Midas commentary for March 3, 2000

Section:

8:45p EST Wednesday, March 1, 2000

Dear Friend of GATA and Gold:

Here's tonight's "Midas" commentary at
www.LeMetropoleCafe.com by GATA Chairman Bill Murphy.

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

* * *

MIDAS COMMENTARY FOR MARCH 1, 2000

By BILL MURPHY
www.LeMetropoleCafe.com

Spot Gold $291.10, down 80 cents
Spot Silver $5.07, up 1 cent.

Technicals

The scandal grows. Meaningless, these technicals. Might
as well get to what this gold market is really all
about.

The CRB rose 3.32 today to close at 212.10. Even lowly
cotton was limit-up.

In that CRB rise was a $1.34 move up in the price of
crude oil. It finished the day at $31.75 per barrel.
April gasoline rose more than 5 cents per gallon to
finish the day at 99.35 cents per gallon, the highest
since the Gulf War, and heating oil (what warm weather
spell?) rose more than 3 cents to finish the day at
79.40 cents per gallon.

The dollar was finally clobbered too, as the yen rose 2
1/2 yen, while the euro rose around 80 points to 97.51.

All of that and still gold was bopped at the end of the
day by Chase Bank and the gold carry trade hedge fund,
Moore Capital. To make matters worse, there were rumors
on the Comex floor during the session that there were
PRODUCER BUY BACKS.

This just cannot be. The blatant manipulation by a
faction of the U.S. government and certain bullion
dealers becomes more apparent by the day.

Demand for gold around the world is at record levels,
many of the large gold producers are delivering into
their forward sales (which is reducing gold supply
hitting the physical market), and gold sales and
lending have been restricted by the European central
banks. Yet gold remains almost exactly at the same
price it has been at for three years.

GOLD IS NOT ALLOWED TO RISE IN PRICE NO MATTER WHAT.

The cries for a Congressional investigation into the
gold market will begin to grow, And soon there will be
one.

Silver acts like it wants to go right back up again.
Word is that the silver going into the Comex warehouses
will go right out again. The new total is 95,593,836
ounces, up 1.8 million ounces today. Just more games
being played in a precious metals market.

Saturday will be an interesting silver day as it is
expected that Warren Buffet will be required to
disclose (as part of a general disclosure) whether he
still owns his silver.

Fundamentals

One more bullet gone for the shorts:

"AMSTERDAM, Feb 29 (Reuters) -- The Dutch central bank
said on Tuesday it sold 5.5 tonnes of gold last week
and will stop its sales programme until at least
September since it has achieved its 100-tonne target.

"'We've sold 100 tonnes for the one-year period from
September to September. Then a new period starts, but I
cannot confirm that we will start selling gold in
September, October or even November,' central bank
spokesman Hendrik Jan Eijpe told Reuters."

Cafe tidbits:

A Cafe member who is a money manager sent me this
yesterday:

"There is no real reason for the dollar to be strong.
The trade deficit is at record levels, we have the
potential huge bubble, and possible settlement problems
in the banking system if things get real crazy, which
is a possibility, due to the derivatives."

Another anecdote for you:

"I work in an industry that supplies the heavy trucking
industry. We have always said 'you can see the state of
the economy by sales of trucks and accessories.' We
always lead the economy up or down by a couple of
months. I'm getting worried by what I'm hearing about
the slowdown in sales."

And then we have:

"The Aussie dollar has been hammered by some
'investment funds' (according to local analysts) in
recent days. The last time this happened the Reserve
Bank of Australia. sold gold to defend the Australia
dollar. Also, at Australia$500/oz., Aussie miners find
it very attractive to hedge, hence the recent increased
forward selling activities by them. Just coincidental?
You bet."

The Aussie dollar gets curioser and curioser. Today it
closed sharply lower at 60.44. On the other hand, the
Canadian dollar closed at 69.07 up slightly and not too
far from recent highs. Australia is a commodity
country, like Canada, and commodity prices are going
up.

What is different about the two currencies is that
Australia has gold producers that have a tendency to
hedge their gold production when given an opening. A
weak Aussie dollar means that gold is higher priced in
their local currency versus a dollar gold price. That
gives them a greater incentive to do some hedging. I
wonder who is selling off the Aussie dollar and why.

GATA is not the only one on the Bank of England's case:

"Gold auctions to blame for $30 million fall, says Rio"

"By Roland Gribben, London Telegraph.

