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Physical demand will break manipulation on Comex

Section: Daily Dispatches

By Bill Murphy
September 15, 2001

Gold $286 up $6
Silver $4.26 up nine cents

The agony for all Americans is overwhelming. For that
matter, it has to be agonizing for the entire world --
excluding the subhumans who carried out the plane
bombing monstrosities.

Even to comment about markets seems so trivial, but as
President Bush remarked today in his radio address to
the nation, we must go on with our lives on Monday --
with a special awareness.

When it comes to financial awareness, one cannot afford
the luxury of not grasping that what is ahead of us
marketwise is not pretty. The following news items were
featured by Bloomberg on Friday:

* * *

London, Sept. 14 (Bloomberg) -- European stocks
plunged, with most indexes ending their worst week in
almost three years, on concern the United States will
retaliate for the terrorist attack that destroyed the
World Trade Center in New York. Losses accelerated as
crude oil gained as much as 5.1 percent.

quot;Nobody wants to hold stocks over the weekend,quot; as
investors are concerned the situation may escalate,
said Thomas Pethofer, who helps manage 3.5 billion
euros ($3.2 billion) at Gerling Investment in Cologne.
quot;It's better to hold cash.quot;

The Dow Jones Europe Stoxx 50 Index dropped 184.79
points, or 5.6 percent, to 3098.20. All of the 18 Stoxx
industry groups fell. Germany's benchmark DAX Index
slid 6.3 percent, bringing its drop this week to 13
percent, and France's CAC 40 Index shed 5 percent for a
weekly loss of 11 percent.

* * *

U.S. Treasuries Advance,
Pushing 2-Year Yields to 50-Year Lows

New York, Sept. 14 (Bloomberg) -- U.S. Treasuries
gained, pushing two-year yields to the lowest level in
almost half a century, as Tuesday's terrorist attacks
drove investors to the safety of the most actively
traded government securities.

Two-year notes, which account for as much as 40 percent
of trading by primary dealers, rose 6/32, or $1.88 per
$1,000, to 101 13/32, according to Toronto Dominion.
Yields fell 11 basis points to 2.87 percent in the
second trading day after a two-day closure after the
attacks destroyed the World Trade Center in New York
and damaged the Pentagon near Washington.

* * *

U.S. Economy: Production Falls for 11th Month in Row

Washington, Sept. 14 (Bloomberg) -- U.S. industrial
production fell in August for an 11th straight month,
suggesting a fragile economy that may weaken more as
the effects of the worst terrorist attack in history
take a toll on business.

The 0.8 percent drop in the Federal Reserve's measure
of work performed at factories, mines and utilities
followed a 0.1 percent decline a month earlier. Until
August, production hadn't fallen for so many months in
a row since February-December 1960.

The decline, the first in six months, was led by a
record decrease in computer costs. The index including
all prices included rose 0.4 percent after a July drop
of 0.9 percent that was the largest in almost eight

* * *

Crude Oil Rises on Concern
U.S. Response Will Affect Oil States

New York, Sept. 14 (Bloomberg) -- Crude oil rose,
nearing $30 a barrel, on concern U.S. retaliation to
this week's terrorist attacks in New York and
Washington will disrupt oil supplies from the Middle

Crude oil trading was halted at $29.76 a barrel, up
$1.99, on the New York Mercantile Exchange, which was
holding an Internet- based trading session today, its
first since the attack Tuesday.

* * *

It is hard to imagine a less attractive scenario for
investors in the stock market. What is worse is that
economic conditions are likely to deteriorate sharply
from here.

The Fed just pumped in $100 billion into the financial
system. The inflation implications of this maneuver are
obvious. The stark implications for the already
overvalued dollar are ominous. Central banks around the
world will do what they can to stem the fall of the
dollar, but even if they are effective, it will work
only in the very short term.

For a long time Cafe members have heard it here that
exiting from the stock market would prove to be the
right thing to do and that to be heavily invested in
gold and the gold shares was the way to go.

That could not be more the case than now. Chris Powell
and I have spent three years now crying out to our
political leaders to do something about the gold fraud
before some event out of the blue set off a gold meltup
that could rock our financial system because of the
massive gold short positions of the shortsighted
bullion banks and central banks.

Americans have no clue of the gold horror show out
there because the mainstream U.S. press suppressed
reporting of GATA's documentation to placate the high
and mighty bullion banks. The American public is going
to be shocked and blindsided when the price of gold
goes north of $1,000 per ounce.

Fortunately, the journalistic world has begun to wake
up and the GATA's information IS slowly getting into
the mainstream. It is most significant that the
following paragraphs appeared in the new issue of The

* * *

Giacomo Panizzutti, head of foreign exchange and gold
at the Bank for International Settlements (BIS),
estimates that central banks worldwide have lent no
more than 4,700 tonnes of gold to the market.

The figure, published in The Alchemist, the London
Bullion Market Association's quarterly, is about one-
third of the amount estimated by GATA (the Gold Anti-
Trust Action Committee) based in Dallas, Texas. GATA
says it has uncovered evidence that the American
government, assisted by others, has somehow quot;lentquot;
thousands of tonnes to speculators and bullion banks,
notably Citibank and J.P. Morgan Chase, to depress the
gold price.

* * *

The more that serious investors in the world examine
GATA's allegations and findings, the more they realize
that the GATA camp is correct. What we have here is
some of the most irresponsible, negligent, and, in some
cases, criminal behavior imaginable by many bullion
banks and gold industry personnel. They have
perpetuated disinformation about gold to mislead the
investment world and are guilty now of trying to cover
it up.

