The Gordon Brown Gold Rally Indicator Flashing a Buy Signal

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"The Gordon Brown Gold Rally Indicator might once again prove its reliability in 2009. . ."

British Prime Minister Gordon Brown's serial attempts to persuade the International Monetary Fund to sell gold have proven to be one of the more reliable indicators of an impending price spike. Over the past decade, Brown has begged and pleaded the IMF no less than four times to sell from its 3,217 ton hoard. The first three attempts were stymied, but each was the harbinger of a major price rally. Brown's latest attempt to pry metal out of the IMF came during the April meeting of G-20 in London.

This time around the prime minister's foray into the gold market has run into some unexpected turbulence. China and India have requested that the IMF sell the entirety of its reserve - all 3,217 tons. Growing official sector gold demand has been one of the more interesting side bars to the current economic crisis. China and India, it seems, have just upped the ante. The Gordon Brown Gold Rally Indicator might once again prove its reliability in 2009; but if so, for reasons that carry much deeper implications for the gold market and world monetary order in the months ahead.

The founding states, which originally contributed the bulk of the IMF gold reserve, would be out this physical metal should it be liquidated. This leads to some interesting complications in the international politics of gold.

When you take into account that by IMF rules the contributing states still hold the right to restitution at the contributing price, currently around $52 per ounce, one wonders how much incentive truly exists for sales of ANY size.

Perhaps that is the rationale behind the IMF and Gordon Brown concentrating on the 403 ton tranche involved in credit repayments in 1999 - 2000. The IMF claims this gold is not subject to the restitution clause and thus not available to members.

If the gold standard is to be reinstituted, it must be applied fairly and universally. No state should curry favor. In the end, all the talk about IMF gold sales might be the catalyst to discovering what really needs to be done to solve the festering monetary problem that has been loosed on the world economy by the present economic crisis.

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