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Gold frequently disappoints Jim Grant, but does he understand why?

By: Chris Powell

 -- Published: Sunday, 20 May 2018 | Print  | Disqus 

Dear Friend of GATA and Gold:

Interviewed this week by the TF Metals Report's Craig Hemke for the "Ask the Expert" segment at Sprott Money News, James Grant of Grant's Interest Rate Observer, an advocate of gold, said he doubts that central banks intervene against the price of the monetary metal. Grant's comments on gold in the interview begin at the 13:20 mark here:

Grant's comments were disappointing first for their inconsistency and second for indicating ignorance of basic details.

The gold price, Grant said in the interview, is the reciprocal of faith in central banking, and he recalled that former Federal Reserve Chairman Paul Volcker once remarked to him that, for this very reason, he was always rooting for the gold price to go down.

But Grant added that he doesn't think central banks even care about gold anymore, and that the risk central banks would assume in intervening against gold would be much worse than any benefit they would get from it. He said that as an investor in gold he is always expecting a higher price and is frequently disappointed.

Grant is generally acknowledged to be a brilliant guy, so might there be powerful reasons for the gold price not to be performing up to his expectations?

The interview suggests that Grant's knowledge of Volcker does not extend to the assertion made by the former Fed chairman in his memoirs in 2004 -- that central banks should have intervened against gold during an international currency revaluation in 1973:

Nor does Grant's knowledge of Volcker seem to extend to the comment he made to the German financial journalist Lars Schall in 2012, defending central bank intervention against gold at "critical" points:

But Volcker's endorsement of central bank intervention against gold is just a small part of the modern history of such intervention.

For example, if, as Grant believes, central banks don't care about gold, why is their agent, the Bank for International Settlements, maintaining a huge position in gold swaps and derivatives, as recorded, if obscurely, in the bank's monthly reports, and why does the bank refuse to explain the purposes of its position?:

If central banks don't care about gold, why is the Banque de France, according to its director of market operations, secretly trading gold for its own account and the account of other central banks "nearly on a daily basis"?:

If central banks don't care about gold, why does CME Group, operator of the major futures exchanges in the United States, give them discounts of 15 percent in their secret trading of gold and silver futures?:

GATA's documentation file contains much more official acknowledgment of the largely surreptitious involvement of central banks in the gold market. Most of this is not mere "conspiracy theory" but ordinary official public record from government's own archives and statements from central bankers, even if those statements were made when central bankers thought that only their colleagues were listening:

A few years ago your secretary/treasurer and Grant both happened to be making presentations in New York at a meeting of the Committee for Monetary Research and Education. Your secretary/treasurer remarked that since Grant is among the exceedingly few gold advocates who is frequently interviewed by mainstream financial news organizations and since central banks had arranged things so that there were hardly any interest rates left for Grant's newsletter to observe, he might be more helpful to gold's cause and the cause of free markets if he would study the documentation of central banking's gold price suppression scheme and then remark on it publicly.

Of course gold price suppression is not a topic that facilitates invitations to appear on financial news programs on television, which seems to be a big part of Grant's work. (Indeed, your secretary/treasurer doesn't even get invited to CMRE meetings anymore.) But if Grant continues to be frequently disappointed in the gold price, he might find some consolation in better understanding why gold is disappointing him.

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

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