Search This Blog


Search Tool

Jul 11, 2010

ABCNews : Australia Business.

Gas pipeline expansion underway
Work has started on expanding the gas pipeline network in south-west Queensland.

Cloud over timber fumigation location
There is increasing confusion about where a shipment of Tasmanian logs bound for China will be fumigated.

Council to appeal mine rating decision
The Whitsunday Regional Council in north Queensland says it will appeal to the High Court to overturn a decision that could require it to refund rates to the mining company Xstrata.

more business

The Gata Dispatch : FT's on Gold and the Bis Nothing to see here / Hedge Funds Look for Golden edge / Gold Seek Radio Interviews Bill Murphy GATA Chairman. July 11., 2010

FT's Lex on gold and the BIS: Nothing to see here

1:32a ET Sunday, July 11, 2010
Dear Friend of GATA and Gold:
Last week's pseudonymous "Lex" column in the Financial Times about the recent strange and hidden gold swaps undertaken by the Bank for International Settlements was typical FT -- high-falutin' dismissiveness about gold that avoided any original research, avoided even seeking on-the-record comment from the source, the BIS itself.
How does the BIS explain the transaction? Why was it hidden in a footnote in the bank's annual report rather than announced generally? Since commercial banks are not known for maintaining large gold reserves such as those in these swaps, where and how did the commercial banks get the gold? Were the commercial banks fronting somehow for central banks? What's really going on here?
Though the failure of the BIS to announce the transaction demonstrated an intent to hide it, Lex and the FT won't ask about it. Rather than investigate, Lex and the FT have lined up in front of the story to shoo curious onlookers away, much like the bumbling detective played by Leslie Nielsen in the fireworks factory scene in the movie "The Naked Gun":
When it comes to gold and central banking, the FT seems to see its job as being not so much to report the news as to suppress it.
The "Lex" column, headlined "The Gold and the BIS," is appended. Now move along. Nothing to see here.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Gold and the BIS
By Lex
Financial Times, London
Wednesday, July 7, 2010
What to make of the news that the central banks' central bank is sitting on 346 tonnes of gold?
It is held via gold swaps between the Bank for International Settlements and European commercial banks that have collateralised loans with ingots. Such operations had been rare in recent years but took off in earnest just as the Greek sovereign debt crisis erupted -- so the news, contained in a note to the BIS' annual report, unleashed numerous conspiracy theories.
Traders theorised that one or more of the bloc's central banks pawned gold to prop up their groaning banking systems. Spain's regional savings banks, or cajas, and Greek lenders, for example, have sucked in copious liquidity in recent months and are likely to need more.
These transactions bore all the hallmarks of a furtive operation to assist a peripheral eurozone central bank unwilling to be seen pawning its reserves. But the swaps raised only $14 billion -- surely not enough for any such sweeping operations.
Another tale was that the central banks used swaps for bridging finance pending drawdown of the eurozone rescue package; but again, the numbers fail to stack up.
An even more far-fetched explanation has the International Monetary Fund selling reserves to boost its own finances ahead of a bailout.
The reality is almost certainly more prosaic, having more to do with the technicalities of the collateralised lending market than with the entry of a big new player. But the far-fetched theories still had a real-world consequence and put the skids under gold: prices slid back to late-May levels on the news.
Ironic, really, since it is jitters about the eurozone debt crisis that had fuelled the precious metal's fabulous rise -- up 15 per cent from the start of the year to a nominal high of about $1,265 a troy ounce two weeks ago.

Hedge funds look for a golden edge

By Sam Jones and Jack Farchy
Financial Times, London
Friday, July 9 2010 19:10
Not so long ago hedge funds would send their most junior analysts to the seminars that bullion bankers hosted.
Gold, for much of the past two decades, was the ultimate dreary asset -- of interest only to central bankers and miners.
Now those same bankers are struggling to find time in their diaries to fit in many of the hedge fund industry's biggest players.
In mid-town New York funds that employ barely 100 staff are finding themselves with gold holdings larger than those of some developed nations.

