(GATA News)...explosive what he says about Goldman Sachs and N.Y. Fed.
The gold market continues its rocket ship ride upward. Today, the
December futures contract traded as high as $339 early this morning before
selling off going into the Comex open. The gold market is on fire. When
gold was trading in the $250's, Midas told you that "we have them right
where we want them." Many of you believed in what I had to say and
loaded up on gold call options. Congratulations. While some of you were
buying calls, futures, gold stocks etc., the bullion dealer camp was
laughing at us. We knew then we had them, now they know we have them.
Some of the bullion dealers, over hedged gold companies, and "gold
borrowing" funds are in big trouble. Last night, I sent out commentary
which included this statement: "Our camp will be more gracious than the
"Hannibals" have been. We will show mercy on them and let them out of
the back end of our "enveloping horn." When the price of gold hits $340,
we will ACCEPT THEIR SURRENDER."
I never meant to suggest that I would be happy with $340 gold. This
morning I did a radio interview about GATA with the well known Alec
Hogge of South Africa. When asked where I thought the price of gold was
going, I told his fellow South African listeners that, in my opinion,
the proper equilibrium price was a bit north of $600.
Anyway, never have I received such an onslaught of consistently same
feedback. Such as:
"As the Man at the BIS once said....... "GOLD will take no
prisoners.........."
"What do you mean that you will accept their surrender at $340. Peanuts
to you."
"Why take prisoners? These jokers have shown no mercy the past 10 years!
Most of my mining stocks are still a fraction of what I paid, at least
one is in Chapter 11, and another one (Benguet B) has not traded over 25
cents (yes, cents) the past year (the story of how it stays listed on
the Big Board is the subject of another investigation). Gold goes up 25
bucks and you want to be Mr. Nice Guy- give us a break."
The Cafe and the Internet have spoken. In earlier Midas commentary, I
suggested that what we would eventually have is a "fight to the death"
in the gold market. In the Roman Coliseum days, the gladiators battled
until one beat the other. The victorious gladiator would look up to the
adjudicator for that day to see if he would get a "thumbs up" or "thumbs
down" on whether to finish off his vanquished foe. The adjudicator would
often listen to the crowd of spectators for direction. It was called,
"Vox Populi Vox Dei"/ "Voice of the People - Voice of God."
You have been resounding. Thumbs Down to "Hannibal Lecter and the
"Hannibal Cannibals!"
That can happen in many ways. One of them I told you about this summer.
Remember, when I mentioned that one of the Cafe's most plugged in
sources told me that plans were being set in place to squeeze the
December Comex gold contract? That plan is still intact and gaining
advocates. At the time, I noted that squeeze artists were buying the
December gold contract and selling the late spring months of April and
June.
The open interest on Comex is 222,031 contracts, having gone up 7449
contracts more yesterday. The December open interest rose 6,263
contracts and now stands at 136,022 contracts or 13.6 million ounces.
There are less than 1 million ounces in the Comex warehouses. Of course,
most of the specs do not want to take delivery, but not all the gold in
the warehouses is available either as much it just sits there for margin
purposes.
The August futures contract was almost squeezed recently, but one
bullion dealer let the shorts off the hook for a $2 or $3 premium over
the contract price. You might recall that Goldman Sachs took delivery of
over 90% of the August deliveries. Our camp speculated at that time that
they were trying to get their hands on as much physical gold as possible
(either for themselves or for clients), in case of such times as we have
now.
If the August contract was almost squeezed in a dull, glacier like gold
environment, what do you think they will do to the December contract in
this rocket ride environment? As we head into the late Fall, the gold
shorts are going to have to deal with the monster call option position
that is now only $65 above today's close, restricted gold lending by the
central banks and building Y2K fears. The recipe for a gold short
squeeze will get better and better.
The gold shorts and the "Hannibal Cannibal" bullion dealers have had it
their way for years. It is payback time. Big time!
Don't be too stressed that silver has not taken off like gold yet. Many
of the hedge funds were long silver and short gold. They are buying back
their gold and selling silver now. In a recent Midas, you were informed
that sources told us that Moore Capital could be short as much as 25
million ounces of gold. Moore was the big silver seller today. They must
have tremendous margin call pressure and need to sell to shore up their
balance sheet.
$9.78 silver coming.
Fundamentals
The big story of the day for most was Ashanti Goldfields. They have been
one of the leading proponents of hedging over the years and have massive
forward sale positions on. The other day they announced that they had
restructured their hedges. The market place took that to mean they
covered their hedges. The Cafe's John Brimelow was not fooled and told
me at the time. The bullion dealer camp was spreading the word that had
Ashanti covered and the gold market had taken their buying well. John
Brimelow doubted they had covered and was proved right today as it was
disclosed that Ashanti's hedge book currently still represents a net
hedge of 10 million ounces. That shocked industry participants.