"Rio Tinto yesterday added to the Government's
discomfort over last year's gold sales by criticising
the auction process and estimating that the slide in
the precious metal price cost the company $30 million.
Sir Robert Wilson, chairman, said: `We thought the sale
was handled in a pretty clumsy way and that wasn't
necessary. Just to announce the sale obviously had a
depressing effect on the market.'

"He thought Gordon Brown, chancellor, and the Bank of
England should have followed conventional central bank
policy of selling the gold before making any
announcement to avoid the risk of a price fall. The
gold price wobbled as the bank mounted three auctions
as part of the Government programme to reduce gold
reserves from 715 tonnes to 415 tonnes over the next
few years."

Potpourri and the Gold Shares

The XAU finished the day modestly higher at 60.93, up
1.17, ignoring the late day gold selloff.

Is the following an anecdotal sign of the bottom in the
gold market?

"Financial Times, Monday, February 28, 2000.

"Australia's miners bet on the internet as the next
gold rush.

"In the past year more than a third of Australia's 300-
odd listed junior gold producers and explorers have
totally or partly transformed themselves into Internet,
telecoms or other new technology stocks."

Another Hannibal Cannibal bites the dust. Barclays Bank
bullion dealer news: In addition to Tony Hill in their
London office, Martino Bolli got laid off last week in
their New York office.

Bullion dealer woes accelerate:

Word just in that J.P. Morgan is believed to be closing
down its bullion operations in New York to concentrate
all its bullion trading dealings in London. That makes
sense as the gold market manipulation scandal will be
focused on the New York operations of the bullion
dealers. When Congress gets into the act, the
investigating committee members will want to chat with
some of the high and mighty New York bullion dealers.
J.P. Morgan is co-chair of the Counterparty Risk
Management Group with Goldman Sachs. Could J.P Morgan's
motto concerning gold market risk be "When in doubt,
get out"?

This is no small potatoes. J.P. Morgan is the central
bank's bank and has been the top dog bullion bank for a
hundred years. If they close down their bullion trading
operations in New York, it would make them a second-
tier bullion bank -- a major event in the bullion
banking world.

There is also talk that the derivative book of bullion
dealer Credit Suisse is in bad shape, especially their
Australian derivatives.

For months now I have suggested that the gold market
could explode to the upside when the bullion dealers
sound the bugle for retreat. Not just because not even
a fraction of the gold loans can be covered, but
because of derivative problems in many other financial
markets. The day of reckoning nears as the downsizing
of bullion dealer operations escalates.

This has be very very good news for our camp. The less
bullion dealer operations there are, the less peddlers
there will be of gold forward sell programs to the gold
producers and the less bearish propaganda will be fed
to the press.

Another comforting Barrick Gold story:

"Friday, February 25, 2000. Lawyers look to bring
Barrick into amended Bre-X suit.

"Texas class action: Barrick has yet to file a response
to latest allegations.

"By Sandra Rubin. Financial Post.

"Lawyers representing shareholders caught in the Bre-X
Minerals Ltd. gold swindle are asking a Texas judge to
consider new evidence that Barrick Gold Corp. was
alerted to the possibility of fraud months before the
scandal rocked North American markets.

"Toronto-based Barrick not only failed to disclose the
disturbing findings by one of its own experts, but
company officials made 'misleading' public statements
about Bre-X that did not reflect doubts about the
find's veracity, according to the filing in Texarkana,
Texas.

"The class-action lawyers are asking a U.S. federal
court judge for permission to amend their complaint to
add the new allegations. The filing comes as both sides
await a key ruling on whether Barrick, which was among
those dismissed from the Bre-X suit last year, will be
reinstated as a defendant.

"The fresh evidence is based on the findings of Jan
Merks, a sampling expert employed by Barrick, on Dec.
16, 1996, to analyze troubling Bre-X test results.
Barrick had sent 135 samples from what was supposedly
the richest gold find in the world and 133 had come
back showing no gold.

"Mr. Merks was given the results on Dec. 17 -- and
within hours had warned Barrick in a memo that `extreme
caution is in order,' as reported in the Financial Post
in January. He also mentioned a previous gold fraud and
suggested they test for the same telltale signs.

"'Barrick knew this crucial information for almost five
months while tens of thousands of shares of Bre-X ...
continued to trade on the Nasdaq and elsewhere,'
according to the filing. `Despite this knowledge,
Barrick made unqualified public statements about gold
and future mines at Busang, statements that were false,
or at best misleading to investors.

