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Copyright 2001, www.LeMetropoleCafe.com
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quot;MIDASquot; COMMENTARY FOR JANUARY 14, 2001
Anatomy of a rigged market;
and GATA's South African agenda
By Bill Murphy
www.LeMetropoleCafe.com
Chairman, Gold Anti-Trust Action Committee Inc.
Spot gold $263.75.
Spot silver $4.61
Gold sank to a 16-month low last Friday as the funds
and speculators piled in on the short side. It has been
straight down for gold ever since it showed signs of
life three weeks ago and had the audacity to challenge
the pathetically low price of $275.
Silver popped a bit, rallying 6 cents on a burst of
short covering.
Gold demand and who the buyers are:
quot;ISTANBUL, Jan. 12 (Reuters) -- Turkish gold imports are
expected to remain at around 200 tonnes in 2001 after
rising last year on an increase in gold jewellery
exports, a senior trade official said on Friday.
quot;'Last year was successful and we are optimistic for
2001. Looking at the previous trends, we can expect
around 200 tonnes of gold imports in 2001,quot; Serdar
Citak, chairman of Istanbul Gold Bourse, told
Reuters....
quot;'There are a few countries surpassing Turkey in terms
of gold demand. There are India, the United States, and
China, which is a giant, and its figures must be watched
very carefully,' he added.quot;
A note from LeMetropole Cafe's John Brimelow:
quot;Bombay ex-duty premiums AM $6.72 -- PM $7.01. Very
high. Importing apparently very active. Even Far East
commentaries speak of unusually strong physical demand.
quot;MarketVane's Bullish Consensus for gold down 2 to 15
percent -- equal to last year's low and only 2 above
the multi-year low seen in the hedging panic in mid-
'99. Who is selling now?quot;
While still very low, the gold open interest on Comex
has popped up to a bit over 133,000 contracts on the
aggressive new fund shorting.
* * *
Speaking of open interest, from another Cafe member,
sent to Barrick and Homestake:
quot;I am one of your not so proud and unhappy
shareholders. So have sent the item below to GATA.
Maybe they can induce obvious action even if you will
not.
quot;Open interest is highly concentrated in the spot
February contract, which had been liquidating normally
until the recent spate of selling. The current bear
raid has resulted in significant increase in February
open interest. One wonders who the buyers are so close
to first notice?
quot;If I were a hedged gold miner, I would be talking to
the bankers about a bridge loan that would enable me to
take delivery on Comex for redelivery against my hedge
book. This especially if I had high-cost mines and
relatively high priced hedges. Why wear out your
equipment and deplete your reserves when stopping
delivery is much easier? Not to mention what might
happen to gold prices and thereby the future
profitabilty of your high-cost mine.
quot;Something for the South Africans to think about? And
anyone else offshore and thereby relatively immune from
USA government pressure?quot;
* * *
It won't be long now before the Bush administration is
handed the reigns from the Clinton administration to
run the U.S. Government. The Gold Anti-Trust Action
Committee and its supporters are eager to learn whether
the new administration will continue aiding and
abetting the gold cartel's gold price-fixing ways or
send them running to the hills.
That was our reason for sending our letters to the Bush
transition team. We want them to know that if they do
not do the right thing, they will be held accountable
in the future just as the Clinton administration is
going to be.
You might like to know that I have already received
feedback from another Cafe member who knows someone on
the Transition Team and is taking our letter and Reg
Howe's complaint to that person.
One of the questions we all have is: Where does Fed
Chairman Greenspan fit in to all of this and what input
will he give the new administration?
Some passages from Bob Woodward's book, quot;Maestro,quot;
might give us a clue. The key quote in the book, which
discusses the Fed's response in the aftermath of the
crash of 1987, follows. This passage explains
everything subsequent from the crash of 1987 to the
present in terms of the Fed's (more specifically,
Greenspan) modus operandi:
quot;[The Fed] had the legal power to buy up the entire
national and private debt, theoretically infusing the
system with billions, even trillions of dollars, more
than would ever be necessary to restore liquidity and
credit.
quot;In addition, there was an ambiguous provision in
Section 13 of the Federal Reserve Act, the lawyers told
Greenspan, that would allow the Fed, with the agreement
of five out of seven members of its board of governors,
to lend to institutions, brokerage houses and the like,
other than banks.
quot;Greenspan was prepared to go further over the line.