More from today's Platts: The sharp rise in the gold price since the
September 26 announcement of gold sale restrictions by the 15 European
central banks "has resulted in a substantial increase in the value of
Ashanti's unhedged reserves," the company noted. The rise in prices and
increased volatility "has led to certain counterparties being entitled
to margin calls," the company said. Ahsanti "has entered into a joint
arrangement with its major hedging partners for continuing support," it
added.
The market told Ashanti today what it thought of this announcement. The
stock sank to something like 5 1/2 from 9 3/8 with the price of gold
going up $8. What gives?
Ashanti and its bullion dealers, that is what. Cafe sources told me
today that Ashanti has big problems and they relate to maturity
mismatches, margin call pressures, forward sale buy back liquidity
problems and are suffering from faulty "black shoal," "black box"
hedging programs laid on them by certain consultants and bullion
dealers.
I was informed today that Ashanti had a $300 million margin gap with its
bullion dealers. I am told Goldman Sachs is their main dealer. That
means that the bullion dealers front the first $300 million of margin
calls. Of course, that is no picnic for the bullion dealer. Stress
surfaces in all quarters and that stress feeds on itself throughout the
bullion dealer and gold producer camps.
Another source told me that Ashanti started to reel at $280 gold, much
less $325 gold. They are hedged as much as 10 years out. There is not a
big market for getting out of forward sale 10 year out gold positions.
Ashanti has significant problems that are likely to worsen.
In practically every Midas now, I try and explain that gold is exploding
when almost no one thought it would because the industry was working on
disinformation supplied to them by that bullion dealer camp - many of
them good old "Hannibal Cannibals." Their allies, too. For instance,
note these comments by Barrick Gold's Jamie Sokalsky in a Dow Jones
story:
"Gold producers account for perhaps 3,000 tonnes of short positions,
about two-thirds of the market total," according to Mr Jamie Sokalsky,
chief financial officer of Toronto's Barrick Gold, one of the world's
largest producers.
(The story went on:) Gold producers took short positions to hedge
against falling prices, essentially locking in sales prices before gold
is even mined. Now, with gold prices soaring, those short positions are
money losers and the market is bracing for massive unwinding by
producers.
"This is only the first round or two of short covering," one commodities
analyst said.
Sokalsky is telling everyone the total number of gold loans is only 4500
tonnes (two thirds of 4500 is 3,000). He is using Gold Field Mineral
Service numbers. GFMS is a "Hannibal" apologist. The Cafe uses Frank
Veneroso's numbers and they tell us the gold loans are probably a bit
greater than 10,000 tonnes.
Who is right? Well, if they were right and the loans were only 4500
tonnes, the gold market would not be doing what it is doing today. Case
closed. Yet Barrick, who is one of the most heavily hedged gold
companies in the world, continues to spout the party "Hannibal Cannibal"
line. Barrick is becoming a sad case. Their stock was hit today, too, as
the Ashanti news has run up the red flag warning signs of the companies
that have over hedged. Wake up Barrick! You have been in the penthouse
in public esteem. If you tarry too long, you might end up in the
outhouse.
There might have been a much bigger story today. More from Sequin who
put this up at the Kitco gold site:
"The big big rumor today is about the FED bailing out Goldman on 10 M
oz. The market is all excited about it: THEY are doing something. Since
it is the role of the FED (as painful as it might be for us) to prevent
a systemic collapse, there might be some basis for the rumor.
Still, I would be surprised since they haven't been seen in the lease
market for ages.
Yes, they get some other CBs to do the dirty stuff for them. But they
are limited by status. So, it would be interesting to know to which
extent they are at liberty to do that.
Technically, leasing is not selling. However at 10 M oz a clip, we might
not see them every other day.
Today is the day to speak about black holes .
You know, if you happen to fly in their vicinity, you get sucked in, but
you won't care since, at this point, the whole spaceship will not even
be the size of a grain of sand.
Well, there is a black hole in our universe and it is called the 390
December call. It is traded on COMEX and yesterday, the open position
was a tad above 55,000.
That's a nice 5.5MM oz and change. When you know that major market
makers show 3 $ wide on 10 000 oz, you can bet on some fun in case we go
in the low $360's.
Let me explain. As we go close to the strike, the shorts who usually are
option market makers, will have to adjust their delta. (the delta is the
sensitivity of an option to spot moves )
Hence, the higher the spot goes, the more they will have to buy. In such
an illiquid market, a few MM oz, will push it through the strike in
seconds.
Since the law of maximum pain applies these days in GOLD, I would not be
completely surprised to see a seriously punishing run up there and
higher. This is, of course, without taking the OTC derivatives into
account.
Only 5 weeks to go, but I know a few options dealers who are not going
to sleep that much."