Unfortunately for the Gold Cartel, Murphy's Law has
struck again, as they are being found out. quot;What can go
wrong, will go wrong, at the worst possible momentquot; --
and that is happening for the gold price-fixing crowd.

The Gold Cartel has always managed to put gold back in
check whenever they have lost control due to unexpected
surges in demand. They can try to do the same again
this time, or they can let the price of gold explode
now and blame it on the terrorists. Then, from behind
the scenes, they could make some sort of government
decree about gold and bail out the bullion banks by
allowing cash settlements in lieu of their returning
physical gold to the central banks -- or something like

Who knows what the United States will do about a market
that it says it never trades in, but if they do attempt
to control the price (as they are so used to doing), it
will most likely backfire this time in the weeks and
months to come for the following reasons:

* The dollar is in big trouble and is going much lower,
which is going to stimulate worldwide gold demand.

* quot;Safe havenquot; has a new meaning these days. Gold has
been just that for thousands of years.

* Greed was the name of the financial game in the
1990s. Preservation of wealth will be the mantra for
this decade.

* The Fed has injected so much money into the banking
system that it has to diminish U.S. paper and make
inflation a likely problem in the near future.
Wholesale prices were up .4 percent last month alone.

* Some U.S. paper is at 50-year lows. Interest rates
are headed even lower in the short term, which enhances
gold investments.

* GATA is waking up the investment world that the
central and bullion banks are short around 14,000
tonnes of lent gold, most of which is actually sold.
The banks are trapped -- prisoners of their own short
positions. Add to that an inordinate amount of
vulnerable gold derivatives.

That is about as combustible combination as one could
put together, and I could easily come up with many more
problems for the Gold Cartel.

As our country is now at war, all Americans must get
behind our president to win. To do so, we must be
financially sound. That means facing reality. Denial
must not be an option for this decade. Emotionalism
will not protect our 401-ks and the financial well-
being of our families.

Owning gold and the right gold shares is the way to go
from here on to give stability and profitability to
investment portfolios.

There is much else going on in the gold world that
ought to be brought to your attention:

* * *

quot;Central Bank of Venezuela (BCV) authorities are
meeting with counterparts across Latin American in an
effort to limit the sale of national gold reserves in
an effort to stabilize prices. BCV official Laurent
Michel is quoted as saying that central bankers
gathered at the 4th International Reserves meeting in
La Paz (Bolivia) are about to apply a 1999 agreement
under which 14 central banks with 47 percent of the
world's official gold reserves will restrict sales to
strengthen gold investments and the development of new
mining projects in the Latin American region.quot;

(Friday, September 14, 2001, a href=http://www.vheadline.com

* * *

What happens to the gold price if other central banks
follow the lead of the Russian Central Bank and decide
to build their gold reserves while some of the central
banks that have quot;lentquot; 14,000 tonnes of gold try and
get it back?

Many of you sent me emails about Fox TV's Neil Cavuto
regarding his comments about the gold and silver
warehoused underneath the World Trade Center. I pass
this along as I am not sure what to make of it:

* * *

quot;FYI Neal Cavuto (about 9:20 AM CDT, just a few minutes
ago) live on Fox News said that quot;they can't findquot; the
silver and gold under the WTC debris. He cited the
amounts, using figures in the millions of troy ounces
for each metal. I wonder where he got his info. He said
some pretty dumb things, like it could/would add to an
quot;inflationary spiral,quot; which is unlikely, in my
opinion, given the relatively small amount of gold and
silver under there. Again how does he know it's gone
when they can't even get down to the parking garage,
where there could be survivors trapped? If the precious
metals are gone, they must have been gone in advance of
Black Tuesday, and someone must have found out. I'm
just speculating about this now, but it was a statement
that really caught my attention. How could he know?quot;

* * *

What is most important to take into consideration is
that the gold buried under the Comex is deliverable-
grade gold that could be used by the shorts if the
Comex longs stand for delivery in October. There does
not seem to be much of a chance that, even if the gold
is there, it will be available to the Comex shorts that
soon. The Comex gold? The Fort Knox gold? The West
Point gold? The disappearing Special Drawing Rights
Certificates? The 14,000 tonnes of quot;lentquot; central bank

What a mess the Gold Cartel has created -- all in the
name of greed based on lies.

GATA has supporters from all over the world. The Cafe
membership is a worldwide one. I am particularly fond
of two Cafe members I have had the privilege of
meeting; one is in Vancouver, British Columbia, and the
other in Durban, South Africa. One is of Arab descent
and the other is Jewish, a descendant of Holocaust
victims. Both are color-blind, prejudice-free, and just
good people. Like other HUMAN beings, they are anti-

Our president has called out to the world to defeat the
terrorists. It must be done. It is in that spirit that
I share this very special email sent to Chris Powell
and me this week:

* * *

Dear Bill and Chris:

I wish to express great sympathy and participation in
your/our sorrow and pain. My heart and the hearts of
all Israelis go out to you. America has been a great
defender of Israel in so many hard times while we were
the spearhead fighting this murderous terrorism, which
has made all Western culture a target, be it in Israel
or the United States. This is a fight all the West
should unite in. I have been an officer in a commando
unit in Israel and have seen how terrorists entered a
kindergarten and blew the heads of five children --
guns put at their heads from 5 centimeters. These
children were 3 years old. They never knew what was
going on. It was then that I understood the extreme
cruelty these people can reach, and understood that
they will never stop until they are stopped.

I hope the United States will now lead the fight
against terrorism.

I was very worried about you when you didn't write for
a few days, not knowing where you were. You are also
fighters for freedom. God bless you.

With much respect,

Dani Davidi


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