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Friend of Another predicts GATA''s vindication
9p EDT Saturday, October 30, 1999
Dear Friend of GATA and Gold:
Here's quot;The Golden View from The Towerquot; at
www.USAGold.com on Friday night.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
The Golden View from The Tower
for Friday, October 29, 1999
To take some liberties with quot;Apocalypse Nowquot; ... quot;I
love the smell of euphoria in the morning.quot;
It all comes down to departures from reality. The
irrational behavior of your garden-variety fund
managers and individual investors are playing right
into the cliche quot;the bigger they are, the harder they
fall,quot; and those of us on the sidelines with gold are
safely positioned to calmly watch the drama unfold on
what is sure to be a once-in-a-lifetime event. (Except
for those few who are old enough to remember 1929.)
The DOW recorded its highest close since September
20th, reaching 10729.86 at the final bell. It posted a
gain of 107.33 (#43;1.01%) on this final day of its
present configuration. As we reported earlier in the
week, on Monday it will be revamped to include four new
components, most notably Microsoft and Intel among
them.
The Nasdaq enjoyed a record-setting session, both on
volume (1,441,370,000) and on closing value (2966.43)
It reached its new high on its sixth-best daily point
gain of 91.21 (#43;3.17%).
It was an exuberant day for paper all around, not just
for the index components. On the New York Stock
Exchange, 1.14 billion shares were traded, advancing
issues led decliners 2,170 to 974, and for the first
time in memory, new 52-week low were outnumbered by new
highs 84 to113.
As reported by TheStreet.com:
quot;'The psychology of the market has changed,' said one
ebullient (and long) New York equity trader. 'A lot of
people made a lot of money the last two days. Once in a
while you get it right and you've got to press your
position until [the trend] changes. This is awesome.'quot;
Live it up, Sonny. The Tower would love to buy your
various company shares after they prove that they can
double easily from these levels. Just give us a call
when you're ready to retire.
But seriously, doubts do remain on Wall Street, though
they are in the smaller camp. Jim Volk, co-director of
institutional trading at D.A. Davidson, says, quot;I am
still skeptical. A lot of big hedge funds are taking
money off the table. There's still good buying and it's
not like the market is going to go down 500 points in a
week, but I just think they've had enough of a play
that they're ready to rest.quot;
The bond buyers showed no sign of resting today,
driving the 30-year bond down to 6.149% on a second
straight day of full-point gains, today's being 1-6/32.
But despite the recent quot;traders' rulesquot; that say the
dollar follows the Dow, the dollar lost against
currencies across the board. Of note, it lost 0.96 yen
to close down at 104.09 per dollar, and it gave up 0.31
cents against the euro, the euro closing equivalent to
$1.0543. The euro also registered gains against the
yen, climbing 0.68 yen to 109.75 yen.
Because it is such an important point to grasp as
events unfold in the gold market, I offer a quick
rehash of a portion of yesterday's Golden Views. When
people embark on a search for truth, they can never be
too sure what to believe, and what to dismiss. Unless
you are standing on the doorstep as a firsthand witness
to the unfolding of events, the search for corroborating
evidence can be a never-ending thing. We hope this
comment by an impartial authority (impartial to the
fate of gold, that is) will help you see clearly
that the price of gold is not set by the supply and
demand of the physical market but rather by the supply
and demand of gold derivatives -- contracts that
position the holder to gain or lose money based on a
future price of the futures contract. Our quot;authorityquot;
is none other than William Rainer, chairman of the
Commodity Futures Trading Commission. He delivered an
address that emphasized that quot;the CFTC should treat
financial futures [such as those for Treasuries] in a
fundamentally different way than futures based on
metals, agriculture or energy.quot; He said he was
skeptical that the quot;remote possibility of manipulationquot;
for financial futures justified the current level of
regulation; that financial markets did not rely on
financial futures for price discovery, which is one of
the fundamental principles of US futures regulation.
Clearly, the case is clear that the aforementioned real
underlying assets, including metal (gold), DO rely on
the futures markets for price discovery. That is
important to grasp (and is why we repeated it) because
there is currently a disparity between the
availability-vs.-demand of real gold when compared to
the abundant trading of quot;paper gold.quot; When real gold
can't be moved adequately at the quot;paper goldquot; pricing
levels, there will be a sharp adjustment in which all
hell breaks loose due to the global scale of the gold
derivative markets. Read on....
On a relatively slow day in these gold market, the spot
price was last quoted in New York at $298.20, off 20
cents from yesterday, settling in the middle of the
day's trading range. As we turn now to Bridge News for
their brief comments on a seemingly uneventful day, be
sure to take note of our interjected commentary on some
action by the Bank of England that we hope you find to
be as satisfying as we did. It would seem we are
squarely positioned within the end game...
quot;New York Precious Metals Review: December silver down
10c in late selloff. By Melanie Lovatt. Bridge News.
