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Today Karachi, tomorrow the world
11:50p EDT Friday, October 1, 1999
Dear Friend of GATA and Gold:
Here's tonight's quot;Golden View from The Towerquot;
commentary at www.USAGold.com.
Evidence grows that the short squeeze in gold is only
beginning. I'll send more along these lines to you
shortly.
Please post this as seems useful.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
After the Close:
the GOLDEN VIEW from The Tower
Friday night, October 1, 1999
There is much excitement and talk in The Tower about
the gold-quest movie quot;Three Kingsquot; (opening today) so
everyone here is making haste to wrap this up for the
grand opening. This TownCrier is typing as fast as
possible, so please for give the mistakes. We'll give
you the review when The Tower is re-manned.
Yesterday's stock market rally in hindsight seems to
have truly been driven by quarterly position
adjustments as we described yesterday, and the selling
resumed today right from the start. Only a late day
rally saved the indices from bigger losses on the day.
The DOW lost nearly 64, and the Nasdaq gave back nine
points.
The 30-year bond took a beating on a surge in the
National Association of Purchasing Management's
manufacturing index. This was discussed in an earlier
report, so suffice to say that the long bond lost 1-
9/32 in price, driving the yield up to 6.145%.
In currencies, the dollar lost 1.22 yen over the
previous close, and the euro climbed to $1.0724,
gaining .29 cents.
Turning now to gold, the day's price gain of $6.30 beat
the $5.80 seen on the December contract. We wonder when
this will become standard operating procedure. For now,
spot prices were last quoted in NY at $304.00. We'll
turn it over to Bridge News for comments on today's
futures trading:
quot;NY Precious Metals Review. Dec gold up $5.8 after NAPM
figures. By Melanie Lovatt and Tina Petersen, Bridge
News.
quot;Washington, Oct. 1 -- COMEX Dec gold settled up $5.80
at $305.3 per ounce, boosted by the dip in bonds,
stocks and the dollar's continued slide against the
yen.
quot;The financial markets were hit by the jump in the US
Sep National Association of Purchasing Management
index, with the price component hitting its highest
level since May 1995. The US NAPM Sep price index was
at 67.6, up from August's 59.8. The big NAPM number is
fueling inflation fears, a positive for gold which is
often used as an inflation hedge. However, some are
concerned that it will encourage the US Federal Reserve
to hike interest rates at its meeting next Tuesday and
Wednesday, which could prove a short-term negative for
gold. Nevertheless, traders said that the gold market
remains bullish and that it was simply following its
recent trend, which resulted in Tuesday's 1 1/2-year
high of $329.
quot;Leonard Kaplan, chief bullion dealer at LFG Bullion
Services, noted that while lease rates have fallen back
from their highs of over 9% for 1 month this week, they
remain 'enormously high at 4.8%.' He noted that they
are '10 times what they were a few months ago' and
should continue to fuel gold's price rally.quot;
[Here's our interjection of the gold lease rates at
day's end:
1-month 5.1510% -1.7490
2-month 5.2200% -1.2510
3-month 5.5850% -1.4980
6-month 4.9610% -0.5000
12-month 4.5400% -0.4950
... now back to our tale...]
quot;With lease rates at these levels and the continued
need for many players to cover options exposure, the
price could rally up to $340-360, Kaplan said.
quot;He noted that gold had held support when Dec slipped
back to $295.10 Thursday and could now head higher. 'It
is a bull market and it will tend to move higher when
there is no significant news,' he said. Bill O'Neill,
director of futures research for Merrill Lynch said
today that gold prices should at least average $300 per
ounce in the fourth quarter of this year, with a near-
term range of $280-340. O'Neill said this week's
announcement that European and Swiss central banks will
cap gold sales and limit lending alleviates the major
negative for the market.
quot;David Meger, senior metals analyst at Alaron Trading,
said that on a purely technical basis, he could call
for a 'blowoff top,' which is a spike that would end
the move higher. However, he said that he can't agree
with this on a fundamental basis. 'There are too many
leasers and people with options exposure still,' he
said. He noted that he expected to see them try to
gradually cover their positions in small tranches on
the London open. 'They'll try to cover gradually
because they've already gotten enough attention,' he
said.
quot;Dec gold reached a high of $310 in the morning, its
highest level since Wednesday's $322.40. Traders said
they expect gold to continue to be supported on the
breaks. 'This is the first time I am having a really
positive view toward the market,' said an analyst.quot;
*
COMEX delivery intentions so far for October is now up
to 1,603 contracts (5 tonnes). Today, 120 notices were
added to yesterday's First Notice Day sum of 1,483
contracts.
