SHAKA ... ZULU
I just received this email from an out-of-work Australian miner:
"Why does the Reserve Bank of Australia always sell when the gold price approaches $300?
"Australian mining companies (directors on Board of Reserve) have forward sales until 2002 with a low price, and with a low Australian dollar/U.S. dollar rate. They must be making a fortune. So much so that they can buy to fill contracts rather than mine gold.
"When gold was floated, didn't the reserve banks pledge not to sell reserve gold onto the commercial market?
"Something must be done. I and 20,000 other Australians have been out of work for nearly two years."
I have promised the Australian miner that something WILL be done.
For the Gold Anti-Trust Action Committee has devised a strategy to take on and defeat those who are colluding to suppress the price of gold -- including gold-mining companies that are helping to devastate their own industry in the hope of picking up the pieces when their competitors have been ruined.
GATA's strategy is patterned after the strategy of the great South African Zulu warrior, Shaka. As a youth he was shunned by his own people and went into exile. But he returned to become a leader of the Zulus and devised a plan to conquer their adversaries. Previously wars between tribes were more for show; there was no real fight. It reminds us of what is going on in the gold industry today. There is a lot of complaining but no one is acting against those in the industry who are helping to ruin it.
We are going to change that.
Shaka devised the strategy of the enveloping horn. His attacking Zulu warriors massed in a diamond-like formation. The piercing point of the diamond struck first. While the enemy engaged in battling the Zulu warriors at the point of the diamond, the diamond's left and right flanks bolted out to the sides and enveloped the enemy in the shape of a horn. Before the enemy knew it, he was flanked, surrounded, confused, and beaten.
GATA is now selecting a law firm to challenge gold's enemies in federal court. That will be the point of our diamond. Those who are colluding to keep the price of gold down will have a fierce battle on their hands in court. And while we confront them there, we will envelop them on both flanks.
On the left flank we will publicize to the news media, financial authorities, and the public how short the colluders are, what they have done to the gold industry, and how their reckless conduct is threatening markets throughout the world.
Gold mine production in 1998 was about 2,529 tons. Gold demand was about 4,130 tons. That left a production deficit of about 1,600 tons. Gold Fields Mineral Service estimates that central banks sold about 450 tons last year. So 1,150 tons reaching the market had to come from other sources. Much of that supply is the "leased" (borrowed) gold that the colluding shorts have plopped into the physical market, confident that they could keep depressing the price and buy the borrowed gold back cheaper.
The problem for the shorts now is that the price of gold has gotten too low and physical demand is exploding. The shorts are running into a brick wall of demand. On top of that, we believe that the gold market short position now may have reached 3,000 tons, a quantity that simply cannot be covered in any reasonable time.
GATA believes that there was collusion in letting the Long-Term Capital Management hedge fund out of a 300-ton short position in an off-market transaction. For if, as it began to go bankrupt, LTCM had gone into the open market to buy 300 tons of gold, the price of gold would have soared.
WHAT IF THE SHORTS HAD TO COVER NOT JUST 300 TONS BUT 3,000 TONS?
GATA will direct media attention at this situation and turn up the heat on the shorts.
We believe that total gold loans may be as high as 8,000 tons. For there has been a deficit between production and use for years.
That brings us to the right flank of our battle.
We will confront the gold-mining companies that are excessively hedged, and will call for a shareholder revolt against them. (See press release below.) On the GATA web site now under construction we will document excessive hedging by particular companies and urge their shareholders to sell their shares and purchase shares of the gold producers that are not excessively hedged or barely hedged at all.
We will applaud the companies that buy back their hedges and post that information on the GATA web site so it may be circulated around the world.
Here is an example of the kind of issue we feel must be addressed.
Anglogold of South Africa claims to be the world's biggest gold producer. In the fouth quarter last year, though the price of gold was below $300 and at rock-bottom levels, Anglogold raised its hedge position to 11.8 million ounces from 8.1 million ounces. That is a dramatic increase, and it means that Anglogold flooded the market with gold in the fourth quarter.
The press release circulated by Anglogold in North America made no mention of this extraordinary selling of gold. It was mentioned only in South Africa, where Anglogold is required by law to disclose such sales. Even there Anglogold did not make its extra selling clear; analysts had to review the company's information carefully to figure it out.
