FT's Lex on gold and the BIS: Nothing to see here
1:32a ET Sunday, July 11, 2010
Dear Friend of GATA and Gold:
Last week's pseudonymous "Lex" column in the Financial Times about the recent strange and hidden gold swaps undertaken by the Bank for International Settlements was typical FT -- high-falutin' dismissiveness about gold that avoided any original research, avoided even seeking on-the-record comment from the source, the BIS itself.
How does the BIS explain the transaction? Why was it hidden in a footnote in the bank's annual report rather than announced generally? Since commercial banks are not known for maintaining large gold reserves such as those in these swaps, where and how did the commercial banks get the gold? Were the commercial banks fronting somehow for central banks? What's really going on here?
Though the failure of the BIS to announce the transaction demonstrated an intent to hide it, Lex and the FT won't ask about it. Rather than investigate, Lex and the FT have lined up in front of the story to shoo curious onlookers away, much like the bumbling detective played by Leslie Nielsen in the fireworks factory scene in the movie "The Naked Gun":
When it comes to gold and central banking, the FT seems to see its job as being not so much to report the news as to suppress it.
The "Lex" column, headlined "The Gold and the BIS," is appended. Now move along. Nothing to see here.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Gold and the BIS
Financial Times, London
Wednesday, July 7, 2010
What to make of the news that the central banks' central bank is sitting on 346 tonnes of gold?
It is held via gold swaps between the Bank for International Settlements and European commercial banks that have collateralised loans with ingots. Such operations had been rare in recent years but took off in earnest just as the Greek sovereign debt crisis erupted -- so the news, contained in a note to the BIS' annual report, unleashed numerous conspiracy theories.
Traders theorised that one or more of the bloc's central banks pawned gold to prop up their groaning banking systems. Spain's regional savings banks, or cajas, and Greek lenders, for example, have sucked in copious liquidity in recent months and are likely to need more.
These transactions bore all the hallmarks of a furtive operation to assist a peripheral eurozone central bank unwilling to be seen pawning its reserves. But the swaps raised only $14 billion -- surely not enough for any such sweeping operations.
Another tale was that the central banks used swaps for bridging finance pending drawdown of the eurozone rescue package; but again, the numbers fail to stack up.
An even more far-fetched explanation has the International Monetary Fund selling reserves to boost its own finances ahead of a bailout.
The reality is almost certainly more prosaic, having more to do with the technicalities of the collateralised lending market than with the entry of a big new player. But the far-fetched theories still had a real-world consequence and put the skids under gold: prices slid back to late-May levels on the news.
Ironic, really, since it is jitters about the eurozone debt crisis that had fuelled the precious metal's fabulous rise -- up 15 per cent from the start of the year to a nominal high of about $1,265 a troy ounce two weeks ago.
Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource
Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.
For Prophecy's complete press release about its production plans, please visit:
Join GATA here:
New Orleans Investment Conference
Wednesday-Saturday, October 27-30, 2010
Hilton New Orleans Riverside Hotel
* * *
Support GATA by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:
* * *
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Sona Resources Expects Positive Cash Flow from Blackdome,
Plans Aggressive Exploration of Elizabeth Gold Property
On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia.
Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013."
For complete information on Sona Resources Corp. please visit: www.SonaResources.com