A few financial journalists and market analysts lately have noted the seemingly anomalous and counterintuitive behavior of the price of gold, which has fallen amid the greatest burst of money creation in history and the explosion of commodity prices.
For example, see "What Happened to Gold?" by Michael Batnick of Ritholtz Wealth Management on February 26.
But these journalists and analysts attempt only speculation, not journalism, which might explain things a lot better.
From time to time GATA does attempt journalism, as manifested by the organization's documentation archives -- and as the organization attempted journalism 20 days ago when your secretary/treasurer wrote to the Bank of England and the United Kingdom's Treasury Department to pose two simple yes-or-no questions:
-- Have the Bank of England and the Treasury's Exchange Equalisation Account (or any agency answering to the bank or the Treasury) leased gold in the last 12 months?
-- Has any leased gold been returned to the bank, the Treasury, or any agency answering to them in the last 12 months?
Of course, as Federal Reserve Chairman Alan Greenspan famously acknowledged in testimony to Congress in 1998, gold leasing by central banks is a mechanism of price suppression. Greenspan said: "Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over the counter, where central banks stand ready to lease gold in increasing quantities should the price rise".
The Bank of England cordially replied today that it will not answer GATA's simple questions about gold leasing -- will not say whether the bank has been leasing gold in the last 12 months. A representative of the bank's communications office wrote:
"Thank you for your email. I am afraid that there is no further information that can be provided."
The UK Treasury Department has not replied to GATA yet and perhaps never will, though better luck might be had by, among others, the Financial Times, Wall Street Journal, and The Economist if they waived their rules against putting to central banks any critical questions and particularly any critical questions about gold.
But now that the Bank of England has acknowledged that GATA's questions about the bank's surreptitious recent interventions in the gold market are too sensitive to answer, it fairly may be assumed that those interventions are exactly what is happening to gold and that as a result, the monetary metal is grossly underpriced, at least if it was to be priced fairly in a free and transparent market.
How long will gold remain underpriced?
Since central bank interventions against gold are undertaken surreptitiously, their instigators must believe that they would not work if they were widely known and understood -- would not work unless central banks were able to deceive the markets and investors. So the answer to the question of gold's price may remain whether financial news organizations and market analysts will ever muster enough integrity to attempt honest journalism about gold.
Investors in the monetary metals and executives of monetary metals mining companies might do well to nudge those news organizations and market analysts to attempt such journalism.
About the Author:
Chris Powell is a political columnist and former managing editor at the Journal Inquirer, a daily newspaper in Manchester, Connecticut, USA, where he has worked since graduating from high school in 1967. His column is published in newspapers throughout Connecticut. He is also secretary/treasurer of the Gold Anti-Trust Action Committee Inc., (GATA) which he co-founded in 1999 to expose and oppose the rigging of the gold market by Western central banks and their investment bank agents.