Gartman Letter notes Turk's disclosure of U.S. gold lending, swaps


From The Gartman Letter
for Monday, October 22, 2007

By Dennis Gartman

.... While on the topic of gold, we shall nod in the direction of the folks at GATA who've argued for years -- often seemingly braying in the wilderness -- that the US government was manipulating the gold market via gold-lending operations. The government has denied that vehemently, even as GATA has trumpeted it relentlessly.

Last week Mr. James Turk, one of GATA's leading lights and a gentleman whose work ethic and tenacity we have come to admire over the years, wrote that:

"... the U.S. Treasury quietly made a subtle change to its weekly reports of the U.S. International Reserve Position, which includes the U.S. Gold Reserve. This change was first made May 14. It says the U.S. Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported 'including gold deposits, and, if appropriate, gold swapped.' (Emphasis added.) This description provides clear evidence that the U.S. Gold Reserve is in play. Gold has been removed from U.S. Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price-capping efforts. Gold placed on deposit gets loaned out by these bullion banks, and then sold into the spot market to try capping the gold price."

Sadly, even if Mr. Turk is right (and for the moment it appears that he is), gold is weak. This is enormously bullish news of gold; it is having no effect at all, however, making us recall our old aphorism that a market that will not rally on overtly bullish news is not bullish.

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