Is Aussie government manipulating its stock market?

10p EDT Thursday, October 12, 2000

Dear Friend of GATA and Gold:

Here's an English translation of this week's interview
on the NTV television network in Germany about
manipulation of the price of gold.

This cat is out of the bag. We'll take the credit.

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

* * *

Carola Ferstl interviews Martin Siegel
on the N-TV network in Germany, October 10, 2000

C.F.: Today we deal with a topic that we didn't talk
about for a long time. We don't look at gold, since
stocks and their ups and downs are in the middle of
interest. Gold as a possibility of investment has
nearly been forgotten. This may be doubtless a result
of gold's performance. In the last years gold didn`t
perform in a satisfying manner. Perhaps there was a
decreasing enthusiasm for gold as a protection against
inflation, but perhaps there are some other reasons.
Martin Siegel wants to show us those reasons. Good
evening, Mr. Siegel. What is the reason why gold isn`t
performing right now?

M.S.: First of all, your presentation of the situation
isn`t quite true. Gold gained 30 percent in a 12-month
period on a deutsche mark or euro basis. This is
naturally because of the dollar's performance, but gold
performed very well in camparison to German stocks or
the new markets or especially the Nasdaq.

C.F.: You uncovered a kind of scandal. Not you
personally, but some time ago there has been an
uncovering of a scandal, which is about the price of
gold. This has something to do with the central banks.
What`s the story?

M.S.: OK, but quot;scandalquot; is not quite the right word.
The story is that there are some big investment banks
and they have borrowed gold from the central banks.
They are interested in a low price of gold because of
these transactions. They have the possibilities to
spread negative statements on gold via press, media,
and news agencies to keep these transactions going,
which are good for a profit of two to five billion
dollars a year.

C.F.: Can you explain in more detail how this
transaction works?

M.S.: An investment bank -- let`s say Deutsche Bank --
borrows gold from a central bank. Sixty to 70 central
banks take a share in this transaction worldwide. Then
this gold is sold in the market. I don't know the
reason, but the lending fees of the central banks are
very low. As a bank with good solvency, like Deutsche
Bank, you can borrow the gold from a central bank for
about 1 percent. After having sold the gold, you can
invest this money at a rate of 4, 5, or 6 percent, and
you get an annual profit of about 5 percent relatively
risk-free.

C.F.: You want to say that all of them are interested
in leaving the price of gold where it is. What would
happen if this entire scenario stops working or what
would happen if the price of gold increases?

M.S.: It seems like all investment banks worldwide are
involved, because there are no real big investment
groups that want to buy gold aggressively to get the
shorts to fall. This would be possible in a relatively
easy way. A speculator like Soros could topple over the
entire gold market within few hours, but these big
business people do not seem to be interested in
destroying a market that is so lucrative for all
participants. The important fact is that when the
central banks are not any longer ready to lend gold and
they want their gold back, then the price of gold will
explode. The investment banks that were borrowing the
gold -- like Deutsche Bank or Goldman Sachs, as two of
the major participants -- would be in big trouble to
deliver the gold back from the market. They could not
fulfill the contracts, because supply and demand are
equal only because of the new gold lending from the
central banks.

C.F.: But you say all of them are involved in these
transactions. Why should those central banks stop the
process now, and why should this game end?

M.S.: The central banks will loose their gold in the
long run. They will lend more and more gold until there
is nothing left in the safes. This is the time when the
transaction will collapse, because the demand in the
market will be higher than the supply. Today demand is
always steadily higher than the supply side and they
are equal only because of the lending and selling of
the central banks. The price of gold has to move higher
when gold isn't available for the central banks to do
these transactions.

C.F.: When will this happen?

M.S.: This depends upon the central banks and if they
want to keep their gold. Last year the European central
banks and the Swiss decided to limit their sales of
gold to 400 tons per year and to stop their gold
lending for five years. This announcement alone, called
the Washington Agreement On Gold, led to an explosion
in the price of gold -- you can see it in the charts --
from about $260 to $340 per ounce, but the increase in
the price of gold was stopped then because of selling
from other central banks, especially from the Near
East, Kuwait and Jordan, but also from South America:
Uruguay, Argentina, and Brazil.

C.F.: Mr. Siegel, thank you very much for the
interview. We have run out of time. We will talk about
the topic again in the near future.