(This article by Bill Murphy starts at post #410 and reads in sequence to #417)
Some financial institutions such as Goldman Sachs may
have more complicated problems as a result of the surge
in Treasuries. Word from another informed Cafe member
is that Goldman was massively short gold with the
"carry trade" on. Reportedly Goldman sold millions of
ounces of gold borrowed from central banks and took the
proceeds and invested in a yield curve play of some
sort. It appears that Goldman also got caught going the
wrong way in the trade by being short Treasuries.
That fits. On Wednesday and Thursday I reported to you
that Goldman Sachs was by far the big gold buyer. That
is when the losses in the yield curve trade began to
accelerate as Treasury bonds soared in price. If
Goldman Sachs was getting out of a credit market trade
gone bad, it would make sense that it had to buy back
some gold shorts too.
On Friday, when I sent out the bulletin about massive
buy stops just above the market, I mentioned that our
sources said Goldman was going to sell gold into those
buy stops. Since the floor knew of these stops, it is
now obvious that Goldman planted that story, as they
were not sellers at all. Later in the day Goldman was
buying gold call options in frantic fashion.
More bad news for the shorts came Thursday night when
the following story was distributed by Bridge News. It
was an extremely bullish story for the gold market
that, astonishingly, most of the wire services did not
even bother to send out. Certain bullion dealers we
know and other gold industry people had no knowledge of
this:
"Milberg Weiss Announces Class Action Against Ashanti
Goldfields Co. Limited.
"Notice is hereby given that a class-action lawsuit was
filed on February 3, 2000, in the United States
District Court for the Eastern District of New York on
behalf of all persons who purchased the common stock of
Ashanti Goldfields Co. Limited Inc. between July 28,
1999, and October 5, 1999, inclusive (the 'class
period').
"If you wish to discuss this action or have any
questions concerning this notice or your rights or
interests with respect to these matters, please contact
www.milberg.com.
"The complaint charges Ashanti and certain of its
senior officers with violations of the Security
Exchange Act of 1934.... The complaint alleges that
defendants issued a series of materially false and
misleading statements concerning the company's hedging
strategy, ostensibly designed to protect Ashanti
against fluctuations in the price of gold. The
complaint further alleges that defendants' statements
during the class period misrepresented and concealed
the true risks presented in the company's hedging
strategy, ostensibly designed to protect Ashanti
against fluctuations in the price of gold. The
complaint further alleges that defendants' statements
during the class period misrepresented and concealed
the company's exposure to the volatility in the price
of gold. On October 6, 1999, the complaint alleges,
Ashanti announced that its hedge book had turned
'negative' by over $450 million and that the company
would be required to meet massive margin calls, which
it did not have the capital to meet. In response to the
company's belated disclosures, the price of Ashanti
common stock fell over 56 percent to close at $4.125
per share on October 6, 1999."
This is a major development for the gold industry and
it was barely reported except by the likes of the Cafe
Thursday night. Tack that on to the other under-
reported announcement last week that the European
central banks may be required to send 747 tonnes of
their gold to the European Central Bank as part of
increased reserve requirements. The Cafe reported on
this bullish development too, while the mainstream
press and commonly quoted gold analysts went comatose
and barely gave it wire service/press mention.
(This article is continued on post #412) |
