Strong Dollar Policy = Weak Gold Policy

December 31, 2001

At least one issue about gold remains a sticking point. Gold is not just a commodity; it is a monetary asset. Countries do have the right deal in their monetary assets. Do countries acting as silent agents, however, have the right to deal in gold as a monetary asset in a manner that controls the price of gold as a commodity? It is this dual role of gold that confuses people. It is also this dual role that GATA (the Gold Anti-Trust Action Committee. See www.gata.org) is concerned about in so far as it impacts the free-trade of gold.

The battle appears to be at the front where gold as a monetary asset as valued in a basket of currencies may have an impact on these currencies if it is allowed to trade freely. As such, a floating gold price is not in the best interest of the current US monetary policy, and possibly other countries as well (the UK?). It is this issue that the monetary policy makers take free reign in using ESF and other regulatory loopholes to secretly deal in gold to maintain a steady price of gold. The secrecy, they likely feel, is required so as to not have public policy become a determinating market factor, if such trades were to be discovered.

The US strong dollar policy, when all is said and done, is really a weak gold policy. The unstated dollar vs. gold relationship is the heart of the GATA matter, as this is what has resulted from the policy makers' desire to stabilize currencies. It is this desire and subsequent secret market actions (alleged) that puts the stranglehold on the gold price, which is the crux of the GATA mission.

In short, current official monetary policy can not allow gold -- the monetary asset -- to rise in the gold commodity marketplace. To do so, would destroy or weaken the strong dollar policy. I believe it is this juxtaposition that GATA is concerned about. US policy does not recognize gold as an official monetary asset, it appears to use its considerable influence with media and Wall Street to take the media heat off of gold so as to not create an investment demand. In the meantime, they must contend with a monetary asset that as much as they may not like it, has the ability to weaken the dollar beyond their desire or control. As such they appear to have pulled the stops on their alleged secret campaign against a rising gold price.

Unfortunately, such a policy can not be carried out in a vacuum. Such policy requires coordination with Wall Street and the media. Here maybe where GATA's efforts should lie. This coordination unfairly tips the government's hand such that insiders are privy to a policy that the rest of us are not. As such, thousands and perhaps more unwitting investors have been duped by this secret policy against gold. Gold, the commodity, remains on all of our radar screens. It is fair game to investment capital, as such. Gold, the monetary asset, is not fair game for investment capital. The alleged strong dollar policy therefore allows gold to trade as a commodity but seeks to suppress the price of gold secretly in order to stabilize the dollar and to protect an alleged 14,000 ton naked-short position that has been amassed world-wide in the effort to keep the dollar strong. The purveyor of this policy is allegedly the public Gold Auctions of the UK and the ESF (Exchange Stabilization Fund) of the US Department of the Treasury. In addition, certain Bullion Banks have been let in on the secret as the agents of this policy, since they are the agents of commodity gold exchange.

The GATA mission should be to educate the public as to the dual role of gold in the world economy today; expose the strong dollar policy for what it is (a secret campaign against commodity gold); expose the secret policy against gold and the large short position this has caused and the risk this creates for the dollar. Expose the participants in this scheme and push for an open market in gold. This is not without consequences since a free-trade gold market will undoubtedly change US monetary policy since the dollar will be devalued against gold, the monetary asset -- something that may not play well in Washington. In fact, such a policy may actually be harmful to an already weakened economy.

Such an approach may be the one that is necessary, as it appeals to both camps. It recognizes a right of the US to deal in its asset -- gold. But it also holds us accountable for such dealings. GATA is about accountability in gold.

China has only 2% of its Total Foreign Reserves in gold.