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Dow Jones story says banks don''t want gold price to rise
By Bill Murphy
www.LeMetropoleCafe.com
May 22, 2001
Gold $285 up 90 cents
Silver $4.54 up 1 cent
Information is pouring in from all over and from
various sources that there is indeed a Gold Syndicate
(part of which may be a de-facto situation) that is
taking on the Gold Cartel. The Gold Syndicate knows
that what GATA is claiming is true and they believe
that Frank Veneroso's gold loan numbers of 10,000 to
16,000 tonnes (two to three times what the industry
acknowledges) are correct.
This Gold Syndicate includes one of the most famous
names in Wall Street history, the Chinese, and
aggressive players from the Middle East. The gold
market is so tight that I have been told by the best of
sources that some of these interests may soon resort to
buying up gold reserves in the ground from gold
producers. The Gold Syndicate has been accumulating for
a few months now, but when the Dow Jones story about
GATA broke two weeks, they felt it was time to be more
aggressive, for they know that GATA has the goods on
the collusive cabal shorts.
That is all I can get into for the moment. What this
means is that the Gold Cartel is in big trouble.
As you know, I have pointed out for some time now how
all price dips have been supported by these strong
buyers. Today was no different as the Gold Cartel
desperately tried to bash gold all day, but they ran
into the Gold Syndicate's buying once again, and gold
closed higher on the day. That is extraordinarily
powerful action after the climactic selloff yesterday,
after gold traded as high as $298 in the Asian market.
Please note:
On the big up day on Thursday, almost half of the open
interest increase of 11,994 contracts was in the June
option. That is unusual as there are only 4 1/2 days
left before first notice day now. That was not black-
box, weak-hand buying, but strong-hand, smart money
buying going into a delivery period that is nearly upon
us. A squeeze of the June gold contract is, I think,
probable.
The Comex gold open interest is only 133,347 contracts,
an extremely low number. However, the June open
interest is still around 71,000 contracts -- not low,
since there is only a week left before first notice
day. The general low open interest also tells us that
the trade does not want to be short, or has no physical
gold to hedge; that is, no reason to be short.
It gets better. Yesterday, on the selloff the Gold
Cartel (Goldman, Deutsche Bank, et al.) was selling
August gold instead of June gold, even though it was at
a disadvantaged price. That is more evidence that even
the Gold Cartel is afraid to be short June. They are
afraid of being squeezed too. Yum, yum!
John Brimelow throws some more wood on the building
bonfire:
* * *
Bombay ex duty premiums: AM $5.43 PM $5.34, with world
gold at $282.50 twice.
Back well into legal import territory.
Indian fathers don't get to fine tune gold purchases
when their daughters are imminently about to get
married!
Doubt the Bears are aware of this.
Mitsui had a conference call to discuss gold market
action yesterday afternoon. It featured Andy Smith,
speaking from Istanbul, and their NY options trader.
The option dealer said that things had been very rough,
with volatility approaching that of Oct 99 and Feb
2000. He reported that things were calming down by
Monday PM.
Andy Smith said that everyone at the conference was
puzzled. There was general scepticism that the rally
could have any stamina, but not a lot of confidence.
(Separately, I have been told a number of attendees got
straight back on planes to return home on arrival.) He
expressed the view that the rally quot;did not seem
naturalquot; and demonstrated quot;clever timing.quot;
Then, POSSIBLY IMPORTANTLY, he went on to say that the
behaviour of the market over the past several weeks had
been puzzling. Prices had been stealthily sidling
higher, but lease rates had not come off. It put him
mind of the silver market in the months before Buffet's
activity had been detected. He went on to say that of
course he did not mean it was the same party, or with
the same purpose, -- but he left the clear impression he
has been detecting accumulation.
It was common cause that there had been fund
activity.Answering a question from his options
colleague, Andy agreed that the funds by historical
standards had a good deal of firepwer left. But he
pointed out that in recent years the Large Specs have
not run net longs for than a couple of weeks. Although
he thought they quot;won't give up easilyquot; and would try
again, he repeatedly said that he thought the
descending line $335 (Oct 99) $315 (Feb 00) would mark
the limits of this run - at $295.
One wonders if Andy has friends who like symmetrical
charts!
JB
* * *
Lehman Brothers has a big problem. Last year, they
publicly advocated the gold carry trade. They must be
loaded up with it, even though they are not bullion
dealers. Hence the following note from one of your
members:
quot;Great rally until 10:59 am, when CBS released a story
from Lehman quoting Peter Ward on gold stocks. 'We
recommend reducing positions. Gold stock prices are
irrational and it's hard to believe any squeeze is
imminent.'
quot;'Irrational'? Shades of Greenspan!quot;
* * *
Stretcher bearers, stand by!
The following story helps to confirm the information
about Chinese gold buying that I learned about in South
Africa and was passed on to the Cafe:
* * *
Investors race for 'safe haven' gold
By George Trefgarne
Financial Correspondent
The Telegraph, London
May 22, 2001
The price of gold leapt 7pc yesterday -- its biggest
rise for nearly two years -- as the precious metal
dramatically rediscovered its traditional status as a
safe haven from inflation and other uncertainties.
