Kitco's Nadler overlooks the biggest parts of the gold market


3:12p ET Sunday, July 8, 2007

Dear Friend of GATA and Gold:

Interviewed Friday by Michael Kane on the "Market Morning" program on Canada's Business News Network, Kitco senior market analyst Jon Nadler disparaged suggestions that the gold market might be manipulated.

First Nadler said jokingly that, yes, the gold market IS manipulated -- "by the people who write about manipulation."

Getting serious, Nadler offered only one argument against a belief in manipulation of the gold market. He said that "retail investors globally" now control more gold than all central banks combined. The gold market, Nadler said, is "controlled by individual investors, not sinister forces behind the scenes."

That private parties now may hold more gold than central banks never has been disputed by GATA. Indeed, it may have been GATA consultant Frank Veneroso, now global market strategist for Allianz Dresdner, who first observed a few years ago that women in India, with their collection of monetary jewelry, had just about cornered the gold market and made it impossible for the huge short positions in the market to be unwound gracefully.

But this situation does not disprove manipulation, for it does not disprove that the central banks remain huge players in the gold market. And the best estimates are that central bank dishoarding is responsible for a quarter to a third of annual gold market supply, since gold demand long has been running so far ahead of mine production and the recycling of scrap gold.

Since the central banks acknowledge -- no, PROCLAIM -- that they coordinate their gold sales and leases (that's what the Washington Agreement on Gold is about), even as the other parties in the market do NOT coordinate their activity, the central banks are by far the overwhelming influence on the gold price in the short term.

Besides, in counting only real gold, Nadler misses the bigger part of the gold market -- derivatives, futures, and options, PROMISES to supply gold. These derivatives rather than the exchange of gold itself constitute most daily trading in the gold market, and hundreds of billions of dollars' worth of derivatives are counted by the Bank for International Settlements. Those derivatives are assuredly NOT the work of the "individual investors" Nadler says are in charge of the gold market. To the contrary, they are mostly the doing of central banks and the major financial institutions fronting for them.

Maybe if Nadler had been given more time on BNN on Friday he could have addressed these crucial aspects of the gold market. In any case NOT to address them is dishonest.

For a few more days you can watch Nadler's interview at the BNN program archive here:

It's in the Friday section at 10:10 a.m.

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

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