Link here to G.A.T.A. and a nother gold update. Going to check the G.A.T.A. article now.
stockhouse.com
From: SteveH
Subject: Incredible, eh?
Leroy,
This is a repost of a note from GATA. All I can say incredible...just incredible.
Note the part about the Middle East and oil. This sounds like A/FOA theory is spreading, as this is part of their message.
SteveH
ps. They accept contributions: lepatron@lemetropolecafe.com. Tell Bill I sent you.
Dear Friend of GATA and Gold:
GATA Chairman Bill Murphy has just posted the following commentary at www.lemetropolecafe.com. There are indications that we all should
stay tuned, and watch closely.
Please post this as seems helpful.
CHRIS POWELL Secretary, Gold Anti-Trust Action Committee Inc.
June 15, 1999 Spot Gold $259.20 down $1.10 Spot Silver $5.05 down 5 cents
Technicals
Battle stations! The volume has been light of late and the world is bearish. A contrarian's delight. In a normal market, the CPI number tomorrow
should be of importance in a very oversold market like gold is, but this is no normal market.
Silver continues to confound, but no surprise there either. If we are right, there will be an upside silver price explosion some time this year that
will run silver up some $3. It will probably all happen in a two-to-three-week stint.
Fundamentals
Headline: "An Icon's Fading Glory; Now the Gold Rush Is to the Exits," by Jonathan Fuerbringer of The New York Times, June 15, 1999.
Never have I seen so much anti-gold diatribe, ever. It has built into a crescendo of cackling like nothing I have ever seen. It is like
one-upmanship for financial writers on the gold market. This article follows a slew of negative articles that have come out of the Financial Times
World Gold Conference in London.
Then there is a comment by Kevin Crisp, gold analyst of Counterparty Risk Management Group member J.P. Morgan [JPM]: "Gold is on a path
of evolution away from being a closely held store-of-value asset."
Of course I cannot talk about the bear conference of the world without talking about Andy Smith and the Mitsui [MITSY] crowd. They held a
dinner at this conference and I understand they were all talking about $180-$230 gold and pounded away at the bearishness of the market to all
the guests. (You might like to know that it was reported to me that GATA has the bullion dealers and the LBMA irritated. Such a pity!)
The orchestration of lower gold prices has been a thing to behold -- the sheepish reportage of the press is quite another. It has me shaking my
head. At the same time it is a moment in history to press on, to fight the fight, and to position ourselves to make some serious money.
Have you lost it, Midas? you might very well say.
No, I don't think so. Our day is much closer at hand than the Hannibals think. Reason 1: It is becoming more apparent that the cracks in the
financial system that we have discussed ad nauseam are starting to surface.
The Internet bubble is coming apart at the seams. Bond yields have hit 6.15 percent. The action today was horrendous as the rally failed, even if
was due to some evening up ahead of tomorrow's CPI number. (Will they cook them one more time?) This type of poor bond market action was
more remarkable in that it occurred just after the convenient intervention to support the dollar vis-a-vis the yen. Rumors of hedge fund problems
are flourishing. This follows a hush-hush banking meeting in Philadelphia.
The signs are here now. Something is seriously wrong out there in financial land. Hence the obvious attack to try to discredit gold and the one
barometer that stands for financial stress. Can it be any more clear?
As those problems surface, marketplace greed will begin to turn to marketplace fear -- an emotion not felt by the masses in the financial arena for
a very long time. When that new emotion kicks in and investments in paper assets begin to go sour, hard assets will begin to have more
investment appeal, much more -- especially as the year goes on and Y2K fears flex their muscles.
But just as important I have a sense that the major gold producers have had it with the bullion dealer crowd, and with the central banks. The
Bank of England announcement may have been a watershed event. The big boys could live with $280-$310 gold; that price even allowed most
to make money and pick up fire-sale assets as the juniors withered into oblivion. But the BOE announcement has pushed prices so low that it is
a new day for them; even the bigguns are suffering and being pushed to the point of fighting back.
