Where be Me Gold?

GATA Gold Anti-Trust Action Committee and Jason Hommel of The Silver Stock Report have both long been advocates of gold and silver as true money seeking to destroy the apparent manipulations in the markets and uncovering how much gold truly exists. Now the IMF may be wondering the same. The article has been edited for the sake of brevity.

GATA complains that the International Monetary Fund allows its member central banks to report their gold holdings and their gold out on loan as one item, not as separate items. As a result, the world does not know how much central bank gold has been leased into the market and how much really remains in the vault.

While the World Gold Council (WGC) says that only about 5,000 of the claimed 33,000 tonnes of central bank gold has been leased into the market, GATA claims that probably more than 15,000 tonnes has been leased into the market.

If GATA is right, then when the central bank gold is exhausted, as it must be eventually — and faster if other central banks start buying such as in Russia, China, South Korea, South Africa, Argentina, and other countries — the supply and demand dynamics of the gold market will change dramatically! …and the price will soar.

China alone has $1 trillion of foreign exchange reserves. If China diversifies a mere 5 percent of that into gold, that would be $50 billion, which, at $670/oz., is nearly 75 million ounces. At 32,152 ounces per tonne, that would be 2,300 tonnes, nearly as much gold as the world’s mines produce in just one year.

Now even the IMF seems to be wondering how much gold its member central banks have left.

The IMF’s rule change could be the biggest change in the gold market in the past 36 years, since 1971, when the United States decided to stop redeeming paper dollars for gold on world markets.

This if materialized can be a monumental stage in the bull market for gold and silver. More so, if prices rise too quickly it may cause a squeeze for those short gold and will prompt an even stronger advance that may send gold to prices that have not been seen in centuries.

Has the IMF Admitted GATA is Right?
Jason Hommel
February 17, 2007


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