To the prophet Ken Benes from lemetropolecafe.com
Midas du Metropole
"The Gold Market and Precious Metals Commentary"
Q. Little Bear is in the 'doghouse'. Which table do you think he'd be under ?
A. Gold, of course. But he is hopeful.
July 6, 1999 - Spot Gold $257.10 down $6.90 - Spot Silver $5.19 down 15 cents
Technicals
The bear is roaring in New York, but he is about to be sent back to the hinterlands of Maine and Canada. The gold market crashed today and closed in new 20 year low ground. Sellers were everywhere and buyers were few and far between. The ploy by the collusion crowd to create very negative sentiment worked. Not much else can be said here that is worth a tinkers darn. The technicals mean very little in a market that is manipulated.
Silver got caught up in the gold market bear mauling and was sent South searching for support. It found some around Georgia and the silver bull might be headed back to New York faster than one might think. That support in Georgia was someone who took 600,000 ounces of silver out of the Comex warehouses after the close. They now stand at a very low 74 million oz. $5.18 support held on a closing basis. Our long standing bullish silver outlook remains in tact.
Fundamentals
On Friday in an email to the café, I made the following comment after referring to the fact that Anglogold commented about the market being oversubscribed by some 300% to 400% ( what we had told you earlier in the week ) and that it was disconcerting to see the bullion dealer banks offering huge size once again to short covering specs:
"Something does not sit right again here. Why are the bullion banks offering size going into an auction that is oversubscribed 3 or 4 times? What oversold market, like gold, produces such feeble rallies with such strong demand? If Goldman Sach IS such a big buyer - who are they buying for? I have a sickening feeling that the manipulation of the gold market is intensifying…."
Unfortunately, it is clearly escalating as the "manipulating crowd" is pulling out all stops to crush the gold market and its followers. The results of the BOE auction were as follows:
25 metric tonnes ( 803,600 ounces ) was sold at $261.20 per troy ounce. A total of 4,174,000 ounces was bid for which meant the auction was covered 5.2 times in terms of the number of bids made.
This is how I analyze what just occurred in the gold market and is right in line with the email that I sent you. The BOE sale is one of the very last supply shock events that our "officialdom" and the "Hannibal Lechter" bullion dealers can use to manipulate the gold price lower. Ironically, their situation is actually getting more desperate. The supply/demand deficit at about 150 tonnes or more per month ( a Veneroso Associates calculation ) is greater than the bullion dealers ever dreamed it would be and it now appears that the IMF gold sale will not get through the U.S. Congress. That is why they had to call on the British to bomb the market - not so much with physical gold, but bomb the market psychologically with that announcement. I suspect our officialdom ( via the N.Y. Fed ) and the bullion dealers have been doing the rest of the gold selling damage in some coordinated fashion.
Look at the sequence of events that just transpired. Through our sources, we hear at the beginning of last week that the auction is 400% oversubscribed. Goldman Sachs is visibly seen buying 265 and 270 August calls. That is well reported to the marketplace and they know it will be. And sure enough at the end of the week, Kelvin Williams of Anglogold confirms our initial reports to Reuters that the market is 400% oversubscribed and that one of his counterparty banks is expected to take down the entire 25 tonne amount. This created bullish expectations around the world that the carnage in the gold market might finally abate.
But when I found out the bullion banks, led by Chase, were offering all the gold in size to any buyer who showed up, it become apparent they knew something that I, and most gold market participants, did not - until I saw what was happening once more. The fix was in again. That simple.
Look at the record. The gold market went straight down after the BOE announcement on May 7. The selling was led every day by Goldman Sachs. The specs started to pile in again. That went on until we reached $257- $260. The market went sideways and then drifted up a few dollars. The rally attempts were feeble. During this whole time, the price of gold never closed more than $2 higher on the day. Never was there any type of gold market excitement "allowed" to build.
The bullion dealers ( and possibly our N.Y. Fed ) cannot afford to let any serious excitement build for this is their last shot to hold the price down. So very cleverly, they allowed certain information to circulate to build up some hopes and cause some of the shorts to cover. That was accomplished to some degree, so now those hopes had to be quickly dashed and thus they bashed the market today. They have also subtly reflected to the market: we have another auction coming in September; do you want to buy ahead of that one too?
