From today's Gartman Letter...... (9-22)

COMMODITY PRICES HAVE FALLEN FROM THEIR HIGHS, but with the US dollar weakening once again, we can reasonably expect that the commodity markets will turn for the better sooner rather than later. In the case of gold, the market already is, for as one can see from the matrix of prices below, spot gold is back toward $1013 as write, and is also trading £620.15… higher in both instances from yesterday and in the latter, even compared to the level seen last Friday when gold
closed firmly.

Regarding the implications of the recent IMF gold sale announcement and the rumours regarding the possible purchase of that entire sale by the Chinese or by some other central bank, we are this morning reproducing the best article we’ve seen covering this circumstance, from our friends at The Bullion Desk (thebulliondesk.com). They wrote:

"On Friday, the IMF executive board formally
endorsed the sale of 403.3 tonnes of gold,
equivalent to 1/8th of its total holdings. The IMF
holds the third largest gold reserve after the US and
German governments, with 103.4 million ounces, or
3,217 tonnes of gold.

"First, the Fund would stand ready to sell gold
directly to central banks or other official sector
holders if there were to be interest from such
holders," the IMF said in a release. "Such
transactions would redistribute official gold holdings
without changing total official holdings."

According to UBS analyst John Reade, the
statement keeps the hope that the IMF's gold will be
sold directly to other central banks or sovereign
holders alive, even if there was no new detail about
the disposal programme in the release. "The
importance of this announcement is that the sale is
formally approved and - in theory - could occur at
any time."

In the past few years emerging countries like China
and Russia have increased their purchases of gold
as a means to diversify their reserves and move
away from currency risks.

On April 24, China revealed it has boosted its gold
reserves by 454 tonnes to 1,054 tonnes by the end
of last year since figures were released in 2003. The
country has now the fifth-largest gold holdings of
any nation in the world, coming behind Italy at 2,452
tonnes, and in front of Switzerland, at 1,040 tonnes,
according to data from the World Gold Council.

Meanwhile, Russia has also been very active in
increasing its holdings, with a 69-tonne addition in
2008 and an increase of over 62 tonnes in 2009
year-to-date. It replaced the European Central Bank
as the tenth largest gold holder in May and is now
looking to surpass the Netherlands, which hold
some 610 tonnes.

The Central Bank of Russia (CBR) stated back in
November 2005 that "it would be appropriate to hold
10 percent of its reserves in gold," which would
imply holdings of at least 1,000 tonnes of gold.

"There has been speculation for some time whether
the gold will be transferred directly from the IMF’s
vaults to the vaults of other central banks," Eugen
Weinberg at Commerzbank said. "However, as no
central bank has apparently shown any interest in
buying IMF gold, the sale should be via the market,"
he added. "It is feasible, though, that central banks,
including China’s, could acquire the gold at lower
prices via the market."

The gold sales will most likely be conducted through
the Central Bank Gold Agreement (CBGA), the IMF
said. A new five-year CBGA was unveiled on
August 7 by its 19 signatory members. It will start on
September 27, continuing the current agreement
that will end on September 26. The annual quota of
the CBGA3 will be 400 tonnes, down from 500
tonnes under the current accord, a figure that is now
likely to include sales by the IMF.

The fact that the IMF will sell its gold within the
agreement of the new CBGA is yet another
evidence of European central banks' lack of appetite
to sell, most of which remain major gold holders.

CENTRAL BANKS SEEN SHIFTING TO NET BUYERS
IN COMING YEARS

The official sector became a net buyer of gold in the
second quarter of 2009, mostly due to a sharp fall in
sales from the CBGA signatories and purchases by
other official holders like Russia, according to
GFMS. The consultancy in its recently updated Gold
Survey 2009 forecast further net purchases in the
second half of the year.

"Central banks in aggregate will continue buying
gold on a net basis in the second half...as sales
from CBGA members are expected to remain at
extremely low levels," it said. "There is some scope
for more scope for more buy-side interest to
emerge.The official sector will generate net demand
of more than 20 tonnes in the second half, resulting
in net sales for the full year of just 16 tonnes, which
would be the lowest annual total in over two
decades," it added. Once the IMF sales programme
is completed, the official sector as a whole to have a
broadly neutral impact on the market, GFMS said."

Finally, regarding China and commodities, we note that China is and has been a fervent and aggressive buyer of “stuff” around the world. To that end, we note that China’s sovereign wealth fund, China Investment Corp, bought 14.5% of the shares of Noble Group… a long standing client of TGL and one of the savviest commodity trading firms we’ve come to know over the years. For CIC, this is a wonderful decision for they’ve gained years of expertise in the markets that they would have taken decades to accumulate otherwise. Further, this serves only to show how serious is China’s intention of securing what it needs in the way of global commodities… “stuff”… to assure its long term economic growth. This is a win-win decision if we’ve ever seen one.