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A big development Thursday 5/13 GMT?

Section: Daily Dispatches


By Bill Murphy

Spot Gold $276.80, down $1.10
Spot Silver $5.36, down 3 cents


Goldman Sachs and Deutsche were all over gold today,
selling it in "boatloads." They were all over it
yesterday too. The technicals are certainly bearish,
but they meant nothing on the upside and mean little
here either. This is a manipulated market. When the
"goon squad" and "officialdom" is exposed for what they
are doing, the price of gold will rally sharply in
time. VERY SHARPLY. It will not be a pretty sight for
the gold bears and that is our big picture technical
analysis for the day.

As you will note below, the "smartins" are moving into
silver and accumulating. It has held up very well under
the gold onslaught. The premiums in India remain very
strong indicating solid demand. $9.78 silver before the
end of the year.

Special ... Scandale Gold 3

More Transparency. Treasury Secretary, Robert Rubin
resigned today. Just more fuel to add to the bonfire.
Something is surely rotten in the state of Denmark.
Check that. Make it "the state of England" or "the
state of the Gold Market." The fact that Rubin was
going to resign was well known by the insiders. Just
one more reason that the gold market manipulators and
orchestraters of this lower gold price timed the
announcement by the Bank of England and the British
Treasury that they are going to sell 415 tonnes of
gold, when they did.

The gold market was set to take off. The colluders
were about to begin to lose control of the situation.
IMF and Swiss gold sale propaganda by the various
officialdoms was not working. Gold shares around the
world were soaring. The key $290 gold carry trade
area was about to be penetrated up the upside. The
Masters of the Universe could not let that stand.
Imagine if the price of gold today was $302 bid and the
Rubin announcement was made. Gold then goes $310 bid.
The gold borrowers first start choking, then start

Thus the conspirators, especially the American
administration, made the call to the English poodle to
devastate the gold bulls with this dramatic
announcement Before doing so, the "squad" ( Goldman
Sachs, J.P. Morgan, Deutsche Bank, and Co. ) were
obviously given the word and they told their big name
clients, "The price of gold will not go above $290."

There is even more to this story. It has something to
do with what Professor Von Braun has been telling the
Cafe and it has to do with the Bank of England and the
London Bullion Market Association. I received the
following note this morning from a very informed Cafe

"Had a good long chat with our dealer friend this
afternoon. The BOE was active in the lease market
yesterday. Spoke of the upcoming sales. Discussed why
there was a 'preference to keep the metal there.' (See
the BOE press release.) He says it is a real pain in
the ass to move the bars, etc.

"I asked him how much he thought was actually in the
vaults. He said it didn't matter. I asked: What do you
mean? Well, if it is out on lease, they'll just call it
back in. It's like a bank account, he went on. If one
person goes in and asks for their cash, it'll be there.
Pause. I asked: So when I buy in the cash-market from
you, I am really buying a spot deferred contract?
Pause, then: 'Yes.'

"I left the more obvious question un-asked...

"This is the bucket trade. While the more prominent
carry trade has the effect of accelerating supply to
market, the bucket trade has the effect of deferring
demand. Cash transactions aren't cash transactions.
They are spot deferreds. Nothing more than a claim on
the gold 'at any time.' Just like the ATM machine. Can
the bank's book be bigger than the underlying physical
coverage? Sure. What's the probability of everyone
withdrawing their cash on the same day?

"To work through an example: I buy cash gold from Bank
A. Bank A, in turn, will lay off a portion of this
physical liability with Bank B. Bank A's position might
be further neutralized with some out-of-the-money calls
and other such instruments; the rest of the buyer's
funds go into 5 percent T-Bills. Bank B does the same
sort of thing with Bank C, and Bank C in turn with Bank
D, and so forth. If 30 percent of the physical
liability is laid-off on the next guy at each stage, at
the end of the daisy chain we find only a minute
quantity of ultimate physical coverage.

"In other words, an analog of the fractional banking
system has been reconstructed on top of the bullion

"Achilles heel: Returns are still calculated on the old
dollar-based system. And they mark-to-market every day.

"Perhaps this is why we saw the whites of their eyes
last week."

What is he saying here? That the potential disaster out
there is even bigger than we thought. The Bank of
England and subordinate bullion dealers are reported to
be a big lenders of gold. Maybe too big? For they are
operating the gold market in a fractional reserve
system manner.

Here is another example of what this is all about. A
customer wants to buy a tonne of gold. The bullion
dealer says, "You own it." But instead of buying the
gold (and thus creating gold demand), the dealer gets
his "cover" by doing some sort of derivative
transaction with calls and maybe some futures. Because
they know the fix is in, maybe they take no cover at
all. We have been telling Cafe members for some time
that we have heard that the central banks (bullion
dealers) have enormous exposure above the market. So
this all fits and the picture is getting clearer and

The Bank of England and the British Treasury made this
gold announcement under severe duress and in near
panic. In time this will become more apparent, and
someone is going to have to answer many questions. In
time this scam is going to be exposed and the price of
gold is going to skyrocket. Various financial
institutions will go down, just as long Long Term
Capital Management did. But instead of one "systemic
risk" problem there might be 10, all occurring at the
same time.

In the meantime, the Gold Anti-Trust Action Committee
will continue to alert the House Banking and Financial
Services Committee to this time bomb, and hopefully the
committee will learn what we know and take action. The
longer this goes on, the bigger the problem will be
down the road.

Haruko Fukuda, chief executive of the World Gold
Council, seems to agree somewhat with GATA on the
reason for the decision by the British Treasury. She
made these comments yesterday to a London conference:

"Gold is at once a commodity and a universal currency.
Is the British chancellor of the exchequer challenging
that long-held assumption by bringing the gold ratio
down to a mere 7 percent of the United Kingdom's total
official reserves? Or was there another hidden
political agenda? We at the World Gold Council have
been told by the treasury that it was emphatically a
political decision."

That is what we said last Friday. Fukuda went on to
say, "Despite persistent efforts by the United States
to drive gold out of the international monetary system
entirely, gold is still there."

But Fakuda seems a bit out of step with the very
visible George Milling-Stanley of the World Gold
Council, who had this to say yesterday in an interview: