Gold suppression scheme now is taken for granted


11:20p ET Tuesday, February 24, 2009

Dear Friend of GATA and Gold:

The following financial commentary from the daily newspaper in Melbourne, Australia, suggests that central bank efforts to suppress the gold price are now largely taken for granted in the financial world. But somehow all the supposed experts who for years have been calling GATA crazy for asserting that there was a gold price suppression scheme have not yet begun sending their apologies. Maybe it's because, like the central banks and their investment-house agents, they too have wanted gold suppressed all along.

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

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What's Blowing the Golden Bubble?

By David Hirst
The Age, Melbourne, Australia
Wednesday, February 25, 2009

When Lord Keynes made his celebrated comment about gold being the "the barbarous relic" he was referring to events as far back as Gutenberg.

With movable type, paper money became feasible. But the Gutenberg revolution also led to the spread of learning, the Renaissance, and an explosion of world trade.

Gold became an unsatisfactory medium of exchange as the world entered the modern age. Cash, banknotes, and cheques were far superior to gold, especially when backed by gold.

It is in the United States where the great gold debate is centred.

America is a gold-loving nation. Gold could well be added to the "three Gs" that kept the Republicans in power in recent times: God, gays, and guns.

Fear of fiat or paper money goes back to the Civil War, when the currency of the Confederacy was rendered worthless, and to the "wildcat banks" that printed their own money and were dubbed "wildcat" because only a wild cat could find them. Gold and silver were preferred.

Indeed, gold has been the best wealth protection scheme for much of the past 3,000 years and might just be a better place to be than in currencies controlled by the cash-in-helicopter-loving Ben Bernanke or Timothy Geithner, the Treasury secretary who didn't know about filing taxes.

As gold heads out the window and down the path, with great media attention after years of oblivion when the commodity was barely mentioned in polite society, there are whispers of a bubble.

Was not gold at $US1,000 a year ago?

In the past decade, gold has risen steadily but not dramatically -- showing nothing like the drama in the rise and fall of oil and with housing and the tech stocks.

Given world instability, this is hardly a bubble.

While gold has traded steadily upwards, we have descended from celebrating the BRIC nations -- Brazil, Russia, India, and China -- to contemplating the terrors that lie in store for banks with stakes in the PIGS --— Portugal, Italy, Greece, and Spain.

Gold's worth is also determined by supply and demand and the desire of central banks to cap gold.

On the supply side, as shown by the latest figures from Australia -- but also evident around the world, production is faltering. There are many reasons, but principally there isn't much of it in the ground and the easy stuff was dug up by the Romans.

But demand is also on the skids. India and the Middle East, the main users of gold for jewellery (practically gold's only use), are in severe doldrums.

Given all this, why are prices so high and why is the dreaded "B" word being used in connection with gold? Gold was high a year ago, but no one called it a bubble.

L.A. ladies aren't selling their gold rings, old cufflinks, and gold plate (as reported in the Los Angeles Times) to take advantage of the gold price.

They are selling gold because they are broke.

The principal force driving gold is the transformation of the world economy. When gold last reached $1,000 (for a day) those same people never dreamed of raiding their closets and drawers for old trinkets.

Fear is driving gold. But where?

Let us assume we are entering a hyper-inflationary period when truckloads of dollars will be required to buy an egg. Will the person with eggs part with them for gold or, assuming the egg holder is as desperate as the buyer, would they not be swapping the egg for bread? One can't eat the gold. If currencies collapse, barter might become the new means of exchange. Thus, rather than buying gold, we should be buying hens. Or geese. Preferably geese that can lay golden eggs.

The gold buff's best argument is that we should never have departed from the gold standard. But then we would never have had derivatives or hedge funds or any of the exotic schemes that allowed a small proportion of the world's population to enjoy a few decades of unrivalled wealth.

To miss that Ponzi scheme would have been tragic.

But remember the words of the man who saved us from the Great Depression, or is credited with doing so. By a so-called executive order, President Franklin D. Roosevelt declared on April 5, 1933, that:

"All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them."

Who is to say that such an order won't be issued in co-ordination by governments around the world some day?

Everyone that can should own some gold. But be wary of the Norman May approach of "gold, gold, gold."

The Devil doesn't hand out easy choices. He wouldn't be the Devil if he did.


David Hirst is a journalist, documentary maker, financial consultant, and investor. His column, "Planet Wall Street," is syndicated by News Bites, a Melbourne-based sharemarket and business news publisher.

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