It is about time.
This story by crossed my desk this morning and will give you some idea of what they are up against now:
"DECISION TIME FOR GOLD PRODUCERS, By Damon Frith. June 15, 1999.
"More than half Australian gold production is uneconomic at the depressed current price and local miners are rapidly reaching a 'decision
point.'
"CIBC Grundy senior resource analyst John Macdonald said yesterday half of the country's production and more than half of its producers
were mining gold at a cost higher than the yellow metal's spot price.
"Mr. Macdonald said, on average, local producers had forward sales that could keep their mines operating for another four to five years but that
many producers 'face a decision point.'
"'You can have a healthy hedge book but if you're producing above the spot price, is it worth keeping mines open when you can buy gold
cheaper on the market to meet forward contracts?' he asked.
"Australia is the world's third-largest gold producer, with an output last year of 310 tonnes.
"Macquarie [X.MBL] Corporate Finance associate director Richard Phillips said research now in progress suggested that 27 of the top 50 local
gold companies produced gold above the spot price.
"Gold is trading at about $US258 an ounce following approval by the Group of Seven leading industrial countries for the International Monetary
Fund to sell up to 10 million ounces of gold to fund developing nation debt repayment schemes.
"Mr. Macdonald said the large number of shorts in the market --investment instruments that effectively gamble that the gold price will fall --
were betting on the IMF sales going ahead and would have to scramble to cover their positions if that strategy failed.
"He said that could lift gold back to $US300 an ounce.
"The gold price has been in a tailspin since early May when the UK Treasury announced it would sell 415 tonnes of gold over several years.
"Before that announcement, gold had stabilised around the $US390 an ounce mark following a series of blows to sentiment caused by a few
central banks, including Australia's, selling gold reserves and the apparent defeat of inflation by the large developed nations.
"The continuing perception that central banks want to unload gold holdings equivalent to 10 years of global production is likely to keep the
gold price depressed in the short- to medium-term.
"'There is a growing view the current low gold price is here to stay and just delivering into a hedge book won't get you there,' Mr. Phillips said.
"'It was OK when the view was the gold price would turn, but we are now likely to see more mine closures and company mergers.'
"Mr. Phillips said U.S. producers had been through a spate of mergers and South African producers had rationalised and were now moving
offshore to diversify their risk."
What is important to remember is that the biggest commodity moves of all time come out of the greatest despair. I have seen and been a part of
big, big moves that have come out of a time of hopelessness (although this one does take the cake).
Something to take heart about:
For the first time we are hearing of buy stops building above the market -- that is what this article alludes to. But there is more. We cannot get
into many details but from two sources we are hearing of physical buying that is going to emerge going into the Bank of England auction that
will surprise the shorts. We have been told that this group has been buying gold properties and the gold shares. We suspect that this
well-heeled buying group is one of the main reasons the XAU has held up so well relative to bullion. That divergence may really be telling us
something, as divergences often do.
On that note, I just returned from having a beer with Cafe member Bill S., who is very knowledgeable about the oil market. He informed me that
oil production in the United States has fallen to 5.8 million barrels per day, the lowest in 50 years. At one point we produced 9 million barrels per
day. We are now importing 55 percent of our oil needs. A cold winter will send the price of oil into the low $20s, according to Bill S. This is not
too good for the dollar, much less inflation, down the road.
Now the Middle East crowd gets paid in dollars no matter where they sell their oil. During the 1970s, when oil ran up, inflation was rampant in
the United States and the dollar went into the toilet, so the Arabs were penalized for being paid in dollars, according to our astute Cafe member.
He says they will not make the same mistake again. Thus, 1) we know some of the Middle East crowd is buying up gold properties, 2) the dollar
is likely to suffer greatly down the road as a result of our trade deficit 3) the Arab crowd will not make the same dollar mistake again -- it makes
sense that they might buy cheap gold, just when no one is looking and the bullion dealers are smug as can be. Remember, it was not long ago
that the Arabs were suffering financially because of low oil prices; now they have surpluses.
