Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

Mudcat, MLSOFT and other fellow gold bulls,

Please check out this important, thought provoking two part study that has, imo, mind boggling long term implications for your consideration (Part 1 of 2 parts)........

I welcome your comments on this subject.


THE WASHINGTON AGREEMENT - WHAT IT REALLY MEANS

We - at "Gold-Authentic Money" - believe we are on the brink of a massive gold bull market.

However, the market is constantly aware of the dominating force of the Central Banks in the gold price - as has been the case for the last quarter of a century. Before one gauges the future levels of is price - a close look at their attitude to the metal is warranted. We believe that they are instrumental in the restructuring of the gold bullion market. Why? And how can we be so sure?

In this article on the Washington Agreement - we examine their attitude towards the metal and hopefully - adjust the view that Central Banks, in themselves - are anti-Gold plus - anti a high price for Gold and that they will dump this "Barbarous relic" the moment they can. We believe they are happy to have gold functioning in the Monetary system and at a significantly higher price.

The final part will show that the Central Banks will be repeating history- by looking at a time when Gold was used effectively to take the world through extremely difficult days and into tremendous subsequent growth.

Part 1 - The Washington Agreement - What it really means!

In September of 1999, 15 main Central Banks - including the European Central Bank and with the tacit support of the I.M.F. and U.S. Federal Reserve [through their continuing absence from the Gold market - in what is now called the "Washington Agreement" - made certain critical agreements:

Gold will remain an important element of Global Monetary Reserves.
The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual Sales will not exceed approximately 400 tonnes and total sales over this period will not exceed 2,000 tonnes.
The signatories to this agreement have agreed not to expand their gold leasing and their use of gold futures and options over this period.
This agreement will be reviewed after five years.
Clearly, these agreements were intended to remove the threat of unexpected gold sales by them and provide a clear picture of what they would be doing for the next five years - at which time they would meet again to either renew, remove or adjust the agreement.

The immediate impact on the market was that the price of gold moved up quickly to around $330 an ounce before slipping back again to below $300. Calm settled into the market and a steady consolidation of the price has been taking place until recently - when the price moved back up over the $300 mark where we see it today.

Why - after such a campaign against gold - would the key players remove their threat to this tarnished commodity? Let's take a deeper look at this event and gain a proper perspective.

Did the Monetary Authorities ever, really turn against Gold?

The U.S. termination of the convertibility of gold in the early seventies and its termination of the sales of its own gold reserves was the first factor, to say "No!"
34, 000 tonnes of gold still sitting in the vaults of the Central Banks says "No!"
The relatively small amount of gold, sold by the IMF after which Members refused to sanction more sales, says "No!"
The low level of gold sales by other Central Banks in general, says "No!"
The E. C. B. 's policy of holding 15% of its reserves in gold, says "No!"
The sale by IMF debtors of gold to them, despite the protestations that this was a one off event, says "No!"
The use by India of gold in its debt settlements, says "No!"
The purchase of Gold, to be used as a Reserve Asset by Central Banks over the last four Years including by Germany, Italy, France, says "No!"
The Washington Agreement, itself, was - in fact - the loudest shout of "No!"
Gold was never shut out of the world's monetary system - simply sidelined - whilst the US$ ascended to its present position.

Let's review what has happened over the last thirty and more years a colonisation of the world by the U.S. Dollar. Dollar Imperialism!

The US$ is used in 85% of all transactions world-wide. It forms 76% of the world's Reserves. The control over these by the Fed is not simply absolute [through their ability to freeze deposits] but fundamental. What happens to the US$ happens to reserves. Countries outside the territorial control of the U.S. are within their financial control [Al Qaeda is the classic example]. No more the need foe Gunboats - no more the danger of bad sovereign debts - the US$ is controlled by the Fed.

By far the most extensive and effective system of world control has been established since the last World War - particularly since the late sixties. It was vital that this process be insidiously established within the context of a strong US$.

Since the seventies and the 'Floating' of the Dollar and Sterling, the Dollar has gained ground in terms, not only of worldwide use - but acceptance. Gold was the only obstacle in the way of the conquering US$. So successful has this conquest been - that it is now wears the mantle worn formerly by gold - as the measuring line of value, despite its profligate, proliferation. Indeed if the price of gold were to rise to where it was before, to $850 an ounce, it would not be seen as a Dollar devaluation anymore - but a simple price rise of yet another commodity. The Dollar would now be the measure of Gold. At no time would the world say the Dollar has been devalued in terms of gold, as would have been the case in 1970! This was and is, the only - sought-after victory - of the campaign against gold.

But what should now be done with the silent but forcefully present, mountain of gold, sitting in the shadows? The Washington Agreement has given us clearly defined direction on this.

The first and second points of agreement made in the W.A. certainly seems to us, as - not a simple reduction of sales - but indicative of a decision to sell no more, with the exception of sales already decided upon. It would therefore be reasonable to assume that this was a termination of decisions to sell over and above sales already agreed. The emphasis being on the termination factor!

As if to clarify this - we noted that Italy, France and Germany bought between 400 and 500 tonnes, each - in 1998 - just prior to the Agreement.

The W.A. is best seen as a reaffirmation of gold's continuing monetary role and a halting of the attack in actions and posture on gold.

Such a move had to precede gold's re-acceptance. The structure of the gold market in 1999, simply would not have borne the pressures bought to bear on it, had the change been made silently.

More at a later time!

Julian D.W. Phillips

http://www.authenticmoney.com/part1.htm

For those interested, part 2 to follow in my next post.

Regards,
Dan