Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The impact of the I.M.F. sales of gold on the gold price itself will not be given here, but is given in the Gold Forecaster newsletter, issued weekly.
The 2007 Crockett Report recommended that the IMF establish an endowment, funded by the proceeds of limited and structured gold sales. In June 2009, the process allowing the I.M.F. to sell 403.3 tones of gold was finalised. The joint statement on gold released in August 2009, announcing the renewal of C.B.G.A., included the following wording: “The signatories recognize the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceilings.’ To date, 212 tonnes of gold have been sold by the IMF in off-market transactions and the IMF has announced plans to offer the remainder of its saleable gold on the open market.”
What does Phase 2 of the I.M.F. Gold sales mean?
After directly offering gold to the world’s central banks, selling to only a few of them, the I.M.F. moved to Phase 2 of their gold sales. Please understand though that Phase 1 allowed the I.M.F. to announce to whom they had sold gold and what amount. Many central banks would have been unhappy that their potential purchase would be announced, simply because it could affect the gold price and send it higher, making future purchases more expensive. This is particularly so of inscrutable China, who last year announced that they had added to their reserves over the previous five years. This was well after the event and was seen not to imply that more would be bought by China [we believe they continue to buy surreptitiously]. So, once the I.M.F. had completed Phase 1 they turned to Phase 2.
This was to the ‘open market’. The terms of Phase 2 implied, by definition, that no buyers would be named. Sales through the open market by the I.M.F. would be to buyers who the I.M.F. would not know themselves. It is a condition of the ‘open market’.
The ‘open market’
What is the ‘open’ market? It is the gold market where brokers or banks representing clients buy and sell gold. It is a 24-hour market where such professionals at one time or another during the day buy and sell gold for their clients. The main physical market is in London, where it has been for hundreds of years. Five leading Bullion banks come together twice a day to buy and sell gold for their clients who are linked to them through the dealer’s banks who, in turn, are connected to all their worldwide buyers and sellers by phone. The results of their twice daily dealings are published on the website www.goldfixing.com where you can see which of the banks were buyers and which were sellers at that Fix.
Why did the I.M.F. not name those to whom they sold gold to?
Are the names of those who bought gold from the I.M.F. known to the market? No. Each broker or bank involved keeps the names of their clients to themselves. This is preferred by most clients anyway. This is perfectly normal and has no sinister connotations, whatsoever.
To repeat what we said above, even the I.M.F. would not know who they sold gold to. All they would know is their own bankers who would only know the buying banks at the time the gold sold, but not their clients.
Will new I.M.F. sales affect the Gold Price, if so how?
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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.
