Search for the Gold Truth -Bill Murphy

Section:

The Christmas, end-of-year holiday season is often a time of reflection for many of us. As a result of the Terrorist attacks and warring strife in the world, the closing out of 2001 may be more poignant than most years. As chairman of The Gold Anti-Trust Action Committee, it certainly is for me.

Chris Powell and I will soon commence year four in our effort to expose the manipulation of the gold price. From day one we stated that our main goal was to expose the "truth" about the gold market. That is what we told the Speaker of the House, Dennis Hastert; the chairman of the Subcommittee on Domestic and International Monetary Policy, Spencer Bachus; the chairman of the House Joint Economic Committee, James Saxton; and the President of the United States, George W. Bush, via his private fax.

Over the past four years we had discovered massive amounts of evidence of gold market manipulation. None of that evidence contradicts our initial assertion that gold was not allowed to rise in price due to an orchestrated effort of certain bullion banks. Unfortunately, we have learned the gold price manipulation extends into the International Monetary Fund, the Bank for International Settlements, the Federal Reserve Bank of the United States and the U.S. Treasury's Exchange Stabilization Fund.

It is not a pretty picture. We are talking about the most powerful and wealthiest institutions in the world. Who wants to take them on under any circumstances?

That is especially the case for the world's major gold producers that count on the bullion bankers for financing and on the politicos for mining rights, permits, etc.

To question these powerful institutions is to challenge the established elitists of the world.

But, that is just what must be done if "truth" is to remain a standard to be aspired to. It saddens me to say that GATA has found out the tedious way the "truth" is often sacrificed by the establishment and mainstream press to preserve the interests of "big money." How else can you explain the three-year U.S. media blackout of GATA and Reg Howe's ongoing lawsuit against The Gold Cartel in U.S. District Court for Massachusetts?

Fortunately, that has not been the case in South Africa. The GATA African Gold Summit held in Durban on May 10, 2001 was covered by all the major South African press and covered for two days by the South African Broadcasting Company. All the major gold producers in South Africa have also financially supported the Gold Anti-Trust Action Committee's search for the "gold truth". We are most thankful for their generous contributions and appreciation of the efforts of the GATA camp.

One of those supporters in South Africa is AngloGold, the world's largest gold producer. Their highly respected CEO, Bobby Godsell, is also the chairman of the World Gold Council. He is most unique in that he is willing to share his thoughts, ideas and opinions with AngloGold shareholders over the Internet. It is most admirable and reflects a most serious "truth-finding" effort on his part.

The following is a correspondence between Le Metropole Cafe member and GATA supporter, Jim Bruce, and Bobby Godsell. With all the commotion in the gold world these days, I think you will find the exchange illuminating:

Dear Jim,
I have no problem with your sharing any part of our correspondence as you see fit.
Have a good Sunday!

Bobby Godsell

Dear Mr Bruce,

Thank you for your email. For ease of reference I offer you a response to your five questions, under each question, and simply to distinguish answer from question I have put the answer in capitals. Please do not hesitate to come back with a further response. I know I work with less than full information, and value what I have learned from many sources, including email!

Regards

Bobby Godsell

From: Jim Bruce
To: Bobby Godsell
Sent: 2001/12/15

Mr. Godsell,

It is an honor to write you sir and thank you very much for the time you take with this email.

I am an AU shareholder (thru a number of funds) and am in my mid-60's. I own my own computer services company in upstate South Carolina. I have been a gold buff for many years, going back to at least the early eighties.

Frankly sir, I am frustrated because I cannot help but believe the gold markets have to have been manipulated over the last few years. Nor can I understand why, if it is not true, the WGC is not standing up to that or promoting with gusto, gold as primarily having monetary value and being an integral part of ones investment portfolio, rather than push an agenda to sell jewelry.

I've read some of your commentary on the net and respect your views. I have also followed GATA and Bill Murphy and visited LeMetropole Cafe many times.

While understanding that Mr. Murphy seems eccentric at times, and can also get quite angry and frustrated thereby ticking off the gold establishment, he and his team do 'throw enough wood on the fire' to make the average person lean towards manipulation as the only logical reasoning for the suppression of gold prices. With half of the larger mines, the WGC, the Fed, bullion banks, most of the news media and central banks all ignoring him without comment (other than to call him a 'loon' from time to time), it does make Mr. Murphy's accusations or conspiracy theory all the more believable, as well as ominous to the average investor and, the rapidly growing better than average investor.

I pray I do not insult your intelligence with my comments or the following questions, it is just that there is so much 'stuff' out there and I'm just a little fella trying to make a living and leave my family a few bucks when I'm gone.

Some questions if I may:

1. Since no one in the gold industry has refuted GATA's evidence, why would it not be possible to invite a Bill Murphy or Reg Howe to London to present that evidence to the World Gold Council? It sure would clear the air for a lot of folks like me. Regardless of who would wind up being right. If not, could you give me a logical reason why you wouldn't invite these folks?

