The Golden Truth: Is Russia Really Selling Gold?

Friday, October 23, 2009

Is Russia Really Selling Gold?

Doubtful. However there is a widely disseminated news report out of Moscow on Reuters that Russia plans on selling 46 tons of gold this year. While a couple people I know who are familiar with the way things work in Russia question the validity of this story, here is my take on it:

The Russian entity supposedly selling the gold is Gokhran, which is the State Precious Metals and Gem Repository and takes orders from the Finance Ministry. The Russian Central Bank, which operates independently from Gokhran and takes orders from the Kremlin, has purchased around 67 tons of gold YTD, including 400,000 ounces, or roughly 12 tons last month.

But, who cares? IF the Gokhran gold really is for sale, they have a neighbor directly to the south (China) who is overstuffed with dollars and who I'm sure will be interested in buying the entire lot. The question is, IF the suspected global shortage of physical bullion is bona fide, would Russia demand a large premium to spot for this chunk of gold? Perhaps Russia wrapped this offer in Christmas lights in order to create a bidding frenzy. If they thought the sale of 45 tons of gold would hurt the price of gold, they would have kept the sale quiet. If the sale happens, it will now be bid-in-comp and will likely be executed substantially above spot.

If the view that there is truly a physical shortage of gold and silver that has developed globally is bona fide, the sale of this chunk of Russian gold at premium to spot will confirm that view. A long-time London contact of GATA's Bill Murphy told Bill today that "physical gold is EXTREMELY hard to buy in SIZE. His sources are firms that have been in the gold business for 50 years. He believes it is going to get more difficult to secure supply in the weeks and months ahead." This particular source of information, over the seven years I've been reading Murphy's nightly Midas report, has uncannily accurate insight and intel on the gold and silver market.

4 comments:

EconomicDisconnectFriday, 23 October, 2009
Dave,
it makes no sense that Russia has been adding gold to their reserves for a while only to sell a bunch. I wonder if they float this story to try and get a gold price reduction to add more. Agree, we need proof.
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Julia WongTuesday, 27 October, 2009
Beijing source confirmed that the dash for USD by offloading Gold is real. Apparently, Russia is running gigantic government deficits till 2012 and lots of Dollar Bond needed to be repaid (credit crunch in USD credit supply). Apparently, they still need to issue government bonds on top of the Gold sales.

Moreover, Russia still has tons of gold in the mines, they can always just ramp up mining production like they did last year (21% up in production)in the future to recover their gold holdings.

Last but not least, checkout the fast falling gold price.
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UnknownTuesday, 03 November, 2009
Get, I disagree. If Russia has been adding at a lower price, it makes perfect sense to sell at a profit. Gold near all time high.
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ahnnSunday, 27 November, 2011
To sell gold for profit makes really perfect sense. And if they will going to sell, there is always China.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.