Turk looks at the South African rand price of gold

11:40a Saturday, December 20, 2003

Dear Friend of GATA and Gold:

GATA consultant Reg Howe has inspected the books of
the Bank for International Settlements, the Commodity
Futures Trading Commission, the U.S. Office of the
Comptroller of the Currency, and other financial
authorities for his new analytical essay, quot;Gold
Derivatives: Hitting the Iceberg.quot;

Howe's major conclusions:

quot;That producer hedge book reductions have had little
if any impact on total gold derivatives reported by
the BIS suggests, as does the absolute data itself,
that producer hedging never accounted for much more
than the very visible tip of a gold derivatives
iceberg consisting in major part of transactions
related to the gold carry trade, which never could
have grown to the size implied by the BIS data
without the active support of the G-10 central
banks....

quot;Clearing house rules require that losses to trading
accounts be posted each day at settlement. Losses of
the size incurred by the commercial gold shorts over
the past few months beg two tough questions: What risk
management system would allow losses of this magnitude
to accrue without mandating the closure of losing
positions? And are the central banks, directly or
indirectly, assuming the burden of these losses?....

quot;While gold derivatives reported by the BIS declined
slightly in this year's first half, the gold
derivatives of U.S. commercial banks, including J.P
Morgan Chase, rose in the second and third quarters
by nearly 1,000 tonnes. These increases, which came
at the same time that the commercial shorts on the
COMEX were raising their open positions to record
levels notwithstanding eye-popping mark-to-market
losses, lend further support to the hypothesis that
the commercial shorts consist primarily of bullion
banks with both heavy exposure to the gold carry
trade and substantial official support.quot;

Together with GATA consultant Mike Bolser's recent
study, quot;Government Intervention: Gold and Long-Term
Interest Rates,quot; which can be found here --

a href=http://www.gata.org/Bolser121803.htmhttp://www.gata.org/Bolser121803.htm/a

-- this research documents how central banks are
struggling to defeat free markets and deceive the
world about international economic policies and
conditions. This is essentially totalitarian
and unjust and thus is likely to have a bad end.

Howe concludes:

quot;The gold community has prospered more than most
over the past year. And having endured years of
oppression by government, not to mention ridicule
by establishment figures of all stripes and colors,
gold bugs have earned the right to enjoy their
good fortune. But real gold bugs are not
profiteers. They are freedom fighters. For them,
securing their own financial survival and that of
their families is important but not sufficient, for
they dream of a world in which gold is again the
international monetary numraire and where all
peoples and nations meet on a level economic
playing field characterized by free markets and
an absence of malignant government intervention.

You can find Howe's quot;Gold Derivatives: Hitting the
Icebergquot; at his Golden Sextant Internet site here:

a href=http://www.goldensextant.com/commentary26.html#anchor25233http://www.gol...

If you read nothing about markets over the next year
besides these works of Bolser and Howe, you still will
know more about what is really happening than if you
read the major financial publications from cover to
cover every day.

GATA is deeply grateful to Bolser and Howe for their
scholarship and courage.

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

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

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