What lies behind the mystery Brussels meeting with the WGC, and new restrictions on gold sales in Austria?

The Slog investigates

The Slog has a long history of blogging about the gold market. The site’s predecessor was already being scorned for talking about gold price manipulation way back in 2006, ultimately combining all of the evidence into a long essay during 2009. That evidence suggests that for years the US sold Deep Reserve gold to the Chinese to help contain debt, then sold more to protect the Dollar, and then – when it finally became clear to the Goforits that a crash was imminent – sold tons of the stuff to keep the price down….and thus keep punters in the stock market. QEs 1 and 2 also had this effect, by making stock purchases cheap for institutions.

Effectively, over a seven year period at least (the policy was probably enacted by Greenspan) the US Government – and the central banks of several others – directly attacked the ordinary investor’s ability to own a hedge against collapse by suppressing the gold price; and conned them into staying in stocks and shares when there was no real benefit to be had, medium term, from being there.

Happy nowadays to maintain the Cheap Buck, the US has played a more or less straight bat this year. Others, however, are keen to hoodwink their citizens into believing that the currency is healthy. The euro, of course, is dying of stupidity – but the less faith people have in it, the more quickly it will become novelty lavatory paper.

For the last six months, the EU’s central bank (ECB) led by Jean-Claude Trichet has been buying huge amounts of sovereign bonds denominated in euros. This year alone, it has troughed its way through 143 billion of them. By making the auctions look more successful than they would be on a level playing field, Trichet’s actions in the short term act directly to keep the euro price artificially high. Expat Brits in France and Spain suffer directly as a result  – despite being entirely innocent bystanders in this continuing exercise in applying emergency flying buttresses to the eurozone.

With the covert acceptance at last that Greece is now a corpse, the situations in Italy (and increasingly Spain) are draining off the last dregs of faith in the euro. The ECB’s bond buying policy will continue, but long term use of it would sooner or later cause currency inflation…and more to the point from Trichet’s warped perspective, it’s no longer working: investors, increasingly, don’t want the bonds at any price. Faith has been lost in the guarantor of last resort.

An array of news this morning continues to reaffirm the depth of the crisis: while the G20’s vapid pledge about being ‘committed to a strong and coordinated international response to address the renewed challenges facing the global economy’ has lifted shares in early trading, it’s a meaningless communique. More telling are first, the EU declaring full speed ahead on eurobank recapitalisation (interesting given that ten days ago they said it wasn’t necessary); and second, US money market funds running away from the eurozone as fast as their full carpetbags will allow.

In this apocalyptic context, the policy of central banks once again becomes very simple: stop the punters from fleeing the commercial routes of investment in favour of safe havens. In the eurozone, investors no longer have any Government bonds they can really trust. In fact, so insane is the situation that UK gilts are offering miserly yields for the simple reason it’s better than 0%, and allegedly ‘safer’. But realists know this is merely another quark in the system. The only big, logical place for safe haven investors in the EU now is gold bullion. Not paper trackers, but the shiny metal itself: trackers are run and ‘guaranteed’ by banks – so for anyone with common sense, they’re just as risky as banking sector shares.

Buying gold thus becomes something the eurocrats must make look less attractive – and limit wherever they can. Take a look at this gold price chart from yesterday:

From the left above, 5A, 9A and 1P represent from 9am to 3pm bourse trading in gold’s spot-price. In the rest of the markets at this time, distraught traders, analysts and Chancellors are watching as the FTSE falls close to 5% in four hours, and then steadies at around 3.4%. Yet the gold price plummets by $55. Strange way for safety-seeking tooth-suckers to behave, isn’t it. Analyst sites talk of ‘commodity fall contagion’ but frankly, that’s bollocks: anyone who can’t tell gold from copper shouldn’t be allowed out at all.

But in that third square above, the NYSE wakes up and goes to work. The Fed doesn’t want falling gold, because that means rising debt value…and nervous investors don’t like the look of the sh*itstorm gathering pace in Europe. So gold rallies – and then levels off $18 higher than the base point.

