(GATA News) BULL'ing STAMPEDE w/ EXPLOSIVE GOLD MARKET NEWS
Bill Murphy, Chairman, Gold Anti Trust Action (GATA)
In my opinion, the following news stories are,in toto,
explosive news for the gold market. I will explain after
you have read them. In essence, they validate what Midas
du Metropole has been telling you all year!
October 11 - UBS turns screw on gold firms
Swiss bank acts on debts as hedging contracts go sour
By Dan Gledhill
UBS, the Swiss investment bank, is thought to have
tightened the screw on struggling gold producers by
calling in debts on outstanding derivatives contracts.
Many mining companies took out these complex
derivative positions earlier this year in order to
hedge themselves against further falls in the gold
price. However, gold's sudden recovery in the last
fortnight means that these contracts are now heavily
in the red.
The concern about the ability of gold producers to
make good these losses is believed to have prompted
UBS to take the unusual step of requiring early
margin payments. Among the companies affected is
thought to be Ashanti, whose derivatives exposure is
reported to total $450m (œ270m). UBS's credit
exposure to Ashanti alone is said to be $61m. Other
investment banks affected by the malaise in the gold
market are Goldman Sachs, JP Morgan and
Credit Suisse First Boston.
Fears that the gold sector has suffered enormous
losses in the derivatives market drove the share prices
of producers sharply lower last week. Ashanti,
the Ghanian producer which has entered into merger talks
with Britain's Lonmin, fell heavily, as did Canadian
miners Cambior and Barrick Gold. There is also concern
that a number of hedge funds, which had sold gold
short to prosper from lower prices, have been caught
out by the sudden rally.
Gold's recovery, to close on Friday $70 above this
year's low at $320.15 an ounce, was prompted by the
decision of European central banks two weeks ago
to suspend the selloff of their reserves. It brought
to an end four years of almost continuous decline,
which saw the price of the precious metal plummet
from $415 to $250 an ounce. Analysts believe that many
gold producers, assuming gold would continue to
depreciate, took out derivatives positions
so large that they would actually profit from
lower prices.
One derivatives specialist said: "I think that,
judging by the events that have unfolded in the market,
the reasonable explanation is that some mines
have aggressively over-hedged."
It is unclear whether the banks that took out such
positions with mining companies and hedge funds decided
to cover their risk elsewhere, or chose to
leave their books open in the belief that the gold
price would come back. UBS declined to comment on
its exposure.
Most analysts believe that gold's current strength
will continue as customers with bearish derivatives
positions are forced to buy gold to square their books.
However, they remain convinced that by the end of the
year the commodity's downward spiral will resume.
"Gold won't subside suddenly," said the derivatives
specialist. "It is possible that we will see further
rallies, but I think we will still find that when it's
all over, gold will move below $300 before the end
of the year."
Lonmin, formed from the old Lonrho mining company,
already owns 32 per cent of Ashanti and announced on
Tuesday that it is negotiating to acquire the
remaining 68 per cent. End.
The disinformation crowd just won't quit. How can anyone
who knows anything about the gold market say that reigning
in gold loans will eventually be bearish for gold?
London (Dow Jones) October 11 -- Central Banks are
selling gold in order to prevent a further sharp rise
in prices from causing a major financial crisis,
according to Ted Arnold, analyst at Prudential Bache
Securities Ltd.
Many funds and banks sustained heavy losses over the
past two weeks as gold surged after 15 European central
banks stunned the market by saying they would cap
sales of gold for the next 5 years.
If gold prices continue to rise sharply they could
cause major losses at U.S. and European investment
and bullion banks and cause a domino effect that
could lead to a major financial cisis, Arnold said.
"Central banks, according to our sources, have acted
swiftly to prevent a repeat of an LTCM-type of crisis
by making sure that gold prices remain in a tight range.
Enough selling is done by agents of the monetary
authorities involved to cap gold...around the $330 area
basis spot London while the floor is very solid in
around the $315-$316 (a troy ounce) area basis spot,"
Arnold said.
Central bank "regulation" of the bullion market always
seems very far fetched to most observers, but it is a
"cheap" option compared with the potential cost of
bailing out banks and generally injecting liquidity
into an economy if there were a full-blown financial
crisis, he said.
A relatively small amount of gold would be needed to
sell towards the top end of a range and then buy back
at at the lower end. The one thing that is absolutely
certain, however, is that no central banks is going to
annnounce that it is acting in the market to achieve
stable and range-bound prices, said Arnold. End.
A quote from highly regarded Barry Riley in Saturday's
London Financial Times:
"A gigantic short position - some say 10,000 tonnes
in aggregate - has been built up during the past few
years and it has created a new threat of instability
related to derivatives."
Lordy, Lordy! This news is a horror show for the
shorts. The conservative FT has a columnist who is
now touting the gold loan numbers of Frank Veneroso.
They are more than twice the GFMS numbers that gold
producers, hedge funds and the general media have
acknowledged to the investing world.
The Swiss are so concerned about the gold loan
situation that they are turning up the heat on the
producers over them. The European central banks
have already told the world that they were going to
curtail their gold lending. Now this statement.
