MIDAS COMMENTARY FOR 5/12/99, Page 1

PAGE 2, MIDAS COMMENTARY FOR MAY 12, 1999

"AH: George, you've obviously been watching the
'conspiracy' theorists who believe that every time the
gold price is ready to raise its head, something knocks
it back quite badly. We saw that happening again this
week. In fact last week the gold price seemed to be
heading above $290 and maybe even to $300 before the UK
announcement came out. What's your take on these
conspiracy theorists?

"MILLING-STANLEY: Well, there's no doubt with the UK
Treasury announcement on Friday that the conspiracy
theorists, especially those on the Internet, had an
absolute field day over the weekend. My take on it is
that I don't believe that the world central banks are
ganging up to keep the gold price depressed. I frankly
don't find that a credible thesis. The fact that many
speculators are going short -- all speculators have
seen that those who did go short over the past couple
of years have tended to make good money, so it makes
sense for them to go the same way, and when it makes
sense for people to be going in one direction, then I
don't look for a conspiracy to make them do so."

Yet, Doug Lieshman (of Vancouver, B.C.) and Art
Ettingler (Calgary, Alberta), in their Yorkton
Securities Retail Mining Research, had the following to
say about the British:

"What are they afraid of?

"After the latest announcement by the U.K. Treasury on
Friday, following the strong price performance of gold
and gold producers during the week, it is hard not to
think in terms of conspiracy. The announcement
described the Treasury's intention to sell 415 tonnes
of its 715-tonne gold reserve over the 'medium term,'
with 125 tonnes being sold during the current fiscal
year. The 125 tonnes represents less than 5 percent of
annual global demand, while the 715 tonnes currently
held by the Treasury represents only 16.7 percent of
the UK's official gold reserves. The amount to be sold
this year is not really significant, but more
importantly, England is not selling off nearly two
thirds of its reserves as many had interpreted when the
announcement was made. But in the world of the gold
markets, intent speaks louder than facts.

"Since last spring, when the Swiss were making business
headlines concerning their desire to become gold
merchants, numerous institutions, such as the IMF, the
French, President Clinton, and Japanese government
officials have voiced their intentions of how to deal
with their gold reserves. (In the instance of the
Japanese, the announcement really dealt with government
support of a weak yen, which ultimately translates into
a strong U.S. dollar and lower gold price). But as the
chart below illustrates, the timing of these
announcements seems peculiar. In many cases the
announcements were made soon after recent improvements
in the gold price, essentially killing any rally at an
early stage. In particular, announcements by the IMF,
President Chirac, and the U.K. Treasury last week put
an end to the early stages of a better gold market.

"From a business perspective, it doesn't make sense to
damage the market you're selling into. We hear of two
reasons why there might at least be a loose effort
among the G-7 countries to keep the gold price low. The
first and most logical is their fear of inflation. A
rising gold price would be considered a leading
indicator for inflationary pressure and would play
havoc with Wall Street (and with the Democrats' attempt
at re-election in the year 2000). The second reason is
related to the lending of gold by central banks to
hedge funds. These funds borrow gold at only a few
percentage points and then may sell this gold to
finance third world investments. The volatility in
emerging markets over the past two years could have
resulted in a lot of nervous central bankers wondering
how their gold loans will be repaid. By keeping the
gold price and a leading indicator of inflation low,
the central bankers are hoping third world markets will
recover and the funds will be able to repay their
loans."

There may be much to fear on the inflation front after
all. Rubin, Greenspan, and the British know what the
big boys are thinking. They get their feedback. Here is
an example of what is circulating out there:

London, May 11 (Bloomberg) -- Government bonds are in a
"bear market" and won't emerge any time soon, as global
economic growth drives investors into stocks and
commodities, said Stanley Druckenmiller, who manages
Soros Fund Management's $6.75 billion Quantum Fund.

"The probability of a global boom is not remote,"
Druckenmiller said at a Nation's Bank Montgomery
Securities Conference in London. As a result, "the
world economy will suck money out of the bond market."

He also predicts that copper, silver, aluminum, and
timber will rebound as global demand increases. "A bull
market in commodities is just starting."

Note that he does not mention gold. Of note is that we
told you last week that we heard George Soros was
buying silver around the $5 05 to $5.10 area. Thanks,
Icarus. Your information was right on the money. This
is proof of it.

Now why would the BOE and British Treasury do what they
just did knowing the in crowd thinks a commodity boom
is coming? Why suppress the price of gold? Want to sell
it? Fine. Why not do so at $320? Cafe members know the
answer.

Even the reserved and well-followed market technician
Martin Pring had this to say about all of this:

"We rarely comment on fundamental developments but
question the rationale of why the British Treasury
would announce the sale of gold bullion ahead of time,
in the full knowledge that the announcement would
result in an inferior price being received for the
metal. Such actions defy logic, and are certainly
negligent so far as the British taxpayer is concerned.
That is: Unless a higher motive is involved."

Bravo, Martin! Right on!

Perhaps this transparent gold cartel reads the Gold
Stock Analyst that the highly respected John Doody puts
out. He had this to say in his May issue:

"Whether IMF or Swiss sales, market fears are entirely
due to one-sided reporting and lack of understanding of
the full issues, which don't fit into a sound bite.

"IMF: Clinton/Rubin, UK's Brown, Japan's Miyazawa, et
al. can blather on about a 5-million ounce sale from
the IMF's 103 million ounce horde to help the poorest
nations, but it won't happen. Congress must approve any
sale (part of okaying a 1983 IMF funding request).
Comments by congressional leaders Saxton (Republican)
and Daschel (Democrat) show no sale will happen until
the IMF agrees to major changes -- which also won't
happen.

"Swiss: OKd new Constitution, cleaning up 125 years of
amendments; this did not authorize any gold sales, but
simply dropped the meaningless gold/Swiss franc
$96/ounce conversion rate. Considering government
attempts for broad consensus, with over 40 percent of
the cantons and citizens still opposed, the vote was
close. Now a sale could occur, with profits split one-
third federal, two-thirds cantons (as required for all
Swiss national bank profits). But the feds want all
gold sale profits and the cantons still want their two-
thirds. So the new constitution will have to be amended
in the year 2000. With so close a constitutional vote,
the amendment is unlikely to pass."

As Midas goes to press, a bombshell has come to my
attention via a phone call from an informed source in
London. Tomorrow in the London Financial press it will
be disclosed that Goldman Sachs is supposedly short
1,000 tonnes of gold. There is much more, but we will
have to wait to find out what comes out in the morning.

Midas

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