We don't know who the hell's been buying all this stuff.
It seems a very fair guess that somebody was quietly feeding the market...
Subj: David Marantette - U.S. Gold Sales
/ Patrick Bloomfield - Invisible hands squeezing gold
Date: 10/19/99 7:08:40 AM EST
From: LePatron@LeMetropoleCafe.com
To: dougak
David Marantette has served commentary at the Dos Passos Table,
entitled, "U. S. Gold Sales." Some surprising revelations.
"Who in this country is buying this Gold? This may shock you.
The biggest area of the country that is buying gold coins
is the Silicon Valley area in California. Believe it or not,
the computer people, the producers and sellers of computers,
are the biggest buyers of gold coins. What do they know that we don't know?"
The following article was in Canada's Financial Post yesterday:
Invisible hands squeezing gold
Human nature may account for some unusual price moves
Patrick Bloomfield, Financial Post, October 18, 1999
"Talk about invisible hands shaping the markets! My guess
is that we are seeing some very invisible hands at work
today, but far from the kind envisaged by Adam Smith.
Gold markets provide one illustration.
A little more than week back, Chris Thompson,
chairman of South African mining house Goldfields Ltd.
was telling the world that this mining group,
the world's second-largest gold producer,
had bought back the bulk of its gold hedge position
because it expected prices to rise. This past Friday
Mr. Thompson reinforced his message: "Having looked at
all the fundamentals of the current gold market, it seems
inevitable to us that much higher gold prices are available."
His words made some sense. Yet, the same day,
the London spot bullion price continued its modest decline.
Why? After all, the significant excess of global
demand for gold over newly mined gold continues.
Goldfields and its fellow South African mining giant,
AngloGold Ltd., have been reported to be buyers. The
major central banks had agreed to cap their selling,
leasing and derivative business. And the scrap market
ain't what it used to be last year.
It seems a very fair guess that somebody was quietly
feeding the market. And that gives at least a little
substance to those rumours that continue to circulate
of the U.S. Federal Reserve having baled out a major
investment dealer by delivering on a gold contract
due and also being prepared (with other central banks)
to keep gold bullion markets in check.
For asking the question that led to this line of
thought (and for supplying some of the answers), I
am indebted to a citizen of Dallas called Bill Murphy,
who among other activities is chairman of an organization
there called the Gold Antitrust Action Committee.
Now I freely admit that this action group has a certain
thrust, in that its members have long believed that there
were too many darned invisible hands directing the
world's bullion markets as it was, and that, among
other results, this was going to precipitate a massive
bear squeeze -- which it did.
That said, there is sense to the suggested sequel,
that the squeeze continues, but under the covers, so to speak.
I also wonder whether it was wholly coincidence that
Fed Chairman Alan Greenspan's chose to deliver his
little homily just last week on the need to test
the risk assumptions in those fancy little
computer-driven asset diversification models.
One has only to look back to the Long Term Capital
affair 12 months ago to recall that this highly
sophisticated hedge fund was basing its major
currency and bond bets on models set up by some
very high-powered people. Yet those bets still proved losers.
I am sure that Mr. Greenspan had a like thought
in mind when he pointed out the damage that can
be done to any sophisticated model by abrupt
changes in human sentiment.
Did his words of caution also help accelerate
one of those changes in human sentiment?
Only time will tell.
But to revert to my original topic, Ashanti
Goldfields Ltd. told analysts in its recent conference
call that it had done extensive sensitivity testing
on its gold hedging and derivative positions. But
that was not enough to spare it from margin calls
as human sentiment changed and gold prices
leaped upward.
In combination with other factors, markets have
certainly taken Mr. Greenspan's musings seriously.
You can check out the extent of the current risk
rethink by going to the web site (www.yardeni.com)
of Edward Yardeni, Deutschebank Securities chief
U.S. economist and market strategist.
A week ago his numbers already suggested that the
premium over 10-year bonds being paid for the
Standard & Poor's 500-stock composite had fallen
below 40% from a recent peak of near 50%.
That was when the S&P was at 1275, some 28 points
higher than last week's dismal close.
If the premium were to slip further to a more normal
20%, then that would imply a further decline of 170
points or so off Friday's S&P closing level.
In the market's current mood, the risk is that bargain
hunters will hold their fire for that kind of target
-- or a lower one. Last week, even buyers of Internet
stocks had stopped to think." End
The Dos Passos Table
Discussion du Jour: Guest Speaker
David Marantette
Goldstock Letter
gold@goldstock.com
October 19, 1999
U.S. Gold Sales
Did you see this past week that Canada's Finance Department announced...
Did you see the announcement that the U.S. Mint has sold...
Do you know that total Gold sales this year will probably exceed...
... there was no such U.S. announcement. But it is what is going
on. Amazing, isn't it? The U.S. has been selling ...
Well, this Gold is going out of the U.S. Mint in gold coins, presumably
to U.S. citizens. It is probably Gold that will be hoarded and not
spent. It is in coins, and will probably not be melted for other purposes.
Who in this country is buying this Gold ?
This may shock you.
The biggest area of the country that is buying gold coins is the
Silicon Valley area in California. Believe it or not, the computer people,
the producers and sellers of computers, are the biggest buyers of gold coins.
What do they know that we don't know?
U.S. Mint sales of gold coins have been tremendous...
..... So much so that whatever the panic demand for U.S. gold coins,
the demand will be met with little or no reason for prices to increase.
My friend Bill Murphy at lemetropolecafe.com has used GATA to slay
a few central bank dragons in the past couple of weeks. He has the
shorts running way past the foothills.
Beyond all that, we keep reading about the huge sales of Gold over the
past couple of years by producers, speculators, and central banks. Well,
we know about the shorts. We know who the sellers are. We know about the
gold mining companies selling forward two years and more of anticipated
production. We know about massive sales and short positions.
What's the part of the story we don't know ?
We don't know who the hell's been buying all this stuff.
Well, we hear about the demand in India, the demand in China, etc.
The jewelers the dentists the computer manufacturers are buying.
Great.
Is it enough to take up all the supply?
Some central banks have been buyers? True! Some central banks have been
buying Gold. The Central Bank of Taiwan has been one of the banks.
Buying so much that they have been criticized by the U.S. Government.
Because of it, the Taiwanese have one of the strongest currencies in the
world. Who knows this? Why have they been buying, and really just how much?
I'm beginning to wonder if under the guise of short sales and who lent
to whom, there isn't an even bigger story. A story of a change in power.
Change from Europe to ?. A change in power that could change the rules.
Remember this old adage,
"He who has the Gold makes the rules"?
Where has it all gone?
David Marantette, Goldstock Letter, gold@goldstock.com, October 19, 1999
All the best,
Bill Murphy, Chairman
Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com |
