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Gold sales becoming scandal in Britain
12:25a EDT Monday, July 12, 1999
Dear Friend of GATA and Gold:
You may enjoy this essay by Professor Von Braun
at www.lemetropolecafe.com, which continues his
efforts to explain the mystery of the gold market.
With good wishes.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
The Plot Thickens.
More on quot;The Mystery in the Gold Marketquot;
July 11, 1999
By Professor von Braun
The Rocket School of Economics
A report that appeared in the BBC news July 8 should
help to resolve a minor dilemma the World Gold Council
It was stated in this BBC report that (according to the
bullion market) estimates of the total gold owned by
the residents of India is 35,000 tonnes. (That IS
35,000 tonnes.) Furthermore this report went on to say
that annual demand from India was another 800 tonnes --
considerably more than demand in the next three highest
consumers, Italy, the United States, and China, who, it
seems, consume 750 tonnes between them.
Instead of running those well-filmed, badly scripted
television ads that remind us all of the History
Channel, the World Gold Council needs only visit the
people residing in what the BBC report called quot;rural
India,quot; where it seems, the report stated, quot;practically
all savings are in gold holdings.quot;
Now it would seem that if you increase consumption in
India, then the low gold price is a thing of the past.
Any marketing consultant should be able to figure that
out, and at these price levels the Indians should be
able to imitate an American housewife shopping on New
York's famous 5th Avenue during the quot;after Christmas
sale.quot; What's more, these people are already willing
buyers, as evidenced by their annual consumption
Why be so stupid as to target CNBC and CNN viewers who
really don't give a damn about gold anyway, when
obviously you have consumers who already are leading
the consumption stakes?
This BBC report should also be of interest to the
London Bullion Market Association, which, as we have
noted before, tells us that they trade 900-1000 tonnes
per day on what must be a very busy exchange. We have
suggested that the LBMA trades the entire known above-
ground gold reserves (estimated to be 120,000 tonnes)
2 1/2 times a year. No mean feat.
Now for those of you with a mathematical bent, as in
quot;how many pennies are there in the pound,quot; given that
Central Bank reserves are believed to be about 26,000
tonnes, India owns 35,000 tonnes, which gives us a
total of 61,000 tonnes. So appears the amount that may
be available to trade is, at the wildest, most
optimistic guess, 60,000 tonnes, which the LBMA (so
they tell us) trades every three months. Not bad. Not
bad at all.
The World Gold Council would also find it interesting
and perhaps helpful to its case (assuming that the
council knows what its case is) that the quot;rural
Indiansquot; are not all that sophisticated, and, it seems,
would not buy paper gold but would want the real thing,
the physical metal, delivered at the point of sale.
We would also suggest that, on a cautionary note,
should the LBMA ever contemplate setting up shop in
quot;rural India,quot; it think twice since there may be a
problem with actual delivery from the association's
members, who, it seems, love to trade without having to
deliver. Being based in the United Kingdom could cause
a minor problem since, if you could not deliver, you
might suffer the same fate as your imperial British
The venerable Bank of England should also pay attention
to this BBC report and employ some American-trained
telemarketers -- the people who call you up over the
phone and sell you things. We point this out because
India consumes 16 tonnes of gold a week and it would
have been prudent for the BOE to a) employ a group of
U.S. telemarketers and b) give them every Indian phone
book there is and let them go to it.
Why deal with the LBMA when you could deal direct with
the unsophisticated rural Indians? Keep in mind that
the Brits, back in the days when they had some clout,
controlled what went on in India (or they thought they
did), and if you (assuming of course that you are an
unsophisticated rural Indian) had a phone call from a
telemarketer speaking on behalf of the Bank of England,
offering gold at 5 percent below spot, you would buy
This campaign, coupled with some television ads from
the World Gold Council on Indian TV -- Does the WGC
have an office in India? One would certainly hope so --
should do the trick.
It is obvious (as a result of the price action in gold
since the BOE announcement) that the LBMA, trading its
900-plus tonnes per day, can't absorb a 25-tonne sale.
That signals that something is seriously wrong. After
all, the well-publicized BOE 25 tonne quot;auctionquot; is
only 2.5 percent of the daily turnover of the LBMA. And
they cant absorb it?
Well, have I got a deal for you.
Whatever is driving the gold market at present has
nothing to do with physical gold. That is becoming very
obvious. The sophisticated urban electronic whiz kids
that seem to inhabit the U.S. stock markets should take
note of the activities of their quot;unsophisticated rural
So the World Gold Council, a body that seems to imply
that it is speaking for and on behalf of the quot;worldquot;
gold market (and according to our world atlas, India is
a part of the world), be sophisticated enough to at
least target real consumers and consider India as its
ideal market, instead of the United States. Or should
the World Gold Council seriously consider changing its
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