15 January 2015

Straining at gold gnats while swallowing central bank camels

Chris Powell characterised my post on marginal miners as "straining at gnats while swallowing camels". It is an accusation of hypocrisy, that I'm being "very strict and precise in smaller matters of the law, but careless and loose in weightier matters" (see here for an explanation of Chris' use of Matthew 23:24). I'm entitled to a defend myself I guess.
Firstly, Chris said my post "argues today that gold's price is being kept down in large part". In large part? The very title of my post said "Gold price may be affected" and I said "this may crimp increases in the gold price" I think that is enough "may"s to qualify my statement and make "large part" an unfair representation of my post.
Chris goes on to say that I "overlooking central bank 'production'" and that it is "exceedingly hard to get respectable people to discuss that part of the market". In other words, that I focus on smaller matters while ignoring weightier matters. I assume that Chris is not arguing that gold commentators are only allowed to post on central bank camels and cannot post on smaller gold gnat issues. Therefore I guess he is commenting on my overall 6 plus years of commentary on this blog.
Certainly I do focus on detailed technical issues - that is where my expertise lies. It is also partly because that is an area few cover, while almost all other blogs cover GATA's central bank camels extensively enough, so I look to offer something different to those who are looking for a gnat level understanding of the gold market. But Chris' point is that "respectable people" aren't discussing it. Now I don't take it he means the majority of gold commentators are not respectable, but that the mainstream doesn't consider them respectable and will only listen to those it considers respectable.
I'm guessing that Chris' comment is that given I work for the Perth Mint that makes me respectable in the eyes of the mainstream. Unfortunately I don't think the mainstream would consider what I say on gold to be respectable and would consider me hopelessly conflicted as my employer makes money from selling gold and thus from a higher gold price.
In any case, when it comes to central bank camels I think I have looked at these weightier matters, and in a far more considered manner than many. For one, I did a 10 part series on fractional reserve banking (starting here) with this one specifically on the role of central banks and how "central bank lending of gold allows the bullion banking system to expand gold credit and this extra supply suppresses the price". I doubt that can be considered shirking from the matter. Consider also these selections from my blogging history (with select quotes):
  • Central Bank gold reserves transparency: So if it is good enough for the Reserve Bank of Australia to report this level of detail with respect of its gold reserves, I think it is fair to say it should be good enough for other central banks
  • The Bundesbank & the Narrative of Central Bank Omnipotence: central bankers use ... use public statements to play the Common Knowledge Game and drive market outcomes by proxy."
  • Central banker pop quiz on gold: that was just to scare people off investing in gold, because do you really think we don't understand gold when we employ over 300 Ph.D. economists and have written hundreds of papers on gold
  • Why gold's contango suggests central bank interference: the fact that gold has been in contango for "essentially all of the last 25 years strongly suggests central bank interference with the gold market
  • Reserve Bank of Australia Gold Sale: governments will want to be re-elected. Rather than take the tough decisions, they will turn the inflationary tap back on. For that reason, I believe that gold will again have its day.
  • Counter to Ben Bernanke's The World on a Cross of Gold: Bernanke’s words, much like Temin’s and Eichengreen’s, contradict his argument. If central banks could absorb and sterilize gold, “reflecting conscious Federal Reserve policy,” the central bank, not the gold standard, was running the show
  • To roll or not to roll, that is the central bank's question: Moves to return gold are eminently sensible, of course: what is the point of a country having its gold out of its immediate physical control if everything goes to hell. That is really the whole point of having gold reserves.
  • The death of gold: the theory of suppression of the gold price misses the point. To kill gold you don't manipulate its price, you manipulate its volatility
  • Central Bank Selling: The end result will be gold in the hands of individuals and what I call “the decades long privatisation of gold” will be complete. As per Professor Fekete, the power over the money “supply” will then be in the hands of the average person, where it should be
And finally, Australian Gold Confiscation, where I drew attention to a previously ignored mechanism by which the Reserve Bank of Australia could enact confiscation in Australia. I would argue the above is plenty of drawing attention to camels, particularly for someone who whilst speaking on this blog personally, still works for a government where politically neutrality on policy matters is expected.
Tone is very hard to get in the written word, so let me say I'm not at all fussed by Chris' comments - I can take as good as I can give - and I don't expect Chris to have read all of my 450 blog posts and understand where I'm coming from. Hopefully, Chris, you'll reconsider your J'accuse?


  1. I'm glad Chris Powell considered his "j'accuse" enough to deliver it to you, Bron.

    If you are contending, Bron, that institutional manipulation of markets is a nominal issue, then I'd say your credibility has been tapped out.

    It stands that those who've learned to peacefully coexist with evil have not long delayed their own doom at the hands of that very evil.

  2. Sorry, I have no idea how you can consider all those articles I have written on central banking as contending that institutional manipulation of markets is a nominal issue. See what you want to see.

  3. Where GATA went wrong from the very start is they analysed gold like a commodity. With demand outstripping supply they assumed this gap was being filled by central banks. In the late 1990's they concluded 25% of central bank gold had gone forever, and updated this to 50% several years later.

    It is GATA who strain at gnats / swallow camels because it is Western investment demand followed by divestment that govern gold prices. No one in the gold community wants to acknowledge the thousands of tonnes of gold (and silver) net imported into UK during the bull market, for example.

    Many questions can be answered by examining national trade data but of course this doesn't happen. Instead it is very convenient to blame central banks who lost all of their gold years ago, but will continue to be blamed for many more years nonetheless.

  4. This was going to be my reply to Jake, but it looks like he's been banished again!
    I'll post my response anyway:

    Jake wrote: "Only enormous bankster illegal paper positions can move gold prices such as they have been since 2011."

    My reply: Keith Weiner brilliantly demonstrated in real time time that it was actually physical selling that collapsed prices in April 2013 rather than paper positioning. This was later revealed to be the case from the trade data... investors that had been pulling gold into the West during the bull market (e.g. in 2009 the UK net imported 1100mt) suddenly stopped and became suppliers on a net basis. This reversal was brutal with the UK net exporting 1400mt in 2013, a 2500mt swing from the peak.

    Are Western investors now reconsidering their bearish position? Moves in GLD holdings last 2 days suggest they could be, meaning India + China + West pulling in the same direction again.

  5. Sorry, Jake's just spamming with a lot of Bron is an idiot stuff so I've turned on moderation. I don't read it just tick it spam and I'd say don't feed the troll but you make a good point so I let your comment through.

    I note that Chris responded http://www.gata.org/node/14965 "to GATA Suchecki long has seemed respectable enough -- that is, intelligent, incisive, and informed -- always to be required reading" I suppose that makes them idiots too according to Jake, oh well.

  6. Chris Powell does not possess an abundance of credibility himself. Similarly, I remember when Bill Murphy debated Jeff Christian in 2011. God that was painful. Jeff didn't have to exert himself even 1% to defeat Murphy. Sadly, Murphy could have easily been beaten by anyone who had done 1-2 years of decent research, even if they were teenagers. GATA has managed to dig out a lot of incredibility valuable papers, etc, but when it comes to the actual talking, using the knowledge stored in their heads, sadly their performance is extremely sub-par.