Sequin is an obvious Pro. He knows his stuff. It is interesting to note
how he is commenting on the Dec $390 calls too. If he and I are jumping
up and down about it, so are a lot of others. This is explosive!
But what may be more explosive is what he says about Goldman Sachs and
the N.Y. Fed. How many times have you heard Midas pound away on this
theme? It extends to the core of the Bank of England sale, etc. And it
is supportive commentary of the "BOMBSHELL" I delivered to you last
Friday in Midas' commentary. Key point refresher from that Midas:
"Two days ago, I received information that a futures commission merchant
(a Refco type firm) was told by another futures commission merchant that
it was not prepared to deliver gold on its 'gold forward or futures
contract' obligations that were expected by a client of the firm who was
standing for delivery. In essence, the shorts were declaring "force
majeure" - WE CANNOT DELIVER.
This is not a Comex problem as far as I know. From what I am hearing, it
is an OTC problem, where few people really know what is really going on
behind the scenes. The firm that expected delivery was stunned. It was
about to be 'floored.' According to our sources, this firm then got a
phone call from the Federal Reserve requesting that they do not pressure
the shorts into making delivery and that they would make sure that the
longs received their gold. I am not privy as to exactly how that would
happen.
According to another source, there were actually a couple of firms that
told the longs that they were not prepared to deliver "forward" contract
gold in the size expected. Goldman Sachs is one of the firms mentioned
to me that is not prepared to fulfill its obligations. That is what my
sources in the market place are telling me."
Now, two days later the word on The Street is that Goldman was fed 10
million ounces by the N.Y. Fed. Don't you think that our "BOMBSHELL"
story should gain credibility and get some legs?
Potpourri and the Gold Shares
The XAU retreated today to close at 84.61 down $4.20. Gold was strong
all day, so the XAU was perplexing to many. It isn't really. We have
told you about the hedge funds being short gold. We have even told you
about the "hedge funds" being long the big cap gold stocks. The hedge
fund gold shorts are covering their gold shorts, so they are selling
their gold stocks. They have to get out.
In addition, the Ashanti issue has many money managers reassessing their
gold stock allocations.
From Pakistan: Reuters - "Gold trading in Pakistan, one of the largest
importers, has largely come to a halt as rising international prices
have left several major players unable to deliver their commitments,
traders said on Tuesday."
The gold premiums in Asia are holding up surprisingly well on this mega
gold move up.
Cambior is a great little gold producer, but it's shares fell 21% today,
its biggest loss in 4 years on concerns that is too has overly hedged.
Funny, a couple of months ago, the Hannibals "strongly suggest" the
likes of Newmont sell a good deal of their coming forward production,
for fear of losing their credit ratings. Now the price of gold rallies
sharply and the companies that have stuck their toe too much in the
hedging waters might lose their credit ratings because they hedged too
much. What an industry!
Anglogold came out with a strong press release today announcing it "has
no gold lease rate exposure at all before early 2,000 (and limited
exposure thereafter), and this has contributed substantially to the
stability of its hedged position." In other words, their bullion dealers
have the "roll risk," not Anglogold.
Tiger Watch: they continue to stink up the place. Their net assets have
slumped from some $19 billion to $22 billion down to $8 billion. They
lost another 6.7% for September and are now down 23% for the year. I
wonder how many illiquid positions they still have on their books and
are stuck with.
More bullion dealer, hedging problem news from Reuters:
"A bullion trading source said market talk that an Australian bank was
facing huge losses form recent sharp gains in bullion prices triggered
fresh buying as the bank would be forced to cover its position soon.
Banking sources in bullion markets in Australia said most Australian
banks running gold books were short to some degree.
One source said the hedge book of Bankers Trust, recently acquired by
Australia's Macquarie Bank Ltd.m was in "pretty dismal shape."
The gold investment game has changed overnight. I think the coming play
in the gold share sector will be the small junior companies that have
found gold resources or reserves. Gold in the ground and no, or few,
hedges in place if they are a gold producer, too. I am picking up some
of these babies
One of my bigger gold stock positions is one such company: Golden Star
Resources on the AMEX. GSR is trading right below one, once traded at
21, is a Frank Veneroso favorite, and has 6 properties (most in the
Guyana Shield) that could become significant mines. I found out today
that two highly regarded hedge fund managers are bidding for the stock.
Many of the little guy gold stocks are nowhere near where they should be
price wise. That is because some long time shareholders of size are
selling now. They can get out, where they could not do so easily two
weeks ago. These types do not believe the gold move is for real, so they
are giving the stock away practically. They will be very sorry. As the
price of gold moves up from these levels, these little golden jewels
should shine as investments.
Gold price dips can, and will, occur at any time. They present buying
opportunities.
All the best,
Bill Murphy, Chairman
Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com |