The Fed might lend money, but only if these
institutions agreed to do what the Fed wanted them to
do. He was prepared to make deals. It was not legal,
but he was willing to do it if necessary. There was
much at stake. At that moment his job was to do almost
anything to keep the system righted, even the
previously inconceivable.quot;
Two years now and the mainstream U.S. press still
refuses to recognize GATA. A Cafe member says it best:
that GATA is a four-letter word to them:
quot;Page MW6 of the 15 Jan. 2001 issue in the European
Trader talks about the BIS lawsuit, but the only people
suing, according to Barron's, is First Eagle SoGen
Fund. Barron's reports that J.P. Morgan (we are told
that JPM is an 'independent party') said the price that
the BIS wants to pay its private shareholders is fair,
but they make no mention of a earlier JPM estimate of
the value of the shares. This is sad but not
unexpected.
quot;Still this is good news. The events that will soon
unfold will force these people to mention the dreaded
four-letter word: GATA. And that a fund that they must
have some respect for is also suing the BIS will
prevent them from calling GATA some fringe group for
suing the BIS.quot;
The Gold Anti-Trust Action Committee would like to
extend its profound thanks to Scott and Kenneth Harn of
the International California Mining Journal for their
recent coverage of GATA. From another Cafe member:
quot;I just received my January 2001 issue of The
International California Mining Journal. It has a 13-
page surprise inside. Looking good! Bill Brian.quot;
The California Mining Journal's 13 pages in question
consists of an essay by me and James Turk's crucial
essay, quot;The Smoking Gun.quot;
Meanwhile, the Northern Miner refuses to cover GATA
even though Cafe members have strongly suggested that
it do so for two years. None are so blind that will not
see.
* * *
From Bill Buckler's www.the-privateer.com.
quot;Gold started three straight years (1998-2000) at
exactly the same level, $289.
quot;Pretty amazing isn't it? Gold starting each year 1998
through 2000 at exactly the same level in U.S. dollar
terms. And considering the banging and (you should
pardon the expression) crashing that went on throughout
the period on almost all other markets everywhere,
gold's annual trading range is equally amazing. It
hardly moved.
quot;This, we submit, is much more amazing than gold's
recent performance in going down in tandem with the
U.S. Dollar. Yet that phenomenon, gold going down with
the Dollar since late November 2000, has caused more
gnashing of teeth amongst the gold fraternity than
anything else that has happened to gold for years. In
fact, ever since Gold had that awful year in 1997 and
dipped below its US$300 quot;floor,quot; the U.S. dollar gold
price has been harnessed very effectively. It has
seldom gone above US$300 and seldom gone below US$270.
quot;January's aside, what we DO know is that since 1997,
every gold excursion above US$300 or below US$270 has
coincided with a large 'hiccup' in the global financial
system.
quot;Now we have what is potentially the biggest quot;hiccupquot;
of all -- the prospect of an actual quot;recessionquot; in the
U.S. economy. And gold, which was actually threatening
to break loose just three weeks ago (when talk of a
U.S. recession had yet to surface), has subsided right
back to its 2000 lows. Nothing surprising about that --
the US$ gold price has been doing the opposite of what
it 'should' do for years now.quot;
* * *
Is there any reason Bill Buckler's on-the-money
commentary could not be called quot;Anatomy of a Rigged
Marketquot;?
There is a reason that Reg Howe has included the
following in his lawsuit in U.S. District Court in
Boston:
quot;34. This complaint alleges manipulation of gold prices
from 1994 to the present time by a conspiracy of public
officials and major bullion banks. This manipulative
scheme appears directed at three objectives: 1) to
prevent rising gold prices from sounding a warning on
U.S. inflation; 2) to prevent rising gold prices from
signaling weakness in the international value of the
dollar; and 3) to prevent banks and others who have
funded themselves by borrowing gold at low interest
rates and are thus short physical gold from suffering
huge losses as a consequence of rising gold prices.quot;
Or this:
quot;50. The first wave of preemptive selling in excess of
three standard deviations occurred in mid-1994,
coincident with Mr. Greenspan's decision to assume the
two seats on the BIS's board allocated to the American
issue. Gold prices, which had been in a generally
rising mode for the prior year and a half, went into an
extended sideways move that lasted until 1996. The
Office of the Controller of the Currency's reports on
gold derivatives go back only to the first quarter of
1996, at the end of which the total notional amount of
gold derivatives held by reporting U.S. commercial
banks stood at $57.6 billion. Thus by mid-1994 it is
probable that American bullion banks had already
established a short position in physical gold of
sufficient size and risk to concern the Fed.quot;
* * *
GATA's Operation South Africa is going along very
smoothly.
