GATA Chairman Murphy to be on nationwide broadcast in Canada on Saturday

By Thom Calandra, Editor
CBS.MarketWatch.com
Thursday, July 25, 2002

Gold has yet to reap the benefits of a misfiring stock
market. The metal's believers say the delayed gains
will make future bullion rallies among the most powerful
on record.

Indeed, this week alone, gold mining shares have lost
11 percent in a day and gained back 6 percent. Such
large percentage moves usually come only once every
four or five years. Gold mining shares, and the metal,
saw a steady flow of investor interest until early June,
when bullion indexes hit their highest levels in almost
hree years.

The good times saw holders of gold mutual funds
sitting on gains of 80 percent and more for the year's
first five months against steep losses for the overall
stock market. Yet against the backdrop of the stock
market's July swoon and a fading U.S. dollar, the
rallies for gold and gold mining shares stopped in
their tracks.

Those who were sure gold would keep feeding off
dollar weakness, Mideast turmoil, and the flight from
tainted corporate America are asking themselves
what happened.

quot;I am somewhat perplexed by gold's moves of late.
Lots of possibilities but none of them sound enough
to say, 'This is what is going on,'quot; says Barry Cooper,
precious metals analyst at CIBC World Markets in
Toronto.

Gold, the actual metal that is supposed to be attached
neither to corporate liabilities nor sovereign debt,
flirted with $330 an ounce in late May, giving the metal
an 18 percent gain for the year. That was the best
return for any class of investments in the world. Bullion
then came hurtling back to earth. On Thursday, spot
gold was $310 an ounce, down $1.

The mining shares, many of them having manufactured
100 percent-plus profits for their followers this year,
were hit hardest. As a group, gold mining shares in most
countries have lost 30 percent of their value since late
May/early June. At one point this week, shares of the
world's largest gold miner, Newmont Mining (NEM),
were back to where they were in late January.

quot;Gold has failed to break through $330 on two occasions,
and with gold needing to advance to continue to drive the
(mining) shares, gold shares were vulnerable to a selloff.
That vulnerability has been compounded by the wholesale
liquidation that's playing out on Wall Street,quot; says the
longtime editor of Gold Mining Stock Report
(www.goldminingstockreport.com), Bob Bishop.

To be sure, gold mining stocks are still far ahead of the
overall stock market for the past 12 months. The
U.S.-traded mining shares are up 10 percent for the past
year vs. an almost 30 percent loss for the Standard amp;
Poor's 500 Index.

Some point to hanky-panky on Wall Street as one
reason for the gold selling this month. Wall Street critics
say investment banks used large gold derivative positions
to finance failed companies such as Enron. J.P. Morgan
Chase and Co. (JPM), the largest issuer of gold derivatives
in the United States, is at the center of such speculation.

Others see banks, and the Wall Street community, being
forced to raise money in order to cover their gaping losses
from the plunging stock market. Thus, large banks are
selling gold to meet their fiscal obligations. Or so the
thinking goes.

Gold, like many commodities, is often the subject of
cloak-and-dagger talk. Yet few can pin down how, or
why, an investment bank manipulates the metal in
trading pits and on the global stage, where central
banks own vast supplies of bullion.

quot;As one would expect, there have been rumors galore
of manipulation,quot; says Adrian Day, a Maryland fund
manager and editor of Global Analyst newsletter. quot;One
might reasonably ask why today -- with stock markets
collapsing, and the derivative problems of J.P. Morgan
and Citibank (C) suddenly grabbing the headlines --
why would anyone chose today to dump his gold?
One cannot dismiss the possibility of official intervention
in the gold market.quot;

Brien Lundin, editor of one of the oldest bullion
publications, 31-year-old Gold Newsletter, also thinks
governments might be meddling in the gold market, just
as they do in currency trading. quot;On Monday, gold
reached $324 -- and the Dow was in free-fall. Something
had to be done and, over the next two days, the dollar
soared and gold dropped like a dead duck. The
intervention was obvious.quot;

Lundin's Jefferson Financial LLC stages one of the
year's biggest gatherings of gold and contrarian
investment advisers, the New Orleans 2002 Conference
in November. Newsletter editor Richard Russell and
mutual fund icon John Templeton will make
presentations this year. (See more on the conference
at www.neworleansconference.com.)

John Hathaway, manager of the Tocqueville Gold Fund
(TGLDX) in New York, is one of the metal's biggest
believers. His writings on miner hedging, derivatives,
and the thinly traded and easily moved gold-futures
markets are among the best on offer these days. quot;Gold
got hammered (earlier this week) because (Goldman
Sachs unit) J Aron had built up a short position
front-running against a central bank seller, probably
European,quot; says Hathaway. quot;A nice trade for them, and
I don't think there was more to it than that. Physical
buying had been absent for a month but started to
reappear at the low end of the range.quot;

Gold mining stock analysts, such as Cooper at CIBC in
Toronto, are sticking with their heady price targets.
Cooper sees gold going to $350 an ounce some time next
year. In a 100-page examination of gold and gold mining
shares, Cooper features a picture of a 78-ounce gold
nugget from Greenville, Calif. He uses the hunk of metal
as a launching point or why gold mining shares deserve
to be very expensive.

quot;Based on the spot price of bullion, the gold in the sample
is worth about $22,000 at spot prices. The specimen's market
value, however, is more than $60,000 given its rarity,quot; says
Cooper. quot;Gold stocks are also rare as an investment, with
a worldwide market capitalization of under $60 billion, or
less than 1 percent of the market capitalization for the
combined Samp;P 500 companies. Gold deposits are rare,
as any exploration geologist will tell you, and therefore,
premium valuations can be expected.quot;

At his California office, editor Bishop at Gold Mining Stock
Report is waiting for the next phase of the gold rally. quot;A
month ago I believed gold to be in the early stages of a
long-term bull market. Nothing has happened in the interim
to change that view.quot;

In Louisiana, Lundin at Gold Newsletter sees great things
ahead for those who stay the course on bullion. quot;The bad
news for gold investors is that the $325 price level will be
furiously defended by those who are on the wrong side of
the gold trend,quot; he says. quot;The good news is that, when it is
finally breached, some pretty amazing things are going to
happen for gold and gold stock investors.quot;