Le Metropole members,
Midas du Metropole has served commentary at
the James Joyce Table.
Late in the day today I received a phone call from
London saying that a bombshell is coming out in the
London Financial press in the morning. The essence
of what I was told is that GATA is right on target
in its allegations and that will become very clear
tomorrow. It supposedly has been uncovered that
Goldman Sachs is short 1,000 tonnes of gold; the story
goes on from there.
Tomorrow might be some day.
"Robert Rubin resigns,hmmm"
"why there is such danger to the banking system
as a result of the humongous gold carry trade, et all"
"Yorkton Securites"
"The World Gold Council"
"The Gold Stock Analyst"
"the George Soros camp is bullish on silver"
All the best,
Bill Murphy
Le Patron
--------------------------------------------------------------------------------
lemetropolecafe.com
May 12, 1999 - Spot Gold $276,80 down $1.10 - Spot Silver $5.36 down 3 cents
Technicals -
Goldman Sachs and Deutsche were all over gold today, selling it in "boatloads". They were all over it yesterday too. The
technicals are certainly bearish, but they meant nothing on the upside and mean little here either. This is a manipulated market.
When the "goon squad" and "officialdom" is exposed for what they are doing, the price of gold will rally sharply in time. VERY
SHARPLY. It will not be a pretty sight for the gold bears and that is our big picture technical analysis for the day.
As you will note below, the "smartins" are moving into silver and accumulating. It has held up very well under the gold
onslaught. The premiums in India remain very strong indicating solid demand. $9.78 silver before the end of the year.
Special -
Scandale Gold 3
More Transparency. Treasury Secretary, Robert Rubin, resigned today. Just more fuel to add to the bonfire. Something is
surely rotten in "The State of Denmark". Check that. Make it "The State of England" or " The State of the Gold Market". The
fact that Rubin was going to resign was well known by the insiders. Just one more reason that "the gold market manipulators"
and orchestraters of this lower gold price timed the announcement by the Bank of England and the British Treasury that they
are going to sell 415 tonnes of gold, when they did.
The gold market was set to take off. The "colluders" were about to begin to lose control of the situation. IMF and Swiss gold
sale propaganda by the various "officialdoms" was not working. Gold shares around the world were soaring. The key $290
"gold carry trade" area was about to be penetrated up the upside. The "masters of the universe" could not let that stand.
Imagine if the price of gold today was $302 bid and the Rubin announcement was made. Gold then goes $310 bid. The gold
borrowers first start choking, then start puking.
Thus, the conspirators, especially our administration, made the call to the English Poodle to devastate the gold bulls with this
dramatic announcement Before doing so, the "squad" ( Goldman Sachs, J.P. Morgan, Deutsche Bank, and Co ) were
obviously given the word and they told their big name clients that, "the price of gold will not go above $290".
There is even more to this story. It has something to do with what Professor Von Braun has been telling the Café and it has to
do with the Bank of England and The London Bullion Market Association. I received the following note this morning from a
very informed Café member:
5/11-Had a good long chat with our dealer friend this afternoon. The BOE was active in the lease market yesterday, FWIW.
Spoke of the upcoming sales. Discussed why there was a "preference to keep the metal there." (See the BOE press release.)
He says it is a real pain in the ass to move the bars, etc. I asked him how much he thought was actually in the vaults. He said it
didn't matter. What do you mean? Well, if it is out on lease, they'll just call it back in. It's like a bank account, he went on. If
one person goes in and asks for their cash, it'll be there. Pause. I asked: So when I buy in the cash-market from you, I am
really buying a spot deferred contract? Pause, then 'yes'. I left the more obvious question un-asked...
This is the bucket trade. While the more prominent carry trade has the effect of accelerating supply to market, the bucket trade
has the effect of deferring demand. Cash transactions aren't cash transactions. They are spot deferreds. Nothing more than a
claim on the gold 'at any time'. Just like the ATM machine. Can the bank's book be bigger than the underlying physical
coverage? Sure. What's the probability of everyone withdrawing their cash on the same day?
To work through an example: I buy ‘cash' gold from Bank A; Bank A, in turn, will lay off a portion of this physical liability with
Bank B. Bank A's position might be further neutralized with some out-of-the-money calls and other such instruments; the rest
of the buyer's funds go into 5% T-Bills. Bank B does the same sort of thing with Bank C and Bank C in turn with Bank D.