This alone is clear evidence as to why the upcoming G20 will achieve nothing: because in the madhouse called globalism, there is no united front against anything this side of alien invasion. But above all, it shows the first step in the ECB’s last-gasp attempt to keep some sense of order within its common currency, and the EU’s bourses. The worse-than-expected deterioration in eurozone purchasing managers’ indices adds to evidence that the region’s recovery has gone into reverse; that increases pressure on the European Central Bank to cut interest rates….but I understand that Trichet himself thinks this would be like farting against thunder at this stage. For once, I agree with him. It probably won’t stop the ECB reversing its rate increases of the Spring – but additionally, Belgian Governing Council member Luc Coene very pointedly remarked in Washington yesterday that the EU central bank would “act quickly on all fronts” to avoid disaster. It looks like gold manipulation is one of those fronts.

Last night, I checked the ECB’s gold situation out. Not from its website, you understand: that simply obfuscates, or hides – and then if all else fails, it just lies. It seems that in the last three months of this year, the ECB has bought over four times more gold than it did in the whole of 2010. That is a general trend – fivefold for the year to date among central banks – but not at that level.

Now, new evidence has come to light suggesting that what Christine Lagarde vaguely called ‘extraordinary measures’ last Tuesday are already under way. I’m grateful to a regular Irish Slogger for pointing out this excerpt from the website shitfplan.com. It’s not what you’d call copper-bottomed as a source, but it is interesting (my emphasis):

‘The most alarming situation we identified is one relating to the purchase of gold coins and bullion – specifically in the country of Austria – but one that will likely make its way across the EU if it hasn’t already. According to the bank representatives and manager we spoke with, Austrian banks have now been ordered to restrict the sale of gold and silver bullion purchases and are limiting personal acquisitions of precious metals to 15,000€ (approximately $20,700 USD) at a time, or 11 ounces of gold at today’s prices. Upon further discussion, we learned that these policies were implemented over the course of the last 30 days. Had you visited an Austrian bank three months ago, you would have had absolutely no problem purchasing a large quantity of gold/silver from the bank. You’d simply call the bank about 24 – 48 hours in advance, let them know you’re coming and how much you needed, and you’d personally pick up your order within a couple days.’

Well well well. So far, this much I can tell you. On August 15th this year, a meeting took place in Brussels between eurocrats and representatives of the World Gold Commission. This is intriguing, because the WTC is the nearest thing the gold industry has to a marketing board: it effectively promotes gold for every reason imaginable, and especially as a form of investment.

The Slog has learned that, at this session, two things were discussed. First, how to make gold look less attractive. Yes, I know – seemingly bonkers, but these are strange times. And second, how to proceed towards a quietly conducted programme of making retail sales difficult for ordinary EU citizens.

Three days later on 18th August, this piece appeared at Bloomberg’s site:

‘Gold demand fell 17 percent in the second quarter from a year earlier as investment slipped, the World Gold Council said. Global demand dropped to 919.8 metric tons from the “remarkably strong” 1,107 tons a year earlier, when Europe’s debt crisis boosted gold’s appeal…’

Now I’m sorry, but either these Charlies are talking about a different planet to the one I inhabit, or they’re lying. Call a bullion dealer today, and he’ll tell you demand is through the roof and he can only give you a certain amount.

The WGC is sitting pretty whatever happens: it knows that in the end, the price of gold will sky-rocket whatever the EU maniacs do or don’t do…and frustrated demand has always, historically, raised the appetite for something even more….once the shackles are released.

As to the meeting’s second item, I’ve no idea where that went – or indeed what the point was of discussing it with the WGC. But a German banking source confirmed to The Slog this morning that restrictions have indeed been applied to the retail sale of gold in Austria. More than that, however, the person wasn’t prepared to disclose. I can also tell you that nowhere on the Austrian internet are those restrictions either confirmed or even mentioned.

I had a long conversation with my bank here in southern France at 9.35 am BST+1 today. Apart from 48 hours notice (which is standard) there were no restrictions on buying gold bullion over the counter. So if the intention is to roll out the policy EU-wide, it hasn’t happened yet.

Stay tuned.

‘An Act to provide relief in the existing national emergency in banking, and for other purposes, in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order …‘

From FDR’s emergency gold act, 1933