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Citigroup gold report getting around; MineWeb disparages BoE gold quality issue

Section: Daily Dispatches

8:55a ET Monday, October 1, 2007

Dear Friend of GATA and Gold:

Citigroup's market research report acknowledging that central banks have been manipulating the gold price is rapidly gaining attention in the investment world.

The latest recognition comes in an essay titled "Why Should You Buy Gold?" at by John Stepek, who writes:

"In the absence of a reliable paper money to take up the baton of world reserve currency, the prospects for gold only look better and better. And it seems central banks know it. Central bank bullion sales earlier this year were 'clearly timed to cap the gold price,' reckon [Citigroup's] Hill and Wark. That's the kind of conspiracy theory chatter that has had gold 'bugs' of all stripes condemned as unhinged for years -- and yet now it's coming from a major investment bank.

"Why would central banks fear a strong gold price? It's simple. The gold price is essentially an indicator of confidence in paper money. The higher it is, the less confident people feel about the worth of their fiat currency. And if people lose faith in paper money, then effectively they're losing faith in our entire economic system. When you think about it like that, you start to see why central banks might want to keep a lid on the bullion price."

You can find Stepek's commentary here:

Meanwhile, MineWeb's Lawrence Williams contends that the problem encountered by the Bank of England in meeting the "good delivery" standards for gold at the London Bullion Market Association is a "storm in a teacup" and "an irrelevance."

GATA will disagree, considering the issue evidence that the Bank of England, a big seller of gold, is running out of the better stuff with which it can manipulate the market -- which is not to say that the bank has run out of all gold or that the troublesome gold can't be melted and refined into deliverable grade.

After all, the gold quality issue would not have come to the attention of the LBMA and then the attention of the world if the bank had not tried to push the inferior metal into the market and if enough other central bank gold necessary to the central bank price-suppression scheme had been available.

But at least Williams acknowledges that the central banks "are perceived to be manipulating the gold market" to keep the price from rising and that many monetary authorities "regard gold as an anomaly which should no longer form a part of world currency reserves."

You can find Williams' commentary, "Storm in a Teacup over Central Bank Gold Holdings Quality," at MineWeb here:

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

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