Friday, June 01, 2007


Central Bank Selling To Ease

Bloomberg reports on the markets. "Gold in New York rose the most three months on speculation that central banks will slow metal sales after the European Central Bank said it has no plans to sell more bullion through September. Silver jumped 2 percent."

"The ECB is one of 16 signatories of the so-called Central Bank Gold Agreement, which allows members to sell no more than 500 metric tons of gold each year. The ECB said today it sold 60 tons since September."

"The metal fell 6.6 percent to $651.50 an ounce on May 24 from an 11-month high of $698 on April 20. Some European central banks sold gold worth $912 million last month. 'It's a psychological boost for the market,' said Dennis Gartman, gold trader, economist, and editor of the Gartman Letter. 'You've removed a seller.'"

"Gold futures for August delivery rose $10.20, or 1.5 percent, to $676.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Feb. 21. The metal has climbed 6.1 percent this year. The price gained 2.3 percent this week, marking the first increase in four weeks."

"Signatories of the central-bank accord sold about 290 tons of gold since September, according to George Milling-Stanley, manager of investment and market analysis at the producer-funded World Gold Council. Signatories include central banks in Spain, France and Portugal."

"The ECB's sale of 60 tons doesn't include gold sold by other European central banks, ECB spokesman Raphael Anspach said. GFMS Ltd., a metals-research firm in London, estimates the banks will sell about 400 tons under the accord this year."

"'The banks have been selling aggressively for the past three weeks, and that's kept the market from going anywhere,' said Carlos Perez-Santalla, gold trader and president of Hudson River Futures. 'Now, the market is free to breathe.'"

"'Heavy central bank sales appear to have peaked for now,' said William O'Neill, a partner at Logic Advisors. 'We expect $700 to be revisted.'"

"Silver futures for July delivery rose 27 cents to $13.74 an ounce. The percentage gain was the most since Feb. 23. The price climbed 5.7 percent this week, the most since early December."

"Historical price charts show silver is a better buy than gold after the price rebounded this week, Gartman said. 'Silver's far more important industrial demand trumps gold's mere investment demand,' Gartman said. 'Time to own silver.'"

"Silver has climbed 6.2 percent this year. The metal rose 46 percent last year, while gold climbed 23 percent."

From "Other metal prices moved higher along with the price of gold, with platinum for July delivery closed up $9.80 at $1,295.60 an ounce and palladium for September delivery closed up $4.20 at $377.45 an ounce."

The Financial Times. "When the Roman emperor Constantine struck off a new gold coin, he expected it to give good, durable service. And the extra-durable solidus did, about 700 years' worth. Modern monetary systems have a somewhat shorter shelf life."

"That the current monetary system may not last for the ages was underscored the other day by Kuwait's decision to uncouple its dinar from the US dollar. For years, the two had been lashed together as a preliminary to the projected creation of a common Persian Gulf currency."

"The more the dollar's value sagged, the more dollars the members of the Gulf Co-operation Council have had to absorb just to maintain the desired exchange rates."

"Now Kuwait has chosen to go its own way, leaving Saudi Arabia, Qatar, the United Arab Emirates and Bahrain to ponder their tolerance for open-ended dollar-buying. Little Kuwait just might be the herald of big change, both in the dollar's fortunes and the world's monetary organisation."

"To a degree, the world turns on open-ended dollar buying and the muscular feats of money-printing it calls forth."

"That the paper dollar finds favour the world over must be counted as one of the greatest achievements in the annals of money. To paraphrase Richard Nixon, the president who closed the US gold window, we are all dollar bulls now."

"Or rather, we are up to a point of saturation, a point that Kuwait seems to have finally reached. Its neighbours, too, appear to be on the edge of dollar surfeit. Broad money growth in the Gulf region is running at 20 per cent, in no small part a consequence of rampant dollar absorption."

"'Inflation is a hot topic in the kingdom,' the Financial Times reported from Riyadh recently, 'as city residents feel the pinch of rental and price increases suddenly feeding into an economy that has grown used to inflation of around 1 per cent a year since the 1970s.' The Saudi statistics gatherers today acknowledge a current rate of 3 per cent."

"In most of the dollar-buying states, monetary growth is fast enough to upset the eternal rest of Milton Friedman. In all cases, a slower pace of dollar absorption is an integral part of a monetary cure. It will be said that only some members of the dollar-buying bloc want to be cured."

"The rest, notably, China, are happy to keep on cranking the monetary presses. But the upward track of US interest rates and the downward path of the dollar exchange rate tell a different story. One thing's for sure, the greenback ain't the solidus."

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