Sunday, October 25, 2009

Gold market: accident waiting to happen or crime scene?

Market analyst Paul Mylchreest, who wrote the 2006 report for Credit Agricole's Cheuvreux brokerage house concluding that the gold market was being manipulated surreptitiously by central banks and, the following year, a similar report for Redburn Partners, has revisited the gold market in a study for his own analysis service, the Thunder Road Report.

Mylchreest examines the gold traded in the world's biggest gold market, London, and concludes that either a tiny amount of real metal is supporting a spectacular volume of paper trades, "an accident waiting to happen," (Alternative 1) or else that the world's gold supply is spectacularly larger than officially acknowledged and the London gold market has been used in recent years to launder questionably obtained gold, perhaps the fabled "Yamashita's gold" plundered from Asia by the Japanese military during World War II, in which case the London gold market is a "crime scene" (Alternative 2).

The author writes:
- "It seems to me that an investigation into the gold market is justified. The Bank of England and the Financial Services Authority (FSA), which have some responsibility for overseeing the gold market in London, are probably the best placed institutions to carry this out."
- "Given that the outlook for most paper currencies is so dire, I don’t see the need to alter my portfolio weightings at this point whether Alternative 1 or Alternative 2 is correct. If it’s the latter, it just means the authorities can keep the fiat currency party going for longer, but eventually the party has to end. As I said in the last Thunder Road, “Defence is sometimes the best means of attack”, 90% of my portfolio is in gold, silver and food/agriculture related stocks at this point."


The full report is available by clicking here.

Source: Chris Powell, Gold Anti-Trust Action Committee, October 16, 2009.

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