Gold Council chief keynotes Denver conference

12:45p EDT Tuesday, October 19, 1999

Dear Friend of GATA and Gold:

The Financial Post in Canada published yesterday this
interesting article about gold, repeating speculation
that the U.S. Federal Reserve has bailed out a major
brokerage house that is short gold. The article
mentions GATA favorably.

Please post this as seems useful.

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

* * *

Invisible hands squeezing gold

Human nature may account for
some unusual price moves

By Patrick Bloomfield
Financial Post

October 18, 1999

Talk about invisible hands shaping the markets! My
guess is that we are seeing some very invisible hands
at work today, but far from the kind envisaged by Adam
Smith.

Gold markets provide one illustration.

A little more than week back, Chris Thompson, chairman
of South African mining house Gold Fields Ltd., was
telling the world that this mining group, the world's
second-largest gold producer, had bought back the bulk
of its gold hedge position because it expected prices
to rise. This past Friday Mr. Thompson reinforced his
message: quot;Having looked at all the fundamentals of the
current gold market, it seems inevitable to us that
much higher gold prices are available.quot;

His words made some sense. Yet, the same day, the
London spot bullion price continued its modest decline.

Why? After all, the significant excess of global demand
for gold over newly mined gold continues. Goldfields
and its fellow South African mining giant, AngloGold
Ltd., have been reported to be buyers. The major
central banks had agreed to cap their selling, leasing
and derivative business. And the scrap market ain't
what it used to be last year.

It seems a very fair guess that somebody was quietly
feeding the market. And that gives at least a little
substance to those rumours that continue to circulate
of the U.S. Federal Reserve having bailed out a major
investment dealer by delivering on a gold contract due
and also being prepared (with other central banks) to
keep gold bullion markets in check.

For asking the question that led to this line of
thought (and for supplying some of the answers), I am
indebted to a citizen of Dallas, Bill Murphy, who among
other activities is chairman of an organization there
called the Gold Anti-Trust Action Committee.

Now I freely admit that this action group has a certain
thrust, in that its members have long believed that
there were too many darned invisible hands directing
the world's bullion markets as it was, and that, among
other results, this was going to precipitate a massive
bear squeeze -- which it did.

That said, there is sense to the suggested sequel, that
the squeeze continues but under the covers, so to
speak.

I also wonder whether it was wholly coincidence that
Fed Chairman Alan Greenspan's chose to deliver his
little homily just last week on the need to test the
risk assumptions in those fancy little computer-driven
asset diversification models.

One has only to look back to the Long-Term Capital
Management affair 12 months ago to recall that this
highly sophisticated hedge fund was basing its major
currency and bond bets on models set up by some very
high-powered people. Yet those bets still proved
losers.

I am sure that Mr. Greenspan had a like thought in mind
when he pointed out the damage that can be done to any
sophisticated model by abrupt changes in human
sentiment.

Did his words of caution also help accelerate one of
those changes in human sentiment? Only time will tell.

But to revert to my original topic, Ashanti Goldfields
Ltd. told analysts in its recent conference call that
it had done extensive sensitivity testing on its gold
hedging and derivative positions. But that was not
enough to spare it from margin calls as human sentiment
changed and gold prices leaped upward.

In combination with other factors, markets have
certainly taken Mr. Greenspan's musings seriously. You
can check out the extent of the current risk rethink by
going to the web site (www.yardeni.com) of Edward
Yardeni, Deutschebank Securities chief U.S. economist
and market strategist.

A week ago his numbers already suggested that the
premium over 10-year bonds being paid for the Standard
amp; Poor's 500-stock composite had fallen below 40% from
a recent peak of near 50%. That was when the Samp;P was at
1275, some 28 points higher than last week's dismal
close.

If the premium were to slip further to a more normal
20%, then that would imply a further decline of 170
points or so off Friday's Samp;P closing level.

In the market's current mood, the risk is that bargain
hunters will hold their fire for that kind of target --
or a lower one. Last week, even buyers of Internet
stocks had stopped to think.quot;