GATA makes new contacts in Washington

By Bill Murphy, Chairman
Gold Anti-Trust Action Committee Inc.
May 30, 2000

Today the Dallas Morning News published the first
full story about the Gold Anti-Trust Action
Committee that has appeared in the mainstream U.S.
press in the 15 months since GATA began.

It is fair and balanced, though, for the life of me,
I cannot understand where John Hathaway of the
Tocqueville Fund is coming from with some of his
comments here. I had suggested that the reporter,
Bill Deener, call him.

Hathaway's recent report about J.P. Morgan's $38
billion gold derivative positon buildup came about
ONLY as a result of the work of a paid GATA
investigator, who uncovered the data at the U.S.
Office of the Controller of the Currency.

Next time I will refer journalists elsewhere.

Along with the story, the Dallas Morning News
published a color photograph showing GATA artist
Alain Despert, his limited-edition print, quot;GATA,quot;
and myself at the Arts District Gallery at the
Fairmount Hotel in Dallas.

The online version of the story may be viewed at
the business section of www.dallasnews.com.

The text of the story follows.

* * *

Gold prices still tarnished;
lobbyists call for inquiry;
most analysts reject conspiracy theory
that U.S. is manipulating market

By Bill Deener
Dallas Morning News
May 30, 2000

When night descends on the stock market, the sun
typically shines on the gold market -- but not
always and not this time.

Gold prices have been languishing around $275 for
months, even though inflation fears and higher
interest rates have sent stock prices reeling. The
yellow metal historically has been a safe haven
during uncertain times, but so far investors have
turned a cold shoulder.

quot;Gold can't get much above $290 before every rally
is beaten back,quot; said Bill Murphy, chairman of the
Gold Anti-Trust Action Committee, a Dallas-based
lobbying group.

With the annual demand for gold -- primarily for
jewelry -- far exceeding the supply from mines and
scrap gold supply, prices should be rising, said Mr.
Murphy. But they aren't, and Mr. Murphy thinks he
knows why.

quot;The gold market is being manipulated by U.S.
government officials and New York bullion banks to
add gold supply to the market and suppress the
price,quot; he said.

Some might discount Mr. Murphy as just another gold
bug gone bonkers, but he's smart, energetic, and
widely known in the gold industry. Early last year,
Mr. Murphy launched his lobbying effort -- which is
funded by five major gold mining companies -- to
push for higher gold prices. And he's taking the
fight quot;to the highest levels of Congress.quot;

On May 10 Mr. Murphy and other committee members met
with members of the U.S. House Banking and Financial
Services subcommittee on domestic and international
monetary policy to air their concerns.

quot;The Gold Anti-Trust Committee requests that
Congress launch a full and complete investigation
into this matter,quot; said Mr. Murphy. quot;The longer that
gold prices are held down, the bigger the eventual
crisis.quot;

Differing opinions

A spokesman for the subcommittee, who asked not to
be identified, confirmed that Mr. Murphy had met
with the committee. quot;If there is a way we can play
an appropriate role in answering their unresolved
questions, I am sure we will,quot; the spokesman said.
He indicated, however, that the subcommittee members
don't consider the matter a high priority and met
with Mr. Murphy more out of courtesy than anything
else.

Nevertheless, Mr. Murphy, a former wide receiver
with the Boston Patriots of the old American
Football League, apparently has friends in high
places. A 1968 graduate of Cornell University, Mr.
Murphy worked as a commodities trader with the now-
defunct Drexel Burnham Lambert Inc. He said he moved
to Dallas about a year ago to be closer to his dog,
Little Bear, currently in the custody of his ex-
wife.

The gold market is fertile ground for conspiracy
theories because of the inherent distrust many gold
bugs have for the U.S. government, which churns out
worthless paper money, they argue, with no gold to
back it. And it didn't help that gold prices plunged
from about $400 an ounce in 1996 to $250 last
summer.

However, the majority of gold industry analysts
don't believe declining gold prices are the result
of government collusion.

quot;I don't think there is a conspiracy,quot; said John
Hathaway, portfolio manager of the Tocqueville Gold
fund. quot;It is just a market that is adrift for a lot
of reasons.quot;

The latest incarnation of conspiracy theories took
flight in late September 1999 after gold prices
first soared from $250 an ounce to $339 an ounce and
then quickly fell back to previous levels. Gold
prices initially spiked after 15 European central
banks, which own about half the world's gold supply,
announced they would limit their annual sales of
gold.

This bit of good fortune for gold investors was
short-lived, however. Within days the central bank
of Kuwait announced it had loaned out its entire 89
tons of gold reserves. Soon afterward gold prices
headed south. Mr. Murphy and other conspiracy
theorists believe someone in the U.S. government
persuaded Kuwait to dump gold into a shaky market to
bring down the price.

Short positions

But the conspiracy doesn't stop there, according to
Mr. Murphy. Large New York banks that trade gold --
or bullion banks, as they are called, J.P. Morgan
chief among them -- dramatically expanded their
quot;shortquot; position in gold in late 1999, which further
eroded gold prices. An investor in a short position
makes a profit when the price of the underlying
stock or commodity declines.

A spokesman for J.P. Morgan declined to comment. The
Office of Comptroller of the Currency, which
monitors banking activity, does report that J.P.
Morgan holds $38 billion in gold derivatives, but
it's unclear whether these are long or short
positions.

While all this may sound farfetched, these ideas
have currency among some rank-and-file gold
investors. Ethan Stroud, a Dallas attorney and gold
investor, said he and others believe if the price of
gold weren't being manipulated, it would rise to
$600 an ounce.

quot;It seems odd to me that just as the price of gold
starts to rise, a phantom appears, and starts
selling gold,quot; said Mr. Stroud. quot;That is where the
scandal lies.quot;

The obvious question is why the U.S. government or
New York banks would want to suppress the price of
gold. There are two reasons, according to the
conspiracy crowd: First, moribund gold prices
indicate that inflation remains under control, and
most governments strive for that.

Second, a low gold price means more profit to the
bullion banks. That's because they borrow gold from,
say, European central banks for 1 percent interest
and then sell it and invest the proceeds. But these
banks eventually have to return the borrowed gold,
and if the price has risen, they make less profit.

But Joe Foster, portfolio manager of the Van Eyk
International Investors Gold Fund, and other gold
industry experts seriously doubt the conspiracy
notion. Gold simply isn't viewed as the hedge
against inflation that it once was, he said.

Further, gold investing thrives in an environment of
political upheaval and economic turmoil, and while
the stock market has been volatile, investors still
like stocks.

quot;Investor confidence in the Federal Reserve to
control inflation has not been shaken,quot; Mr. Foster
said. quot;There is just a lot of confidence in the
Federal Reserve.quot;

Mr. Hathaway of the Tocqueville Gold fund said it's
entirely plausible that the U.S. government quot;gave
incentivesquot; to the Central Bank of Kuwait to lend
gold, but quot;governments from time to time intervene
to prevent a crisis.quot; In other words: So what?

And while he believes the bullion banks shorting
gold have made the bear market in gold more severe,
the real reason is very simple, said Mr. Hathaway:
quot;There are no big buyers.quot;