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A study by the International Monetary Fund in 1999,
obtained last week by GATA's researcher R.M., reported that more than 80
central banks had lent 15 percent of official gold reserves into the market
and that central banks then lending gold included the German Bundesbank, the Swiss National Bank, the Bank of England,
the Reserve Bank of Australia, and the central banks of Austria, Portugal,
and Venezuela.
The IMF study, commissioned as the agency pondered
selling some of its own gold, emphasized the lack of transparency in the gold
market and the secrecy demanded by central banks.
"Information on the gold market is
patchy," the study said. "Transactions are characterized by a high
degree of secrecy. Apart from the relatively small amount of open trading on
exchanges, gold trades are private, over-the-counter transactions, and little
is reported on these transactions. ... Official information on gold lending
is virtually nonexistent."
As a result, the IMF study said, its
information was "largely drawn from private sources."
Predictably enough, the study said "the
increased mobilization of central bank reserves through gold lending
operations has had a depressing influence on the spot price for gold since
on-lent gold is usually associated with sales of gold in the spot market."
Indeed, just a year earlier, urging Congress not to
regulate financial derivatives, Federal Reserve Chairman Alan Greenspan had
disclosed that controlling the gold price was the primary objective of gold
lending: "Central banks stand ready to lease gold in increasing
quantities should the price rise."
(See: http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm.)
Further, the IMF study said, gold lending had caused
central banks to become active in the gold derivatives market with bullion
banks and gold producers, "selling through forwards and options."
In turn, "bullion banks have made efforts to
secure and consolidate long-term relationships with central banks."
"The number of countries with official-sector
involvement in the gold lending market is now estimated to have reached over
80. The outstanding amount of gold lending provided by the official sector by
end-1998 amounted to nearly 15 percent of official gold holdings of all
central banks. The share of industrial countries in the stock of total
official gold lending rose from 33 percent at end-1995 to 46 percent by
end-1998 as some industrial-country central banks increased their lending,
while new lenders, such as the Bundesbank and the
Swiss National Bank, entered the market."
Thirteen years later it seems likely that the
proportion of central bank gold reserves that has been lent into the market
is substantially higher, as Western central banks continue to demand secrecy
for their gold lending even amid growing concerns about the security of their
gold reserves vaulted abroad.
With so many central banks
lending so much gold in secret to financial institutions whose primary talent
lately has been shown to be rigging markets, who but the usual agents of
disinformation still can deny that the gold market is manipulated precisely
to prevent the world from enjoying free markets generally?
The IMF's 1999 study of gold lending has been posted
at GATA's Internet site here:
http://www.gata.org/files/IMFGoldLendingFullStudy1999.pdf
Your secretary/treasurer surely cannot have
perceived everything of significance in the study and so would be grateful to
receive comments on it by e-mail at CPowell@GATA.org.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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