Gold's Golden Rule

Gold was weak Monday on the heels of news that the Treasury Department is lobbying congress to allow the International Monetary Fund [IMF] to sell 400 tonnes of its gold. Here's the original Reuters report of the planned gold sale. If we look at where the potential systemic financial failures are today, we'll come up with a handful of countries that, let's say, were never intended to be the recipient of IMF funds when it was founded. Surely, that irony is not missed by many. Be as it may, I don't expect the bureaucracy to call for its own demise, hence I don't yet consider its attempt to shore up revenue by selling gold as gold price manipulation.

On the other hand, similar proposals have come before, and each time the U.S. Congress, proving that its collective IQ is at least in the double digits, rejected them. Perhaps it is even aware of the golden rule:

He, who has the gold, makes the rules.

While 400 tonnes may sound like a lot (about $12 billion at current market value), it is a drop in the bucket compared with central bank reserves of countries that have stated their intention to diversify away from U.S. dollar-denominated assets. Click on this link for a list of central bank gold holdings as a percentage of total reserves.

A clear dichotomy exists between the Central Banks of the "East" and "West." Since the annual production of gold is a small fraction of the above-the-ground stock (a defining characteristic of monetary metal, one might add), the best way to increase Central Bank gold holdings is to buy from other Central Banks. Hence, I predict that no matter how much of its gold the IMF will sell, it will find eager buyers. Meanwhile, any price weakness is a gift to buyers of physical bullion.

Comments

[Dawson Lodge:]

This gold liquidation by the IMF is a creditor forced sale.
China has instructed the debt cartel to surrender the gold, a nice forward offer at $1000 per ounce.
It's a done deal except for the clearing.
If not surrendered voluntarily, it will be bought in the open market, thereby crashing the monopolist's precious US dollar (faster and sooner), and blowing the FED out of the water, which doesn't help either side.
The Chinese are tough but they are practical. They have given the globalists enough rope to hang themselves.
The new kids on the block (in NY) can't compete with thousands of years of trading expertise. All warfare (including economic) is a game of deception. Nixon though he was going to get over on these guys.
hahahahahahahahaha

2008 Feb 28 01:02 AM

[jt:]

ITMW...good little snippet. You're right on the money in terms of the fact that someone will snatch up whatever the IMF would sell, would the US Congress at last enter into its final stages of Altzheimermentia, be it the Chinese, or the Russian CB, or some Abu Dhabi trillionaire.

But what I will recommend you revisit is your hesitancy to call this what it is and has been each time it's been brot up: manipulation of the price. Go back and look...each time they have pulled this stunt over the past 6-7 years has been when gold has threatened to take off and overwhelm the manipulation.

And here we are again. The nice thing is that now more and more BigMoney has wisened up to what the Western CBs, and esp the Fed, along with their bullion/investment bank lackies, such as GoldmanSucks and JPMorgain4Elites, have been doing. Now each takedown is being met with more buying. And now they know what it means when they trot out the tired old IMF sales story to try to take the price back down, (ala "The Shining") "It's Feddy!!! It means get the shotgun ready so that when the Cartel ax pounds a hole thru gold's price supports, Big Money is standing there with a load of bucks-shot ready to blow Feddy and its friends right back outta there. jt

2008 Feb 28 01:13 AM

[jt:]

Dawson...that's an interesting theory. Or is it more than that? Where did you hear that? That would be fascinating to find out is true. And it would make some sense. I'd certainly rather see them buy it in the open market, to perhaps end the manipulation sooner, but on the other hand, perhaps it would be better to have the collapse happen a little slower so that those of us who have watched this develop for years have a little more time to prepare and to try to get others to get ready. jt

2008 Feb 28 01:17 AM

[low:]

Enduring this game may be daunting but witnessing it is something else. The last time I can remember it at this level of play, I think it was the Dutch. Things may have changed a bit since then, I think it was the early-mid nineties. Something says I shouldn't say it but I can't resist. Wouldn't it be something to dump it all @ $999.00 and it still tops 1100 after all that tonnage. I'm no expert but I'm seeing 2500 per ounce
despite all the wriggling the big dogs can manage!

2008 Feb 28 07:10 PM

[Mr. G:]

Until the FED stops printing money to support the banking crises in the U.S., gold should remain in an upward trend notwithstanding the ups and downs in its channelling pattern.

2008 Mar 09 01:49 PM