India's Gold Purchase: A Complete Non-Event

Given that this was such a simple news story – with nothing especially surprising about it – my first inclination was that it did not merit a commentary on the subject. However, seeing the reaction to this news convinced me that my first inclination was wrong.

Reading several reports on this news item, the “analysis” is remarkably the same: India's purchase is a “surprise” because everyone expected China to grab the first share of this gold, but this “removes some anxiety” from the gold market which the IMF's long-promised sale supposedly caused.

Addressing these two themes in order, certainly most knowledgeable commentators in the precious metals sector fully expected China and India to buy all of the 403 tons which the IMF has been authorized to sell. Those with reasonable memories will recall that China and India jointly called for the IMF to sell all of its thousands of tons of gold only a few months earlier. Obviously, with the IMF selling only a small fraction of their gold, China and India would be expected to be jointly standing at the front of the line-up to buy the IMF's gold.

Whether the IMF announced a sale of gold to China and then India, or India and then China, or both together, there are no “surprises” here. Indeed, the real “surprise” is the claim by the writers of these various news items that the proposed IMF sale has caused “anxiety” in the gold market. What anxiety?

When two of the world's new, economic powerhouses make it clear that they covet the thousands of tons of gold being held by the IMF, there was never a possibility (as claimed by one writer after another) that this gold would be sold “in the open market”. Indeed, the “voice of reason” through this long, drawn-out farce has been gold-sector icon, Jim Sinclair.

If Sinclair was not the first to scoff at the potential impact of an IMF sale of gold, he was certainly the loudest. He pointed out that in the past, such official sales of gold have tended to be gold-bullish – because when such gold was rapidly absorbed by the market, and where that same market demonstrated that its appetite for gold had not even begun to be sated, that this reinforces the bullish sentiment in this sector.

Indeed, the only people who expected (or at least hoped) that the paltry sale of 400 tons of gold would “depress” the gold market, or at least cause genuine “anxiety” are the anti-gold cabal. With respect to this group of hardly-unbiased observers, we can observe their own sentiments by reading the words of their “mouthpiece”: Kitco's Jon Nadler.

It utterly mystifies me why anyone interested in the precious metals sector would listen to a word of the disinformation on the gold market from this sleazy snake. Consider this: Nadler has worked for a precious metals web-site, during a decade in which the price of gold has nearly quadrupled – and yet Nadler, himself, virtually never thinks that “now” is a good time to buy gold.

True to form, Nadler desperately tried to twist the sale of IMF gold to India in a manner which was designed to try to generate some “anxiety” in the gold sector about this non-event. Nadler referred to the sale of gold to India as “removing one cloud” which supposedly hung over the gold market. In fact, as someone who writes about this sector on a full-time basis (and thus is regularly exposed to the daily news in the market), Nadler's remarks demonstrate his complete lack of sincerity.

In the real world, the anti-gold cabal has been trying to depress the gold market for a year with the proposed sale of gold by the IMF. Long before the IMF even had approval to sell this gold, the anti-gold manipulators were “announcing” and “re-announcing” this sale roughly every six weeks to two months. With the exception of last autumn, when the Wall Street-engineered “crash” of global markets took everything down, this proposed sale of gold by the IMF has had no relevance at all to the gold market.

As I wrote back in July, in “Two Short-Term Scenarios for the Gold Market”, during gold's traditional “seasonal weakness” from May through the summer, the gold market completely shrugged-off the IMF non-event – despite the increase to weekly sound-bites about this sale, which the anti-gold cabal continuously fed into the market during this period to try to depress sentiment.

The manipulators were totally unable to push the price of gold lower during this period, despite the fact that India (typically the world's largest importer of gold) had virtually stopped its gold-buying for most of the year. Indeed, the one thing which was totally obvious in this sector, after countless “announcements” of this IMF-sale is that selling this gold would have no impact on the gold market (at least, no negative impact).

Most likely, most of the people writing these “news” pieces today were simply fishing for some “angle” to fill up space – and turn this trivial announcement into a “news story”. Obviously, such an excuse does not apply to Kitco's Nadler. As someone who writes a daily column, he has years of practice in simply “filling space” in his writing.

Nadler has been the loudest voice in broadcasting the message of the manipulators. Yet, despite a year of evidence that this propaganda-campaign has been utterly ineffectual, today he is still spouting the same drivel. With many commentators providing useful and honest advice and commentary on the precious metals sector, investors could use their time much more productively than by reading the tired, repetition of the same anti-gold message from people such as Nadler. The only possible value of Nadler's pseudo-insights into this market would be as a contrarian indicator for this sector: if Nadler says gold is going down, then now is the time to buy!

With the IMF's remaining 203 tons of gold clearly set aside for sale to China, hopefully we will not be subjected to more “news” stories depicting that upcoming event as a “surprise”, as well. If there is any real “news” regarding these 403 tons of IMF gold, it's that it comprises 20% of all the gold which will be sold under the “gold agreement” of Western, central banks over the next five years. The latest of these five-year agreements began as of October 1, 2009.

