John Embry: Paper assets seeking safety send gold soaring

Section:

12:56a ET Tuesday, June 6, 2006

Dear Friend of GATA and Gold:

A research paper commissioned by the International
Monetary Fund appears to confirm the Gold Anti-
Trust Action Committee's longstanding complaint
that the IMF has directed member central banks to
double-count their gold when it has been leased or
swapped or otherwise has left a central bank's vault
orpossession.

The paper, "Treatment of Gold Swaps and Gold
Deposits (Loans)," was written by Hidetoshi Takeda
of the IMF's Statistics Department and published in
April. It acknowledges at length the potential for
double-counting central bank gold under current
IMF rules andsuggests rules to prevent it.

Thepaper has been posted at GATA's Internet
site here:

http://www.gata.org/IMFGoldSwapsPaperApril2006.pdf

Responding to the research paper, GATA consultant
Andrew Hepburn, who discovered the double-counting
of leasedand swapped gold at several IMF-member
central banks, remarked that even in arranging to
correct the gold deposit books of its members, the
IMF still wouldallow them to be less than forthright.

Hepburn noted IMF guidelines maintaining that
"to qualify as reserve assets, gold deposits must
be available upon demand to the monetary
authorities." But, Hepburn added, central banks
have lent so much gold to suppress its price and
make it less competitive as a currency that their
gold loans now far exceed annual gold mine
production, and so the loaned gold cannot
practically be repaid "upon demand." Recovering
the central banks'loaned gold without exploding
the gold market would take years.

In any case, the IMF's acknowledgement of the
double counting of loaned or swapped central
bank gold is more evidenceof central bank
intervention in the gold market and will be
analyzed further by GATA soon.

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

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