Stay tuned!
Potpourri and the Gold Shares
From Cafe member THC.... A bullion dealer made this comment: The Bank of England sale conditions are primed to drop the price as much as
possible.
Here is what he remarked:
1) Gold is to be sold "as is."
2) No physical inspection of the gold is allowed.
3) All the gold will be sold at the lowest accepted price.
4) Neither the government, Treasury, or the Bank of England makes any warranty, express or implied, with respect to the weight and quality of
the gold.
I wish my nightmare investments turned out as well as the following. From Bloomberg:
"MILAN, June 12 -- Italy's Foreign Exchange Office, or UIC, said Long-Term Capital Management, the U.S. hedge fund that almost collapsed
last year, paid back the $150 million it borrowed in 1996."
Same story over and over. The in crowd is miraculously bailed out somehow, while the average Joe is left holding the bag. Sickening!
Speaking of the in crowd, I found it interesting to note some of the attendees at the Bilderburg meeting in Portugal:
* Jon S. Corzine, retired senior partner of Goldman Sachs [GS].
* Stanley Fischer, director, IMF.
* Vernon E. Jordan, senior partner, Akin, Gump, Strauss & Hauer.
* Ottmar Issing, member of the Executive Board, European Central Bank.
* Hilmard Kopper, chairman of the Supervisory Board of Deutsche Bank [DTBKY].
* William J. McDonough, president of the Federal Reserve Bank of New York.
* Alessandro Promumo, CEO of Credito Italiano.
* Padoa-Shioppa Tommaso, member of the Executive Board, European Central Bank.
* David Rockefeller, chairman, Chase Manhattan Bank [CMB].
* John L. Thornton, president and co-CEO, Goldman Sachs Group.
* Martin Wolf, associate editor and economics commentator, The Financial Times.
So what do we have here?
Goldman Sachs, Deutsche Bank, and Chase -- three big bullion dealers, proud Hannibal Lechters.
The Financial Times that calls the Gold Anti-Trust Action Committee "extremist" and "dangerous."
The IMF and a close Clinton administration tie-in.
Officials of the ECB, which includes the Central Bank of Italy.
How quaint!
This got my juices going, so I went back to some Midas commentary that was written four months before GATA was even dreamed of. I
thought you might like to see what Midas wrote right after the LTCM blowup and compare it the events of the past nine months. Many have
asked how GATA came about. This will strengthen the picture for you.
Midas du Metropole, Sept. 26, 1998
"And that brings me to the most intriguing possibility of all. If the Fed and banks not even involved in the LTCM fiasco had to do the
unprecedented by stepping up to the plate to try to arrange a solution for the huge derivative problem that LTCM faced, what else could the
Fed be up to? For a very long time now we have been harping about the incredibly large short gold positions by the hedge funds and what that
liability could mean exposure-wise. We made special note of this in the last Midas. Well, if we are correct and the hedge funds are short all this
gold (true or not, it was last year that we heard Meriwether was short 350 to 375 tonnes) the LAST thing the Fed can allow in the very short term
is for the price of gold to take off too quickly. The gold loans are cheap. Since the price of gold has not done much compared to the movement
of other derivative positions, it would make sense the gold short would be one of the trades LTCM (and other troubled hedge funds) still has
on. That trade has not collapsed on them yet, so they have not been blown out like they have elsewhere. One thing the orchestrators (the Fed
and other banking institutions) of the bailout might do is borrow some gold from bullion banks and stop an out-of- control gold rally. An
exploding gold market would undo their fix-it plans for LTCM. They need to buy time and figure a way out of this entire derivative problem.
Besides, this problem (the gold borrowings) could be worse than the others. Where are all the hedge funds that are short gold going to find
such massive quantities in a very short time?"
