Ted Butler: NYMEX/COMEX start to sweat, so let''s keep the pressure on

10p ET Saturday, February 14, 2004

Dear Friend of GATA and Gold:

As you'll see from the Reuters stories below, Germany
again is talking about selling gold reserves, just hours
after there were strong indications of intervention in
the currency markets to weaken the euro against the
dollar. These are often reliable signals of dangerous
stress in the currency markets and the need of the
central banks to scare gold buyers.

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

* * *

German Government Backs Bundesbank's
Welteke On Gold Fund Plan

a href=http://www.reuters.com/newsArticle.jhtml?type=topNewsamp;storyID=4359185...

BOCHUM, Germany, Feb. 14 (Reuters) -- German Chancellor
Gerhard Schroeder has backed a plan by the president of
Germany's central bank, Ernst Welteke, to use interest
earnings from gold reserve sales to fund research and
development.

Speaking at a Social Democrats regional conference in the
western town of Bochum on Saturday, Schroeder said it was
vital the government continue its drive to boost research funding.

quot;Maybe the government and the Bundesbank together will
manage to put the income from the gold sales that have been
discussed into a fund, where all the profits will be put into
research and development,quot; Schroeder said.

Bundesbank President Ernst Welteke has said he favours
selling some of the central bank's gold and using the
proceeds to fund education and research projects but it is
not clear if the Bundesbank's board would support the sales
and no decision has been taken.

Some German politicians have said it is not for the
Bundesbank to decide how the funds will be used.

A proposal to sell gold and invest the proceeds in
interest-bearing securities to fund education and
research would require a change in the current law
governing Bundesbank profits, which are normally
transferred to the government and used to pay down
public debt.

Welteke has already said that there would be no majority
on the Bundesbank's board for outright gold sales without
such a change in the law.

Any change to the law governing the Bundesbank is a
decision for parliament rather than the Bundesbank itself,
the central bank said.

The Bundesbank, the world's second largest holder of gold
with more than 3,400 tonnes in its vaults, has sold only
small amounts in recent years but has recently said it
wants to join other central banks in selling gold reserves if
a 1999 accord limiting European central bank sales is
renewed.

The Bundesbank said last month it would like an option to
sell 120 tonnes of gold per year under the new accord, or
4 percent of its total stock.

* * *

Dollar Bounces Back, Helped by Euro

a href=http://www.reuters.com/newsArticle.jhtml?type=topNewsamp;storyID=4357917...

By GERTRUDE CHAVEZ

NEW YORK, Feb. 13 (Reuters) -- The dollar clawed back
from early losses on Friday in volatile trade amid a wave of
profit-taking in the euro after the single European currency
hit a near-record high against the greenback.

Earlier, the U.S. currency fell sharply against its major
counterparts on a report that the U.S. trade deficit widened
sharply and a surprisingly weak consumer sentiment
survey.

Markets were also perturbed by rumors of intervention by
the European Central Bank after the euro fell a full cent in
less than half an hour, reversing gains posted after the
softer-than-expected U.S. data. Traders said the
intervention rumors were fueled by the sale of some 2
billion euros by a big European bank, a move that
accelerated losses in the single European currency.

Traders, however, were unable to confirm the ECB's
presence in the market.

quot;The market may well have been spooked by the
intervention rumors, but the end result is still some
pretty ugly short-term price action for the euro,quot; said
Shaun Osborne, chief currency strategist at Scotia
Capital in Toronto.

quot;Friday's session will likely qualify as a key reversal day
and failed retest of the prior high, setting the market up
for a minor correction at least of the past week's rally,quot;
he added.

In late afternoon trade in New York, the euro was down
0.5 percent at $1.2737. The dollar was up slightly at
105.52 yen and rose 0.6 percent to 1.2384 Swiss francs.

Sterling was down 0.37 percent at $1.8845 after touching
an 11-year high of $1.8978.

Analysts, however, remain bullish on the euro and are
likely to buy the currency again on some dips. Next week
should provide ample opportunity to renew positions on the
euro amid another heavy economic calendar, traders said,
with the release of U.S. industrial production and capacity
utilization, the February Philadelphia Fed survey, and
consumer price data.

Earlier on Friday, two U.S. Senate office buildings and a
postal facility in Jersey City, New Jersey, were evacuated
due to the smell of smoke and the discovery of a suspicious
powdery substance, respectively. Traders said the news
weighed on the dollar, but the impact was mild and
temporary.

quot;News of Senate building evacuation could have weighed
on the dollar. But it is difficult to tell after such a volatile
day,quot; said Lauren Germain, currency strategist at Banc
of America Securities. The Capitol police later said a
false alarm prompted the evacuation of the Senate office
buildings, and the New Jersey post office was reopened
after a two-hour shutdown.

The dollar had fallen sharply earlier under the weight of a
trade deficit that grew nearly 11 percent in December to
$42.48 billion, more than analysts' forecast of $40 billion.
Then news of a steep decline in consumer sentiment
sent the euro a little higher, before it was repelled just
below its lifetime high of $1.2898.

quot;Even if we had a better-than-expected (trade) number,
people would have said the only requirement for this
number to continue improving is for the dollar to
continue weakening,quot; said Ashraf Laidi, chief currency
analyst at MG Financial Group in New York.

Theoretically, a weaker dollar encourages exports as it
makes overseas prices for U.S. goods cheaper while
discouraging U.S. purchases of more expensive imported
goods. Therefore, a weaker dollar should help narrow the
trade deficit, a major component of the current account.

Federal Reserve Chairman Alan Greenspan gave support
for this view earlier this week when he dismissed concerns
about the dollar weakness, saying it should help narrow
the gaping current account deficit.

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