News

October 01, 2009

The Opaque World of Gold Derivatives

Michael Coulson, Author of The Insiders Guide to the Mining Sector

In the last couple of weeks the issue of gold derivatives has returned to centre stage following the massive Barrick share sale to raise funds to reduce its gold hedge position materially. It virtually coincided with an announcement by the Gold Anti-Trust Action group (GATA) that the US Government, through the Federal Reserve, has refused its request to view documents under the Freedom of Information Act relating to US gold swaps over the last decade or so. GATA have also got their hands on some recently released documents from 1975 when then Federal Reserve Chairman, Arthur Burns, outlined in some detail the Fed’s gold policy. Much of that policy consisted of actions taken to control gold market sales and purchases by other central banks including France and Germany, which rather undermines the view of some commentators that the US Government has no interest in the gold market whatsoever.

The Barrick and FIA events, whilst not related, are not completely unconnected, for it is Barrick that GATA has been sniping at for some years over what it believes is Barrick’s central role in acting as a stalking horse in the gold market for a range of entities, including the US Government, anxious to keep the price of gold down and thereby calm nervous currency markets which have been in a state of high excitement since the financial crises of the late 1990s.  The theory put forward for...