Another misplaced sneer about gold from The Wall Street Journal

Section:

12:25a Friday, February 17, 2012

Dear Friend of GATA and Gold:

The willfully ignorant sneering about gold in the mainstream financial news media never stops. The latest example comes from The Wall Street Journal's Liam Denning, who snickers in commentary appended here that support for gold now should be coming from central bankers, the scourge of gold bugs. Denning writes that "central bank buying masks the impact of weak jewelry demand, slowing increases in investment flows, and higher supply."

But in sneering that gold, "as an investment, yields nothing," Denning conveniently neglects to note that all major currencies now yield nothing as well, failing to pay a real rate of interest. Where's the sneering about them?

And Denning doesn't grasp the implications of a detail he acknowledges -- that the official buying of gold is coming from central banks in "emerging markets." That is, there are two groups of central banks -- the Western central banks, which long have been, both openly and surreptitiously, part of a gold price suppression scheme, and the Eastern central banks, particularly Russia's and China's, which now strive anxiously to hedge their dollar surpluses with the monetary metal and which have admitted their awareness of the gold price suppression efforts of the Western central banks:

http://www.gata.org/node/4235

http://www.gata.org/node/10380

http://www.gata.org/node/10416

"For gold bugs used to vilifying central bankers," Denning writes, "it must be discomfiting to rely on them for support."

Not really. Up against the totalitarian tactics of most of the power and money in the world, gold bugs and other adherents of free markets may be glad of support wherever they can find it. That support is far less discomfiting than relying on The Wall Street Journal to tell the truth about gold -- or relying on that newspaper to report anything contrary to a Western central bank's interest.

... Dispatch continues below ...



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Here's a recent example from the Journal. On December 6 last year that newspaper published an essay by a member of the Federal Reserve Board of Governors who resigned last year, Kevin M. Warsh, and who wrote that "policy makers are finding it tempting to pursue 'financial repression' -- suppressing market prices that they don't like." Warsh added, "Efforts to manage and manipulate asset prices are not new."

(See http://www.gata.org/node/10839.)

Warsh's disclosure might have been stunning to any financial journalists paying attention and so might have piqued their curiosity. Which policy makers are trying to suppress which market prices, and how does Warsh know? Does he know from his experience at the Fed? Just what are they doing over there these days? Just how do they "manage and manipulate asset prices" and how long have they been doing it and exactly how?

Your secretary/treasurer reached Warsh by e-mail through the Hoover Institution at Stanford University, with which, the identifier at the bottom of his essay said, he had become associated. He declined a request to elaborate. Then your secretary/treasurer brought Warsh's essay to the attention of a couple of reporters at the Journal and urged them to press the questions. While Warsh's essay appeared in their own newspaper, there is as yet no evidence that they have pursued the story behind it, nor that they are discomfited by letting it slip through their pages.

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

* * *

Central Bankers Rub Gold Bugs the Right Way

By Liam Denning
The Wall Street Journal
Friday, February 17, 2012

http://online.wsj.com/article/SB1000142405297020405980457722743246413987...

Fondlers, as Warren Buffett might call them, now wander the corridors of the world's central banks. Show them some love, gold bugs.

The identity of who buys gold has changed radically, as the latest report from the World Gold Council confirms. Just five years ago, jewelry accounted for two-thirds of gold demand. Last year, it represented less than half. Yet gold demand increased 13 percent overall in that time, and the price more than doubled.

Beyond dental crowns and those fancy cables that electronics retailers are always pushing on you, gold's utility is limited largely, paraphrasing the Oracle of Omaha, to fondling. As an investment, it yields nothing.

But if bridegrooms and rappers aren't buying, then who is? Fearful investors are one critical group. Between 2009 and 2011 demand for physical gold and exchange-traded funds jumped by 9.4 million troy ounces, more than offsetting the 6.6-million-ounce drop in jewelry consumption.

Most of that surge in investment demand happened in 2009, however. Flows into ETFs, in metal terms, slumped in 2011.

Increasingly, central banks, especially in emerging markets, have been the marginal buyers of gold. In 2011, an incremental 6.2 million ounces of supply came from miners and recycling. Demand for jewelry and industrial and dental applications, however, dropped by 1.8 million ounces.

Investors bought just 2.4 million ounces extra -- enough to offset the drop in demand elsewhere, but nowhere near enough to absorb growing supply. Enter the central bankers, who purchased an extra 11.7 million ounces. Having bolstered gold by debasing the paper money they print, they now help by buying the metal itself.

For gold bugs used to vilifying central bankers, it must be discomfiting to rely on them for support. And given how central-bank buying masks the impact of weak jewelry demand, slowing increases in investment flows, and higher supply, it probably should.

* * *

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