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Surmounting the Cartels' "End Game" Juggernaut

As an almost revered subject, the question of whether central banks across the world will be buyers or sellers of gold is one usually left until after the event.   Central Banks themselves are usually very unhappy to talk about their gold policy.   When they do it is a once-in-several-years-event.   As a result we watch the behavior patterns of the last decade to see what lies ahead.

First we look at the I.M.F and look at just how it will support gold.

The I.M.F. Gold Sales.

We have been waiting so long for clarity on the policy the I.M.F. are to adopt with the sale of their 403.63 tonnes of gold.   The IMF Executive Board has now approved the sale of 403.3 metric tons.   The head of the I.M.F., Strauss-Kahn said, "These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market.    Most importantly, the sales are strictly limited to 403.3 metric tonnes, which is one-eighth of the fund's total holdings, so the IMF will continue to hold a relatively large amount of its assets in gold."

Prior to selling the gold on the market, the I.M.F. is prepared to sell the gold directly to central banks or other official sector holders.  These sales to official sector holders will be conducted at market prices and would shift official gold holdings without changing total official gold holdings.

As another G20 meeting rolls around, this time on home soil, the time comes once again for the economically curious but politically unconnected to wonder what is really happening behind closed doors. But while admiring the pageantry, chuckling at the awkward group photos, and parsing the joint communiqués like newly found Dead Sea scrolls, the overwhelming majority of observers will miss the meeting's dominant theme: hypocrisy.

Everyone agrees that the principal agenda item in Pittsburgh will be the need to rein in the 'global imbalances' that created the late economic crisis. Everyone also agrees that these imbalances involve too much spending and borrowing by Americans and too little of both by the Chinese and other developing nations. In his remarks this week at the United Nations, President Obama used his peerless rhetorical skill to frame the issues clearly and plainly. Noting that a return to pre-crisis economics is impossible, the president assured the world that his administration will pursue policies to increase savings and decrease spending at home and challenged his Chinese counterparts to enact measures with the opposite effect in their own country.

The Obama Administration waited until the wee hours of September 11th, 2009 to quietly inform Americans of its decision to slap new tariffs against low-end tire imports from China. Coming only days before this week's important G-20 meeting in Pittsburgh, an occasion when China will likely renew its campaign to push the world towards a post-dollar economy, the timing of the announcement seems particularly ill-advised. To be frank, it is like waving a red flag in front of a bull. It is not surprising that China instantly retaliated with their own duties on U.S. auto parts and agricultural products.

The Administration's action could be simply explained by the president's need to mollify the trade unions that played a big role in his ascendancy to power. However, the equation may be more complicated.