Best of the Week
Most Popular
1.Spain Ignores Scotland Lesson as Catalan Independence Referendum Could Spark Civil War - Nadeem_Walayat
2.Used Car Buying From UK Dealer Top Tips, CarMotion.co.uk Real Customer Experience - N_Walayat
3.Spanish New Civil War Begins as Madrid Regime Storm Troopers Quell Catalan Independence Rebellion - Nadeem_Walayat
4.Virgin Media Broadband Down, Catastrophic UK Wide Failure! - Nadeem_Walayat
5.Are the US Markets setting up for an Early October Surprise? - Chris_Vermeulen
6.The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It -John_Mauldin
7.Stock Market Crash 2018; Will it Prove to be Another Buying Opportunity - Sol_Palha
8.The Profoundly Personal Impact Of The National Debt On Our Retirements - Dan_Amerman
9.Stock Market as Good as it Gets; Like 2000 With a Twist -Gary_Tanashian
10.1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - Nadeem_Walayat
Last 7 days
Debt-Driven Consumer Economy Breaking Down - 23rd Oct 17
Next Wall Street Stock Market Crash Looms? Lessons On Anniversary Of 1987 Crash - 23rd Oct 17
This Super Metal Is Set To Soar By 300% - 23rd Oct 17
More New Record Highs As S&P 500 Gets Closer To 2,600 Mark - 23rd Oct 17
Another Minor Stock Market Top? - 23rd Oct 17
Bitcoin Hits $6,000, $100 Billion Market Cap As Helicopter Ben and Jamie Demon Warn The End Is Near! - 22nd Oct 17
Time for Caution in Gold Miners - 22nd Oct 17
“Great Rotation” Ahead; Will it Be Inflationary or Deflationary? - 21st Oct 17
The Trigger for Volatility, Rates and the Next Crisis - 21st Oct 17
Perks to Consider an Agent for Auto Insurance - 21st Oct 17
Emerging Megatrends Hurting Consumers - 21st Oct 17
A Catalyst of the Stock Market Bubble Bust - 21st Oct 17
Silver Stocks Comatose - 21st Oct 17
Stock Investors Ignore What May Be The Biggest Policy Error In History - 20th Oct 17
Gold Up 74% Since Last Stock Market Peak 10 Years Ago - 20th Oct 17
Labour Sheffield City Council Employs Army of Spy's to Track Down Tree Campaigners / Felling's Watchers - 20th Oct 17
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

The Gordon Brown Gold Rally Indicator Flashing a Buy Signal

Commodities / Gold & Silver 2009 Apr 20, 2009 - 12:30 PM GMT

By: Michael_J_Kosares

Commodities

Best Financial Markets Analysis ArticleAs illustrated above, 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, pleaded and otherwise cajoled the IMF no less than four times to sell from its 3217 tonne hoard. Each of the first three attempts were stymied for one reason or another (mostly having to do with reluctance on the part of the U.S. Congress) and each was the harbinger of a major price rally. Brown's fourth and latest attempt to pry metal out of the IMF came during the early April meeting of G-20 in London.


The accompanying chart was last published in April, 2007 just after Brown's third appeal to the IMF and just before the historic price run-up that took gold over the $1000 mark. His initial appeal in 1999 came just prior to the first leg of gold's present bull market which took gold from $280 to $450 -- a 60% gain. The second came just prior to the 2005-2007 price run-up which took gold from $425 to the $650 level -- a gain of more than 50%. The current plan, awaiting U.S. Congressional approval, is for the IMF to sell a 403 tonne tranche involved in credit repayments between 1999 and 2000.

This time around the prime minister's foray into the gold market has run into some unexpected turbulence. China and India, according to a Bloomberg report last week, has requested that the IMF sell the entirety of its reserve, that is, all 3217 tonnes. Given the dire circumstances within the present monetary order, it is not difficult to understand why. 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. If potential IMF sales bring to the surface a growing desire by central banks and nation states to acquire gold and in significant amounts, we may be in a whole new ball game -- one that could add to the already notable verticality of the last two legs of the bull market. The Gordon Brown Gold Rally Indicator might once again prove its reliability in 2009, but if so, it could be for reasons that carry much deeper implications for the gold market and world monetary order in the months to come.

The politics of gold

Often lost in the debate about IMF sales is the fact that the founding states, which originally contributed the bulk of the IMF gold reserve, would be out this physical metal should it be liquidated. The IMF gold is not some amorphous, orphaned hoard lacking claims of ownership. It is in fact an important entry on the balance sheets of the nation states which contributed it, and those contributors include, among others, the United States and several of the larger European states. This leads to some interesting complications in the international politics of gold.

If you would like to broaden your view of gold market news and analysis, please feel welcome to join our free NewsGroup to receive by e-mail periodic gold news alerts and USAGOLD Market Updates with relevant commentary like this one.

When you take into account that by IMF rules the contributing states still hold the right to restitution at the contributing price, which is currently around $52 per ounce, one wonders how much incentive truly exists for sales of ANY size let alone the reserve in its entirety as China and India have suggested. The European states, for example, might question why their portion of the IMF gold reserve should be utilized to satisfy the trade imbalance problems of the United States (which is what China and India are in fact suggesting) -- particularly at these prices and even if the sale is a comparatively modest 403 tonnes.

Perhaps that is the rationale behind the IMF and Gordon Brown concentrating on the 403 tonne tranche involved in credit repayments in 1999-2000. The IMF claims that this gold is not subject to the restitution clause and thus not available to members. There was a time when such a rationale might go unchallenged, but these are unusual times and unusual circumstances. In the 1970s, under economic circumstances similar to today's, IMF members compromised on the restitution issue. Over 1500 tonnes of gold were earmarked for sale, but half went to members under the restitution clause and the other half was auctioned.

If the gold standard is to be reinstituted, and the appeal by China and India has the taste and feel, at least in a de facto sense, of a return to using gold as a final means of payment, it will have to be applied fairly and universally. No state should curry favor or somehow nudge their way to the front of the line. In addition, as recently suggested in an article on the gold standard by the Financial Times' Gillian Tett, the price would have to be multiples the current price in order to truly deal with the problem of international dollar imbalances. 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 which has been loosed on the world economy by the present economic crisis.

Final Note: The link below will take you to much-needed question and answer session assembled by the International Monetary Fund on the subject of its gold sales. A study of this page and its subsidiary links will lead to a better understanding of the issue, i.e., what is and isn't possible under the present circumstances.

IMF - Gold Frequently Asked Questions

By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver

Michael Kosares has over 30 years experience in the gold business, and is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold, and numerous magazine and internet articles and essays. He is frequently interviewed in the financial press and is well-known for his on-going commentary on the gold market and its economic, political and financial underpinnings.

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife