Tuesday, June 29, 2010

Selling Secrets About...Gold?

Heidi Moore of Forbes magazine managed to flush out an interesting wrinkle in the Russian espionage scandal: one of the data that the accused spies flushed out was prospects for the gold market.
James G. Rickards, senior director for market intelligence at Omnis, pointed us to the fact that the FBI complaint mentions that the global gold market was one of the key sources of interest of the Russian Federation and its intelligence agency, SVR.

"On a number of occasions, the SVR specifically indicated that information collected and conveyed by the New Jersey conspirators was especially valuable. Thus, for example, during the summer and fall of 2009, Cynthia Murphy, the defendant, using contacts she had met in New York, conveyed a number of reports to [Moscow] Center about prospects for the global gold market."

According to the complaint, the SVR responded in November 2009 that the information on the gold market was very useful and had been forwarded to Russia's Ministry of Finance and Ministry of Economic Development.

If Russia wanted information on the gold market, it would hardly be alone. In 2009, of course, gold jumped 24% in value, closing the year at $1,095 an ounce - a price that seems quaint now that gold is over $1249 an ounce, but was still the biggest story in the financial markets of 2009.

Murphy's alleged tips about the gold market must have been quite powerful. It's impossible to tell how they influenced Russian economic policy or thinking, but we can look at some of Russia's moves at the time and notice some striking trends that show that Russia dramatically reversed its stance on gold in late 2009.

Before October 2009, Russia had been planning to sell nearly 25 tons of gold into the market. In November 2009, however, one month after Murphy's alleged report to the SVR about gold, Russia started stocking up on the precious metal. In November 2009, Russia's central bank bought more than $1 billion of gold from the foreign exchange market in order to better control the price of the ruble, central bank deputy chairman Alexey Ulyukayev told Reuters at the time. Russia also said at the time that it might buy gold from the state repository, Gokhran....

How's about that. The alleged espionage ring had an influence on the Russian central bank's policy of buying gold. Geo-industrial espionage, with gold at the centre of it.

Part of me is wondering why they'd bother, given that forecasts are all over the place. It might have meant easy money for the alleged sellers of secrets.

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