The IMF gold-sale was desperately patched-into this sales agreement – despite the fact that the IMF is not a Western, central bank. The reason for this is that the anti-gold cabal has run out of gold which it can persuade these bankers to dump onto the market. During the last year of the previous five-year agreement, which called for a target/quota of 500 tons per year, Western central banks were only willing to sell less than 200 tons.

The new agreement has reduced the new target/quota to 400 tons per year. Yet, even with the inclusion of the IMF sale of gold into this deal (for no real reason of any kind), there is no chance of the manipulators being able to persuade its central banker allies into selling anywhere close to 400 tons per year.

What this really means to the gold market is that this gold-sale (and any/every future, official sale of gold) has absolutely no significance or news-value as a “cloud” or source of “anxiety” for the gold market. Instead, the only significance of such announcements is that it provides an opportunity for the many, national governments who are eager (if not desperate) to add to their gold reserves – without immediately driving the price of gold higher.

The semi-knowledgeable journalists (and disingenuous serpents, like Nadler) who provide their own “explanations” of such events should simply be ignored. During the years when central banks were large, net sellers of gold, there was some bona fide news value in announcements of official gold sales.

Having entered a new era in the gold market, where central banks are now net-buyers of gold, the significance of such gold-sales dwindles considerably. Instead of being important market-movers, such future sales should be covered in much the same manner as Gordon Brown's foolish decision to dump half of the United Kingdom's gold – at only a tiny fraction of its value. In other words, such sales are not “threats” to the gold market, but rather examples of misguided politicians and bureaucrats squandering an invaluable asset.

Comments

[Mad Hedge F...:]

Not for me. News broke this morning that, out of the blue, the Reserve Bank of India bought 200 metric tonnes of gold from the IMF for a handy $6.8 billion. The news set the gold market on fire, boosting the December futures $40 to an all time high of $1,088. It is the largest transaction in the barbaric relic since the Alaric’s Visigoths sacked Rome in 410 AD. It has been public knowledge for some time that the IMF was looking to unload 403 tonnes of the yellow metal in order to fund lending to poor countries. Many traders say this threatening overhang is why gold failed to definitively break out to the upside this year, despite six attempts. The expectation was that China would take this hoard as part of a broader diversification away from the dollar. Bringing India into the fray, which had no prior history of stockpiling gold, is a whole new plate of basmati rice. Not only does this raise the prospect of a bidding war with China for more gold reserves, other cash rich emerging market central banks are likely to join the mosh pit as well, no doubt panicked by the ominously rising whirr of printing presses in the developed countries. My short term goal for gold was $1,200, but I now have to raise that to the $1,300 favored by some chartists in view of the new dynamics. If you want to see my long term target, take a look at the chart below, which has gold zeroing in on its inflation adjusted all time high of $2,358. For those who prefer holding the barbaric relic of the physical kind, visit the tightest spreads in town on American Eagles and bullion at www.millenniummetals.net/ . And while you’re there, sign up for their free research product on precious metals.

Nov 04 07:05 AM

[Graham and ...:]

What was eventful was not who was buying (India) but who was selling (the IMF, and its last "tranch).

Nov 04 09:09 AM

[fireball:]

gold is the constant to measure the fiat currencies. poloiticians and their owner/handlers know the shell game is over when gold gets out of control.
the next scheme will be how to tilt the playing field another way if gold threatens the "faith based" monies.

Nov 04 09:31 AM

[Jeff Nielson:]

Hi Fireball.

So-called "bullion-ETF's" were the LAST card the anti-gold cabal held up their sleeves. They diverted tens of billions of dollars which WOULD have been invested in REAL bullion or precious metals miners, and duped people into funneling money into their bogus paper, instead.

As the rumblings in the gold community of the "dubious" legitimacy of these funds continue to get louder and louder, a default on their obligations to hold bullion equal to their total units becomes more and more probable.

If the mere (legitimate) sale of gold to India can cause this sort of reaction among the general market, imagine what will happen to the price of REAL bullion when people discover that bullion-ETF's are mostly just "paper".


On Nov 04 09:31 AM fireball wrote:

> gold is the constant to measure the fiat currencies. poloiticians
> and their owner/handlers know the shell game is over when gold gets
> out of control.
> the next scheme will be how to tilt the playing field another way
> if gold threatens the "faith based" monies.

Nov 04 10:33 AM

[fireball:]

when/if gld and slv get caught it should get interesting. when i was building my secured savings position we had yet to see the bush jr./obama era of hyper spending.
i have replaced two jrs. i have one more to acquire and maybe a silver miner i have been looking over.

Nov 04 11:31 AM

[Jeff Nielson:]

Fireball, it certainly looks to me that the silver miners have lagged the gold miners, so if you're "underweight" there, it sounds like a good plan to add one (or two).

For those who are comforted by analyst recommendations, a Canadian analyst named Peter Brieger had some very nice things to say about a silver junior called Scorpio Mining (SPM on the TSX, not sure about U.S. listing). While I am generally less-than-complimentary about these analysts, Brieger is an exception who does his homework (Disclosure: I hold a small position in SPM).

His interview is available on the BNN web-site (Business News Network - bnn.ca).

