Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2019 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