Frank Veneroso''s report to the GATA African Gold Summit

Section:

10:35a ET Thursday, May 24, 2001

Dear Friend of GATA and Gold:

The following dispatch from yesterday apparently
didn't make it through to everyone on our email
list, so I'm sending it again in the hope that
those who get it twice will forgive the
duplication.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

South Africa Watch:
Gold Spike Punctures Banks' Cozy Cartel

By Adam Aljewicz
Dow Jones Newswires
May 23, 2001

JOHANNESBURG -- The latest run-up in the gold price has left
a lot of investment bankers nursing extremely sore positions.

The reason is that gold has risen more in the last two weeks
than in the past two years. You've probably heard all of the
reasons and more, but just in case you've been in
geosynchronous orbit for a while, market commentators
have cited inflation, technicals, fundamentals, rising oil
prices, and rising tensions in the Middle East.

The usual suspects, I hear you cry.

But whatever the reason there seems to be something
much more sinister going on.

The Federal Reserve and other financial institutions stand
accused of trying to force down the price of gold and faces
possibly embarrassing revelations if a legal case against
top financial institutions gets under way.

A group of disgruntled gold investors collectively calling
themselves the Gold Antitrust Action Committee, under
lawyer and gold analyst Reg Howe, is pressing for a full
judicial hearing of its claims that the Bank for
International Settlements, central banks, and investment
houses have colluded to keep the gold price down,
because they all stand to lose a packet if it goes up.

If allowed to go to the discovery stage, obliging banks
to reveal their complete documentation, the case might
force a number of U.S. Federal Reserve officials, including
Fed chairman Alan Greenspan, on to the stand to be
cross-examined on their motives. Or course, GATA's
case may well be a Trojan Horse, but the case, if it
continues, will reveal true motives on both sides.

"For people who are short of gold, the high gold
price is a disaster," said a South African gold mining
executive, requesting anonymity.

"And they'll do whatever they can to make sure
sentiment doesn't turn positive. But don't print that
or I might be shot on the way home," he said.

A decision on whether the case will go to discovery
is earmarked for the end of June.

Lease Rates

Commentators have cited a recent World Gold
Council meeting for gold's rally, but who's taken
any notice of the WGC in the past few years?
Not gold. Some say it's the market's technicals,
but technicals are, more often than not,
kick-started by the fundamentals, and these haven't
changed in years. Demand still exceeds mine supply.

Some say it's inflation, but inflation has been rearing
its head for a while now and anyway, the past few
years have seen a glut of gold analysts arguing that
gold's relationship with inflation went out years ago.
Some even venture that the relationship was never
real and just a cruel joke invented by former
governments to prop up its value.

Tensions in the Middle East and rising oil prices?
Gold's seen it all before.

More significantly, though, are reports that central
banks are no longer lending gold to commercial
banks as aggressively as before, so lease rates
have risen to reflect the relative scarcity on the
market, driving up the cost of borrowing the metal.

This means that speculators who have borrowed
gold in the past at lower prices, expecting to pay
it back later, have been heavily squeezed. U.S.
institutions are outraged.

When gold rallied to $284/oz on Comex Friday
both Chase and Goldman Sachs were said to have
been selling with every ounce they could muster.
Every time it approached $275/oz they sold heavily
to drive the price lower still.

Some would say this reeks of desperation, but the
bears say gold's rally is inexplicable, a flash in the
pan, that gold's fundamentals don't warrant a higher
price, that the demand out of India is purely
seasonal, and that the price will plunge to the low
$260's before too long.

If it does, the banks will be popping the champagne
corks down at the Plaza Hotel.

The bulls, meanwhile, point to tightening lease rates,
inflation fears, and talk the Bank of China is converting
its dollar reserves into gold -- all factors the banks
don't want to know about.

The case continues ... in court?