Gartman Letter: Gold rigging by central banks is only to be expected


By Dennis Gartman
The Gartman Letter
Thursday, August 16, 2007

As for gold, given the dollar's strength and given the stock market weakness globally, and given the recent correlation between gold and these two other markets, one might have thought that gold would be down quite materially. In dollar terms, it is down marginally; in euro terms it is up materially ... and that, we think, tells a large and engaging story.

Gold has rather obviously had difficulty trading upward through $670 and through E500. We do not know for certain, but we would have no difficulty believing that central bank selling has helped to keep spot gold below these two important resistance levels.

Given the gold sales that are still permissible under the Washington Agreement, and given the lack of such sales in recent weeks, the central banks have more than adequate "ammunition" upon which to draw to keep gold from breaking to the upside. We suspect they shall use that ammunition if needed, not to nefariously keep gold from rising, but to keep it from rising in order to keep gold from sending a signal of panic to the world's investors in equities and debt.

If the Fed, the European Central Bank, the Bank of Japan, the Bank of China, et al. are prepared to push liquidity into the system, it is reasonable to expect them to sell gold in small or even large sums in order to keep gold from rising, for should gold push upward through these resistance levels at a time when stocks are falling, the public at large will properly take that as an ominous sign. Certainly we would!

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