Paulson & Co., one of the world's most successful hedge fund managers, denominates a third of its $33 billion of assets under management in a share class bolstered by huge positions in the gold market. In fact, gold is the firm's largest single position. The $3.4 billion stake in the SPDR Gold Trust, a listed US instrument backed by physical gold, equates to a greater tonnage of the metal than Australia holds.
The reason for this is simple. Amid fears that the global economy could be heading for a double-dip recession -- and as financial markets continue to gyrate -- some hedge managers are becoming increasingly bullish about the precious metal. They are drawn to gold's traditional status as a store of value in crises.
Paulson & Co. is the largest hedge fund to back gold, but others including Soros Fund Management, Tudor Investment Corp., Greenlight Capital, and Third Point, are now converts.
"I have never been a gold bug," Paul Tudor Jones, founder and chairman of Tudor Investment, wrote last year. "It is just an asset that, like everything else in life, has its time and place. And now is that time."
The consensus view among the funds is that the price of gold -- trading at around $1,200 an ounce -- will rise to well above $1,500 before it suffers any sizeable correction.
This expectation of further prices rises (gold has increased four-fold since 2002) is based in part on the view that bullion provides a hedge against a rise in inflation.
Some fund managers believe a sharp jump in inflation is unavoidable as a result of central banks’ monetary easing policies, which have, in effect pumped more money into the economy.
Historically, they say, the correlation between gold and inflation is hard to ignore.
Over the past half century, the gold price has tracked the amount of money in the world -- measured broadly in terms of "M2" monetary supply -- fairly accurately, peaking at times of inflation, such as the mid-1970s and early 1980s.
The hedge funds argue that the recent swelling of the monetary base will translate into a spike in monetary supply. When it does, gold prices will follow.
"The number of funds who are exposed to gold has increased massively in the last three or four years," says Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy.
In common with other investors, hedge funds are also keen to hold their gold in physical form -- either as bars in a vault or as an investment in an exchange-traded fund backed by physical assets.
Marcus Grubb, head of investment research at the World Gold Council, an industry-backed body, says the funds are looking to reduce counterparty risk in the event of another crisis: "In the past they might have been happy to just use futures strategy. Now they are looking to have physical investment."
Many analysts agree that gold is likely to set fresh nominal all-time highs in the coming months. But they also see the weight of investment in the metal as a warning signal.
Mr. Klapwijk says the rush to invest in the metal is not irrational. The motivation is fear about the debasement of paper currencies and of a panic in markets fuelled by any worsening in the eurozone debt crisis. But he also says that gold currently has "elements of a bubble."
Jeffrey Currie, head of commodities research at Goldman Sachs, points to a strong historical inverse relationship between gold prices and real interest rates. The time to sell, he says, will be when the economy returns to normal.
"It's pretty simple. Just stay long until real rates rise, likely driven by central banks taking liquidity out of the system."
"Gold's appeal is clear in this zero-cost-of-carry environment," says Mr Klapwijk. "But what if real interest rates were at 3 per cent? In my view, investor interest would be a good deal lower."
At that point, other supply and demand factors may come into play.
As the price of gold has risen, jewellery buying in India, typically the backbone of gold consumption, has fallen sharply. So if investors bought gold at a slower rate or became net sellers, the price would probably fall until other sources of demand picked up the slack.
"Don't forget: Gold is also a commodity with supply and demand fundamentals that can come into play," says Mr. Klapwijk.
Some managers are all to aware of the distinction, and view with derision the bets of their colleagues in a market they know little about.
"The problem is that people see it [gold] as both a commodity and a refuge," said the manager of one London-based macro hedge fund. "It is not really a liquid instrument and there's a danger that the market is being cornered."
Paulson & Co. remains optimistic that the trade is not crowded. In a presentation to potential investors, salesmen from the firm point out that gold ETF holdings amount to $78.3 billion,a fraction of the $2,849 billion held by U.S. money market funds. The implication is that, with massive unconventional monetary easing under way, gold will become the ultimate store of value.
Not all hedge funds are convinced, however. While a third of Paulson & Co.'s assets under management are denominated in gold, most of the holdings are those of its employees, including Mr. Paulson.
In spite of having one of the best names in the business, Mr Paulson's dedicated gold fund, which has a capacity of up to $5 billion, has raised just $500 million..
12:30a ET Sunday, July 10, 2010

GoldSeek Radio interviews GATA Chairman Bill Murphy

Dear Friend of GATA and Gold:
GATA Chairman Bill Murphy was interviewed this week by Chris Waltzek of GoldSeek Radio. The interview is eight minutes long and starts at the 88:20 mark at GoldSeek Radio here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Join GATA here:
New Orleans Investment Conference
Wednesday-Saturday, October 27-30, 2010
Hilton New Orleans Riverside Hotel

* * *
Support GATA by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:
* * *
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit: