The Professor disputes Martin Armstrong

11a EDT Saturday, July 3, 1999

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy's brief commentary last night
by email to members of www.lemetropolecafe.com will be
of special interest on the eve of the Bank of England gold
auction. It follows.

With good wishes.

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

* * *

Friday, July 2, 1999

Today's market activity was very quiet, but silver,
oil, and copper all closed higher once again, with gold
finishing right above unchanged. Bullion dealer Chase
offered HUGE size in the gold pits for the second day
in a row, stopping any serious rallies.

The open interest dropped more than 5,000 contracts in
yesterday's action, so the specs are covering while the
bullion dealers sell. A bit of the same old pattern we
have seen for such a long time.

It is especially disconcerting when one hears this
today from Kelvin Williams, Executive Director of South
Africa's Anglo Gold Ltd.: quot;The auction is going to be
oversubscribed by three or four times the amount of
gold on offerquot; (confirming what we already told you).
He went on to say, quot;One of our counterparty banks has
indicated a firm intention to make a bid for the full
100 percent.quot; Perhaps this confirms the rumor that
Goldman Sachs was going to do just that. We will know
more by 11 a.m. or so London time on Tuesday.

Regardless, something does not sit right again here.

Why are the bullion banks offering size going into an
auction that may be oversubsribed three or four times?
What oversold market like gold produces such feeble
rallies with such strong demand? If Goldman Sachs IS
such a big buyer, whom are they buying for?

I have a sickening feeling that the manipulation of the
gold market is intensifying, and I will deal with that
soon. I say this because it is clear that the natural
supply/demand fundamentals are improving daily. Our
camp says there is a 150-tonne or more natural
supply/demand deficit that must be met EVERY MONTH.
Central bank selling is minimal, as is producer forward
selling, and the Asians are rebuilding gold stocks
after their crisis, so scrap supply is zilch. That can
leave only leased gold borrowed from central banks
hitting the market.

Could that 1,000-tonne short position at Goldman Sachs
partly be gold borrowed from the U.S. Fed? If Goldman
is buying back gold at the auction, is it doing so in
behalf of the U.S. Fed? Is that why they called the
Bank of England into action to sell gold? Some quid pro
quo between the U.S. and British governments?

This is all very disturbing. You know that we will do
what we can to try and get a better handle on all this.
The more GATA investigates the gold market, the worse
the stench becomes.

Whatever happens in the short term, it is clear that
the shorts will blow up at some point in the not-too-
distant future, for the longer they keep the gold price
down, the greater will be the deficit, and the gold
loans will be just that much bigger as they continue to
grow and grow.

The shorts WILL have their butt handed to them and the
resulting short-covering panic will cause the gold
price to go far higher than most can imagine.

All the best,

Bill Murphy
Le Patron, www.lemetropolecafe.com

-END-

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