For those who like companies with major, U.S. listings, Silvercorp Metals, a Canadian junior silver/lead/zinc producer with its operations in China just got a listing on the NYSE. This is another company which is worth taking a look at (I hold no position in this one).


On Nov 04 11:31 AM fireball wrote:

> when/if gld and slv get caught it should get interesting. when i
> was building my secured savings position we had yet to see the bush
> jr./obama era of hyper spending.
> i have replaced two jrs. i have one more to acquire and maybe a silver
> miner i have been looking over.

Nov 04 11:43 AM

[The Recusant:]

Au contraire mon frére! We need these "surprises" to awaken the public and politicians to the very real likelihood of inflation and the demise of the U.S. dollar as the international currency. Those in the know realize that the sale of 200 tons is a drop in the old gold bucket, but it importantly draws attention to the whole gold-as-a-safe-haven issue. With the government spinning off uplifting reports of how we have missed the recession bullet, "big" news of a country dumping their dollars for gold bullion helps balance the scale of such propaganda. Although I'm flush with gold investments right now, I certainly don't want to have to depend on gold as my sole source of wealth in the distant future. The sooner the public and politicians fully realize the facts and take action to correct our monetary and currency problems, the better!

Nov 04 11:56 AM

[Jeff Nielson:]

Well said!

Yes, I was surprised at the reaction to this predictable event - but certainly not disappointed. And as you point out, the REAL reason why people (such as myself) are trying to "bang the drum" about the real state of the economy is that greater awareness is an essential first step in confronting our problems (instead of hiding from them).


On Nov 04 11:56 AM The Recusant wrote:

> Au contraire mon frére! We need these "surprises" to awaken the public
> and politicians to the very real likelihood of inflation and the
> demise of the U.S. dollar as the international currency. Those in
> the know realize that the sale of 200 tons is a drop in the old gold
> bucket, but it importantly draws attention to the whole gold-as-a-safe-haven
> issue. With the government spinning off uplifting reports of how
> we have missed the recession bullet, "big" news of a country dumping
> their dollars for gold bullion helps balance the scale of such propaganda.
> Although I'm flush with gold investments right now, I certainly don't
> want to have to depend on gold as my sole source of wealth in the
> distant future. The sooner the public and politicians fully realize
> the facts and take action to correct our monetary and currency problems,
> the better!

Nov 04 03:29 PM

[Skaiste:]

Although I always assumed Nadler is being paid to write against gold and silver, my final aha moment came when Nadler one day said: Don’t be a fool, wait for the end of depression to buy silver for $6 in 2012. The next day he writes: Roubini on CNBC declares the worst is over, than he goes on to quote many sources on how economy is back on it’s feet. At the end of the article to paraphrase his conclusion, it sounded something like this: “all you gold bugs thought the sky is falling, what a complete morons you are”
This guy will spin his lies anyway he can

Nov 04 07:48 PM

[Genesis:]

I didn't realize that, by supporting divestment of IMF gold holdings, India and China were placing orders for that gold. I wonder how many other countries are in line to buy the IMF's gold.

Nov 04 08:04 PM

[Econ 101:]

Is China (or some front organization for the Chinese Governnment) also selling gold contracts? What might happen if the Chinese decide not to deliver on gold (or silver) contracts ? They just tell the West to go pound sand??

Nov 05 04:40 AM

[Jeff Nielson:]

Hi Genesis.

I think it was a reasonable implication at the time that China and India made their joint "suggestion" to the IMF to sell ALL its gold that they were lusting after at least a big chunk of that.

However, when you combine that earlier statement with the more recent decision of the Chinese government to RECOMMEND gold as an investment to its own citizens (on a government-owned network) that this makes interpretation unequivocal.

Advocating the IMF to sell all of its gold, WITHOUT intending to step in as buyers would (naturally) depress the gold market for at least a few years. We could hardly expect the Chinese government to advocate 'tanking' the gold market and recommending gold to its own people as an investment - at the same time.

As for which other nations might be in line to BUY that gold, there have been DOZENS of governments which have bought gold in the past year or two. Even the European Central Bank actually bought some gold early this year - at a time when gold was at an all-time record-price in Euros.

I think the BETTER question to ask is: which governments are definitely NOT interested in buying gold?

The only two I can name off-hand are the governments of Canada and the U.S. Given the size of the Canadian economy, it's virtually non-existent holdings of gold are a national disgrace - and indicates a COMPLETE abdication of responsibility to the Canadian people by the Bank of Canada (currently being run by a Goldman Sachs Stooge).

With the likelihood that there is little gold left in Fort Knox which is actually OWNED by the U.S. government, it is likely in a similarly delinquent situation as Canada.


On Nov 04 08:04 PM Genesis wrote:

> I didn't realize that, by supporting divestment of IMF gold holdings,
> India and China were placing orders for that gold. I wonder how many
> other countries are in line to buy the IMF's gold.

Nov 05 02:43 PM

[TWTFG:]

Nadler is a anti-gold/silver shills , he does not even write "his" articles !!
Don't worry about him !!
Get the metals and hoard them !!

Nov 09 01:09 PM