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Gold's 400 Tonne Opportunity


IMF's planned precious metal sale just more market noise.

The International Monetary Fund (IMF) announced yesterday that another committee has approved its proposed sale of about 400 tonnes of gold.

I've commented before that these proposed IMF gold sales are basically noise to the gold market (and we don't even know if Congress will approve them yet either), but I thought I'd also point out that Anglogold Ashanti's (AU) planned 45% hedge book buyback by year-end (which was announced yesterday and comes to 194 tonnes) will cover about half of the IMF's proposed 400 tonne sale. I'm not even sure these IMF sales will occur given the present election year gridlock in the U.S. Congress.

I'd also note how gold continues to resist the downward pull of the euro. The stubborn precious metal won't trade below last week's lows, even as the euro slides to a new closing low and drives the dollar index back to last week's highs. The last correction of gold and the euro occurred in the November-December period after gold began to resist the euro's downward tug and diverge to the upside.

Given the rampant speculation we're seeing about the dollar rally (the explosion in volume of the Dollar Bullish Index Fund (UUP), last week), in a result of enormous speculative inflows, coinciding with the end of bounces in the dollar index in the past, it's more than likely signaling the same thing now.

As for the comments from the Federal Reserve Bank's Thomas Hoenig about the Fed possibly raising rates due to rising inflation (this explains why the dollar has a slight bid today), at least one Fed president is willing to admit that inflation is a problem.

Unfortunately, Hoenig doesn't vote on the Federal Open Market Committee (FOMC). Secondly, this is just more bluffing on the part of the Fed. It can't raise rates due to the continuing fragility of both the financial system and the economy, and everybody knows it. As Clint Eastwood would have said last night to Hoenig: "Go ahead, make my day."
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