The Greatest Con: The Rubin Dollar

2:20a EST Tuesday, February 8, 2000

Dear Friend of GATA and Gold:

Reginald H. Howe, Harvard-trained lawyer and former
mining executive, and sole proprietor of
www.GoldenSextant.com, has analyzed Barrick Gold's
announcement Monday about its hedging, and observes
that the company bought only quot;virtualquot; gold, paper gold
-- and well may have done so with the help of the U.S.
Treasury Department's Exchange Stabilization Fund.

Please post this as seems useful.

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

* * *

WHO SOLD BARRICK THE CALLS?

By Reginald H. Howe
www.GoldenSextant.com
February 8, 2000

Yesterday Barrick Gold made its much-anticipated
announcement on hedging. As of the end of third
quarter, as reported at its website, Barrick had 14
million ounces of gold sold forward and had written
long-term call options on another 4 million ounces.

According to yesterday's release, Barrick has: 1)
reduced its exposure on call options written to 2.7
million ounces; 2) stretched out the delivery schedule
on its its spot-deferred contracts, which now cover a
total of 13.6 million ounces; and 3) engaged in quot;an
important new dimensionquot; by purchasing call options on
6.8 million ounces. It adds that the new purchased call
options quot;cover 100 percent of production from March 1,
2000, through 2001quot; at strike prices of $319/oz. in
2000 and $335/oz. in 2001.

Thus Barrick's hedging program, according to the
release, quot;has been reduced from 18.8 million ounces at
the end of the third quarter to a net 9.8 million
ounces at year-end 1999.quot;

While the numbers do not fully jibe with the prior
quarter's, the net reduction in its hedge book of some
9 million ounces consists of 400,000 ounces delivered
under forward contracts, a reduction of 1.3 million
ounces in written calls, and the purchase of new calls
for 6.8 million ounces. Yet here is how this
announcement was interpreted by one allegedly competent
gold analyst (www.goldminingoutlook.com):

quot;The fact that Barrick was able to close nearly half of
its huge hedged position in the fourth quarter of 1999
(a total of 280 tonnes of gold were closed out by
Barrick in less than two months) without pushing the
gold price up by even a penny must have come as a shock
to a substantial portion of current gold long-side
speculators, many of whom assumed that Barrick was
'trapped' because it couldn't possibly lift its hedges
(so this argument went) without causing a sharp spike
in the gold price.quot;

But if Barrick had closed out its forward contracts by
the amount of its new purchased calls (6.8 million
ounces or 212 tonnes), it most certainly would have
caused a spike in gold because Barrick would have had
to buy physical gold.

That is not what Barrick did.

No, Barrick bought paper gold -- virtual gold -- from
someone who is either crazy or possessed of deep
pockets and a strong desire to cap gold.

Frankly, under current circumstances in the gold
market, it is difficult to imagine anyone but the U.S.
Treasury Department's Exchange Stabilization Fund
willing to backstop call options on more than 200
tonnes at strike prices from $319 to $335.

What a day the sellers of those calls must have had
last Friday!

As for investing in Barrick, my advice would be to
identify the counterparties to those calls first. For
every $100 over the strike price, they are looking at a
$680 million loss.