Gartman ''couldn''t care less'' if gold price is manipulated

Section:

Gold Bugs vs. Gartman

By John Partridge
Globe and Mail, Toronto
Wednesday evening, March 1, 2006

http://www.theglobeandmail.com/servlet/story/RTGAM.20060301.wdebate03
01/BNStory/Business/home

They agreed that the price of gold will continue to rise.

But as for how far, how fast and why, forget it.

On these and many other issues, two leading gold bugs and a well-
known U.S. investment newsletter publisher begged to differ, as they
matched wits in Toronto Wednesday during a televised debate.

The gold bugs were John Embry, precious metals specialist and chief
investment strategist at Sprott Asset Management in Toronto, and
ally Bill Murphy of Dallas, chairman of the Gold Anti-Trust Action
Committee. Both believe the metal's price has for years been
manipulated by a cartel of central banks, dominated by the U.S.
Federal Reserve Board, that have used their extensive gold reserves
to suppress the price in an effort to prop up the value of their
currencies. They contend the central banks now retain far less gold
than the 31,000 tonnes they claim to have.

They also figure that the price of gold, which has risen more than
120 percent in the past five years -- and closed in New York
yesterday at US$565.80 an ounce, for April delivery, up $1.90 -- is
going to hit $1,000 or $2,000 and more in fairly short order because
supply will not keep up with investor demand.

"I basically think that paper money has a distinct problem and that
gold will reassert itself for a considerable period of time," Mr.
Embry said. "So, yeah, I'm really bullish on gold. I can see $1,000
gold quite easily."

"In essence, there's a major short position out there because the
central banks don't have the gold they had," Mr. Murphy said. "They
have about half of it. The rest has been used to suppress the price
and now that demand is kicking in, the price is taking off." And
that short position, he added, will at some point have to be
covered, which will drive gold prices rapidly skyward.

Their opponent in the debate, hosted by Report on Business
Television, was Dennis Gartman, editor and publisher of The Gartman
Letter, a daily investment commentary published from Suffolk, Va. He
would not forecast a specific price for gold but allowed that he
could perhaps see it hitting $1,000 an ounce maybe 20 years from
now, but certainly not in the next two years -- and he dismissed the
cartel and conspiracy theories as a waste of time.

"Quite honestly, I couldn't care less," Mr. Gartman declared. "It is
not important to me if there has been a manipulation to keep the
price of gold down, because the price of gold has been going up.
Whether they have deceptively kept it down is inconsequential to
those of us who trade in it. The trend is up and is continuing to
be."

In Mr. Gartman's view, the key driver of stronger gold prices,
especially in the past year, is that what he described as "second-
and third-tier" European central banks have been buying it to
diversify their reserves, which for years had been concentrated in
U.S. dollars and, more recently, in euros.

Gold hit a record high of $872 an ounce in January 1980. To match
that in today's dollars, the price would have to top $2,100.

Also Wednesday, Bank of Nova Scotia said that investors have driven
the price of gold up so sharply that for now they have also run the
most important traditional buyers, jewellery makers, out of the
market.

Gold has climbed from $500 since the beginning of last December, but
although this is usually a period of heavy jewellery demand, most of
the upward pressure has come from professional and retail investors
buying exchange-traded hold funds, according to a quarterly report
by the bank's ScotiaMocatta Precious Metals division. "Contrasting
buoyant investment demand, jewellers and manufacturers from the
jewellery-centric markets of India and the Middle East continue to
report lacklustre trading conditions with buyers sidelined by high
prices," the report said.

In an interview following the debate, Mr. Murphy described this
as "sticker shock," and said the jewellers' absence will be only
temporary. "Because there is such a supply-demand deficit, the
sticker shock will end and at some point they will be forced to go
back in," he said.

There were plenty of other issues on which the gold bugs and the
publisher disagreed during the debate.

Mr. Embry, for instance, said he figures the U.S. economy is in far
worse shape than official statistics suggest and, indeed, that the
United States is "unfortunately" heading for a depression that
will "destroy" the value of its currency.

Not Mr. Gartman. In his view, the economy is in fact "much stronger
than the data would show us," and he does not see a depression in
the cards, at least not in his lifetime.

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