Well, the world is slowly waking up to what is going on here and our day is not as far away as you might think on this dismal day. Reuters -July 6- London: Major gold miners seek Blair statement on UK sales
Executives from some of the world's leading gold miners demanded on Tuesday that British Prime Minister Tony Blair answer rumours that UK gold sales were timed to help out speculative short sellers in the market.
The letter arrived as Britain sold 25 tonnes of gold, the start of a programme intended to cut reserves from 715 tonnes to 300 tonnes during the next few years.
Chairman and chief executives at Canada's Placer Dome , U.S. Miners Newmont Gold and Homestake Mining , South Africans Anglogold and Gold Fields and Ghana's Ashanti Goldfields , sought Blair's response to rumours that reserve sales were to bale out firms running short positions in gold.
The letter, a copy of which was faxed to Reuters, quoted parliamentary remarks made by British opposition MPs on June 16 suggesting Britain's announcement of reserve sales had been to "save the bacon of those firms running short positions".
"We believe it would be helpful for you to make a public denial of these rumours or investigate them publicly, " said the letter, signed on behalf of all the companies by Place Dome President and CEO John Willson. End
Now where have you heard that sort of commentary before. If that letter by many of the leading gold companies in the world does not have GATA's stamp all over it, nothing ever would!
I also suggest that the "cartel" has overplayed its hand - such as the cries of the IMF and our administration for Congressional approval of the sale of IMF gold to help the poor. Today, South African President Thabo Mbeki hit out at the BOE decision, saying its negative impact on prices threatened the country's embattled mines which employed around 300,000 people.
Maybe Treasury Secretary Summers will suggest to the Black Caucus in Congress to ignore Mbeki and this Reuters press release that hit the tape today:
The Johannesburg Stock Exchange said on Tuesday it had suspended East Rand Proprietary Mines Ltd shares at the request of the directors. The struggling gold miner is to apply for liquidation in the face of falling earnings due to a depressed gold price.
ERPM managing director Ivan Vidulic said the mine was forced to apply for liquidation after the government-- its largest shareholder--refused to give it 18 million rand in bridging finance.
Closure of the mine, which funded the British war effort in the second World War, would cost 5,000 jobs, a prospect which has angered the country's powerful National Union of Mineworkers. End
And finally from South Africa- Finance Minister Trevor Manuel said this sale and others endangered jobs and investment in South Africa and other African gold producers like Tanzania, Ghana, Mali, Burkino, Faso, and Zimbabwe. Manuel blasted the IMF gold sale proposal, "It doesn't make sense to tell countries we will weaken your economies and then give you a little debt relief". Presidential hopeful, Al Gore, take note.
Kelvin Williams of Anglogold echoed the negative sentiment about the BOE sale saying the British sale was naïve and would contribute to the collapse of several marginal South African mines. "The BOE has chosen what we believe is a remarkably inappropriate method. The trouble with announcing a public auction in advance in a non-transparent market is that it gives speculators an opportunity to sell in advance of the sale." Williams went on to say that short sellers had moved into the market and are now heavily short. Then he suggested that the BOE gold sales be reconsidered.
The World Gold Council did not pull any punches either. According to a Dow Jones release today, they said the First Bank of England gold sale was a disaster for the gold market and for all gold producing countries.
" At this price the people of Britain are being short-changed by the Chancellor ( of the Exchequer Gordon Brown ) by a staggering GBP 450 million ( $600 million ), the World Gold Council said. And in one of the great gold market quotes of all time, "This is the economics of the Mad House" The WGC went on to say that any interest earned over the next two years would be dwarfed by the scale of the losses already incurred on the value of gold in the reserves.
This is stunning, right on commentary by those in the gold industry that are being devastated by the obvious orchestration of lower gold prices. But low and behold, look who comes all bright and cheery today about how all is wonderful in the gold market; the "Hannibal Lechter", bullion dealer crowd in all their deceitful, hypocritical glory.
From Kevin Crisp, head of precious metal strategy at J.P. Morgan, bullion dealer and Counterparty Risk Management Group leader: - on the sale price: It's towards the upper end of most people's expectations. The allotment price is pretty much where the market has been trading, or maybe slightly under, so no nasty surprises……"The auction has gone pretty smoothly, it shows the bank can sell gold in a reasonable fashion in fairly large tranches and get pretty close to the market place. Five times the cover ratio is an encouraging first auction."