Etc., etc. If 30% of the physical liability is laid-off on ‘the next guy' at each stage, at the end of the daisy chain we find only a
minute quantity of ultimate physical coverage. In other words, an analog of the fractional banking system has been
reconstructed on top of the bullion markets.
Achilles heel: Returns are still calculated on the old dollar-based system. And they mark-to-market every day.
Perhaps this is why we saw the whites of their eyes last week.
Now, what he is saying here is, the potential disaster out there is even bigger than we had thought. The Bank of England and
subordinate bullion dealers are reported to be a big lenders of gold. Maybe too big? They are operating the gold market in a
fractional reserve system manner.
Here is another example of what this is all about - a customer wants to buy a tonne of gold. The bullion dealer says- you own it.
But, instead of buying the gold ( and creating gold demand ), the dealer gets his "cover" by doing some sort of derivative
transaction with calls and maybe some futures. Because they know the fix is in, maybe they take no cover at all. We have been
telling Café members for some time that we have heard that the central banks ( bullion dealers ) have enormous exposure
above the market. So this all fits and the picture is getting clearer and clearer.
The Bank of England and the British Treasury made this gold announcement under severe duress and in near panic. In time, this
will become more apparent and someone is going to have to answer many, many questions. In time, this scam is going to be
exposed and the price of gold is going to skyrocket. Various financial institutions will go down, just like long Long Term Capital
Management did. However, instead of one "systemic risk" problem there might be "10" all occurring at the same time.
In the meantime, GATA will continue to alert The Banking and Financial Services Committee to this time bomb and hopefully
they will learn what we know and take action. The longer this goes on, the bigger the problem will be down the road.
Haruko Fukuda, Chief Executive of the World Gold Council, seems to agree somewhat with GATA on the raison d' etre for
the decision by the British Treasury. She made these comments yesterday to a London conference:
"Gold is at once a commodity and a universal currency. Is the British Chancellor of the Exchequer challenging that long-held
assumption by bringing the gold ratio down to a mere 7% of the UK's total official reserves? Or was there another hidden
political agenda? We at the World Gold Council have been told by HM Treasury that it was emphatically a political decision."
That is what we said last Friday. Fukuda went on to say," Despite persistent efforts by the United States to drive gold out of
the international monetary system entirely, gold is…..
However, Ms. Fakuda seems a bit out of step with the very visible George Milling- Stanley of the World Gold Council who
had this to say yesterday in an interview:
"AH: George, you've obviously been watching the "conspiracy" theorists who believe that every time the gold price is ready to
raise its head, something knocks it back quite badly. We saw that happening again this week. In fact last week the gold price
seemed to be heading above $290 and maybe even to $300 before the UK announcement came out. What's your take on
these conspiracy theorists?
GEORGE MILLING-STANLEY: Well, there's no doubt with the UK Treasury announcement on Friday that the conspiracy
theorists, especially those on the Internet, had an absolute field day over the weekend. My take on it is I don't believe that the
world central banks are ganging up to keep the gold price depressed. I frankly don't find that a credible thesis. The fact that
many speculators are going short – all speculators have seen that those who did go short over the past couple of years have
tended to make good money, so it makes sense for them to go the same way, and when it makes sense for people to be going
in one direction, then I don't look for a conspiracy to make them do so."
Yet, Doug Lieshman ( Vancouver, B.C. ) and Art Ettingler ( Calgary, AB. in their Yorkton Securities Retail Mining Research
had the following to say about the British:
What are they afraid of?
After the latest announcement by the U. K. Treasury on Friday, following the strong price performance of gold and gold
producers during the week, it is hard not to think in terms of conspiracy. The announcement described the Treasury's intention
to sell 415t of its 715 t gold reserve over the "medium term", with 125t being sold during the current fiscal year. The 125t
represents less than 5% of annual global demand, while the 715t currently held by the Treasury represents only 16.7% of the
UK's official gold reserves. The amount to be sold this year is not really significant but more importantly, England is not selling
off nearly 2/3 of its reserves as many had interpreted when the announcement was first made. But in the world of the gold
markets, intent speaks louder than facts.
