interest rates and U.S. Treasury bills to make it unprofitable to own gold. I don't know how much change in the fed funds rate and the Treasury bill rate it takes to do that, but I'd sure like to find out.
And just yesterday GATA consultant Robert Lambourne reported that the Bank for International Settlements, the central bank of the central banks, recently jumped back into the gold swap business, apparently to relieve tight conditions in the gold market:
Indeed, three years ago the director of market operations for the Banque de France, Alexander Gautier, told the London Bullion Market Association meeting in Rome that the French central bank trades gold for its own account "nearly on a daily basis" and is "active in the gold market for other central banks and official institutions":
If central banks "couldn't care less about the price of gold," why are they trading it "nearly on a daily basis" and why is the BIS arranging gold swaps?
Of course GATA has compiled an enormous amount of official documentation showing that central banks care desperately about the gold price and about concealing their intervention in the gold market, and always will care as long as gold is considered money, a form of money competing with central bank currencies. A summary of that documentation can be found here:
Still more of it can be found here:
So why does Moriarty insist that there is nothing to this even as he fails to address even one document? Why does he constantly misinform his readers?
Is it because the stock-touting business is a lot easier when nobody knows anything?
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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-- Published: Monday, 29 August 2016 | E-Mail | Print | Source: GoldSeek.com