PRINCETON, NJ -- Bundesbank president Ernst Welteke has once again sought out the media to blab about Germany selling its gold. Yet again, the sell call comes as gold lays within reach of $300 an ounce. But this time the capping ploy failed.
Gold briefly fell below $297 an ounce on the news, but soon kicked up again as dealers parsed his comments and saw no reason for alarm. It punched through $298 at midday before settling down again near Friday's close.

Welteke last talked down the gold price in the final week of February with some suspiciously timed comments to Bloomberg about Germany diversifying its reserves. This time, Welteke called on Frankfurter Allgemeine Zeitung to say exactly the same thing.

It is curious that Welteke is so anxious to talk about gold sales since there is nothing that Germany can do until 2004 when the current Washington Agreement comes up for renewal or revision. There is no point reiterating the news since nothing new is offered.

More startling is his suggestion that Germany would be better served to invest in equities."We must consider in the medium term if we can't convert some of our gold - small volume and without pressurising the market - into securities," Welteke told the prestigious Teutonic journal.

Hong Kong tried this stunt in 1998 as a way of propping up the market as the Asian Contagion spread. It was roundly, and rightly, condemned for doing so since governments, let alone central banks, have no business viewing national reserves as just another portfolio.

The conflicts of interest and potential for abuse are too hideous to contemplate. Does anyone believe that a central bank invested in the equities market is not going to use its inside track on interest rates and money supply to fine-tune its holdings appropriately? It is impossible to think that a member of the European Central Bank council considers this an appropriate message to send, especially to emerging markets that would latch onto any precedent allowing the market to be fiddled.

It's enough to make a conspiracist of anyone.

Whatever Welteke's real intent, he has spent his best ammunition and the market is threading its own path. Adding to the intrigue is evidence that the relationship between the dollar and gold continues to deteriorate. It started to break down in December and there is currently no reliable statistical connection between the two if you regress the data back to the start of the year.

<ul> ~ Bundesbank's gold marionette</ul>
<center>

<HR>

</center>