Tuesday 15th November 2005 AD
"SELLERS AND BUYERS"

This last weekend, Germany announced it may sell some of its gold. "Proceeds from some of the central bank's gold reserves may be used to set up a 25 billion-euro investment fund," reported Bloomberg.

Isn't it interesting how reports of 'proposed' government or central bank gold sales always seem to conveniently pop-up as the gold price heads into new high territory?

The Bloomberg report continues, "there may be scope to sell central bank gold within an international treaty, Peer Steinbrueck told reporters in Berlin, adding that Bundesbank approval is needed to sell gold."

Central Banks seem to have an unblemished record of poor timing.  For example, many would remember the widely publicized Bank of England gold sales of 1999 to 2001 where BoE sold gold at 20 year low prices and re-purchased US treasuries at all time high prices.

Jim Sinclair is a veteran precious metals specialist and commodities and foreign currency trader, and is a market professional that has seen it all before.  What is his take on the German report?

"During the 1968 to 1980 bull market in gold, large ongoing gold sales allowed big Buyers to enter the market at singular prices. These sales acted to increase the interest in gold by facilitating major purchases. At the present time, Asian central banks who are gold poor and dollar rich could potentially pick a point on the dollar and take every ounce that other central banks want to sell."

"This type of anti gold spin improves the market by broadening the base during the early stages of a bull market. I have seen this before and know it from experience. In fact, this might have been the factor that brought in the Middle East interests into the 1968 to 1980 bull market."

"When you read the Bloomberg article, remember that there's very little relationship between what the politicians say and what action the German Bundesbank will actually take. Respected German economists remember all too well the hyperinflation of the mid-1920s. Even more important, they understand that when currency is not redeemable in gold, its value depends entirely on the judgment and the conscience of politicians."

Jim Sinclair makes some excellent points.  While these types of reports in the mainstream financial press seem aimed at harming the (gold) market, in the long run they in fact serve to do the opposite.

Whether the central banks of some nations are selling their gold and others are buying is not important to us as individuals, what is important is whether we personally own some or not.

As Individuals - our job is to equip ourselves with the knowledge that will help us survive and prosper in our changing world.  At Daily Dig - our job is to dig up the relevant information that will provide you, our valued readers, with this knowledge.

Best Regards  - Philip Judge pjudge@anglofareast.com