Portugal says most of its gold is gone and people are coming for the rest

10:48p ET Wednesday, January 15, 2003

Dear Friend of GATA and Gold:

Flash! JP Morgan Chase has been compelled by
a reporter for a foreign news agency to
answer questions about its gold derivatives,
and some financial analysts have responded
skeptically to the firm's explanation.

The story below was distributed today by AFX
News, a division of the major French news
service, Agence France-Presse.

The story wrongly implies that GATA has been
spreading quot;rumorsquot; about Morgan Chase.
Actually, GATA has been spreading only the
data on Morgan Chase that is on file at the
U.S. Office of the Comptroller of the
Currency, and everything GATA has said about
the firm is recorded in public in our archive
on the Internet here:

a href=http://groups.yahoo.com/group/gata/messageshttp://groups.yahoo.com/group...

The story's last sentence is obviously some
silly misunderstanding, since it asserts that
quot;GATA denies it has a long position on gold.quot;
GATA is as long as could be on gold and would
be longer still if GATA Chairman Bill Murphy
hadn't tried drawing to an inside straight in
a poker game at a mining camp near Vancouver
last year.

No matter, for the AFX News story is
remarkable simply for its attempt at real
journalism. A reporter actually picked up the
telephone and tried holding a powerful Wall
Street firm to account. More than that, she
tested the firm's assertions with financial
experts, and quoted them unfavorably about
the firm.

As far as GATA knows, this has never been
done before. Maybe the financial world can be
changed, as GATA has sought to change it.
Maybe even the news media can be changed.

Please distribute this story as widely as
possible. It will raise questions and maybe
give others some aspirations to journalism.

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

* * *

JP Morgan says risk exposure
in gold derivatives less than $10 million

By Anupama Chandrasekaran
AFX News
a href=http://www.iii.co.uk/shares/?http://www.iii.co.uk/shares/?/a
type=newsamp;articleid=4556493amp;action=article

NEW YORK (AFX) -- JP Morgan Chase, answering
charges by a pressure group that it may be
facing excessive risks in the gold market but
not disclosing them, said its exposure to
gold including derivatives is less than $10
million.

JP Morgan was responding to allegations by
the two-person Gold Anti-Trust Action
Committee (GATA), a pressure group which
alleges bullion banks and central banks are
conspiring to rig prices in the gold market.

The US Securities and Exchange Commission
(SEC) is now being asked to arbitrate a long-
running spat between JP Morgan and GATA which
has generated a steady flow of conflicting
claims, rumors, accusations, and denials with
few hard facts.

Both sides are calling on the securities
regulator to investigate their claims about
the other party. GATA asked the SEC last week
to investigate its suspicion that JP Morgan
has a higher risk exposure to fluctuations in
the price of gold than what it has
acknowledged publicly.

GATA's letter to the SEC spelling out its
allegations followed JP Morgan's request to
the regulator on Jan. 3 that it investigate
rumors the bank was trying to keep the price
of gold down and covering up losses incurred
from the recent rise in gold prices.

JP Morgan Chase has registered $41 billion in
gold derivative contracts as of the third
quarter last year in its filings with the US
Office of the Comptroller of the Currency.
This is the notional value, or the sum of the
value of different contracts of the bank's
clients holding different positions, long or
short, on the contracts.

Derivatives are financial instruments that
derive their value from another underlying
asset, like gold. The most common derivatives
are futures and options.

quot;On any given day, JP Morgan's exposure to
the gold market including derivatives is less
than $10 million,quot; a bank spokesman told AFX
Global Ethics Monitor.

quot;The risk of contracts is held by our clients
and we actually don't have any risk
associated in the contracts.quot;

Analysts said that sorting out the
conflicting claims comes down to finding out
for sure which contracts JP Morgan holds on
gold, and if it is betting the price of the
precious metal will rise or fall -- two facts
hard to pin down.

Brock Vandervliet, vice president of equity
research at Lehman Brothers, said the amount
in gold derivative contracts Morgan Chase has
disclosed is not excessive for a large bank.

However, Vandervliet said the amount is
larger than what HSBC and Citibank reported
in the third quarter of last year. HSBC had
notional amounts of $14.2 billion in gold
derivative contracts while Citibank had $12.9
billion.

Vandervliet also said that gold is not a
major part of JP Morgan's derivatives
business and hence may not be that big a
risk.

But analysts agreed the information provided
by JP Morgan is not enough to understand the
actual risk involved.

quot;There are two things that are absolutely
critical to know which make it impossible to
conclude anything really powerful,quot; said
Vandervliet.

quot;First, is the net trading position long or
short? We don't know. Second, how much of
these contracts are held by JPM versus held
for customers supporting a trading book and
therefore not presenting JPM with a material
risk? This is a weakness of the disclosure
and makes firm conclusions very difficult.quot;

The dispute between JP Morgan and GATA, which
gets funding from several small gold
companies, goes back to late last year when
GATA accused the bank of trying to run down
the prices in the gold market.

GATA has in the past also accused the US
Federal Reserve Bank, the International
Monetary Fund, and other bullion banks like
Goldman Sachs of price rigging.

On Jan. 6 GATA consultant James Turk wrote to
the SEC asking for an inquiry.

quot;It's about time that we learn the truth
regarding JP Morgan Chase's activity in the
gold market, the full extent of its gold
exposure, and whether it used gold loans to
fund the so-called 'disguised loans' that it
arranged for Enron,quot; Turk said in the letter
to the SEC.

A SEC spokesman said the organization does
not comment on investigations, ongoing or
otherwise.

Some analysts are also skeptical of the risk
exposure disclosed by JP Morgan.

quot;They have to divulge only material risk that
is a risk large enough to have impact on the
company's assets,quot; said Richard Bove,
managing director of Hoefer and Arnett, a
research group specializing in financial
companies. quot;We accept the amount disclosed as
a matter of faith.quot;

GATA disputed the $10 million figure given
the amount of gold derivative contracts
booked by JP Morgan, citing the bank's
alleged interest in keeping the price of gold
down.

Gold prices are currently at their highest
levels in six years and GATA claims JP Morgan
could be losing money at current prices.

Some industry experts are questioning the
veracity of GATA's claims.

quot;I think they (GATA) could have had long
positions in gold and are always complaining
when prices go down, never up,quot; said Randall
Dodd, director of the Derivatives Study
Center, a non-profit group researching on
financial markets.

Investors who have a long position in gold
derivatives profit when gold prices go up.
GATA denies having a long position on gold.

- - - -

anupama.chandrasekaran@afxnews.com

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----------------------------------------------------

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WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Centennial Precious Metals
3033 East 1st Ave.
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www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com

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222 South 5th St.
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www.ColoradoGold.com
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Gold@gwe.net

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7850 Metro Parkwa
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Greg Westgaard, Sales Manager
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Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

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3601 Park Center Building
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1-800-822-8080 / 952-929-1129
fax: 952-925-0143
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Contacts: David Schectman,
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15018 North Tatum Blvd.
Phoenix, Arizona 85032
a href=http://www.buycoin.comhttp://www.buycoin.com/a
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
figoldstein@buycoin.com

----------------------------------------------------

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

a href=http://www.gata.org/creditcard.htmlhttp://www.gata.org/creditcard.html/a

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Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

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a href=http://www.Crowne-Gold.comhttp://www.Crowne-Gold.com/a
Holding: GATAComm@aol.com

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a href=http://www.e-gold.comhttp://www.e-gold.com/a
Gold Anti-Trust Action Committee Inc.
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Donors of $750 or more will, upon request,
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