Then, we have the Abby Joseph Cohen of the gold
industry - "the bear of bears" the past few years -
telling the gold world that the floor for the price
of gold is around around $316. What happened to all
his $220 bearish forecasts? This is staggering information.
Think on these things. If you are a producer and the
"bear of bears" suggests $316 is where the central banks
will buy, why not cover all your forward sales? Why stay
short for a $2 downside? Makes no sense at all not too. If you
are a hedge fund, why stay with your gold loan at 4%
to 5% gold lease rates with the understanding that
the central banks can lose control of this situation?
The manipulators already have!
This is bombshell news. Since it makes no sense for
producers or hedge funds to stay short, most should
now begin to cover. Ted Arnold is one of the most
visible "Hannibal Cannibal" apologists of all. He
now admits that the gold market situation is so
explosive that $315-$316 is the downside. Gold closed
today around $318. That is the MEGA BEAR talking.
What do you think the MEGA BULLS like me are saying tonite.
GATA has been talking about market manipulation since
January. The Ted Arnold type's mocked us over and over.
Now, he comes out and says the market has to be manipulated
or there will be financial havoc. What crap! It is his
ilk that has caused financial havoc on the gold industry.
miners out of work, gold company bankruptcies, gold
shareholder's investments wiped out, etc.
I have said over and over that before this all ends, one
of the biggest financial scandals in the history of
the United States will reveal itself. How clear can it get?
The manipulating crowd has lost control of their collusion
game and now they are crying to Daddy for help. What a
bunch of wimps! This is disgusting and calls for a
full scale Congressional investigation.
On April 26, I met with James Saxton, Chairman of the
Joint Economic Committee, and told him that this was
going to happen. I also met with Chris Frenz, his
staff director and their chief economist, Bob Kelleher.
I then met with Jim Clinger, Senior Counsel of The
House Committee on Banking and Financial Services.
Also there was Greg Wierzyski of the Capital Markets
Committee. I invite all of the Cafe to contact them
to find out if what I am telling you is so
I told them exactly what Ted Arnold is telling the
world now. The difference is that Ted Arnold is trying to
tell you that the gold maket will be capped. He
obviously was told to put this out by the "Hannibal"
camp that is scared to death that the gold price could
explode and wipe them out.
This is crazy. Oil just doubled in price. Did we have
to hear of nonsense like this? What is wrong about
gold doing the same? I cannot stress it enough. The
gold market was manipulated by the bullion dealers.
They told their clients the fix was in. The clients
believed them. The "Hannibals" were using wrong
supply/demand information and now have lost control
of their gold market cartel. They listened to the
discredited GFMS and not Frank Veneroso.
I can't say what the price of gold will do tomorrow,
but the dye is cast. Uptown we go. Shareholders
around the world will demand producers cover their
hedges. Hedge fund managers that have borrowed gold,
will have to come to grips with the "new" reality
and cover too.
Just curious. What central bank wants to just throw
away its valuable gold reserves at these prices?
Rock and roll time.
When the general investment world understands this,
there will be a STAMPEDE to buy the shares of gold
companies that have not overly hedged. The junior
golds and top quality exploration gold and silver
companies are going to go bonkers. In my last Midas,
I just suggested that soon the little gold companies
that have been given up for "mortsville" will
begin acting like internet stocks. This news could
do it.
Just look at what is happening to my biggest holding -
Golden Star Resources. A few days ago I brought it
up to you as my favorite. It was 15/16. Today it closed
at 1 7/8.
Does that seem impressive? Not to me. When I owned
it at 21, Paul Stephens, renowned portfolio manager
of the Conrarian Fund, said in a Forbes article
he thought this stock could go to 50 to 100. That
was him saying that - not me.
He made that statement because GSR has found so
many exciting gold resources and may have done
what no other exploration company in history did.
At least, that is what Frank Veneroso thinks.
What is important here is there are many great
junior gold companies and gold exploration companies
out there that will go ballistic in price when "The
Maddening Crowd" realizes the price of gold will
inevitably skyrocket. The bears even admit that
now. When central government takes its foot off
the breaks, bye bye.
Support your favorite small gold company. Tell your
friends about them "Now" before they go to the moon.
Their is easy money on the Table here.
Within 2 weeks, The Cafe will open its Chat room. In
the Chat Room, we will have various Conferences
(threads to some) in which you will be able to
learn and talk about your favorite gold and silver stocks.
You will be able to get answers to many of the questions
you might have from knowledgable investors around
the world.
Janet Whitman of Dow Jones did a great story today for
her wire service called, "Gold Gains In One of Biggest
Gold Rushes in History." Janet mentiones
www.LeMetropoleCafe.com. This is a big breakthrough
for us in the mainstream press. The Cafe is growing
by leaps and bounds. And as I reiterated often, we
are being fed the best information in the world on the gold
market going because gold family people want
GATA to succeed.
I urge all of your friends to read my last Midas and
the two pieces by Reginald Howe and John Hathaway that
are up at the Kiki Table and Dos Passos Table. In my
opinion, that is the gold market story in a nutshell.
"Vox Populi Vox Dei"
All the best,
Bill Murphy, Chairman
Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com |