SEVERAL RESPONSES:

1.1 REG HOWE IS IN COURT AT THE MOMENT. GOING TO COURT HAS THE ADVANTAGE OF REQUIRING THE LITIGANT TO VERY SPECIFICALLY FORMULATE HIS CASE, AND REQUIRING THOSE HE ACCUSES TO VERY SPECIFCALLY FORMULATE THEIR RESPONSE.

1.2 I CONTINUE TO VALUE THE ROLE OF BILL MURPHY, CHRIS POWELL, GATA AND THEIR FRIENDS. I THINK THEY HAVE RAISED MANY ISSUES. ISSUES SUCH AS MARKET MANIPULATION ARE SERIOUS ALLEGATIONS REQUIRING A SERIOUS FORUM, SUCH AS A COURT OF LAW. THERE ARE A NUMBER OF OTHER ISSUES ON WHICH I THINK GATA HAS DONE GOOD SERVICE TO THE GOLD INDUSTRY AND ALL ITS STAKEHOLDERS.

I CONTINUE TO THINK THAT THE LEVEL OF DISCLOSURE ON GOLD LENDING BY BOTH CENTRAL BANKS AND BULLION BANKS LEAVE MUCH TO BE DESIRED. GOLD PRODUCERS ARE REQUIRED TO DISCLOSE IN GREAT DETAIL (EVEN MORE SO SINCE FAS 133) AND DO SO. WE AS A COMPANY HAVE CALLED PUBLICLY AND LOBBIED PRIVATELY FOR GREATER AND MORE REGULAR AND MORE MEANINGFUL DISCLOSURE OF LENDING ACTIVITY BY BOTH CENTRAL BANKS AND BULLION BANKS.

1.3 THIS COMPANY HAS IN THE PAST MADE A FINANCIAL CONTRIBUTION TO GATA. I HAVE TRIED SEVERAL TIMES (UNSUCCESFULLY - NOT THROUGH LACK OF EFFORT ON MY OR HIS PART) TO MEET BILL MURPHY/ I WILL CONTINUE TO TRY.

1.4 I CAN SEE MERIT IN A MEETING BETWEEN BILL AND THE WORLD GOLD COUNCIL PUBLIC POLICY STAFF, ESPECIALLY ROBERT PRINGLE, WHO IS THE INTERFACE BETWEEN THE WGC AND THE CENTRAL BANKS. I WILL PURSUE THIS.

2. Assuming you win the bid for Normandy, is AngloGold's interest in a lesser or slower liquidation of Normandy's hedge book than would be in Newmont's case? Might it be greater?

2. MY SENSE IS THAT BOTH NEWMONT AND OURSELVES WOULD APPROACH THE NORMANDY HEDGE IN THE SAME WAY, AT LEAST FOR THE FIRST LITTLE WHILE. WE BELIEVE THAT NORMANDY IS OVERHEDGED, AND WE WOULD DELIVER INTO HEDGE CONTRACTS AS THEY BECAME DUE, AND PERHAPS BUY BACK PARTS OF THE BOOK AS ECONOMIC CIRCUMSTANCES MADE THIS POSSIBLE.

WHERE WE WOULD PROBABLY DIFFER IS THAT WE WOULD NOT RUN THE NORMANDY BOOK DOWN TO ZERO. WE THINK THAT A MEASURE OF FORWARD SELLING IS A PRUDENT PART OF BEING A LARGE PRODUCER: SIMILAR IN MY VIEW OF A LARGE PRODUCER OF ANYTHING SELLING SOME PART OF HIS PRODUCTION IN TERMS OF LONG TERM CONTRACTS. IF WE COULD DEAL DIRECTLY WITH END USERS THIS WOULD BE ALL THE BETTER. I DON'T WANT TO MAKE TRADERS RICH!

3. As chairman of the WGC, can you comment on whether the council has any special interest in United States policy toward gold, and particularly in the accounts of the Exchange Stabilization Fund, in which the gold market analyst James Turk claims to have found evidence of improper government involvement in the gold market? Seems a bit scary to me.

THE WORLD GOLD COUNCIL BELIEVES THAT GOLD HAS A VALID, INDEED CENTRAL ROLE TO PLAY IN THE FOREIGN RESERVES OF ALL NATIONAL BANKS. IT IS THE ONLY ASSET THAT IS NOT SOMEBODY ELSE'S LIABILITY. IT IS ALSO THE MOST LIQUID INTERNATIONAL CURRENCY AFTER THE DOLLAR. THE WGC IS CONSTANTLY ACTIVE ENCOURAGING PRESENT HOLDERS FIRSTLY NOT TO SELL, SECONDLY IF INTENT ON SELLING, TO SELL IN A WAY THAT DOES NOT DISRUPT MARKETS (SEE SWITZERLAND IN CONTRAST TO BRITAIN, IN THIS REGARD). IT ALSO HAS A CAMPAIGN TO PERSUADE BANKS TO BUY MORE GOLD RESERVES, WHICH IS HAPPENING (SEE RUSSIA AND CHINA FOR EXAMPLE).