The price is fixed in London at investment bank NM
Rothschild and in the afternoon was fixed at $291.25 an
ounce, up $18.10 since Friday. In late trading, it
dropped back slightly to close at $290, up $16.85. It
was the highest close since June last year.
Worries have suddenly emerged that the recent
aggressive interest rate cuts by the US Federal Reserve
could have gone too far. There are also rumours that
the Bank of China is converting its dollar holdings
into gold as a result of worsening relations with
America.
Fears over inflation gained ground during the day as
the price of oil jumped perilously close to the $30 a
barrel mark amid heightened tensions in the Middle
East. The benchmark Brent oil contract on London's
International Petroleum Exchange rose 29 cents to trade
as high as $29.68 a barrel.
Peter Beaumont, a gold analyst at UBS Warburg, said:
quot;There is no doubt that US inflation is one of the key
elements. The investment picture has changed in the
last quarter; we have fears of inflation again. I think
it's not unreasonable to expect prices above $300 in
two to three weeks.quot;
The sudden rally in gold will be welcomed by the
industry. Since reaching a peak of over $800 in 1981,
the metal has been on an almost constant downward
trend. However, the metal is prone to dramatic moves.
For several years, hedge funds have sold it short in
the expectation that prices will fall and occasionally
they get caught out. Yesterday, many of these funds
were forced to reverse their trading positions rapidly.
The same thing happened in September 1999 when the
world's leading central banks said they would sell no
more of their holdings.
Peter Hambro, chief executive of Peter Hambro Mining
and an experienced hand in the gold market, said he
first noticed big signs of excitement at a conference
organised by the World Gold Council last Friday. This
caused traders in Asia, where markets were open over
the weekend, to drive the price up by more that $22 to
$296.
quot;There is a fairly significant sea-change in thinking,quot;
he said. quot;Inflation in the US is certainly a concern
and with the euro looking dodgy and the yen under
pressure, gold is as good a place to put your money as
any. Mind you, some people say that is an old fashioned
view.quot;
He said there are also strong rumours that the Bank of
China has become a big buyer of gold. It holds $130
billion (92 billion) of foreign exchange reserves and
as relations with the US deteriorate it is switching
them out of dollars into gold.
quot;I suppose they don't want their reserves managed by
the central banker of the enemy, Alan Greenspan,quot; he
said.
Another source of gold buying is said to be the
introduction of euro notes and coins on the Continent.
quot;All those five hundred franc notes under mattresses
will soon be worthless,quot; said Mr Hambro.
One person who will not welcome the rise in gold is
Gordon Brown. In 1999, he ordered the Bank of England
to sell 415 tonnes of its 715 tonnes holdings.
So far, the Bank has lost money on the trade, having
sold 145 tonnes, at around $265 an ounce. The latest
auction was last Wednesday when the Bank sold 20 tonnes
at $268 an ounce.
* * *
GATA forces have been quietly working behind the scenes
on exposing the gold scandal in Britain prior to their
coming national elections. Blair should get his
comeuppance for the damage he has caused so many
innocent people in Africa.
That is why I was so surprised to get this email today
from James Stock of Durban, South Africa:
* * *
Subject: RE: Chairman - Michael Ancram
Date: Tue, 22 May 2001 16:03:54 #43;0100
From: WilliamHague'sOffice@conservative-party.org.uk
William Hague has asked me to thank you for your e-mail
and to reply on his behalf.
He has carefully noted your comments. We very much
share your concern over the announcement that the
Government are to convert 415 tonnes of gold held by
the Bank of England into Euros, Dollars and Yen. By
announcing the sale months ahead of when it was to take
place the Government has bungled matters.. All that
they have done is to ensure that the gold was sold for
600 million less than its value on the day of the
announcement.
The country still has not had a full account of the
reasons for liquidating such a massive proportion of
our reserves, which will leave Britain with the lowest
bullion holdings of any major country. We are concerned
that this marks another step in the Government's policy
of acting to take Britain into the single currency by
stealth with no mandate and before any referendum.
We want to know the reasons for the Government's belief
that the sale will leave Britain better able to cope
with unforeseen international currency crises. We also
want to know who advised the sale, what other options
were considered, and who now controls our reserves, the
Chancellor of the Exchequer or the Bank of England.
Because of the serious questions arising and the
resultant loss of hundreds of millions of pounds, we
are asking the National Audit Office to conduct an
investigation in to the whole affair. Thank you again
for writing.
Thank you again for e-mailing
Ian Philps
Correspondence Secretary
* * *
I will be out of town tomorrow on GATA business, but
you might like to know that a very savvy fund manager
who is now long gold told Cafe sources that the big
move will depend on how long gold stays over $300. Not
if, but how long. He feels that if it stays over $300
for one week, gold will explode.
I belive we will be $300 bid very soon. That will set
the stage for the big move to $600. Sweet dreams.