GATA's appointments have already been scheduled with
most of the major gold producers. TV and radio
interviews are being set up. Appointments are being
made with political and business leaders in South
Africa. We are also contacting the mining unions and
the leadership of the Zulus.
We mean to keep all Cafe and GATA members as fully
informed as discretion permits. We especially want our
South African friends to know what we are up to because
it may lead to other opportunities.
Recently, I have reported on the terrible health
problems that have developed in South Africa. If it
were not for the gold cartel, there would be money
available from much higher gold prices; there would be
a significant money flow from a general mining boom in
South Africa to deal with these problems.
The situation is dire. Yesterday this arrived from Cafe
member James S.:
quot;There have been demonstrations by HIV-infected people
(tonight's TV news) to protest the high cost and lack
of availability of relief drugs.
quot;It is estimated that as many as 25 percent of South
Africans have AIDS.quot;
From GATA's perspective, ever since the gold price was
taken down from the $385 area in 1996, all the
participants in the gold cartel have been guilty of
looting the people of South Africa of money that would
have come directly and indirectly from gold revenue and
economic activity resulting from a gold price of $100
to $200 higher.
That is what the gold cartel owes the people of South
Africa, and that is just what I am going to tell them.
It is money that they will never see unless action is
taken. It is money that the colluding bullion banks
stole from the poor gold-producing countries.
It is more than just health issues. Also from James S.:
quot;Consequences of a low gold price to South Africa:
quot;Crime increases. Too few police. A deteriorating
health infrastructure. A deteriorating education
system.
quot;Some of the consequences of the above:
quot;A drain drain of badly needed leaders and skilled
personnel... A friend I had dinner with recently is an
Australian immigration official, and he says
immigration of South Africans has never been higher.
quot;Australia, Canada, and the United States carefully
screen and take the best from South Africa.
quot;There are literally whole suburbs of South Africans in
Australia.
quot;The main reasons for leaving are those listed above.
Remember that the people who left recently stayed
through all the drama of apartheid. They threw in their
lot with the new black majority government, and most
jumped ship only because under this rule it has become
uncomfortable for the reasons noted above.
quot;To meet the needs of HIV-infected people and all the
problems that brought the government, money is needed.
That money was obviously not forthcoming through gold,
and in consequence other sources of revenue were
pursued: higher taxes.
quot;Remember that black South Africans were rightly given
to believe that once apartheid was dismantled, their
standard of living would rise. The African National
Congress achieved its mandate to rule based partially
on promises of a better life. The ANC could not deliver
because money dried up. We know why.
quot;This, with the other listed problems, obviously causes
a reluctance to invest in our country. There is an
outflow of capital, a weaker rand, and the misery that
accompanies these financial encumbrances in an
underdeveloped nation.
quot;One of the worst consequences is that the black
government is called incompetent, quot;typical of black
Africa,quot; even though it probably has done better under
the circumstances than the white apartheid government
would have done. With the stigma of incompetent
government comes the higher cost of borrowing. Nobody
says this out loud, but of course more risk means
higher interest rates.
quot;To entice investment into a high-risk country, South
Africa to pay far higher interest rates. Look at the
record. And it probably started at the same time gold
prices started falling.
quot;It all snowballs -- disease spreads, costs rise,
health services get worse so disease spreads again. No
money for police, so crime rises and tourism falls.
People emigrate, tax revenues fall, there is still less
money for government services.
quot;By the way, we have just participated in an Olympics
in which South Africa achieved one of the worst results
ever.
quot;There is no money for training for emerging sports
players. Our players do poorly, our image falls,
investment falls, and on and on....quot;
* * *
Gold is a depleting resource in South Africa. It has
been for years. So the country needs to maximize its
revenue while it can. The money the country has lost
over the last five years can never be replaced.
