Is the U.S. Selling Gold Reserves?
Source: Julian Phillips, Gold Forecaster (9/3/10)
"The Chinese government is careful not to say any more than is necessary."
The Chinese government is very careful not to say any more than is necessary on anything. It's also very useful to have people, supposedly close to government makes statements that may appear to be government policy. Many of the statements come from people helping to lay a smokescreen for the true picture, or to get a reaction, like tossing a stone into a bush to see what flies out.
Before we give the quote we have to tell you this quote is not from a top official but from a central bank researcher. Because of his closeness to the People's Bank of China, it may be assumed he is telling us facts that are common knowledge at the bank. On the other hand the quote is explosive, not backed up by fact, runs counter to common sense and against the information we have. It's natural to then say: "Maybe he knows something we don't know." So, whether you accept this as fact or not is your decision.
Here is the quote: "Sales by overseas central banks could see a sharp fall in gold prices." (The financial news reported Wednesday), citing Zou Pingzuo, a central bank researcher. He continued: "Investors should be careful about investing in gold. Gold prices could fall sharply because of intensive gold sales by the United States and other overseas central banks."
Are the U.S. and Other Central Banks Selling Gold?
We are of the opinion that the World Gold Council (WGC) is a competent body and that they do gather accurate information on 'official' gold sales worldwide. We also note that leasing is not selling just as swapping is not actually selling. The figures published by the WGC tell us that the gold selling has stopped and that central banks, including China's, are buyers.
Yes, when gold is leased or swapped, the gold leaves the owners control; but, unless the overriding agreement is broken, the gold should return to the owner's control. It's there that the main questions lie. And it's there that the statement may gain credibility.
Many are convinced that leased gold or swapped gold is a cover for what in reality is a sale. As a result many believe that the central bank holdings of gold are far less than published. If such obligations do attach to the gold owned by a nation, then, at best, it is 'at risk' and this should be clarified. The risk of the gold not being returned does attach to that gold, because it lies under the control of an entity or person outside that bank. That certainly weakens ownership control as we all know.
Why Isn't the Fed Happy to Prove Its Gold Holdings in an Audit?
Senator Ron Paul has wanted an Audit of the Fed for a long time for, as he said, "the audit should determine not only the simple presence of gold in the U.S. government's vaults at Fort Knox, Kentucky, and elsewhere but also "whether any of it has been obligated."
Senator Paul is fully aware of the Federal Reserve's involvement in gold swaps with foreign banks, an admission made by Fed Governor Kevin M. Warsh a year ago in his battle with GATA's litigation against the Fed under the Freedom of Information Act. It was there that Governor Warsh insisted that the Fed's gold swap arrangements must remain secret. What was the Treasury's response to the Senator? "Representatives from the Treasury Department and U.S. Mint did not respond to requests for comment on Paul's proposal."
Shouldn't the Treasury, the Fed and public institutions, in general, be transparent? You would think so. But then the perceptions we have of government, Fed and the gold reserves, may be radically altered and confidence damaged. After all, it was only after the gold standard was dropped that it was discovered that the UK could not cover all the banknotes it had issued (based on gold).
What stands out starkly is that, if the Federal Reserve does have the gold it says it has, then an audit will reveal this and ensure confidence is bolstered in the central bank's reserves at all levels of the monetary world. So why would a central bank not audit its holdings regularly to shore up any waning confidence? After all, as the nation's purse holder, it should assure the public that its reserves are what it says they are.
What would happen to the Gold Price if central banks and the U.S. were selling?
The answer to this question is not what you may initially think. To get our conclusion, subscribe through: www.GoldForecaster.com.
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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.