IN REGARD TO THE UNITED STATES ALL OF THE ABOVE APPLIES. HOW DETAILED THE DISCUSSION IS ON MATTERS SUCH AS THE ESF I DO NOT KNOW AND WILL ENQUIRE.

SOME OF THESE ISSUES ARE DEALT WITH IN THE REG HOWE COURT CASE.

4. You stated that AngloGold wants to reduce its own hedging and especially Normandy's hedging for market-related reasons. Can you share those reasons with an investor like me, or at least comment on the your anticipated prospects for the gold price?

OUR POLICY HAS BEEN TO HEDGE A MAXIMUM OF 50% OF FIVE YEARS PRODUCTION. THIS IS MODEST BY AUSTRALIAN STANDARDS. WE HAVE NEVER REACHED THIS LIMIT. WE SEEK ONLY THAT NECESSARY LEVEL OF REVENUE SECURITY TO ENSURE THAT OUR COMPANY CAN BE CONSISTENTLY PROFITABLE, AND THAT WE ARE ABLE TO CONTINUE TO BE A SIGNFICANT DIVIDEND PAYER.

FOR NOW, WE BELIEVE THAT THERE IS MUCH MORE UPSIDE THAN DOWNSIDE ON THE GOLD PRICE, AND INDEED OUR PREFERRED SCENARIO ON THE GOLD PRICE WOULD SEE A PRICE IN THE EARLY $300'S FROM 2003. HOWEVER BEING CONSERVATIVE WE CONTINUE TO PLAN THE COMPANY AT SPOT PRICES.

BECAUSE OF THE ABOVE WE HAVE RUN OUR HEDGE DOWN FROM 18 MILLION OUNCES SOLD FORWARD AT 1 JANUARY 2001 TO 14 MILLION TODAY. WE ARE LIKELY TO CONTINUE TO RUN THE HEDGE DOWN IN PREVAILING ECONOMIC CIRCUMSTANCES.

5. Does the WGC have a lobbyist in Washington and/or any contact with the U.S. Treasury Department and the Federal Reserve Board about gold policy?

THE WGC DOES NOT HAVE LOBBYIST PER SE ANYWHERE. IN THE US IT DOES HAVE A STAFF MEMBER WHO HAS BEEN PROMOTING INSTITUTIONAL INVESTMENT IN GOLD BULLION IN THE US (SCOTT RAM) AND HE HAS HAD SOME CONTACT WITH THE TREASURY. THE CLOSEST THE WGC CAME TO THE ROLE YOU DESCRIBE WAS ITS ACTIVE OPPOSITION TO THE PROPOSED SALE OF IMF GOLD RESERVES TO FUND THIRD WORLD DEBT - A CAMPAIGN THAT WAS SUCCESSFUL.

Thanks again for your time.

Jim Bruce
brucej@infoave.net

HOPE THIS HELPS!

BOBBY GODSELL

-END-

On behalf of GATA, I have been to Vancouver and Toronto in Canada: New York twice, Washington, D.C. 3 times, New Orleans twice, Denver, Austin, Texas and Fairbanks, Alaska in the U.S.; Paris; and to Johannesburg twice, Durban twice, Cape Town and Pretoria in South Africa.

On January 7 I travel back to Washington, D.C. to attend a conference titled "Federal Reserve: Myth vs. Reality" at the National Press Club and meet with Robert Auerbach, a conference coordinator, who will speak about waste and abuse in the Federal Reserve.

Auerbach, a former economic advisor to the House Joint Economic Committee, wrote "That Shreddin' Fed" in the December 10 Barron's:

Just 18 minutes of Watergate tapes were erased, while the Fed's "edits" veil years of historic record
By Robert D. Auerbach

"The FOMC also has shredded its unedited transcripts for 1994, 1995 and 1996. FOMC members were told in 1995 that, even though they were "not permitted" to discard "raw transcripts" of meetings before 1994, future unedited transcripts would be "thrown out" and only transcripts edited by the Fed would be retained."

This is most important to GATA because of our own evidence of an extensive cover-up of the manipulation of the gold price, evidenced in part by our own discovery in the 1995 FOMC transcripts.

At a January 1995 Federal Open Market Committee meeting, Virgil Mattingly, the general counsel to that committee made the following statement:

  • "It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The statute [31 U.S.C. s. 5302] is very broadly worded in terms of words like 'credit' -- it has covered things like the gold swaps -- and it confers broad authority."

