GATA chairman''s full report on his visit to South Africa

11:45p ET Thursday, February 15, 2001

Dear Friend of GATA and Gold:

The old politician said that quot;there's no such thing as
bad publicity.quot; He might have been wrong, but at this
stage of GATA's work, we figure that he's right, so we
will take the following critical commentary from South
Africa Business Report as a compliment to the
effectiveness of the recent trip to South Africa of
GATA's Bill Murphy and Reg Howe.

The old politician would have noted happily that this
criticism spells our name right. I will note that at
this stage we welcome even criticism, for it spreads
word of our work, and our friends will know us.

Besides, the author below is probably not familiar with
the details of our case or the details of the strange
concentration and growth of paper gold derivatives.
With a little more study, even he may come around.

Anyway, we told you that we were making a splash in
South Africa. As proof, here's a guy who got wet.

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

* * *

Conspiracy theories won't rescue gold

By Jack Milne
South Africa Business Report
www.businessreport.co.za
February 15 2001

The gold price has been falling for more than 10 years.
Since its peak at $850 in the mid-1980s, the price has
moved down in a series of depressing cycles.

The recent break down through support at $263 suggests
the metal will test the low of $252. If that is broken,
a major selloff could follow, despite the demand for
gold exceeding supply by 1,600 tons a year.

The primary reason for the downward trend is that
central banks around the world have been either selling
their gold directly or lending to others who have sold
it.

Of the 120,000 tons of gold that have been mined since
the dawn of civilisation, about 32,000 tons are held by
central banks, principally as protection against the
possible weakness of paper currencies.

Because inflation has been so low for so long, it is
becoming difficult for central banks to justify holding
this nonperforming asset. They are under pressure to
sell the gold and reinvest in an interest-bearing
government bond such as the U.S. 30-year treasury bill,
which pays about 5.5 percent a year.

The result is that they have been steadily reducing
their gold holdings whenever the gold price showed any
strength.

Recently a U.S. organisation calling itself the Gold
Anti-Trust Action Committee (GATA) has run full-page
advertisements in the local business press claiming
that the gold price is being artificially depressed by
a group of international bullion banks and the U.S.
government (in the form of Alan Greenspan, the chairman
of the Federal Reserve).

They are seeking funds from South African organisations
to help fight an antitrust lawsuit in the U.S. against
these quot;manipulators.quot; They claim there are massive
short positions in gold amounting to between 5,000 tons
and 10,000 tons that must be unwound as a result of
their actions -- resulting in the gold price ($260 an
ounce) rising to equal and then exceed the platinum
price ($597 an ounce).

Obviously this is an emotive issue in South Africa.
Our gold production has dropped from more than 1,000
tons a year to about 450 tons a year over the past 30
years, mostly because of the price.

We had to retrench more than 100,000 miners because the
mines they worked for were not profitable at current
prices.

The doubling of the gold price would mean money for job
creation, housing, education, and essential services. It
would also mean a reduction in the crime rate and all
the other benefits of a robust economy.

But is there really manipulation of the gold price?
GATA's website (www.gata.org) contains the initial
litigation, but the evidence it contains seems to me
rather circumstantial. So what if there are large short
positions? Does that indicate price manipulation?

The bullion banks will argue that in the current gold
market a short position is wise. And then there is the
fact that nowhere in its advertisement or on its
website does GATA address the primary reasons for the
decline in the gold price.

Surely the British and Swiss central banks cannot be a
party to this manipulation -- and yet both are in the
process of selling hundreds of tons of gold. The
Australians, the Dutch, and many other central banks
have also sold, while others have made substantial gold
loans.

Almost all central banks are looking for ways to reduce
their holdings, not because they wish to support any
sort of conspiracy, but because it makes good economic
sense.

The problem is that some institutions, such as the
National Union of Mineworkers, are being taken in by
this campaign and may well support it with funds.

I am concerned that South Africans will all too easily
believe that our economic woes derive from some
international conspiracy.

The reality is that, just as AIDS most certainly
derives from the HI virus, so the demand for gold as a
central bank reserve asset is low and falling because
of consistently low world inflation.