Why China likely works with the U.S. to manipulate gold prices
8a ET Monday, November 18, 2013
Dear Friend of GATA and Gold:
Over the weekend a money manager who is a friend of GATA questioned your secretary/treasurer's comment last week to King World News that, despite the public acrimony between the governments of the United States and China, the Federal Reserve and People's Bank of China are probably consulting every day to manage the gold market jointly:
This observation was drawn only from inference, not from any authoritative information. But it seems to be a pretty good inference. For China is the gold market as well as the U.S. government bond market and any market China wants to be -- China's foreign exchange surplus is that huge. If China had not been at least complicit in the April smashdown of gold, it would not have occurred -- China would have bought the dip at a much higher level. So much for the "Chinese put" many gold investors thought they enjoyed.
... Dispatch continues below ...
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China and the United States have great leverage over the other. Each knows what the other wants.
The United States wants to devalue the dollar gradually and gracefully to reduce its debt burden and improve its trade balance.
Understanding the U.S. objective of gradual dollar devaluation, China wants to hedge its insane dollar exposure and is doing so by acquiring gold and other hard assets around the world.
Each side could blow up the other at any time -- China by dumping U.S. debt instruments and buying gold abruptly, the United States by devaluing abruptly.
So the two governments probably are talking to each other in detail every day and acting cooperatively in the markets in pursuit of their objectives, which really are not so contradictory.
The advice often given by market analysts, some of whom just shrug off the unfairness of gold price suppression and market rigging -- advice to purchase gold steadily at the market rigging's "discount" and just wait for the great international currency reset (and pray that you have time to wait) -- is probably being followed most of all by China itself, which is as well situated as any other nation to push gold futures prices down to facilitate its acquisition of real metal.
Of course financial journalists could always just ask the central banks involved some pointed questions about their involvement in the gold market and then report the central banks' refusal to answer so that investors at least might improve their perspective on the world's most secretive and misunderstood market. But real financial journalism remains even rarer than gold.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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