Midas du Metropole, Oct. 3, 1998
"We know from public statements that our government bailed out LTCM because they feared its failure would threaten our economic system.
One hedge fund! If that is the case (and it must be) then they have to save LTCM. I think LTCM (as a former trader of pork bellies, I still am
cracked up by that misnomer) is short some 375 tonnes of gold. If the price of gold shoots up very fast, then what? What do the bailout boys
do? What do the bullion bankers do with their wakeup call? I suggest this tug of war in gold is bigger than meets the eye. For example, J. Aron,
bullion dealer and big bullion lender, keeps posting lease rates higher than other dealers. I suggest they are part of the Rubin Wall Street cabal
(and we know there is one now, so being a conspiracy advocate is mainstream thinking) and defending their short positions at all cost;
therefore, they need to pay up to do so. They know that if gold zooms the Long-Terms of the world could really be in trouble because their
cheap loans would suddenly be expensive ones. And that could affect their profitable business and maybe even expose them to some serious
problems. But there may be even a bigger problem looming out there. What if the hedge funds are short 1,000 tonnes of gold or more, as we
think they are? Where do they get the gold if the price of gold takes off? Yearly world production is only about 2,400 hundred tonnes. This is
the time bomb we have been talking about. The story gets more intriguing. This came to me yesterday from Bloomberg News.
"'Italy's Foreign Exchange Office said it invested $100 million in Long-Term Capital Management LP and lent another $150 million to the hedge
fund.' The exchange office, or UIC, is a division of the Bank of Italy that sometimes invests the central bank's currency reserves. This is the
Central Bank of Italy we are talking about, which also happens to have many hundreds of tonnes of gold as a reserve. 'Antonello Biegioli, the
UIC's co- director, said the exchange office expects to see the full value of its investments returned.' OK, fine.
"In the same Bloomberg article, Liechenstein Global Trust AG, the principality's biggest bank, yesterday said it expects its $30 million
investment in the fund will be written off almost in full.
"So what gives? Have any of you invested in a vehicle in which somebody gets paid back in full and your buddy loses everything? Give me a
break, Italy.
"The story gets worse, or more mysterious, depending on how you look at it. Next day (yesterday) Bank of Italy Governor Antonio Fazio said
he was unaware, until this week, of an investment by Italy's foreign exchange office, UIC, in LTCM. 'I never heard about it,' Fazio told reporters.
Not so fast, Fazio. Pierantonio Ciampicali, UIC's director, suggested in an interview with Daily La Republica this morning that Fazio might have
been aware of the investment. He said the investment had been discussed by the board at the beginning of 1994, and no one had opposed it.
Asked who was present at the board meeting, Ciampicali said, 'Either the chairman or the director general or both must be present at board
meetings.'
"That brings me to the point of the story. We think there may be as much as 7,000-8,000 tonnes of gold loans out there to producers, hedge
funds, fabricators, etc. The hedge funds alone are short big-time. The Central Bank of Italy (with its huge tonnage of gold reserves) appears to
be clueless about what they were doing. Are they liars? Or they are scared?
"That is a central bank. We know from our own leaders that our own bankers did not know what they were doing lending to hedge funds. This
is public knowledge, discussed in Congress, etc. In essence, lenders had to be bailed out because of their ignorance."
I had not read these comments in 9 months and they ring just as true today as they did then. GATA was still in the womb then. No more.
Because we have truth on our side, will not be silenced, and are gaining many supporters by the day. We will win this one.
The year I played with the Boston Patriots was the year Joe Namath guaranteed that the New York Jets (who were incredible 17-point
underdogs) would beat the Baltimore Colts in the third Super Bowl. I guarantee the same kind of upset victory over the Hannibal crowd. No one
thought the Jets would win, but they did because they were a better football team and few knew it.
We will win too because we are right, and soon many others will know it too. When the facts are known, the gold shorts will be finished and will
be trampled by a relentless gold bull rushing attack.
We will have our own upset Super Bowl win.
Midas |