Since last spring, when the Swiss were making business headlines concerning their desire to become gold merchants, numerous
institutions such as the IMF, the French and US presidency, and Japanese government officials have voiced their intentions of
how to deal with their gold reserves ( in the instance of the Japanese, the announcement really dealt with government support of
a weak Yen, which ultimately translates into a strong US$ and lower gold price ). However, as the chart below illustrates, the
timing of these announcements seems peculiar. In many cases the announcements were made soon after recent improvements in
the gold price, essentially killing any rally at an early stage. In particular, announcements by the IMF, President Chirac and the
U. K. Treasury last week put an end to the early stages of a better gold market.
From a business perspective, it doesn't make sense to damage the market your selling into. We hear of two reasons why there
might at least be a loose effort among the G-7 countries to keep the gold price low. The first and most logical, is their fear of
inflation. A rising gold price would be considered a leading indicator for inflationary pressure and would play havoc on Wall
Street ( and the Democrat's attempt at re-election in the year 2000 ). The second reason is related to the lending of gold by
Central Banks to hedge funds. These funds borrow gold at only a few percentage points and then may sell this gold to finance
third world investments. The volatility in emerging markets over the past two years could have resulted in a lot of nervous
Central Bankers wondering how their gold loans will be repaid. By keeping the gold price and a leading indicator of inflation
low, the Central Bankers are hoping third world markets will recover and the funds will be able to repay their loans.
There may be much to fear on the inflation front after all. Rubin, Greenspan, and the British know what the big boys are
thinking. They get their feedback. Here is an example of what is circulating out there:
London, May 11 ( Bloomberg ) -- Government bonds are in a "bear market" and won't emerge any time soon, as global
economic growth drives investors into stocks and commodities, said Stanley Druckenmiller, who manages Soros Fund
Management's $6.75 billion Quantum Fund.
"The probability of a global boom is not remote," Druckenmiller said at a Nation's Bank Montgomery Securities Conference in
London. As a result, " the world economy will suck money out of the bond market."
He also predicts copper, silver, aluminum, and timber will rebound as global demand increases. " A bull market in commodities
is just starting."
Note, he does not mention gold. Of note is that we told you last week that we heard George Soros was buying silver around
the $5 05 to $5.10 area. Thanks Icarus. Your information was right on the money. This is proof of it.
Now, why would the BOE and British Treasury do what they just did knowing "the in crowd" thinks a commodity boom is
coming? Why suppress the price of gold? Want to sell it - fine, why not do so at $320. Café members know the answer.
Even the reserved and well followed market technician, Martin Pring had this to say about all of this:
"We rarely comment on fundamental developments but question the rationale of why the British Treasury would announce the
sale of gold bullion ahead of time, in the full knowledge that the announcement would result in an inferior price being received
for the metal. Such actions defy logic, and are certainly negligent so far as the British taxpayer is concerned. That is……unless
a higher motive is involved."
Bravo Martin! Right on!
Perhaps this transparent " gold cartel" reads the Gold Stock Analyst that the highly respected John Doody puts out. He had this
to say in his May issue:
Gold Sales Ain't Gonna Happen
" Whether IMF or Swiss sales, Market's fears are entirely due one-sided reporting and lack of understanding of the full issues,
which don't fit into a sound bite.
IMF: Clinton/Rubin, UK's Brown, Japan's Miyazawa,, et al, can blather on about a 5+ mil oz sale from IMF's 103 mil oz
horde to help poorest nations, but it won't happen. US Congress must approve any sale ( part of okaying a 1983 IMF funding
request ). Comments by House leaders Saxton ( Repub ) and Daschal ( Dem ) show no sale will happen until IMF agrees to
major changes ( which also won't happen )
Swiss: OK'd new Constitution, cleaning up 125 years of amendments; this did not authorize any gold sales, simply dropped the
meaningless gold/SF $96 oz conversion rate. Considering Gov't attempts for broad consensus, w/over 40% canton and citizens
still opposed, the vote was close. Now a sales could occur, w/profits spilt 1/3 Federal, 2/3 Cantons ( as required for all Swiss
Natl Bank profits ). But, Feds want all gold sale profits and Cantons want their 2/3. So, new Constitution will have to be
amended in '00; w/so close a Constitutional vote, Amendment is unlikely to pass.
As Midas goes to press, a bombshell has come to my attention via a phone call from an informed source in London.
Tomorrow, in the London Financial press it will be disclosed that Goldman Sachs is supposedly short 1,000 tonnes of gold.
There is much more, but we will have to wait to find out what comes out in the morning.
Midas
Bill Murphy ( Midas ) |