New York -- Oct. 29 -- COMEX Dec silver futures settled
down 10 cents at $5.18 per ounce after sliding to a
two-day low of $5.17 right at the end of the session.
Traders said that silver's move lower was technically
inspired, with its inability to pierce $5.33 resistance
leading to disappointed long liquidation. Aside from
this, precious metals were quiet amid low volume trade.
quot;Traders noted that today's stock and bond market
rallies also sapped strength from precious metals.
Platinum and gold dipped lower at the end of the
session in step with the silver selloff, while palladium
meandered higher.
quot;Traders said that today's precious metals session was
dull, with many brokers and traders taking off at
midday to watch the Yankees baseball team celebrate
their 27th World Series win with a ticker-tape parade in
downtown Manhattan.
quot;However, even with lease rates slipping further, gold
stayed 'resilient' around the $300 per ounce level,
said Leonard Kaplan, chief bullion dealer at LFG
Bullion Services. One-month lease rates are now at
around 0.90%, after staying at 1% on Tuesday through
Thursday. They had started the week off at 1.5%, which
was down considerably on the previous Monday's 3%.quot;
[The TWO-month lease rate has managed to remain
something of an aberation above 3% though... 1-month
1.1080% 2-month 3.0110% 3-month 2.8850% 6-month
2.8200% 12-mnth 2.9500%...]
quot;Traders said that rumors are circulating suggesting
that central banks, especially the Bank of England, had
been lending more gold to the market in the hope that
lower lease rates would keep the prices down and help
producers to cover positions.quot;
Ah-HA!! So NOW you know! From that passage above it
should become clearer to you what the motivation is for
the Bank of England ... to desparately do whatever is
needed to patch together a failing gold derivatives
market.
Please think about this. With the Bank of England in
the midst of a series of auctions, all circumstances
and developments reveal clearly that their goal was not
to garner the highest price for their gold ... to
convert a quot;sterile assetquot; into a great number of
dollars, euros, and yen with which to draw interest.
First, you already know that gold can earn interest.
Second, the pre-announcement of the sales was a sure-
bet to shake the confidence of gold-holders with the
hope of stemming demand and dropping the price. And
third, now you see reports of them lending in the hope
to lower lease rates, which in turn is hoped to keep
prices down. Do these sound like the actions of an
entity that is looking out for an interest to gain the
best possible return on an asset that is being
auctioned? Say it with me now ...No!
Are we upset, here at The Tower? Hell, no. We LOVE it!
We realize that this is perfect confirmation of much
that has been discussed at our Round Table in regard to
the gold market (as we know it) being on its last legs.
Desperate times call for desperate measures, and we
clearly see the desperate measures taken now by the
Bank of England. Yes, folks, when the wheels come off
of this gold derivative market, the only position you
will want to have is gold in hand. The dollar itself
will slide right along with spurious gold contracts, as
it will be the denominator of those failed contracts.
Oh, sure, more dollars are better than fewer dollars;
but gold in hand will be better than any amount of
paper that tries to play as its suitable substitute.
Back to the Bridge News report:
quot;When gold climbed, with December hitting a two-year
high of $339 on Oct. 5, some producers, such as Ghana
mining company Ashanti, became exposed to heavy margin
calls on their options positions.
quot;In the news, Russian Prime Minister Vladimir Putin has
signed a ruling extending the 5% export duty on
precious metals for another 6 months, Stanislav Naumov,
an aide to First Deputy Prime Minister Viktor
Khristenko, said today.quot;
There's not much else to report from the COMEX world of
gold derivatives. The October contract expired two days
ago, and November is an quot;offquot; month (open interest in
November futures is currently only 14). Things will
likely be slow until the December futures (open
interest was down yesterday 2100 to 105,797 contracts)
near their own expiry, and not forgetting, of course,
the approaching expiry of the options associated with
them. Today 4,018 ounces were withdrawn from Eligible
COMEX gold inventory, leaving 90,295 Eligible ounces
and 784,098 Registered ounces on deposit.
There wasn't much news in the energy futures either.
December crude settled up 7c at $21.75. Brokers are
looking forward to the release of OPEC compliance
estimates for October. Because last month's data put
the market on a downward trend when it showed
compliance had slipped by, if memory serves me right,
about 60,000 barrels per day (which is an insignificant
volume in this market) , the traders expect the data to
be extremely important in setting the tone for
November. Some are expection the data will show an
improvement in compliance. One trader said, quot;We're
looking for OPEC compliance of over 90%. That should
help crude easily touch $24.00 again.quot;
And that's the view from here...after the close.
