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Gold Closes March at $302.60, Up 18% in a Year
(April 2, 2002) Gold’s “perfect storm” continues, newly fueled by Japanese buying and the elevated state of war in the Middle East. Gold stocks roared as gold overcame a mini-correction and broke through the $300 barrier to the upside for the second time this year. Meanwhile last week, GATA’s lawsuit was dismissed in court, but what an interesting tale it’s uncovered…
One year ago, we wrote a tongue-in-cheek article bylined Sunday April 1, 2001. This April Fool’s Day article proclaimed the ‘death of gold,’ citing the then-prevailing price trends and sentiment so negative that soon you might go to your local materials recycling center to dump your unwanted gold in a bin next to those for aluminum, glass, and old newspapers.

In attempted humor, of course, timing is everything.

The next day, Monday April 2, 2001, gold bottomed out at $255.95 in London, and from that point was off to the races. Gold is now up 18% in twelve months, gold stocks have been the best-performing sector of the equities markets for the past six months, and gold is gaining new respect as a financial alternative.

On February 9, 2002, we presented the article “Gold’s Perfect Storm on the Horizon.” In that article we make the case that this is, finally, gold’s time to shine after a twenty-year hiatus. (You can access this and all our other past meanderings in the “Archives” section of the website) Since that time, we have seen Japanese retail demand help to drive the gold market. As a result of the Japanese economy’s ten-year skid and the precarious situation of many Japanese banks, as of April 1st the government of Japan has reduced many of the government guarantees on domestic deposits to a threshold of $75,000. This has lead to an 8-fold increase in demand for bullion gold in Japan as savers look for somewhere safe to put their beleagured yen.

"The whole Japanese story is bullish for gold. We're just six months into a bull run that's going to last a couple of years, so overall I'm looking for higher prices," Leonard Kaplan quotes a London-based bank analyst. Others are starting to notice gold, due chiefly to the phenomenal performance of gold stocks since the start of the year. We’ve even heard kind words about gold on CNBC lately!

This year’s April Fool’s Day article on the subject of gold ran in Barron’s on April 1, 2002, specifically the “Up and Down Wall Street’ column.

In this column, Alan Abelson begins his mention of gold by first acknowledging its sterling performance for the first quarter of 2002, with the S&P gold index up 24%, the Philadelphia Exchange gold and silver index up 30%+, and the CBOE gold index up 35%.

Abelson writes, “Just why gold bestirs itself at any given moment may be because of cosmic concerns – World War III, conflagration in the Middle East, another terrorist attack against a U.S. target – or mundane causes, such as Japanese panic buying on fears their economy is going even further down the tubes and may take their currency with it, or simply a burst of short covering.”

“We don’t pretend to have a fix on what’s goosing gold currently,” Abelson continues in his April Fool’s Day column, “But off of the record of the past two decades and in the absence of anything even resembling inflation, at this point gold seems at best a trade and, at worst, as the old saw has it, a hedge against capital gains.”

And as readers of Mr. Abelson’s cautionary columns during the booming equities markets of the 1990’s know, when it comes to capital gains avoidance, this is a man who knows of what he speaks.

Elsewhere, the case of Reginald H. Howe vs. the Bank for International Settlements, was dismissed by Judge Lindsay in Boston District Federal Court on March 26, 2002. The suit, filed on December 7, 2000, sought to bring to light the various manipulations in the world gold markets over the past five years or so, and it succeeded admirably in doing just that.

A great deal of information concerning the relationships and interactions among the bullion banks, the Federal Reserve, U.S. Treasury, the Bank for International Settlements, International Monetary Fund, the Exchange Stabilization Funds, and those very large piles of gold bullion that were once known as the United States Gold Reserve has come to light thanks to the efforts of Reg Howe, Chris Powell, Bill Murphy, James Turk, and a host of others in the GATA army.

We initially wrote about the Howe lawsuit here on December 11th and 21st, 2000. Other views of the gold manipulation story were published here on August 8th, August 25th, and September 1st, 2001. These are all available at our free access Archives section on this website.

I’m sure that the GATA team’s efforts are far from over, because the story of the manipulation of not only the gold markets, but of the contents of Fort Knox itself, just gets curiouser and curiouser. When we will ever read about it in the mainstream press, I can only guess.


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