The GATA Army bombarded Senators, Congressmen, the U.S. Treasury and Alan Greenspan asking for an explanation of this stated reference to ESF gold swaps. This was pursuant to our Army receiving hundreds of letters from Senators and Congressmen via the U.S. Treasury that the ESF "has not held any positions in gold since 1978."

The heat became so intense that Greenspan felt compelled to respond to Kentucky Senator Jim Bunning by forwarding a memo to him that Mattingly had written Greenspan. Mattingly stated the following:

  • "Given the passage of time, some six years, I have no clear recollection of exactly what I said that day but I can confirm that I have no knowledge of any "gold swaps" by either the Federal Reserve or the ESF. I believe that my remarks, which were intended as a general description of the authority possessed by the Secretary of the Treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled."

That just does not cut it and fits right in line with Professor Auerbach's revelations.

It would be my pleasure to meet with Bobby Godsell anytime, anyplace subsequent to the Washington trip. While I would like to present our evidence of the manipulation of the gold price to him, a full examination of that subject can be left to the U.S. Federal Court for the time being, as he so notes.

There are other issues that can be immediately addressed that could have a dramatic impact on the price of gold, the South African Government, gold producers and people of sub-Saharan Africa:

1. AngloGold reduced its hedges 4 million ounces so far this year. Many other gold producers have also reduced their hedges. Why has it had no impact on the gold price?

2. At the GATA African Gold Summit, macro-economist Frank Veneroso presented 6 different methods he used to calculate central bank gold loan numbers of 10,000 to 16,000 tonnes - numbers two to three times those acknowledged by the gold industry. GATA has evidence that the central banks and The Gold Cartel are flagrantly trying to hide the true numbers from the general public.

The clue to the startling discrepancy between the Veneroso numbers and the ones used by the gold industry may lie partly in the treatment of gold swaps by the central banks. For example, the IMF was asked:

Why does the IMF insist that members record swapped gold as an asset when a legal change in ownership has occurred?

The IMF answered:

    "This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets. (see Data Template on International Reserves and Foreign Currency Liquidity, Operational Guidelines, para. 72,")

Yet, the following can be found on the central bank of The Philippines website:

    "Beginning January 2000, in compliance with the requirements of the IMF's reserves and foreign currency liquidity template under the Special Data Dissemination Standard (SDDS), gold swaps undertaken by the BSP with non-central banks shall be treated as collateralized loan. Thus, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap."

The central banks of Portugal, Finland, and the ECB itself, all confirmed (in writing) the Philippine's treatment of gold swaps to GATA's Andrew Hepburn.

Don't the governments of the sub-Saharan African gold producing countries, the gold producers, and the World Gold Council deserve to know what the truth is? GATA would like to see an immediate clarification on this issue from the various central banks, the IMF and the BIS.

That truth could be incalculable to the well being of the poor in sub-Saharan Africa, for GATA believes if the truth were known the gold price would rise above $600 per ounce.

3. Former U.S. Treasury Secretary Lawrence Summers and present U.S. Treasury Secretary Paul O'Neill have refused to answer any questions asked of them by many Senators and Congressman. What are they afraid of revealing and why have they been silent on this serious issue for 3 years? The Gold Anti-Trust Action Committee would like to formulate a series of questions for Secretary O'Neill, to be presented to him at the highest of "official" levels.

In ending, I would like Bobby Godsell and all our gold producer supporters around the world to know that nothing touched Chris Powell and I more than the following e-mail. It says it all for us and reinforces our beliefs that we are doing the right thing and going in the right direction:

My name is Hendrick Masemola from South Africa. I learned about your great work in the December issue of New African magazine and I also went through your web site.

All I can say is that, you are doing a wonderful job. I am very touched by your courage for truth. I am also aware of the risks that you are putting yourselves in together with your beloved families in search for truth.

I also think that you are aware that you are taking on the big guns who won't just sit down and watch you guys exposing them, if not taking away their daily bread. I can only say that, now that you have go this far please do not give up. The very same truth that you are after will set you free.

And if your goals are not achieved now know that an awareness has been created, and we will take the fight on, and if we fail, we will make sure that the coming generation continues until the original goal is achieved, of which I think wherever you guys are going to be, you will be happy.

I am a masters student in politics at the University of South Africa (UNISA) and I am employed by the Department of Politics as an Academic Assistant, I wish that we can learn about this kind of politics because, I think that it affects our lives directly, rather than the philosophy of Aristotle and so ever.

On behalf of the poor people that you are fighting for, those who are aware of your work and from those who are not. From those who can read and from those who cannot. I would like to say thank you and please do not give up and never let the sun go down on us.

Hendrick Masemola

Thank you Hendrick, for putting so much into the proper perspective as the year 2001 soon fades into the history books.

BILL MURPHY
CHAIRMAN
GOLD ANTI-TRUST ACTION COMMITTEE