One gold shorter bids for another; and new Chapman commentary

4:45p EDT Sunday, September 10, 2000

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy has sent the following
letter to the Frankfurter Allgemeine in response
to its September 7 story quoting criticism of
GATA by the World Gold Council and its consultant,
Jessica Cross.

Murphy's reply is specific in every respect and
I think it shows that Cross and, more unfortunately,
the WGC don't know what they are talking about, so
please post it as seems useful.

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

* * *

September 10, 2000

Editor
Frankfurter Allgemeine
Frankfurt, Germany

Dear Editor:

According to the Frankfurter Allgemeine's September 7
article, the World Gold Council and its market analyst,
Jessica Cross, dispute the Gold Anti-Trust Action
Committee's findings about the dangerous size of the
international gold loans, and they believe that there
is no evidence of collusion to suppress the gold price.

As chairman of GATA, I would like to reply.

The article asserted that GATA has been unable to find
a prominent law firm that takes our allegations
seriously. This is incorrect. GATA has retained the
firm of Berger amp; Montague of Philadelphia, one of the
top anti-trust law firms in the United States.

As for evidence of manipulation, there is plenty, from
the U.S. Federal Reserve's rescue of Long-Term Capital
Management, to the timing and method of the Bank of
England's gold sales, to the hugely disproportionate
gold derivative positions built up this year by a few
investment banking houses (particularly J.P. Morgan,
Deutsche Bank, and Chase Bank), to the refusal of the
U.S. Treasury Department's Exchange Stabilization Fund
to explain how it has been generating big profits and
losses over the last two years when it maintains it has
not intervened in the currency markets.

Cross and the World Gold Council accuse GATA of being
supported by gold producers and investors. Indeed we
are. From the beginning our charter has been to protect
their legal rights and to defend gold's traditional
international monetary function. If such an undertaking
can become an accusation with the World Gold Council,
we must wonder, as many gold investors do, what the
council's own purposes are.

At the Financial Times' annual gold conference in July,
Gold Fields Mineral Services publicly refused a
challenge by GATA to debate its analysis of the gold
market. We recently posed the same challenge to the
World Gold Council and hope for a more favorable
response.

The September 7 article quoted assertions that GATA was
not taken seriously when, in May, we delivered our Gold
Derivatives Banking Crisis report to leaders of
Congress; the article said that the leaders of Congress
were just being polite to us. Certainly they were
polite; House Speaker Dennis Hastert spent an hour with
us and immediately arranged another meeting for us with
the chairman of the House subcommittee on domestic and
international monetary policy, who brought six
subcommittee staff members with him. As much as these
people want to be polite, they have important work to
do as well and do not meet with everyone who might like
to sample their courtesy. Since May we have had
conversations with other members of Congress who, when
courtesy is the only objective, delegate matters to
staff members.

The September 7 article asserted that GATA has not
offered motives for the suppression of the gold price.
This is untrue. We repeatedly have done so, and they
include the protection of the gold carry trade, in
which some major investment houses have been deeply
involved, raising cheap capital by liquidating the
mining industry, and the maintenance of a falsely
strong impression of the U.S. dollar and a falsely
benign impression of price inflation in the United
States.

And GATA is not alone among gold interests in its
belief that the gold price is being manipulated. Last
October the Reuters news agency quoted Robert Champion
de Crespigny, chief executive of Australia's largest
gold mining company, Normandy Mining, as saying that
the gold price was falling because of manipulation.
quot;This is banks manipulating the price, because of the
financial trouble two gold companies are in,quot; Champion
de Crespigny said.

Cross' analysis for the World Gold Council concludes
that the gold loans total 5,230 tonnes, and she says
GATA's estimate of 9,000 to 10,000 is wrong because
Gold Fields Mineral Service and the gold council agree
on the smaller figure. But GATA is not alone in
believing that the loans are larger.

At the recent Australian gold conference, the gold
council's own Martin Pringle estimated the loans at
6,000 tonnes. Chase bullion dealer Dinsa Mehta
estimated 7,000 tonnes, and David Hale, chief economist
for Zurich Kemper Hale, said he thought the loans were
three to four times annual mine supply, or at least
7,500 tonnes. GATA sticks with its estimate, which we
believe is based on a review more thorough than anyone
else's.

The September 7 article reported that demand for gold
as an investment has greatly decreased because
inflation is dead and that no one is expecting a
dramatic recovery in the gold price.

In fact demand for gold is at record levels around the
world. The increase in gold purchases in Turkey alone
has consumed gold nearly equal to the gold supplied by
the Bank of England auctions.

As for inflation, it is quite alive. The Goldman Sachs
Commodity Index, the Commodity Research Bureau Index,
and the Journal of Commerce Commodity Index just rose
to new highs. While commodity prices have risen 30
percent in dollar terms over the past year, they have
risen 60 percent in Euro terms.

Meanwhile, the price of gold, formerly a proxy for
commodity prices, has been going down. The yearly
deficit of gold demand over mine supply has reached
1,800 tonnes. Something is very strange here.

GATA would like to debate Cross and the World Gold
Council on these issues. Perhaps the Frankfurter
Allgemeine can facilitate our search for the truth
about the gold market.

BILL MURPHY, Chairman
Gold Anti-Trust Action Committee Inc.