"March 5 is just over six weeks from now. That is how long the world's Central Banks have to come up with another "red herring" to replace the BOE auctions."
(Gold Commentary - January 18)
"This weekend, the Central Bankers of the G-7 nations are meeting in Ottawa, Canada. Do you have any doubt that GOLD will be on the agenda, quite likely at the TOP of the agenda? This meeting will pit three (the U.S., Canada, Britain) against three (Germany, France, Italy), with one "wallflower" (Japan). If the U.S. government is going to accelerate their spending to the extent they plan to WITHOUT the Dollar expiring, they need FULL co-operation from their G-7 "partners". They will find out at this meeting if it will be forthcoming."
(Gold Commentary - February 8)
"Spot furure Gold closed on Friday, February 8 at $US 303.50 - its first close ABOVE $US 300 since February 23, 2000."
The only thing that can stop it for any length of time is concerted Central Bank action, a thing often threatened but VERY seldom resorted to. The Central Bankers of the G-7 nations have now finished their meeting. There can be NO doubt that Gold was high on the agenda at the meeting.
(The Privateer, Early February Issue (#443) - February 10)
There you have it, verse and chapter from our commentary in Gold This Week and in The Privateer itself over the past month. Yes, we said that the only thing that could stop Gold was CONCERTED Central Bank action. All the Central Bankers who matter got together two weeks ago in Ottawa for the G-7 meeting. The G-7 communique didn't say anything about Gold, but the Central Bankers obviously did behind closed doors.
So, a week later, a Central Banker stepped forward and said that he could "imagine" selling Gold. Do you think he was "tricked" into saying what he said by the interviewer? Do you thing that the other Central Bankers present at the G-7 meeting had NOT discussed this course of action in advance? Would you like to buy a slightly used bridge?
On Tuesday, February 19, after a long weekend in the U.S., Comex Gold trading reopened. Shortly after it opened, and before the London Gold market ended trading for the day, a portion of a statement made by Bundesbank head and ECB (European Central Bank) board member Ernst Welteke which was scheduled for broadcast the following day on U.S. TV was "leaked" to the floor.
Here is what Mr Welteke actually said - as televised in the U.S. on February 20:
"We have significant gold reserves in the Bundesbank, and of course we are happy if the gold price rises. That shows that you shouldn't sell your gold at the wrong time. At the moment, there is an agreement between the central banks limiting the sale of gold. That is sensible since if we all sold central bank gold we send the gold price plummeting. That wouldn't be sensible.
BUT I COULD IMAGINE THAT WE SLOWLY SELL SOME OF THIS GOLD AND REINVEST THE REVENUE IN ASSETS THAT PAY AN INTEREST. We should in no case sell the gold reserves to pay off federal debt or finance new spending. At best, we should use the interest to reduce the debt.
The capitalised sentence is the one which was "leaked" to the Comex trading floor on February 19 and led to the $US 5.20 sell off on spot future Gold on that day.
Here's a Reuters quote commenting on Gold trading on February 19:
"The whole move was on the Bundesbank story. ...Britain will conduct the last of its planned 20 tonne Gold auctions in March, and the market has been waiting to see which nation will step in to take up the slack."
Neither the Bundesbank nor the ECB is going to "take up the slack", but the question remains - why did Mr Welteke do this? Clearly to stop Gold from consolidating above $US 300 and thus turning into a BULL market. Why was this deemed undesirable by Europe and the ECB? After all, the Euro is now in competition with the U.S. Dollar for global reserve currency status. And the Europeans have more Central Bank Gold between them than the U.S. has.
There is no way to "prove" this, but by far the most likely reason was simply to buy time. If there is one thing that Europe (and Japan and every other sane nation) does NOT want, it is a financial meltdown taking place in the U.S.. That would be highly dangerous for the entire world at ANY time. But the prospect is especially dangerous NOW, given the increasingly belligerant attitude of the Bush Administration as exemplified by Mr Bush's State of the Union speech on January 29.
So Europe went along. For Gold to be "stopped", they had to. The only other participant at the G-7 meeting who would have had the needed effect on Gold in the short term is Alan Greenspan himself. It is NOT a coincidence that the ONLY major Central Bank or Treasury/Finance Ministry which has NOT publicly mused about the possibility of Gold sales since Gold slipped below $US 300 back in 1997 is the Fed and the U.S. Treasury.
The last time that the U.S. threatened to sell Gold - and then actually sold it - was in the late 1970s with the IMF/Treasury Gold auctions. The result was that they totally lost control of the Gold price. From that day to this, the U.S. has not repeated that mistake. Instead, everyone else has acted, including the Australian Reserve Bank which announced the sale of 66% of their Gold in 1997 and the Bank of England which embarked on Gold Auctions in 1999. That, plus the development of Gold derivatives of all descriptions and massive forward selling programs by Gold producers, has done the trick.
Now, the European Union has publicly "mused" about selling Gold, even though the Washington Agreement is not scheduled to "expire" until 2004. The only ones left in the arsenal are the U.S. financial authorities. But if THEY threaten to sell Gold, at the same time as they are HUGELY expanding their budget deficits and planning to borrow another $US 750 Billion over the next two years, the lid just might be torn off the whole charade.
Mr Welteke's comments pushed Gold down - for one day. For the rest of the week, it has done nothing much at all. Meanwhile, trading on world stock markets is getting wilder by the day. The U.S. Dollar is struggling to maintain the highs it set last month. The Treasury's debt "subject to limit" is within $US 27 Billion of their present $US 5.95 TRILLION debt ceiling. With fiscal 2002 only five months old, the Treasury's debt "subject to limit" has already risen by $US 191 Billion.
Gold cannot be "undiscovered". Its unmatched facility as a medium of exchange cannot be "uninvented". Its history as money cannot be expunged from history. It is not going to go away. We don't know how long this "CONCERTED CENTRAL BANK ACTION" will work. We know that it will not stop Gold in the end. If Mr Welteke has bought the global financial system some time, it will be critical to see what if any constructive use is made of that time. Stay tuned.