A tale of two markets, and two futures


11:58a ET Saturday, February 3, 2007

Dear Friend of GATA and Gold:

GATA's friend Mark Wallace writes:

"I think that what is instructive and lends support to GATA's hypothesis is the way gold has been advancing.

"The advances come in sudden bursts, with little opportunity to get on board. The powers that be are making sure that there is no steady advance, because that would garner widespread support from ordinary investors.

"In 1989 I bought gold eagles for about $389 per coin. Sixteen years later, in April 2005, gold was about $430 per ounce and I was barely breaking even. Then gold shot up to $725 over a 10-month period.

"The point here is that over 16 years virtually all the appreciation occurred in less than one-sixteenth of the holding period. Try catching that move unless you were in the gold sector for the entire time.

"Contrast this with the stock market, where there has been a slow but steady rise in the S&P with no serious setbacks to shake out nervous Nellies. The contrast could not be greater.

"Only people who believe in the Tooth Fairy could believe that this difference is coincidental."

Wallace's observation is consistent with a central bank program of controlled retreat with the gold price -- setting staggered levels of defense against free-market forces, dishoarding central bank gold reserves and smashing the gold market at strategic points to prevent a stampede out of the fiat-money system and into the monetary metals.

As GATA, Jim Sinclair, and others -- even former Federal Reserve Chairman Alan Greenspan, really -- have noted, central bank gold sales are undertaken precisely when gold demand is threatening to overwhelm the fiat system, undertaken precisely when gold is about to be revalued dramatically upward. Central bank gold sales are NOT undertaken for the reason long given by central banks -- to earn a little money on a supposedly dead asset by exchanging it for interest-bearing securities like government bonds or even top-rated corporate bonds.

For, in the first place, having the power to make money by decree, central banks have no need to make it by more strenuous means. And second, the price of gold has increased over the last five years at an average rate of 23 percent -- four or five times the interest rate paid by government and top-rated corporate bonds. If "making money" as it is commonly understood was really the objective of central banks, they would be BUYING gold, not selling it.

No, selling gold, leasing and swapping gold, selling gold options, and such are the central bank mechanisms for deceiving and interfering with the markets in support of the central banks' own ever-depreciating currencies and in support of ever-increasing government power over the individual -- that's all.

This central bank scheme has worked for a while but its failure is inevitable; the gold of the central banks will be exhausted and they will turn to other methods of supporting their own currencies. Since modern central banking is built on deception, since deception is the very PREMISE of modern central banking -- as Fed Vice Chairman Alan Blinder remarked in 1994, "The last duty of a central banker is to tell the public the truth" -- the central banks probably will run out of gold a lot faster than their official figures suggest. After all, even the International Monetary Fund has just admitted that the central banks have been double-counting their gold, counting leased and swapped gold as if it is still in the vault. This double-counting has been done so that the markets might believe that the central banks remain in absolute control of the world.

GATA's purpose is to hasten the day when the gold price suppression scheme is understood and acted upon by people everywhere so that they may protect themselves against the sometimes slow and invisible expropriation and the sometimes sudden and rude expropriation that are basic to modern central banking. The coin and bullion dealers listed at the right of this dispatch and at this page on the Internet -- http://www.gata.org/node/173 -- are among those who will help you act on this understanding. Every little purchase strikes a blow for a new world order that is quite different from the one being contemplated by the financial elites.

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

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