If you think anything might be wrong in in the gold market, ever, you''re crazy

By PAUL WALDIE AND WENDY STUECK
The Globe and Mail, Toronto
Thursday, December 19, 2002
Print Edition, Page B-1
a href=http://www.theglobeandmail.comhttp://www.theglobeandmail.com/a

TORONTO and VANCOUVER -- Barrick Gold Corp.
and J.P. Morgan Chase amp; Co. illegally
depressed the price of gold for years, a $2-
billion (U.S.) lawsuit launched by a major
U.S. gold retailer alleges.

Toronto-based Barrick and J.P. Morgan are
accused of dumping gold onto the world market
for years in order to protect hedge
positions.

The lawsuit alleges Barrick developed the
hedging strategy with New York-based J.P.
Morgan to keep the price of gold down so that
Barrick could acquire other mining companies.

Barrick's quot;Premium Gold Sales Program has
earned over $1.7-billion for Barrick in the
past five years alone, and has enabled the
company to attain a dominant position in the
market,quot; alleges the lawsuit, which is
seeking an injunction to terminate Barrick's
hedging program. The suit, filed in a federal
court in New Orleans, also alleges Barrick
used off-balance-sheet accounting to hide the
transactions.

Barrick dismissed the allegations as
quot;ludicrous and totally without merit.quot;

The company said it has yet to review the
complaint, but quot;the press release contains
numerous factual inaccuracies and defamatory
statements.quot; The company added quot;it would
vigorously defend the suit and pursue all its
legal rights and remedies.quot;

An official at J.P. Morgan declined comment.

The suit was filed by Blanchard and Co. Inc.,
a New Orleans-based company that specializes
in rare coins and precious metals. Blanchard
is the largest gold coin dealer in the United
States.

The company was started in 1979 by James
Ulysses Blanchard, a colourful gold bug who
fought the U.S. government's longstanding ban
on owning gold (the law was changed in 1974)
and turned his hobby into a $100-million-a-
year business. Mr. Blanchard, who died in
1999, sold the gold business in 1988.

In the lawsuit, Blanchard said Barrick's
quot;sustained assault on the price of gold has
pointedly reduced market interest in
Blanchard's products and resulted in a
significant loss of business.quot; The company is
seeking triple damages for its alleged
losses.

Barrick is one of the world's largest gold
producers and a major user of hedging
programs to protect the price it gets for
gold.

The company accounts for between 15 and 20
percent of the 100 million ounces of gold in
the global hedging market. In the third
quarter of this year, Barrick used its
hedging program to realize an average price
of $342 an ounce, about $28 higher tha the
average spot price during the quarter.

However, with the price of gold rising, the
company recently announced that it is cutting
its hedging program by one-third to 12
million ounces by the end of next year. J.P.
Morgan is a major player in gold hedge
programs.

The lawsuit drew scorn from many gold
watchers who said it is ridiculous, given
that the price of gold is at a five-year high
of $342 an ounce.

quot;It's pathetic,quot; said Tim Wood, who edits a
mining Web site called Mineweb.com. quot;If they
wanted to make a case for it, why didn't they
do it when gold was going to $250? Why do it
on the day that it closes at its highest
level in 2002?quot;

Mr. Wood said Barrick's hedging program is
complicated and unique, but it is a
legitimate business arrangement that has
often helped support the gold price.

He added that Blanchard's real motivation may
be the fact that it told clients last year to
quot;avoid gold like the plague until such time
as the free market laws of supply and demand
were allowed to dictate the price.quot;

quot;Their clients have missed out on the price
rise, that's the real reason for this,quot; Mr.
Wood said.

quot;This is more of the same,quot; added gold
commentator Martin Murenbeeld of M.
Murenbeeld amp; Associates Inc. in Victoria.

He noted that this is the second time a
lawsuit has been launched in the United
States alleging a price-fixing strategy.

Two years ago, the Gold Anti-Trust Action
Committee, founded by William Murphy -- a
former National Football League player turned
futures trader -- filed a lawsuit alleging a
group of Wall Street investment firms and the
U.S. Federal Reserve Board conspired to keep
gold prices down. quot;Not surprisingly, [the
case] was thrown out,quot; Mr. Murenbeeld said.

He called the lawsuit a quot;highly speculative
action.

quot;But it is causing no end of consternation to
many people in the gold market, and it
confuses many issues that could lead somebody
to conclude that the gold market is rigged --
which it isn't,quot; he said.