At the Financial Times Gold Conference, James Cross, deputy governor of the
South African National Bank, made a proposal similar to one made by Terry
Smeeton, former head of Forex for the Bank of England, regarding an honest
broker in the auctioning of official gold sales. Auctions conducted just
like sales of government debt by perhaps the BIS. The calendar would be
publicized well in advance and central banks would be free to participate in
these auctions, but would remain anonymous until the time when these sales
were declared by the central banks concerned. That means they would not
necessarily need market expertise. They could sell from time to time and
not have to announce their long-term intentions. At the Conference
Jean-Pierre Roth, of the Swiss National Bank, confirmed that theyíll sell
1,300 tons of gold over several years, however, they have no intentions of
selling the remaining 1,290 tons. Kevin Crisp, of J.P. Morgan, expects
major volatility in gold markets in the future with the metal trading in the
$100 to $150 swings over periods of just months. We think the transparency
of the British market manipulation is painfully obvious not only to
professionals, but to the general public at large. Their efforts have
backfired, otherwise you wouldnít see these proposals of change. If we are
right, gold probably has seen its bottom between $258-$260 an ounce, which
means those investors with long-term intentions should be buyers. [See last
paragraph under World Markets].
Kinross Gold has indefinitely suspended operations at its Macassa gold mine
in Ontario. That is 80,000 ounces that wonít reach the market. Macassaís
total cash costs were $257 an ounce. The companyís overall cash costs are
expected to be $190 an ounce this year.
As weíve mentioned before, official gold sales announcements, which have
driven bullion prices from $300 to $258 an ounce, have hurt the export
earnings of 32 of the 41 poorest and most heavily indebted countries, which
are also gold exporters. As you can see the intent of sales is not to raise
dollars for debt forgiveness, but to dethrone gold as a monetary asset and
allow the gold-carry-trade to flourish to create profits for banks and
speculators and to fuel world liquidity. Recent secret central bank sales
have already lost heavily indebted poor countries (HIPCíS) more than $150
million in annual export earnings. Thus the benefit of the IMF sales has
already been more than offset by the economic costs as a result of the fall
in the gold price. The 31 plus HIPCíS will have gold output of 200 tons in
the year 2000 and at $280 an ounce theyíd earn $1.66 billion. Their future
growth has been undermined by precisely those who wish to proffer a helping
hand, which again tells you the gold is not being sold for their benefit,
but to destroy the price and render gold as a non-monetary asset. The
result will be a one-world bank, and a one-world currency set up as
computerized debits and credits. In nine of the HIPCíS, gold accounts for
at least 5% of export revenues and in Ghana, Guyana and Mali 20% plus. It
also leads to higher unemployment and lower government revenue.
Since 1982 gold has declined. Since 1985 itís been manipulated by central
banks, producers, investment banks and hedge funds. It reminds you of the
fate of Sisyphus, the king of ancient Corinth, who according to legend was
doomed to spend eternity slowly and laboriously pushing a rock up a hill to
have it roll down again. We could be close to the end of the Sisyphian
ordeal in gold. Somewhere along the way a mistake will be made and the game
will be on again.
The saga of Crystallex as a protagonist continues. They are again
challenging Placer Domeís ownership of the Las Christinas gold mine in
Venezuela. Crystallex claims, and rightly so, that PDG does not hold any
rights other than spurious work contracts as part of its Minca partnership
with the almost bankrupt state-owned Venezuelan Guyana Corporation. PDG
claims some 40 concessions, including Las Christians 4 & 6, which is the
heart of the dispute. PDG said in March they were continuing construction,
but little has been done. It is going to be interesting to see if the new
government is as corrupt as the old one was. In addition, our intelligence
tells us that KRY will pursue PDG in US courts. A $3 million payoff to one
of the judges at the last hearing has been uncovered. If you remember we
reported a year ago that there had been a number of payoffs. If PDG doesnít
make a deal fast a number of crooks will be doing jail time.
The G-7 approved IMF gold sales, now gold producers are asking the US
Congress to stop the sale. As Bobby Godsell of Anglogold says, ìit is
politically and morally irresponsible of a large holder of gold to be
selling gold now, particularly when itís a public institution dedicated to
economic development.î The IMF canít go ahead without Congressional
approval and it is no foregone conclusion. Letís see if elitist money can
buy Congress again.
South African gold mining companies and trade unionists have joined forces
to lobby against proposed gold sales by the IMF. They said, thousands of
miners would lose their jobs if the gold price did not recover. At $258 an
ounce 40% of gold production becomes unprofitable, which means 80,000 people
will lose their jobs. At $228 an ounce an additional 100,000 or 60% of the
mining work force would lose their jobs.
DeBeers sales estimates by the experts were wrong again as sales of uncut
stones were up 44% in the first half of 1999. This comes after 18 months of
depressed sales. Supplies to the industry were severely restricted to prop
up prices. DeBeersí stockpile of stones increased from $4.4 billion to $4.8
billion. Retail, 50% of the market, drove the growth.
Placer Gold will reduce its exploration budget from $89 million in 1998 to
$56 million in 1999, and cut overhead by $10 to $35 million this year.
Theyíll take a $15 million pretax charge in the second quarter and theyíll
delay development of the $575 million Las Christinas mine in Venezuela. CEO
John Willson said, ìI am surprised official sector owners of gold appear to
be willing to sell their holdings for less than the long-term cost of
production.î Placer invested in the Deep South mine in So. Africa and
acquired Getchell Corp., which lifted reserves 60 million ounces, but at
what cost? Weíd sell the stock. If they go into a US court or are accused
of payoffs, which they probably will be, the stock probably will sell lower
or not participate in the upside when it occurs.
The following is reprinted with permission from Ted Butler. We strongly
urge you to check out the following
website:www.gold-eagle.com/gold_digest_99/butler062899.html |
