The gold game: Hedging inventory risk

12:39a ET Sunday, May 21, 2001

Dear Friend of GATA and Gold:

Thanks to our friend who spotted and forwarded the article
below from a major German daily newspaper, and to our
friend who translated it. While I get the sense that the
newspaper simply hasn't been listening to much of what
we have been saying and has no command of the details,
that's probably not very important. No, what's probably
important is simply that we're getting noticed more in
Germany. Our friends will know us no matter what is said
about us, and it should be clear that GATA is pretty much
at the center of the gold world now.

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

* * *

From the Sueddeutsche Zeitung
(South German News)
May 18, 2001

Evidentiary gaps:
Lacking convincing evidence of gold-price manipulation,
GATA conspiracy theorists move without industry backing

To some, they are moral heroes who in a desperate fight
against an international banking lobby. To others, they
are fanatics who are just trying to get attention. Even
after the most recent gold congress in Durban, South
Africa, questions regarding the credibility of the Gold
Anti-Trust Action Committee (GATA), which vehemently
presents its conspiracy theory, cannot be answered with
finality.

The interest group, GATA, was in the final analysis unable
to offer convincing evidence in support of their theory,
which maintains that central and investment banks colluded
to support a low gold price in order to secure their own
lucrative gold transactions.The points of suspicion are
simply too vague.

No wonder then, that the main defendants -- among them
figures of no lesser stature than reserve-bank president
Alan Greenspan, former U.S. Treasury Secretary Lawrence
Summers, as well as several banks (Goldman-Sachs, J.P.
Morgan, or even Deutsche Bank) -- were not present. After
all, they did not wish to lend credibility to this
conspiracy-buff assembly by having their own people attend.

It is no accident that the interest group GATA, lead by the
American Bill Murphy, organized this summit in South Africa.
The world's largest mining companies, from which GATA
expected major support, are based in that country.At least
in this respect, GATA's calculations added up. The presence
of the corporate mining giants like AngloGold, Gold Fields,
or Harmony, was considerable. Their representatives, however,
kept a low profile, stayed politely in the background, and
restricted their activities mainly to the gathering of facts.

This reluctance can surely be explained by the companies'
desire not to lose support from either their customers nor
from their creditors.In addition, some of these mining
companies are themselves targets of GATA's attacks.The
conspiracy theorists accuse the industry of artificially
holding down the price of gold through futures contracts
under which the production of future years is sold way ahead
of time.

Nevertheless, it would have a certain appeal for producers
if there was any truth to the conspiracy theories. Naturally,
they would have liked to have sold one of the most
sought-after commodities in past years at higher prices. In
the meantime, the gold industry has insulated itself against
falling prices so well that they should -- at least in the
beginning -- incur losses themselves if prices were to rise.
The relative interests are therefore rather one-sided.

Some financial experts consider it quite possible that the
price of gold would be much higher than it is today if it
was not for gold loans and derivative transactions.But they
consider the theory that central and private banks
intentionally manipulate the price of gold unlikely to be
true.

Adding to that, there is a material gap in GATA's
argumentation: they neglect the fact that the metal has
lost its most important function as far back as the early
1970s with the severance of the last link between gold
and major currencies. And when the most important source
of demand falls flat, so does the price.That is true even
for a commodity that has been romanticized as much as gold
has been.