We'll walk you trough this if you're interested, if
not, skip ahead my merry friend. When COMEX trading
began yesterday, there were 2114 October contracts in
open interest ... a theoretical buyer on one side and a
theoretical seller on the other side at the price
agreed upon at the time they put up their margins and
quot;shook handsquot; on the deal.
The market changed from under them when it became
obvious to others following the European central bank
announcement that gold would not be quot;abandonedquot; as the
important financial asset which it truly is. The
resulting scurry of these new quot;investorsquot; to get in on
the action pushed prices up to these new levels, as
buyers were much more aggressive than sellers.
From records now available of yesterday's events, we
can see that of the 2,114 open October gold contracts,
by the end of the day that number had been reduced by
1,502, and stood at 612 open contracts this morning.
Recall from earlier that yesterday morning, 1,483
contracts were called for delivery, so of the 1,502
contracts that were closed yesterday, we can see that
only 19 of them chose to settle with cash. That
translates to over 98% of the contracts as being
settled with metal. Wow.
This morning began with a whopping (by comparison)
126,972 open December contracts. With each contract
theoretically representing the potential for 100 oz to
be called up quot;front and center!quot;, that could mobilized
395 tonnes of gold that isn't necessarily in the hands
of the theoretical quot;seller.quot; If their contract were
called for delivery, they'd probably pass the buck by
immediately purchasing another December contract and
announce delivery intentions on that with which to
settle their other obligation.
And so the buck gets passed as sellers turn buyers, and
only if a seller is found prepared to deliver gold at
the new price does this cascading meltdown (meltup?)
find some relief. Otherwise, someone at some point has
to turn to the spot market.
And we must ask ourselves again: Why didn't the buyers
simply seek spot gold in the first place? We seem to
recall positing that size can't be gotten at spot
markets without gunning the price. Any other
suggestions? Open interest for all COMEX gold contracts
total 209,241...theoretical obligations to mobilize 651
tonnes. Hah!
Wouldn't it be nice to take a similar walk throught the
LBMA? Always keep in mind as you read this that the
COMEX is dwarfed by both size and type of operations
occurring through the LBMA.
Bottom line on futures: the contract pricing by supply
and demand forces acting upon the contracts themselves
may (or may not) earn you a dollar profit, but there is
no guarantee that this trading will reflect the
realities of the physical supply and demand, or that
your contracts could be successfully exchanged for
physical. Stepping over now to the less theoretical,
more tangible side of the COMEX operations, the gold
depositories saw a little reshuffling action today.
Registered gold at the Scotia Mocatta vault was
transferred to the Registered inventory at Republic
National. 14,609 ounces to be exact. Apparently
somebody wanted it a little closer to home. Meanwhile,
385 oz (12 kilos) of Eligible gold fled the Scotia
Mocatta scene altogether. We're sure the new owner is
quite proud of his London Good Delivery Bar...if that's
what it was.
Total COMEX gold inventory stands at 927,620 ounces
(less than 29 tonnes). Given the high rate of contract
exchange for physical, it becomes somewhat within the
scope of reality to compare that amount with the 395
tonne potential sitting in current December open
interest. This could get interesting. And then there's
alway the LBMA, which could be imploding even as we
speak ... we'd never know 'til it was too late.
The Tower's scouts are kept busy in their quests for
news of gold, so we don't see a change to provide
additional comments of the pale precious metals as
occasionally requested. MK over at the Castle (CPM) has
available the various metals, but here in The Tower it
is gold that holds our interest and keeps us plenty
busy. This following commentary was taken from Bridge
News, and underscores The Tower's reluctance to track
the white metals:
quot;Despite the run-up in platinum and palladium, traders
said they are seeing very little consumer interest.
Traders said that profit-taking sales were being offset
by trade house purchasing.quot;
As you'll see, there is a fundamental difference
between the PGM's and the monetary driven market of
gold. Only gold is exactly gold, so to speak. This is
also shown in the following comments Bridge reported
regarding silver:
quot;Silver is seeing a lack of follow through from the
recent gold run-up, but a trader explained that the
reasons that gold has rallied do not apply to silver.
Nevertheless, he still expects silver to act as a
'tagalong' along commodity and to reach $5.70 in the
near term.quot;
November crude future opened strongly, reaching the
day's high of $24.85 before settling back for a 3c gain
on the day, closing at $24.54 in trading that was
described as boring on thin volume.
And that's the view from here ... after the close.