Anglogold's recent commentary about the gold market failed to highlight the company's own flooding of gold to a depressed market as a big factor behind the stagnation of the price of gold.
To top it off, some major contributors to the World Gold Council met last November, supposedly to discuss the problem of gold leasing. Anglogold took the subject off the agenda.
Meanwhile, 20,000 Australian miners are out of work.
This is an outrage. With your help, we will turn rage on the likes of Anglogold.
GATA believes that all of us together can make a difference and get action, largely because of the power of the Internet. We are mobilizing our "diamond" formation and about to attack with our "horn." We ask you to post this mobilization alert everywhere you can and send it to all the gold-mining companies that come to mind. We are mad as hell and are not going to take it anymore.
"Shaka" ... "Zulu" -- so be it!
Bill Murphy
www.lemetropolecafe.com
The GATA web site is under construction. For information on how GATA came into being, go to the Kiki Table at lemetropolecafe.com.
GOLD ANTI-TRUST ACTION COMMITTEE TAKES DONATIONS,
PREPARES LAWSUIT AND "SHAREHOLDER REVOLT"
Contact: Bill Murphy, GATA Chairman
603-433-9389
RYE, NEW HAMPSHIRE, U.S.A., Monday, Feb. 8, 1998 --The Gold Anti-Trust Action Committee has formally incorporated itself in Delaware and has begun negotiating with law firms interested in undertaking its lawsuit against the Wall Street investment houses it accuses of illegal collusion to control the price and supply of gold, other commodities, and certain related financial securities.
To finance its lawsuit, the committee also has begun to accept contributions from gold-mining companies, their shareholders, and people who want to defend gold's traditional monetary function.
The announcements were made here today by GATA Committee Chairman Bill Murphy. "The committee is only 2 weeks old,'' Murphy said, "but we already have received substantial pledges from mining companies and individuals alike and are certain to retain a law firm. So we are notifying people who have made pledges that we are prepared to accept their contributions now."
Murphy said contributions should be mailed to Gold Anti-Trust Action Committee Inc., in care of John D. Meyer, Treasurer, Box 885, Great Barrington, Mass. 01230.
"We believe that our cause is a noble one -- the creation of a free and transparent market in gold -- and that all who assist it will be rewarded in some way if price fixing is defeated," Murphy continued. "If they work in the gold-mining industry or own gold shares or physical metal, they may be rewarded tangibly. And even if they have no special connection to gold, they will be rewarded by the restoration of the crucial restraint gold always has applied against irresponsible currency policies throughout the world.
"We believe that transparency in the gold market can be increased by publicizing the dangerous growth in speculative short positions taken by the Wall Street investment houses with borrowed or 'leased' gold. We believe that this speculative short position now exceeds 3,000 tons, about 500 tons more than the yearly gold mine production of 2,529 tons. We believe that the investment houses are colluding to suppress the price of gold because their speculative short postions cannot be closed without causing a gold-buying panic.
"We are also going to call the gold-mining industry to task and urge a 'shareholder revolt' against the senior companies that are excessively hedged and themselves helping to suppress the price of gold. Some of these mining companies have unrealized profits of hundreds of millions of dollars in positions that could be closed by buying back their forward gold sales. Those profits could be distributed to shareholders or used to acquire more gold resources.
"We will ask investors to own only the shares of gold producers that have modest hedge positions or no forward sales at all. We will urge investors to sell their shares in the producers that are helping to devastate the gold industry.
"As the collusive shorts are exposed, they will be forced to cover, the price of gold will rise, and mining shareholders will be rewarded for buying the shares of unhedged and less-hedged companies."
Murphy also announced that the GATA committee is developing an internet site to publicize excessive hedging by gold producers. "We want gold fund mangers as well as shareholders to know about excessive hedging," Murphy said.
"Now that we are negotiating with law firms to bring a lawsuit against collusion to suppress the price of gold, no contribution to the GATA committee is too large or too small," Murphy said. "All contributors will receive a written acknowledgement and be placed on the committee's mailing or emailing lists, as they prefer, and be sent progress reports about the committee's work.
"As collateral we can offer only our sincerity and the rightness of our cause. But we believe that this is still America and that one man with the law is a majority. If we can continue to mobilize the gold community, we can change the world.''
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