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Section: Daily Dispatches

By Ilja Graulich
Business Day, South Africa
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May 14, 2001

They are the $289 Club: power brokers who held the gold
price to exactly $289/oz on the last trading days of
1997, 1998, and 1999. So says the Gold Anti-Trust
Action Committee (GATA). (For the record, according to
the London Bullion Market Association, the prices were
$289, $287, and $290 respectively.)

For some, GATA members are heroes, fighting for a
genuine cause: freeing the gold price from alleged
manipulation. For others, they are a bunch of lunatics
-- entertaining, but lunatics nevertheless.

Last Thursday's GATA meeting in Durban was billed as a
watershed event in the life of the group.

GATA was formed to investigate manipulation in the gold
market and recently launched a court case against U.S.
Federal Reserve chairman Alan Greenspan, former
Treasury Secretary Lawrence Summers, J.P. Morgan,
Citigroup, Deutsche Bank, Chase Manhattan, Goldman
Sachs, and the Bank For International Settlements. No
lightweights these.

GATA claims the defendants have been responsible for
artificially depressing the gold price. Evidence in
support of this claim was presented at the conference,
which strangely enough was held in Durban. The city is
not exactly a gold mining or trading hub, but it is in
the home province of Zulu king Goodwill Zwelithini, who
has lent GATA a sympathetic ear, though he failed to
attend last week's meeting.

Those who did attend were local and international gold
bulls and some ministers of African mining countries,
who have yet to see through the bizarre conspiracy
theory that is placed before them.

GATA's main protagonists are four talkative Americans
who have been around since before the gold standard was
abolished. Led by Bill Murphy, a graduate of the School
of Hotel Administration at Cornell University and
former starting wide receiver for the Boston Patriots
of the old American Football League, they presented
their evidence persuasively.

A conspiracy was begun under President Bill Clinton,
they say, led by a quot;factionquot; of the U.S. government and
bullion banks to manipulate the gold price.

Spikes in lease rate graphs, changes in derivatives
holdings by the merchant banks and mysterious shifts in
the gold price all sound very reasonable, and the
evidence has won sympathy worldwide. However, much as
one might like to believe the story presented to the
small gathering, questions need to be asked.

Why, if this evidence is so compelling, have so few
joined GATA's crusade? South African producers
AngloGold, Gold Fields, Harmony, and Durban Roodepoort
Deep sent observers to keep an eye on things. But
AngloGold in particular is unlikely to join up, with
the company regularly receiving hate mail from GATA
sympathisers, who accuse it of wrecking the gold market
with its active hedging policy.

GATA argues that derivatives such as hedges are so
closely linked to the gold price that if the price
rose, the banks would incur huge losses. Meanwhile,
while the price stays low, the banks and the
international financial system are raking it in.

GATA literature is replete with selective quotations in
support of this argument. For example, it quotes
Greenspan as saying in 1998 that quot;central banks stand
ready to lease gold in increasing quantities should the
price rise.quot; GATA's argument rests on selective quotes
such as these.

Murphy says that over the past three years, quot;at no
point in time have we uncovered any information that
contradicts our initial analysis.quot; Why would they? GATA
supporters' case is based on convincing themselves that
the gold price should be rising, were it not for a

The group dismisses what is taught about supply and
demand in Economics 101 that if demand drops and supply
rises, which it has done due to central banks selling,
the price of a commodity should drop.

Should the gold conspiracy theorists be proved right,
they could be heroes. GATA claims that it is also
fighting on behalf of African nations that are getting
a raw deal due to the low price of gold. Such claims
are bound to win them a hearing. But to prey on the
innocence of some and keep hope alive may hurt their
cause in the end.