From Charles Von Arentschildt, chief bullion trader at Deutsche Bank in New York: "The price right before the auction was $262 an ounce. Eighty cents for 800,000 ounces of gold is a small price to pay. I think it shows the tremendous depth and liquidity in the market. I think the auction went very well."'
So, the only two positive comments all day came from the leaders of the "cartel" that is driving down the price of gold and making a fortune off of their gold loans. How obvious can it get about what has been going on here? It is ludicrous how "transparent" this collusion crowd really is and just maybe they have gone too far. After all, many of their biggest gold producing clients are now calling for an investigation into what, and who, may have been behind the BOE sales. Deutsche Bank, J.P. Morgan - perhaps it is time you call up Goldman Sachs and schedule a get together. The world is wising up to what you and certain "officialdoms" are up to.
Potpourri and the Gold Shares
The XAU was hit hard today too closing at 62.95, down 4.12, but it is well above its major 60 support and still represents a significant diversion to the bullion price.
I was informed today about a Bank of Nova Scotia conference call today about the BOE sale so I called up just to listen in and introduced myself. The operator said, " is that G A T A ?". I responded yes. One moment please was her response. She then came back and informed me that the operators were told that "under no circumstances" would I, or any representative of GATA be allowed to have access to the call. Needless to say, this Bank is a bullion dealer.
Here is a good one: Kim Rose, the owner of Eclipse jewelers is taking Britain to court over the BOE gold sales, saying it "would cost jobs and devalue gold". Ross has vowed to file an injunction against the government "within the next few days". "These sales could have catastrophic effects on the ( jewelry ) market," Ross said. "To the average man on the street gold is a tangible asset".
According to a Reuters report, Rose said Britains's Independence Party would fund legal cost arising from the injunction. "I have the full support of the Independence Party. They will finance it and are behind me".
The lease rates inverted today. Someone wants to borrow gold very badly to dump into the market. Hmmmm. The one month rate flew to 2.28 % up 60 basis points, while the six month traded at 1.99% which was almost flat. This would indicate to some degree that it was not producers that were doing the selling today.
Hearings were recently held in Congress by a Finance Committee to review the nomination for Assistant Secretary off the Treasury for Financial Markets. His name: Lewis Andre Sachs. How quaint!
The rap up here is the good stuff and, in all sincerity, very bullish news for the intermediate term. The letter that the gold companies sent today is a big deal for GATA and will be a big deal for the gold market. It is not an idle letter. I will explain now. Had I done so before, we would have been thrown too much in the nutcase camp and our revealing certain privileged information might have mucked up the works.
First, GATA has operatives that have accessed the British government at the highest levels. You are already aware of our connections that primed Sir Peter Tapsell, a member of the oppposition Tory Party . His presentation before the House of Commons has been read all over the world. It was easy for Tony Blair and the Labour Party to call it a partisan maneuver. Regardless, it was very effective.
But the real, new news that we can now tell you now is information from another GATA operative - the discovery of the gold short position on the books of Goldman Sachs was by a member of Tony Blair's own Labour Party. In addition, I was told months ago by a third GATA operative that one of the major gold producers "knows much of what GATA knows" and intends to do something about it. Thus, it is no real surprise to GATA that the gold producers have finally sent Tony Blair this letter. The producers that wrote the letter today have some juicy goods in their back pocket and they have inside knowledge that Tony Blair cannot just sluff this off. A member of his own political party has the goods on the colluding bullion dealer shorts and, for reasons we cannot disclose at this time, believes something must be done about it. There may be some posturing here or there, but it is GATA's opinion, that the producers have the goods on the shorts and they are "mad as hell" and "are not going to take it any more". In effect, the guantlett has been thrown to the bullion dealers and unless Tony Blair does something about the " gold problem", he could face a political scandal that could effect his role as the English leader.
So take heart on this brutal day. The beginning of the end for the "heartless" bullion dealers and certain, "calculating", boorish politicians is not that far off. The letter to Tony Blair by these 6, very important gold producers is a significant event - make no mistake about it. An incredible move up in the gold market is coming and our patience in putting up with this "rigged" market will pay off in a very big way.
Midas
PS - Does it strike you that one major gold producer is conspicuously missing from this group? |
