4:53p ET Thursday, November 24, 2005
Dear Friend of GATA and Gold:
When Russian President Vladimir Putin this week attended
a mineral resources exhibition in the Russian Far East,
endorsed the plan of the Bank of Russia to double its
gold reserves, and expressed support for increasing his country's gold production, many assumed that Russian gold purchases would come from domestic production and thus
not disturb international markets.
But today's RIA Novosti report, dispatched to you earlier
today, quoting the Bank of Russia's first deputy chairman,
Alexei Ulyukayev, suggests otherwise. It suggests that Russia
is ready to enter the physical gold market everywhere. This would be revolutionary, as noted by Michael Kosares, proprietor of Centennial Precious Metals in Denver, whose analysis at his firm's Internet site, http://www.USAGold.com, is appended here.
Indeed, the unusual resilience of the gold price in recent months --particularly since GATA's Gold Rush 21 conference
in Dawson City, Yukon, Canada, which was attended by one of President Putin's economic advisers, Andrey Bykov -- hints
that a central bank has been a buyer for some time now.
Of course Russia's central bank took official note of GATA
in June 2004, when another of its deputy chairmen, Oleg Mozhaiskov, told a meeting of the London Bullion Market Association in Moscow about GATA's contention that Western central banks had been rigging the gold market to the
detriment of the developing world:
http://www.gata.org/RCBTakesNote.html
While GATA, given the Russians' interest, has been trying
to convey much to them, we have no inside information here.
The Russians may be good listeners but they have yet to
prove themselves conversationalists. But if YOU had a
load of paper and electronic currency whose proliferation
was unlimited and if you were disadvantaged by the imperial schemes of the issuer of that currency, what would YOU
do to protect your wealth and your national interests?
Centennial Precious Metals' Kosares argues that if the
Russians are serious about buying gold, their announcement
is the equivalent of the Washington Agreement of 1999,
which put a ceiling on central bank gold lending and
touched off gold's bull market.
Kosares' analysis is below.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
By Michael Kosares
Centennial Precious Metals, Denver
http://www.usagold.com/cpmforum/
Thursday, November 24, 2005
"First Deputy Chairman of the Central Bank Alexei Ulyukayev
said the bank would be purchasing gold 'on all markets on which it is available,' meaning both domestic and foreign markets."
A few observations:
1. We should not forget that it was central bank buying that broke the back of the anti-gold cartel in the late 1960s early 1970s. This paved the way for the massive bull market of the 1970s.
2. Ulyukayev is not talking about paper trading for
speculative purposes. He's talking about buying physical gold and storing it in reserve as a long-term asset.
3. This policy is a major, decisive departure for the G-8 in
that one of its members will be exchanging currency reserves
for gold -- and after a public disclosure. Russia now is receiving a large amount of foreign exchange for its oil and
gas (this will not change for quite some time), probably in
the form of dollars and euros.This looks like the first
step in a long-term program.
4. Russian gold buying will become a new element in the
physical gold market, and likely will put even more pressure
on those short the metal to cover now while it is still
cheap -- of course, that Russia follows through. But I can't
see why they would announce such a plan without meaning it.
5. I rate this announcement by the Russian central bank as
the equivalent of the Washington Agreement in 1999, which
kick-started the current gold bull market. It amounts to
a de-jure action that could have a major impact on the gold market and comprise the primary driving force for the
second leg of this bull market.
-END-
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