FLASH - GATA received invitation to a "Hannibal Cannibals" get together in Paris!
Subj: MIDAS - World Gold Council: Record Gold Demand
Date: 2/17/00 7:35:29 PM EST
From: LePatron@LeMetropoleCafe.com
Le Metropole members,
Midas du Metropole has served commentary at The James Joyce Table.
"WGC: gold demand up sharply"
"bullion desks under pressure"
"Banking Index makes NEW LOW"
"Barrick's CFO dealing with bad information"
"GATA going to the FT World Gold Conference in Paris"
"More on Fed Governor Ed Gramlich's gold comments at UVA"
The James Joyce Table
Discussion du Jour: Gold, Commodities, Midas du Metropole
Midas du Metropole
"The Gold Market and Precious Metals Commentary"
February 17, 2000
Technicals
Derivative problems at some bullion desks. The Caf‚ gold team hears more
and more of that chatter every day. This morning, the reason given to me
for the early run up in the gold price was the buying back of "poison
option positions." The bullion dealers, trying to exit their bummer
trades, were putting their orders with brokers who normally do "fund"
business. In other words, they were trying to hide the fact the it is
dealers who were doing the buying.
Then, "Hannibal Cannibal" Chase Bank did it again, stopping the rally
cold by selling everything in sight. They sold and sold and sold and
the price of gold crashed downwards. During the Comex session it was
up $7 right off the bat, before the selling by Chase sent it down
$5 on the day at one point. A wild day.
Tremendous volatility. The reason for the volatility is quite clear.
For years the manipulation crowd just toyed with the gold market.
They made sure the market was well behaved and quiet most of the time
- many trading sessions rarely exceeded $1 trading ranges. "The Goons"
would get the specs short and take the market down thereby attracting
more selling. The open interest would go up. When the specs were good
and short, "The Goons" would cover and eventually knock the short specs
out as the gold price rose back up again until it reached their agreed
upon wall of resistance. That is the what the gold market was all about
the good part of the last 2 and 1/2 years.
But now times have changed. Gold demand is accelerating, many producers
are not rolling over hedges anymore so that supply of past years is not
hitting the market, the gold carry trade has become too dangerous, so that
mega source of supply has dried up (lease rates hit a new multi-year low
today), and so on. The "manipulation crowd" is running out of ways and gold
supply to hold the gold price down.
That is why the gold price keeps erupting. U.S. officialdom has to keep
coming in themselves or recruit other central bank "poodles" to come in
and sell gold. The line probably goes like this - if you sell gold, we
will do this for you...
There is no other explanation I can think of for the new wild gold market.
The specs want to buy, the producers are covering, so who is selling in such
an aggressive manner at times?
The bad news is that "these guys" keep coming in to knock down the gold
price. The good news is that the 21 year gold bear market is ending.
The extreme gold price volatility is one of the oldest and most reliable
technical signals that a long term trend is changing. That is often the
case for most any market that is in the process of changing course and
direction - for the years to come. A Caf‚ member told me today that it
is like turning a big super tanker around. It takes time, but when it
finally turns, look out below!
The open interest, at a little less than 160,000 contracts, tells us
that the gold market is not attracting a big spec crowd as of yet.
While the frustration level grows and grows for all of us on a daily basis,
the big picture for gold looks better and better by the day.
Maybe I could have said shinier and shinier.
Fundamentals
A few days ago, China announced it was raising its gold price for only
the second time in more than a year to bring their local price in line
with world markets. That is good news for the world gold market as it
will inhibit the smuggling of gold out of China into the higher priced
free market.
Australia's gold output fell 3.9% in 1999.
Australian gold supply is down, but worldwide gold demand is UP and
SURGING.
The World Gold Council in London published its gold demand numbers today
and those numbers speak for themselves:
"Global gold demand rose by 21 percent year-on-year in 1999 to a new
record of 3,278.4 tonnes as off take increased in India, Pakistan and
the United States."
Demand in the 27 nations that the WGC monitors was 7% higher than the
previous record of 3,053.6 tonnes in 1997.
You have heard me say many, many times that the Caf‚'s John Brimelow
knows the Indian gold market as well as anyone. The gold bears pooh
poohed Indian gold demand all last year. John Brimelow constantly
reported to you how strong it was.
Here is what he WGC had to say about that:
"Strong Indian economic growth, especially in the rural areas where
the bulk of the gold demand is concentrated, was the main reason for
the demand increase."
Potpourri and the Gold Shares
A Wall Street Journal story yesterday about huge amounts of water being
diverted by numerous gold mines in Northern Nevada battered Newmont Mining's
share price yesterday. Scientists just reported that the ground water level
dropped more than 1000 feet in places over the past decade --"believed to be
the largest drop in the world."
