Published on Gold Anti-Trust Action Committee (http://www.gata.org)

Colombia intervenes surreptitiously to push peso down

By cpowell
Created 2011-05-25 04:03

Colombia's Dollar Purchases Generate Angst In Forex Market

By Darcy Crowe
Dow Jones Newswires
via The Wall Street Journal
Tuesday, May 24, 2011

http://online.wsj.com/article/BT-CO-20110524-714164.html [1]

BOGOTA, Colombia -- The Colombian peso has been roiled by a dose of fear in recent weeks spurred by discretionary government dollar purchases in the exchange market.

The peso has weakened since the government unveiled its plan to buy $1.2 billion in the forex market until the end of the year. The announcement, made last month by Finance Minister Juan Carlos Echeverry, was accompanied by one important warning: the government wouldn't specify how much it would buy on a daily level.

Since then foreign exchange operators have seen the government come into the market to gobble up dollars, but no one has a clear picture of how much the government has purchased. Echeverry on Tuesday confirmed that the government had indeed been intervening in the spot market but declined to give a figure for the total purchases.

Speculation by traders is that the government's daily operations have ranged from $1 million to $30 million.

... Dispatch continues below ...


Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf [2]

The discretionary purchases have alarmed some traders that were betting on a stronger peso. Many are now anxious that unpredictable dollar purchase by the government could easily hurt their positions.

"The government's plan is really scaring off some traders" who wanted to bet on a stronger exchange rate, said Munir Jalil, chief economist at Colombia's Citigroup unit.

The government's dollar purchases have helped rein in the peso, which had been appreciating strongly against the dollar. On Tuesday, the peso closed at COP 1,831.90 against the dollar from COP 1,826.75 a day earlier.

Still, the strategy has also been boosted by a wave of risk aversion in international markets that has weakened several currencies from emerging economies. The recent decline in commodity prices could also have a strong impact in Colombia, which relies on exports of oil and coal.

"The real test for the government's strategy will be when there's more appetite for risky assets," said Jalil.

The weaker peso is a much welcome relief for President Juan Manuel Santos, who has faced growing pressure from exporters when the peso nears the COP 1,750 mark.

Investors bullish on the peso, however, continue to cite the massive inflows of foreign direct investment, geared at the oil and mining sector, that are expected continue to strengthen the peso and challenge the government.

Indeed, other measures may still be necessary to keep a leash on the currency.

The central bank has some ammunition. It has been buying $20 million daily in the spot market and has ample room to hike its purchases. It may also decide to extend those purchases before their expiration on June 17.

* * *

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Wall Street Journal Publishes Lewis Lehrman's Call for the Gold Standard

In its April 26 edition The Wall Street Journal published an important essay by the Lehrman Institute's chairman, Lewis E. Lehrman, explaining why a gold-convertible dollar is critical to eliminating the shocking federal deficit.

"Experience and the operations of the Federal Reserve System compel me to predict that U.S. Rep. Paul Ryan's heroic efforts to balance the budget by 2015 without raising taxes will not end in success -- even with a Republican majority in both Houses and a Republican president in 2012. ...

"What persistent debtor could resist permanent credit financing? For a government, an individual, or an enterprise, 'a deficit without tears' leads to the corrupt euphoria of limitless spending. For example, with new credit the Fed will have bought $600 billion of U.S. Treasuries between November 2010 and June 2011, a rate of purchase that approximates the annualized budget deficit. Commodity, equity, and emerging-market inflation are only a few of the volatile consequences of this Fed credit policy."

To read more, and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit:

http://www.thegoldstandardnow.org/gata [10]

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