Dollar/gold reversal predicted

10:15p EST Friday, March 31, 2000

Dear Friend of GATA and Gold:

Here's GATA Chairman Bill Murphy's quot;Midasquot;
commentary for today at www.LeMetropoleCafe.com.
It is now copyrighted so please don't post it anywhere
on the Internet without the author's permission.

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

* * *

quot;MIDASquot; COMMENTARY
FOR FRIDAY, MARCH 31, 2000

By Bill Murphy
www.LeMetropoleCafe.com

Spot Gold $278.50 up $2.30
Spot Silver $5.00 up 6 cents

Technicals

A modest bounce. Gold today attempted to reverse its
one-way trip into oblivion, showing signs of life after
a dreadful week. The bullish consensus sank all the way
down to 21 by yesterday and even the Comex floor was
completely demoralized, a recipe for a bounce.

When gold hit the skids early today, the phones to the
bullion dealers from physical gold buyers (especially
from India) began to ring off the hooks. By the close,
many of the floor crowd felt much better about the
near-term potential for the gold price, as their
feeling now is that gold is pretty well sold-out. The
open interest rose 8,000 contracts the past three days
and it is acknowledged that the funds were loading up
on the short side as they usually do when gold fails to
penetrate upside resistance.

While I was away someone bought 7,000 June 2001 gold
calls between 90 cents and $1.30 and bought 700 June
2001 440 calls today. Is it that a real big-picture
bull is stepping up to the plate or is it a big bear
trying to paint the tape by increasing the call option
position on Comex? This a bit complicated, but the
shorts know how the Comex positions are watched to see
what the position of the speculators are; that is,
whether they are overly long, etc. All these call
purchases add to the reported long positions of the
specs, which is what the bears want market analysts to
see. Playing with the call market is much cheaper and
creates little delta hedge buying because the calls are
so far out of the money. The floor broker who bought
the calls was telling all around him how bullish the
buyer was. It was done in such a conspicuous way that
it caught the attention of two Cafe members, and both
smelled some shenanigans.

A move above $284-$285 in the June contract would cast
a very bullish technical gold picture, as gold
marginally broke its December bottom. I have seen this
technical pattern many times and it is usually very
bullish as long as the new low holds. A move above
$284-285 basis June would generate a very strong
technical buy signal in my book, as it would take out
the downtrend line, penetrate support points to the
upside, and catch the tech specs going the wrong way on
a false breakdown of the December lows.

I am hearing more and more that Tiger might have been
long some gold as well as silver, and the selloff the
last couple of days may have been attributable in good
part to Tiger's liquidating those positions.

From one Cafe members yesterday who knows the gold and
silver markets well:

quot;Perhaps this collapse in gold and silver isn't that
bad after all. Tiger just announced closing down their
largest fund, Jaguar.quot;

The same source reported huge physical offtake in the
gold market.

It was a mystery to me why silver collapsed below $5
after finding such strong support right above $5 for so
long. Tiger was known to be a big buyer of platinum and
palladium before their big price runups. It would make
sense that Tiger bought some silver on recent price
setbacks, having been such big winners in the other
white metals. If Tiger was the big seller the past few
days and or weeks, it now sets the stage for a big move
up in the silver price. The break below $5 could have
been a mini-killer move and probably flushed out a good
number of stale longs.

A surprising silver stat from Capital Asset Financial
Services: The average price of silver over the last 26
months is $5.44 an ounce; yesterday's (March 30) spot
price was $4.96, 48 cents below the median.

Fundamentals

Commodity prices continue their higher trend. Today the
CRB was up sharply (2.97) and finished the day at
214.36. The CRB chart is a VERY BULLISH one. It has
moved up from 183 and since January it has risen from
201, making new highs on every advance, and the
setbacks have held a trend line beginning last July.

The CRB is advancing even though the dollar is strong.
What will it do when the overvalued dollar is hammered?
The term quot;strong dollarquot; is really a bit deceiving. The
yen was up almost 300 points today and is close to
going into new high ground against the dollar. A strong
yen and stronger Asian currencies bode well for gold
demand.

