Telegraph sniffs out a little disinformation surrounding gold smash

Section:

But might not those "powerful speculators" be central banks themselves?

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Speculators Smash Gold as Dollar Squeeze Tightens

By Ambrose Evans-Pritchard
The Telegraph, London
Monday, July 20, 2015

Powerful speculators have launched an unprecedented attack on the world gold market, driving prices to a five-year low as commodities wilt and the U.S. Federal Reserve prepares to tighten monetary policy.

Spot prices slumped by more than 4 percent to $1,086 an ounce in overnight trading after anonymous funds sold 57 tonnes of gold in Shanghai and New York, choosing the moment of minimum market liquidity in what appears to have been a synchronized strike intended to smash confidence.

... Dispatch continues below ...



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The move came after China's central bank dismayed "gold bugs" by revealing that the country's bullion reserves stand at just 1,658 tonnes, far lower than widely assumed. While holdings have risen 60 percent since the last update in 2009, they are still a fraction of China's total $3.7 trillion foreign exchange reserves.

Ross Norman, a veteran gold analyst at brokers Sharps Pixley, said sellers dumped 7,600 contracts covering 24 tonnes on the Globex exchange in New York in a two-minute span after it opened late on Sunday night.

A further 33 tonnes were sold at almost exactly the same time in Shanghai. The combined hit of 57 tonnes in such a short period is an extraordinary event in the world's relatively small gold market. ...

Mr Norman said the level of gold reserves announced by China massively understates the country's true holdings. "We think they have at least twice as much, maybe even 4,000 tonnes," he said.

A division of the People's Liberation Army mines gold and transfers the metal to the Chinese finance ministry, acting outside normal commercial channels. The government also buys gold directly from Chinese producers. This is an internal transaction and is therefore not necessarily recorded in China's external reserves.

There is suspicion that China is talking down its true gold holdings as it prepares to join the big league as part of the International Monetary Fund's currency basket, SDRs.

David Marsh, from the monetary forum OMFIF, said China would risk unsettling the world gold market if it revealed bullion reserves of 2,000 or 3,000 tonnes. This might be interpreted as an unfriendly move against the dollar at a "delicate time," he said.

Sharps Pixley said a "seismic change" is under way in the bullion markets as economic power shifts to the East, boosting gold prices over time. ...

... For the remainder of the report:

http://www.telegraph.co.uk/finance/commodities/11752016/Speculators-smas...

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