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Where to from here?

The IMF has stated that the implementation of these new procedures will take some time, so there should be no expectation that central bank lending information will be publicized overnight. The decision to add this transparency to the gold market and institute correct accounting procedures was made over the course of many meetings and years of thoughtful discussion. What we will see as the result of these decisions is a more fair and equitable gold market for all participants where data impacting the market that was previously not available to all market participants will be published and available to the investing public. This new transparency will help drive investment demand in the future.

Authors Note: Blanchard began researching this issue to shine a light on the opaque nature of the gold market, a market that is, at times, dominated by the physical activity of one OTC segment of the market that is specifically designed to confuse the dissemination of information to market participants.

“The other advantage of the OTC market is its confidentiality and lack of transparency: business can be conducted privately, sheltered from the attention of other market participants, competitors, regulators and, of course, analysts! Gauging what is happening on the OTC market is more of an art than a science…Nevertheless, it seems that the following basic assumption holds good: under normal circumstances, the impact of the OTC market on physical supply and demand for gold bullion remains greater than that of the world futures exchanges.”

- Gold Fields Mineral Services (GFMS) Gold Survey 1996

Some commentary in the market regarding our original paper centered around the idea that changes to central bank gold reserve reporting was a non-issue and the focus of Blanchard’s research was to frighten the investing public with tales of market management or manipulation. Even the most cursory and limited review of our original paper and this addendum should underscore that this is an issue of disseminating market data and the transparency of trading information, not one of manipulation. The IMF has thought it appropriate for these changes to the gold market and we want our investors to be as informed on potential market impact as possible. This is research about the implementation of new market transparency and we believe our clients should have expert analysis of its coming impact on the gold market. If nothing else, this removes a large portion of the market supply figures previously been left to “guesstimates” on impact and size. Those changes that began in the gold market in 1999 with the implementation of the Washington Agreement on Gold will continue to drive renewed investor interest in the gold market in the future.

A transparent market is a healthy market and the gold market is getting healthier every day.

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