This is what John Hathaway, senior portfolio manger for
the Toqueville Fund, has to say about the dollar and
gold:

quot;Much more significant than this sensation-grabbing
headline is the untold story of the U.S. trade deficit
and what it means. In a word, the deficit holds the key
to the unraveling of world financial mania and the
resurrection of gold. The U.S. current account balance
as a percent of GDP, according to Bridgewater Daily
Observations, now exceeds 4 percent, the highest in 100
years. The deterioration is exacerbated by high oil
prices but still reflects numerous other factors.

quot;For example, income paid to foreigners now exceeds
income received, in large part a function of the
proportion of U.S. government debt held outside the
United States. It now equals a record 40 percent.
According to Bridgewater, 'the size and speed of the
current account balance alone dictate the
unsustainability of the present situation. The dollar
has not been damaged by the U.S. current account
deficit because there's been an inflow of capital that
has been equal to or greater than the outflow of
dollars from the current account deficit.'

quot;What keeps these fickle flows positive, in our
opinion, is nothing more than the perception that the
return from dollar-denominated U.S. financial
instruments is positive. When this perception changes,
as it inevitably must, this virtuous circle will become
a vicious circle of rising interest rates, falling
stock prices, and rising inflation. The timing to buy
gold stocks and gold mutual funds (don't forget the
Tocqueville Gold Fund) could not be more propitious.quot;

Months ago I reported that a Cafe member told me how
Energy Secretary Bill Richardson was strongarming
Mexico about supporting an oil production increase. The
tone behind the scenes was much more strident than they
let on in public. It was no surprise then when these
excerpts from the following dispatch crossed my desk:

* * *

By William Drozdiak
Washington Post Foreign Service
Thursday, March 30, 2000

VIENNA, March 29 -- As OPEC oil ministers haggled late
into the night Tuesday trying to figure out how much
more oil should be pumped into the world market, their
work was interrupted by telephone calls from Washington
that became more frequent and frantic with every
passing hour.

A parade of exasperated delegates repeatedly had to
leave the meeting hall at OPEC headquarters here to
pick up the receiver. On the other end of the line was
U.S. Energy Secretary Bill Richardson, who peppered
them with pleas to boost oil production so that
Americans -- especially in a presidential election year
-- could be assured of lower gasoline prices.

Coming on top of his tour of eight oil-producing
countries, Richardson's noticeable nagging upset a
number of ministers, including those from Arab
countries on the Persian Gulf that are friendly with
the United States. For instance, close U.S. allies
Saudi Arabia and Kuwait have tacitly acknowledged a
debt to the United States for leading the drive to
expel Iraqi forces from Kuwait during the Persian Gulf
War in 1991, but they never like being reminded that
cheap oil should be the price of their obligation.

* * *

One has to wonder what we have wrought here. My guess
is that the oil price will stay higher than most
pundits think it will and it would not surprise me to
see $30-32 oil again before the summer is over.

Potpourri and the Gold Shares

The XAU managed only a .37 gain to close at 56.57. Very
anemic.

The big news while I was out of town was the demise of
Tiger Management. This is what Reuters had to say
yesterday:

quot;Tiger Management LLC, the big U.S hedge fund that won
fame for snatching double-digit for snatching double-
digit returns from both bull and bear markets,
confirmed Thursday it will shut down and end an 18-
month losing streak propelled by the sharp slide in
old-fashioned 'value' stocks.

quot;Blaming the craze over Internet, technology, and
biotech stocks for overshadowing time-tested investment
strategies, Tiger chief executive Julian Robertson said
he was withdrawing from 'an irrational market, where
earnings and price considerations take a back seat to
mouse clicks and momentum.' The 67-year-old Robertson
told partners he will close all six funds run by Tiger,
including the flagship.quot;

Long-time Cafe members will remember the grief we took
last summer when we were all over the Tiger situation
and suggested that the fund might fold. When we first
got on the story, Tiger's assets were a reported $16-19
billion, down from $22 billion.