"That disclosure has escalated a David vs. Goliath conflict between the
region's farmers, ranchers, environmentalists and Native Americans --
who want to keep this region largely agricultural -- and the state's
second richest industry: mining." - Dow Jones.
Newmont shares were hit hard today too finishing at 23 1/16.
According to Reuters, confusion reigns over whether Australia's biggest
gold miner, Normandy Mining, had changed its forward selling like other
majors.
Their chairman, Robert Champion de Crespigny, followed with, "We see a
trend of relying less and less on forward sales."
I know one of their senior executives, Colin Jackson, and plan to give a
buzz to get the real scoop.
The wire services still continue to put out one Ashanti story after another.
Confusion reigns on this one too. The real issue is what is to be done
about the Ashanti hedge book. Even if some sort of deal is actually
finalized and Ashanti is given reprieve from making future margin calls,
what are the dealers going to do with the Ashanti short positions if
the price of gold climbs sharply again and keeps on going?
If Ashanti cannot be called for margin, how high will the gold price
have to go before the exposed dealers "cry uncle" and panic buy in the
Ashanti shorts on their books.
A probably useless tidbit of information : a birdie told that Mark Keatley,
the fired CFO of Ashanti, is the brother-in-law of Ashanti President,
Sam Jonah.
There is much smoke out there about derivative blow ups and trading
losses in the bullion dealer camp. Specifically, the Caf‚ has brought
the bullion desks of J.P. Morgan and Goldman Sachs to your attention.
I learned today that there are more layoffs coming in the bullion
department at J.P. Morgan. Charles Peabody also tells me that the firm
itself is acting as if it is under stress. Last week, I reported that we
heard there was a blow up of a bullion desk. This may be the one!
As far as Goldman Sachs goes, take a look at a chart of their stock
price. It just broke a key moving average to the downside and broke
the neck line of what looks like to be a massive head and shoulder top.
GS closed today at 82 1/8 down 13/16.
Speaking of the hot shot bullion dealers:
GATA IS GOING TO A "HANNIBAL CANNIBAL" GET TOGETHER IN PARIS !
Yesterday, I received the following in the mail:
Dear Mr. Murphy,
A Personal Invitation
"It gives me great pleasure therefore to extend a warm welcome to you
to attend the 23rd FT World Gold Conference at the Intercontinental Hotel
in Paris on 26th to 27th June 2000."
The invitation goes on to say that for the first time they have invited
respected researchers Gold Fields Mineral Services to participate in the
planning of the conference programme and later on says that the
conference is an "unparalleled networking opportunity, a chance to meet
influential decision-makers and interact with a vast array of miners,
bankers, investors, refiners, analysts, jewelers - in fact, anybody who
takes a professional interest in the gold market."
Two points. This is great progress for GATA to receive an invitation to
the world's most prestigious gold conference. In October, we were
refused admittance to the Denver Gold Group Conference, even with
several well regarded members urging that we be allowed to attend.
The second point has to do with Gold Fields Mineral Services (GFMS).
This FT World Gold Conference is basically run by the LBMA, or the
London bullion dealers, many of whom are "Hannibal Cannibals." Many of
you will remember that the former Chairman of the LBMA sent me an email
8 months ago calling our view of the gold market sheer rubbish.
Stewart Murray, former director of GFMS, now heads up the LBMA.
GFMS has also cast aspersions from the podium about GATA. Their numbers
regarding the gold supply/demand deficit are much lower than those of
the World Gold Council and Frank Veneroso. Their gold loan numbers are
less than 1/2 of those of Frank Veneroso. GFMS is never bullish on the
gold market and their numbers make no sense if the World Gold Council
is correct.
Long time Caf‚ members have heard me issue a challenge to GFMS to let
our camp debate the gold market with them. They will not respond so now
I have GATA sympathizers trying to find out if I could be a speaker at
the FT Conference. While I would not pull any punches, they would have
my word that I would not mention any bullion dealers or gold producers
by name. The topic would be -"Why the gold price is headed for $600 per
ounce and why it is not there now!"
I would like to think that they have enough integrity and confidence to
let me present a different view of what the gold market has been about
and why a big price move is coming. It is not that I will lack
experience being a speaker by then as I am a guest speaker at the
Alaskan Miners Association in Fairbanks, Alaska on March 9 and at the
Committee for Monetary Research and Education Dinner in New York City on
March 29.