"`Not once did Barrick even hint at the troubling
evidence of fraud that it and its consultants had
discovered,' the filing said."

Many of you have asked how Martin Armstrong is doing.

Don't really know. He tried to call GATA's Chris Powell
and me from prison a couple of times, but we were out.
Here is a recent story about him. It is clear that
Armstrong is still really being harassed:

"Lawyers quit Armstrong case.

"By Tony Hagen, Staff Writer, Trenton Times

"NEW YORK -- Martin A. Armstrong, a one-time
commodities guru accused of running a $1 billion bond
swindle from West Windsor, N.J., offices, yesterday
said he will represent himself against civil charges.

"The bond dealer, who headed Princeton Economics
International and Princeton Global Management at
Carnegie Center, has been dropped by the criminal
defense lawyers he retained at the time of his arrest
in September, and his civil defense lawyer is
attempting to be released from the case.

"Armstrong doesn't have money to pay them and a federal
judge has ordered the lawyers to surrender $1.3 million
in retainers they were paid in September.

"A Maple Shade, N.J., resident, Armstrong has pleaded
innocent to charges he concealed up to $450 million in
trading losses by causing false account statements to
be issued to companies who bought his Princeton Note
bonds.

"He has said the losses were exaggerated and he is
being made a scapegoat for offenses committed by
others.

"Armstrong yesterday asked U.S. District Court Judge
Lawrence McKenna to help him get permission to have a
laptop computer in his jail cell so he could do case
research....

"He was jailed at the Metropolitan Correctional Center
in New York City last month after U.S. District Court
Richard Owen found him in contempt of an order to turn
over $16 million in allegedly missing company valuables
and documents. Armstrong said he turned over everything
in his possession.

"Yesterday, he also asked McKenna to help get the
court-appointed receiver in the case, Alan M.Cohen, to
produce a list of items the trader allegedly still has.
Armstrong said his goal is to prove that he doesn't
have the items and get himself released from jail.

"On the criminal charges of securities fraud, Armstrong
faces a maximum jail term of 10 years and fines.

"Yesterday, Martin Siegel, a lawyer appointed to
represent Armstrong against the criminal charges, said
he expected the case would not come to trial until the
fall or early winter of 2000 `at the earliest,' due to
a `massive' amount of research needed.

"Armstrong and representatives of the U.S. attorney's
office, which lodged the criminal charges, were ordered
to return to McKenna's chambers on April 14 to give an
update on their progress in preparing for trial.

"Yesterday, an attorney for the U.S. Attorney's Office
objected to Armstrong's request for a computer, saying
he could do research simply by reading paper documents.
But McKenna said he saw no security risk.

"`You're talking about a laptop computer, not something
hooked up to the phone lines,' McKenna said."

The palladium/TOCOM disaster continues. The NYMEX
raised customer margins to $50,625 as of tonight's
close. Japan Inc. has really boneheaded this one by
freezing palladium contracts until March 15. No one put
a gun to the head of the shorts to stay short. They had
months of time to get out of this well-advertised
explosive PM situation. The effects of this
shortsighted action will be felt for some time to come
and could become a precedent for other exchanges to do
the same thing down the road.

Free markets have been seriously threatened. Is that
what Comex is going to do when the gold price takes off
in a moonshot. And it will!

Oil is the story of the day. As long time Cafe members
know, I have been very bullish on oil for a very long
time now. I also have remarked on the silly oil
commentary plastered all over TV. Gobbledegook.

Today on CNBC a reporter confidently remarked how
Mexico, Saudi Arabia, and Venezuela were going to agree
to cut production at their OPEC meeting in late March.
By the time they started the brief report and finished
it, the oil price had risen another 20 cents per
barrel.

And so much for their backwardization stories (the back
month prices being lower meant that the price of oil
would be going way down, not up).

Many months ago I suggested that $42 was a reasonable
target for crude. There is little technical resistance
between $27 per barrel and that $42 figure. A price of
$42 per barrel does not seem out of the ball park any
longer, does it? Just like $800 palladium became a
reality.

Because oil is the topic of the day and will eventually
have a big impact on the gold price, I am including two
gasoline alerts sent to me by Cafe member Jon Roberts.
Y2K might be alive and well in the oil patch. Never
have I heard so many stories of refinery problems. More
importantly, these two gasoline commentaries will give
you a flavor for what is going on in the oil/gasoline
markets.