I reported that very reliable Cafe sources said $6
billion in redemptions were going to hit the fund and
that the fund's performance was terrible. We also
reported that we had heard they had the gold carry
trade on at the time and thus were short gold.

Friends of the Cafe took that information to Ron Insana
on CNBC. Insana made inquiries to Tiger and Robertson,
who came back to him and said our comments were
quot;obscene.quot; Denials were made on all counts. I was even
chastised by some generally supportive colleagues for
maybe going over the top. Alan Abelson in Barron's
dimissed such talk about Tiger. Harsh emails came in to
the Cafe from Tiger Fund investors.

No one likes to see someone go down for the count,
especially someone as esteemed as Robertson, but can
there be any more vivid example of the importance of
going beyond just what the establishment and the
mainstream press report?

The Cafe stood almost alone out there railing about
Tiger's situation. Where are the retractions from those
who said we were off our rocker?

I get no joy from being proved out on this one, but it
certainly is positive for the Cafe's track record and
should add to our credibility. Hello, gold reporters.

Tiger is not alone in stinking up the investment arena.
George Soros' Quantum Fund lost almost all its 12
percent February gain, according to Stanley
Druckenmiller, who runs the fund. February was the best
month this high-flyer had had in some time.

The investing world is in a tizzy. Think about this.
The legends: Julian Robertson, George Soros, and Warren
Buffet are doing terribly while many of those investors
who pay no attention to value or fundamentals of any
kind have been cleaning up. This has to be a recipe for
a stock market disaster.

This is a classic of classics. Greg Pickup of grain and
soybean note in Chicago tells me that his wife,
Barbara, cannot go to the hairdresser on a day when the
Nasdaq goes down sharply because the people there are
just too upset and cannot concentrate on her hair. The
hairdressers have outperformed Buffet, Robertson, and
Soros. Something tells me this is just not a stable
situation.

Handy amp; Harmon Refining Group Inc., one of the world's
biggest precious metals refiners, filed for Chapter 11
bankruptcy protection in Connecticut. The story appears
to be a crazy one and bears watching. At minimum, it
adds fuel to the GATA fire in our call for a serious
investigation of the gold market by Congress.

Handy amp; Harmon is a member of Golden West Refining
Group of Australia, whose major shareholder is the
privately held Rothschild Group. According to Reuters,
a lawyer for a creditor, Gerald Metals, said, quot;Golden
West has alleged that on Feb. 18, 2000, Barry Wayne,
president and CEO of Handy and Harmon, resigned, and
that, since February 18, most of the senior management
has either resigned or been terminated.quot; The lawyer for
Gerald Metals went on to say that Golden West has
alleged that on Feb. 21 Handy amp; Harmon discovered that
$12.5 million of gold purchased in Peru was missing.

According to Bridge News today:

quot;The bankruptcy filing is not related to the indictment
of several former Handy amp; Harmon executives in
connection with an alleged scheme to defraud the
Argentine government.

quot;Earlier this month U.S. Attorney Robert Cleary
announced the indictment of seven U.S. residents,
including the president of MTB Bank of New York and
several former Handy amp; Harmon executives, in connection
with a $130 million manufacturing and export scheme.

quot;The scheme allegedly involved a conspiracy to ship
precious metals and non-precious metals out of
Argentina to the U.S. at inflated prices, thereby
defrauding the Argentine government out of millions of
dollars in export incentives based on the stated price
of the goods.quot;

On top of this, who turns up to be Handy amp; Harmon's No.
1 creditor? The US Mint, to the tune of $29,888,537.
The next closest creditor was Echo Bay Minerals at
about $5 million and then the Connecticut Development
Authority at $4 million.

Our team is looking into this one and will let you know
if we come up with anything about the latest, dizzying
gold scandal.