This web site posting reflects on what I am talking about regarding GFMS:
Date: Thur Feb 17 2000 04:34
SlangKing (BBC Breakfast biz news on Gold) ID#274240:
Interview with GFMS chap.
Talking the price down, their report coming out demand slumping last and
this quarter. Interviewer..talk of Gold going as high as 380?
GFMS. I think above 300 is as high as it can go, no inflation, no
investment demand...
Interviewer: Miners changing their attitude on hedging is a positive for
the price?
GFMS: They could equally change their mind again if the pog starts
heading south.
--------hehehe~~~~~~~must be getting worried...
This GFMS comment on the BBC came out this morning as the World Gold
Council was reporting record gold demand.
How come GFMS and the World Gold Council's numbers are so far apart?
Same world, same gold market.
A Caf‚ member was going to a Barrick luncheon presentation and asked me
what I would like him to ask them. He came back very impressed with
Barrick and sent me an email back contesting some of what I had to say
about Barrick. His email to me was addressed to "Midas Man." I sent a
copy of his email to Frank Veneroso to get Frank's take on the Caf‚
member's Barrick notations and this was the email I received back from
Frank last night.
Dear Midas Man:
It has been drawn to our attention that a Caf‚ member posed the
following to you:
Caf‚ member:
"Seconds afterwards, I posed your question re "who was doing all the
selling in the fourth quarter?" directly to Jamie Sokalsky, Barrick CFO,
on a private basis. We had been seated next to one another during the
lunch. In essence, their market intelligence does not lead them to give
any credence to the view that there is, or has been, any collusion
between governments and bullion banks to bring down or hold it down.
They are very aware of these theories. A significant percentage of the
late Sept-early Oct spike up was short covering by small and large
speculators. Once they were blown out of the market, their buying was
exhausted. But the higher price brought a lot of bullion out from under
Indian, Swiss and other mattresses which caused the price settle back
down into the mid-280's."
We doubt that the brief rise in the gold price in October was sufficient
to reduce demand and generate selling by Indian and other hoarders
sufficient to throw the gold market into a transitory surplus in the
fourth quarter. Our reasons are stated in a recent report posted on our
web site venerosogold.com. The World Gold Council Q4 1999 demand survey
data supports our contention.
The existence of a sustained deficit in the fourth quarter of 1999
coupled with very significant fund, bullion bank, and producer short
covering definitively points to very large undisclosed official sector
selling in that period.
Veneroso Associates
The World Gold Council's demand numbers that came out today proved
Veneroso's retort was correct and that the answer by Jamie Sokalsky
was a bit off, to say the least.
Many of you have asked about the specific dialogue between a University
of Virginia student and Fed Governor, Ed Gramlich. Bloomberg decided
against doing a printed version of their audio, but I did manage to
secure the following:
Q. Is our government directly or indirectly involved in the leasing of gold?
A. No
Q. What is your opinion on the take or what outcome will be on many of
the gold mining companies pledging to curtail forward selling and also
aggressive hedging that they have been historically involved in?
A. Funny things are going on in the gold market. There's that. There are
various interpretations what other Central Banks are doing about there
own holdings of gold. And the price of gold has become, a little bit
erratic due to these measures. The broader meaning is very questionable.
Let's leave it at that.
The UVA student is to be commended for asking such sophisticated questions.
In addition to the line, "funny things going on in the gold market,"
I thought it very intriguing how the Fed Governor cut off this sharp,
too inquiring UVA student.
I am not at liberty to get into any details, but GATA is moving right
along in our efforts to persuade members of Congress to insist on
answers from The Secretary of The Treasury about whether the Treasury or
the Exchange Stabilization Fund is involved in the gold market in any way.
"Keep the Faith" is the appropriate slogan of the day. It is obvious to
all that there is great stress in the gold market. There is also great
stress in other financial markets. Something seems to be very wrong out there.
Today, the bank index made a.....
The share prices of real world companies are.....
There are other scary divergences.....
The gold fundamentals are extremely bullish. Only the "capping" of the
market is keeping the gold market from soaring to significantly higher
price levels. It may come to pass very soon that those entities sitting
on the gold price may have their hands full with market disasters in the
stock and credit markets and will lose control of their manipulation.
The bank index is headed lower.
The bullion dealers are bankers.
All cannot be well for them.
That means they have to be feeling pressure.
When the pressure becomes too much for their top executives,
the order may just come down
- GET OUT OF YOUR GOLD SHORTS - NOW!
Midas
Bill Murphy ( Midas ) Le Patron, Le Metropole Cafe
Bill Murphy, Chairman, Gold Anti Trust Action (GATA) gata.org
GATA related articles can be obtained at the pay for view site.
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