"Sent: Wednesday, March 01, 2000 11:16 AM Subject:
[opisalerts-l] OPIS Alert

"2000-03-01 11:01:07 EST ***

"NEW RFG SPECS COULD TIGHTEN SUPPLY.

"When regulators decided years ago to roll out Phase II
RFG gasoline in 2000, they had no idea that it would be
against the backdrop of some of the tightest gasoline
supplies in recent memory. Now there is widespread
concern that some refiners and blenders will have
difficulty meeting summer Phase II RFG specifications,
increasing the likelihood that traders, distributors,
marketers and motorists could face more price shocks
this spring.

"Refiners have met the new winter RFG specifications --
entailing lower toxic and nitric oxide emissions --
with little problem. The unique challenge of the summer
Phase II gasoline is reducing the emission of volatile
organic compounds (VOCs). This can be accomplished
through a reduction in aromatics, but refiners already
have dropped nearly all the aromatics they can without
further sacrificing octane. Practically the only
alternative to meet tough VOC standards is to reduce
Reid Vapor Pressure (RVP) levels.

"The Energy Information Administration estimates that
refiners and blenders will have to drop RVP to 6.7psi
-- down from 8.0psi in northern states and 7.1psi in
southern states last summer. This is of particular
concern to northeast gasoline blenders, who worry that
imported blend stocks will not contain the components
necessary to make a low RVP gasoline with sufficient
octane. The `Everest' in this case would be the`D'
grade gasoline -- the reformulated fuel with 93 octane
-- which could possibly trade at unprecedented premiums
to NYMEX gasoline futures.

"`It's going to be totally dependent on the type of
product that's coming from Europe and South America,'
one East Coast blender said. On a positive note, the
blender expects that Venezuelan imports will lend
themselves to blending the summer spec. Other overseas
suppliers could come through as well. `Refiners have
always surprised us with what they have been able to
do,' the blender said.

"But time is of the essence. The summer Phase II RFG
gasoline must be in place at the terminal level by May
1 and at retail outlets by June 1. That makes April the
delivery month for the fuel, and that's when high
octane RFG volumes could be squeezed. The new specs
could affect the availability of other RFG grades as
well. Valero Chairman and Chief Executive Officer Bill
Greehey predicted in January a 50,000 to 100,000 b/d
drop in U.S. gasoline output this summer as small
refiners realize they cannot reduce NOx and vapor
emissions sufficiently to meet the new gasoline
requirements.

"And those refiners that are capable are expected to
pass along some of the costs of making the new
gasoline. EIA estimates that during the summer months,
Phase II RFG gasoline will fetch a premium to
conventional of 4cts gal, compared to an average
premium of 2.5cts gal that Phase I RFG has seen over
the last several years. One Washington, D.C., trader
notes that similar predictions that accompanied the
roll out of Phase I gasoline turned out to be slightly
inflated. Then again, the gasoline supply picture was
not as bleak at that time.

"`We have failed to build inventories at a time that we
normally do, and there's not enough crude oil for
refiners to run with to address that situation in the
near term,' said Tim Evans, senior energy analyst with
Pegasus Econometric Group. `It just looks in general
that we're going to be living hand-to-mouth the whole
summer.'"

"2000-03-01 11:55:27 EST *** "NYMEX OVERVIEW: GASOLINE
"SKYROCKETS ON REFINERY PROBLEM

"NEWS 3/1 11:50 A.M. -- Despite some `disappointing'
draw downs on gasoline from API and DOE, gasoline
futures are skyrocketing once again. Amidst reports of
refinery problems at BP/Amoco's Whiting, Indiana
refinery, and reports that one or more gasoline units
have been shutdown at Hess's St. Croix refinery,
gasoline futures are surging. At press time, the April
contract was 97.35cts gal, a stunning gain of 3.35cts
gal.

"As one trader put it, the market is `incredibly
bullish,' and gasoline has `one dollar written all over
it."

The oil/gold ratio is all the way down to 9.3. When
markets were not rigged or fundamentals mattered, this
ratio would have represented a screaming gold buy
signal. I once did some gold business with an
Afghanistan cashmere merchant. This legendary trader
from Afghanistan told me that if the gold/oil ratio
ever goes under 11, gold is the buy of a lifetime.

I would agree with him, even today.