Back to this one:

quot;Asked to end speculation that the New York Fed had
intervened in the gold market, Greenspan responded: 'I
can say unequivocally that the Federal Reserve Bank of
New York has not intervened in the gold market in an
attempt to manipulate the price of gold on its own
behalf or for the U.S. Treasury or anyone else.'quot;

Many Cafe members have sent emails about our asking
questions of the Federal Reserve chief using the
quot;manipulationquot; word. Check out GATA's Dec. 9
advertisement in Roll Call, posted at www.gataorg. We
never used the word once in our formal questions.
Greenspan is the one who brings it up in the context of
his assertion that the Fed would not manipulate the
gold market.

A Greenspeak encore?

The spring dinner conference of the Committee For
Monetary Research and Education, held at the Union Club
in New York, was great. It was a treat to meet so many
Cafe and GATA members who attended from all over the
country and from Mexico. Just off the top of my head,
your fellow members came from Maryland, Massachusetts,
Colorado, Michigan, Florida, Illinois, New Jersey,
Nevada, Connecticut, and, of course, New York. A great
group.

The press also showed up and included Dow Jones,
Reuters, Bloomberg, Town and Country, and John Dizard
and John Crudele of the New York Post. I had a long
chat with Crudele, who sat at my table.

I enjoyed all the other speakers and was honored to be
among them.

Owen Humpage of the Federal Reserve Bank of Cleveland
subject was: quot;Does the Fed Affect Foreign Exchange
Market?quot;

I was up next and Frank Veneroso followed with
quot;Confessions of a Convert to the World According to
GATA.quot; Frank has a photographic memory.

After dinner James J. Leisenring, vice chairman of the
Financial Accounting Standards Board, spoke on
quot;Accounting Issues in Current Conditions.quot;

That was followed by 83-year-old Abe Briloff, whose
commentary has been in Barron's often in recent years,
spoke on accounting issues. I hope I have half his
energy when I am his age.

The last speaker of the evening was former U.S. Rep.
Henry S. Reuss, former chairman of the House Banking
Committee and the House Joint Economic Committee. His
topic was quot;Limits on Margin Lending for Stocks -- A
Solution.

The speakers were lively and often funny and presented
great material.

Several Cafe members who attended asked if my stolen
car ever showed up. One of them, a Michigan resident,
Scott, was a State Farm insurance agent and I told him
that State Farm was my insurance company and that the
company had been more than fair with me (paying out
just over 50 percent of what I had paid for my Saab
convertible five years ago), and very promptly -- but
maybe too prompt. The day after the insurance check
cleared, I got a call from the Dallas police and was
informed that they just found my car abandoned on the
highway. I went over to the car pound just to see if
anything was still left in it, and I could not believe
what I saw. Not a scratch on the car, $3.50 lying in a
front compartment, my cashmere sweater lying in the
back seat, jumper cables in the trunk, etc.

What kind of robbery was this? Even the out-of-state
license plates were intact. Very strange.

GATA's game plan:

1. Reginald Howe articulates it better than anyone.
Focus on Treasury Secretary Lawrence Summers and the
Exchange Stabilization Fund.

2. Speak to as many U.S. representatives and senators
as possible so that an investigation into the gold
market is set in motion. We just need ONE sympathetic
listener out of all we plan to see to get the ball
rolling. Our investigation will focus on the banks and
their gold books. It is best that I do not go into all
the questions, but I can say that we intend to find out
the size of the gold loans of these banks. If we are
right, the loans are much larger than is understood by
the marketplace.

Fed Chairman Greenspan has asserted twice now that the
Federal Reserve and the New York Fed are not involved
in the gold market, so there should be no interference
from our central banker in Congress' receiving
information from the bullion banks. It should not be a
big deal at all and can be kept in confidence by the
committee doing the investigation. If a bank will not
respond and tell the truth, then the red flags will go
up.

There are about 20 banks that we will suggest Congress
contact. Bing, bang, boom! How long can it take for 20
bankers just to respond to Congress and tell facts that
might even be required information (according to James
Leisenring).

If the loans are as large as we think or twice the
accepted number, alarm bells will start going off. That
will be the beginning of the end for the collusion
crowd, and I don't see why we can't have some answers
soon after the inquiry starts.

In the weeks to come the GATA delegation will be
preparing for our meetings.