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Peter Brimelow: U.S. disclosure cited as proof of gold cartel's price-capping efforts
By Peter Brimelow
Thursday, October 18, 2007
NEW YORK -- Gold froths, but the gold bugs think they have new reason to be confident.
Recently I asked: "Could gold be 'melting up?'"
The yellow metal promptly went off the boil. But then it bubbled up again to multiyear highs.
The ultra-long term $U.S. 5 X 3 Point and Figure chart made available freely by the public-spirited The Privateer Website looks better than ever:
Throughout gold's post-2000 bull market, the much-maligned gold bug services, scarred by 20 years of losses, have been confident but cautious.
Right now, they readily acknowledge that Market Vane's Bullish Consensus survey of advisers, which has been above 90% for five straight days, is negative contrary-opinion-wise. (But this indicator spent two weeks above 90% while gold continued to rise in May 2006.)
And booming India's offtake of physical gold, which has swallowed every price increase since 2000 with the occasional brief gagging, may be gagging again. (But for technical reasons this isn't completely clear.)
The Gartman Letter, not at all a gold bug service but thought to reflect key hedge funds' rekindled interest in gold, sold half its holdings yesterday. But Gartman is a nervous trader.
Nevertheless, for the longer term, the gold bug faction lead by Bill Murphy's LeMetropole Cafe Website is cockahoop. It has long argued that the metal's price has been repressed by what it calls "The Gold Cartel," an alliance between the official sector (central banks, the U.S. Treasury) and chosen instruments (key investment banks and co-opted bullion dealers and others) to create a financial assets boom.
The reason for rejoicing: The discovery by James Turk of the Freemarket Gold & Money Report that, as Turk puts it, "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."
This is exactly what the LeMetropole Cafe gold bugs have long said was happening.
It may seem like an arcane point. But I remember when the idea that central banks were systematically selling gold at all was dismissed as crankishness. Yet it's now universally acknowledged.
And gold, by the way, has fought its way much higher just as the gold bugs said it would.
Turk's conclusion: "This new evidence provided in the U.S. Treasury report as well as the rising gold price itself suggest to me that we are now witnessing the last scramble by the gold cartel to cap the gold price. It is a vain attempt by them, acting under the instructions of the U.S. Treasury, to make the world think that the dollar is worthy of being the world's reserve currency when in fact everyone knows that it is not. In short, the wheel has fallen off the truck. The dollar is heading for a train wreck. Use whatever metaphor you want, but the message is clear -- the dollar is in serious trouble. ...
"The flight out of dollar-denominated assets is gaining momentum, and gold is one of the safest places to be in a currency collapse."
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