But there is no reason for that loss to continue or for
this fraud to go on any longer. All of this can be
righted relatively quickly, if after reviewing our
evidence, the people of South Africa get behind the
Howe/GATA Complaint. As soon as we get into the
discovery process and the gold cartel's participants
are required to tell the truth under oath, the game is
over. Panic buying will set in among the big shorts and
there will be no stopping the gold price from
exploding.
As we all well know, it is not only the people of South
Africa who are suffering. Any gold and gold share
investors over the past five years have been devastated
by the price-fixing scheme. So have many of the gold
companies. Take one of my favorites, Golden Star
Resources, for example. This little junior gold
producer has it all, yet:
quot;DENVER, Jan. 12 /CNW/ -- Golden Star Resources Ltd.
(Toronto: GSC; Amex: GSR) has been advised by the
American Stock Exchange of their decision to remove the
company's shares from listing on the Amex effective on
or about Jan. 26, 2001. Trading on the Toronto Stock
Exchange will not be affected by this Amex decision....
quot;Golden Star remains in compliance with all listing
requirements of the Toronto Stock Exchange and the
reporting requirements of the U.S. Securities and
Exchange Commission....quot;
Ironically, late last week Golden Star, which holds a
70 percent equity interest in the Bogoso gold mine in
Ghana, was the subject of this news story:
quot;Anglo mining giant Rio Tinto [LSE: RIO; NYSE: RTO] has
thrown Denver based Golden Star Resources [AMEX: GSR;
T: GSC] a lifeline for its French Guiana projects....
quot;The five-year graduated deal allows Rio the option to
acquire up to 70 percent of the joint venture with GSR
and its 73 percent owned French exploration subsidiary
Guyanor Resources [T: GRL.B; NM: GUYN]. To kick-start
work on the project, Rio agreed to buy 500,000 GSR
shares (1.3 percent of the issued share capital) for $2
each, a hefty premium on Wednesday's 50-cent close. GSR
is using the cash to fund a work program and to
restructure Guyanor's operations.
quot;GSR president Peter Bradford said insufficient data
was available to define Paul-Isnard's reserves, but
believed the find would prove significant. 'Majors
don't become interested unless it's a multimillion
ounce opportunity,' he added.quot;
Frank Veneroso, who knows Golden Star well, says the
same as Peter Bradford: quot;Rio Tinto invests only in
potential elephants.quot;
Yet GSR gets delisted because of the low gold price and
the price-fixing of the gold cartel. If there ever was
a firm that should join the Howe/GATA Complaint, it is
Golden Star Resources.
Peter Bradford will be at the Investing in African
Mining Conference/Indaba 2001. Perhaps we can discuss
the matter then.
* * *
Super Bowl Weekend is coming up in two weeks -- the
weekend I leave for South Africa. It brings me back to
1969 when the New York Jets defeated the Baltimore
Colts 16-7 in one of the biggest upsets in U.S. sports
history.
The 1968 season was the year I played with the Boston
Patriots of the American Football League -- the
supposedly inferior league to the National Football
League. What few understood at the time was that the
AFL beat the NFL in exhibition game play two years in a
row. We did not think we were inferior at all.
It seems like yesterday that I came out of the locker
room under the lights into Arrowhead Stadium and saw
the Kansas City Chiefs. They had some of the greatest
football players ever assembled on one team ever: Hall
of Fame Lineman Buck Buchanan (6-10, 280 pounds) and
Ernie Ladd (6-9, 300 pounds); linebackers Bobby Bell,
Jim Lynch, and Hall of Famer Willie Lanier; Hall of
Fame defensive back Emmitt Thomas; quarterback Len
Dawson; and running back Ed Podolak. All these guys
were all-pro at one point, and there were many other
great players on that team whom I have left out.
I will never forget that. I had a good game too: four
receptions for 88 yards.
The 1968 Super Bowl was the game that Joe Namath
guaranteed that the Jets would beat the Baltimore Colts
even though they were 17-point underdogs.
That made a big impact on me, and all the AFL players
were very proud to show up the NFL snobs and to prove
the critics wrong.
After GATA was formed, I guaranteed (to the derision of
some) that GATA would defeat the gold cartel and that
the price of gold would shoot up hundreds of dollars
per ounce. That guarantee still stands, and as we win
that day, all GATA supporters who have contributed
their time, effort, or money will be a part of a
winning team effort in one of the biggest financial
market upsets in history. It will be something to pass
along to your children and grandchildren.
