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08 July 2010

Fractious Gold

BIS spoils the gold price party

It was all looking so good for Gold in the last week of June. Gold prices were at or near record highs and it looked as if all investors had to do was ride the train ever higher.

However, long term Gold watchers know that the path of Gold price ascent to date has seldom run true. As July crept around, something in the market changed, we noticed it here at in our news round ups. Gold sentiment seemed to change and the Gold price charts changed with it. In retrospect, the reason for this was pretty obvious. The turn of sentiment has most likely been driven by 346 tonnes of central (or commercial, nobody seems too sure) bank gold swaps with the Bank of International Settlements.

As the gold market continues to digest this development, some Gold market analysts speculate that the Gold swaps are a bullion bank bailout, while some Gold price manipulation theorists are calling shenanigans pointing to parallel surreptitious Gold selling by the IMF.

As Adam Douglas puts it, writing in, "Gold sales by the IMF and big gold swap by the BIS are reminiscent of the London Gold Pool that ended badly in 1968. The Western central banks have rigged the gold market for so long that they can no longer think straight. The only thing they can think of is to do more of the same, hoping that this will reverse the growing mistrust of all things paper and the entire banking system."

With thin summer trade adding to Gold price volatility, and key up coming data events such as European Bank stress test results, Gold holders faith may be tested further over the coming weeks.

At immediately available 1 troy ounce gold bars were trading at 21% premium, continuing to reflect the lag in the physical market adjusting to underlying metal prices. Fixed price 1 troy ounce silver bars were trading at a very hefty 56% premium.

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