(GATA News) I am here in behalf of GATA to let you know we are...
MIDAS DU METROPOLE - November 8, 1999
... from the Jim Blanchard Investment Conference in New Orleans..
"And of course there are rampant rumors that Mr. Peter Fisher of the
N.Y. Fed has been active in calming down the gold market via a trading
account at Goldman Sachs. (Much more supply hitting the market). GATA is
so disturbed about this, our attorneys are reviewing Title 12 U.S Code
-section 263 C which has to do with the "Enabling Act" - in essence we
are looking to see if there is any possibility of injunctive relief
against the N.Y. Fed regarding its gold trading operations...
... I am here in behalf of GATA to let you know we are...
... Bill Jamieson, Business Editor of London's The Telegraph:
November 7, 1999
Gold fix
"Is the world gold market, of which London is the centre, free or fixed?
Searching questions are being asked of the US Federal Reserve Board and
the operational support it may have given to relieve pressure on those
with massive short positions such as Goldman Sachs...
Over here, Gordon Brown faces more questioning this week from Sir Peter
Tapsell MP on the UK gold sales...when exactly did the Bank act as a
depositary for the Central Bank of Kuwait to lend part or all of its
official gold reserves to the market?" End.
GATA is aggressively reviewing its courses of action to ferret out the
truth about what our government (Federal Reserve or Treasury) is doing
in the gold market ... GATA is preparing to call for a long overdue audit
on the gold in Fort Knox...
Ghana demands heads at Ashanti By Bill Jamieson
PRESSURE is growing from the Ghanaian government for top management
changes at Ashanti Goldfields in the wake of the liquidity crisis...
The government, which holds a 20 per cent stake in the group, is keen
to ensure there is no repetition of the circumstances which brought
the company to the brink of an enforced merger with major shareholder
Lonmin, the South African platinum producer. It would also like a...
Although the immediate crisis has passed with a standstill agreement
reached with counterparties to the group's hedge book, the Ghanaian
government was particularly concerned that the hedge book contracts
were so complex that few outside Goldman Sachs and CSFB could unpick them.
Ashanti still has a severe shortage of working capital. Last week it
said it was unable to accept a revised offer from Lonmin, while Lonmin
in turn has said it would not support any move to sell all or part of
Ashanti's valuable Gheita mine in Tanzania. End.
... WANT YOUR OWN BANKER TO BE GOUGING YOUR EYES OUT?
Or, How to Spot the Next Ashanti
By Jonathan Rosenthal
Business Report, Cape Town, South Africa
Friday, November 5, 1999
A prominent London-based gold analyst says he was having a drink
a few weeks ago with a party of bullion bankers that included one
of the counterparties to the Ashanti hedge book.
... this little gathering took place at about the time that Ashanti,
the Ghanian gold producer that owns some of Africa's finest mines,
was faced with liquidation because it was unable to come up with the cash
to satisfy its bankers' calls for additional security on its hedge book.
... Ashanti's problems were almost entirely the making of its bankers,
who wrapped it up in a hedge structure that was bound to lose money if the
gold price rose, and who then demanded margin, or security on the gold loans.
"We really gouged their eyes out," the bullion banker apparently told
his mates, with more than a hint of pride.
When perfectly healthy mines face the prospect of going belly-up every time
the gold price rallies, it becomes clear that something has gone horribly
wrong in the world of gold hedging and derivatives.
... U.S. investors have now begun firing off letters threatening to withdraw
their investments from hedged producers like Barrick, and praising the newly
unhedged, like Gold Fields, for their brave stand.
Australian gold producers, known to be hedged to the hilt, who just a few
months ago were darlings of the market, were made to feel like lepers at
the Denver gold conference last month.
London analysts are now desperately trying to figure out how hedges work
and where the next Ashanti will come from.
Some have taken to comparing the Ashanti debacle to that of Bre-X the...
Some analysts now argue that in the post-Ashanti era, gold companies
with even tiny hedges will face a similar uphill battle to regain the
confidence of investors.
... second factor is whether it can be faced with margin calls. If not,
then its bullion bankers have to be patient and wait for it to deliver
gold. But if it can, then you have the makings of Ashanti II, the
sequel, and the bullion banker saying "we gouged his eyes out" might
just be your own. End.
In last week's Midas, I suggested that John Brimelow had found a clue to
the coming happenings in the gold market. The astute Janet Whitman of
Dow Jones picked up on what John had to say:
Burned Bullion Banks Shying Away From Gold Arbitrage, By Janet Whitman
11/08/1999 Dow Jones Commodities Service
(Copyright (c) 1999, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Bullion banks aren't taking advantage of a
time-tested arbitrage opportunity - evidence that they got burned
by the gold market's recent volatility, according to some analysts
and bullion dealers.
Bullion banks, those actively involved in trading gold, lease gold from
central banks and private sources at cheap interest rates. Those banks,
like most investment houses, typically borrow short and lend long,
profiting from the spread. The steep positive yield curve of late for
gold lease rates, which reflects the cost of borrowing gold, would make
this type of trade particularly profitable.
But bullion banks aren't biting.
The reason, analysts and traders say, is that many of the banks have been
stung by the violent swing in gold lease rates over the past several months,
prompting orders from senior management to reduce their risk.
"It's a mystery why the bullion banks aren't performing their normal
arbitrage function," said John Brimelow, director of international
equities with with Donald & Co. Securities, Inc. in New York. "I think
they're in a state of paralysis."
The volatility in the gold-lending market already is said by bullion
dealers and analysts to have cost many banks tens of millions of
dollars, and a few banks hundreds of millions. Large losses, and the
potential for further hits given the uncertainty about the direction of
lease rates and the price of gold, are keeping bullion banks on the
sidelines, traders and analysts said.
"They got burned and traders, or rather their senior management, have a
very low appetite for doing this kind of thing," said Jeffrey Christian,
managing director of CPM Group, a New York-based metals consultancy firm.
Bullion Banks Vulnerable To A Swing In Lease Rates
... many gold mines and speculative players got caught by the surprise
run-up in the price of gold, it's the bullion banks that have been worst
hit, traders and analysts said...
..."Things could still blow," said the hedging specialist, noting that
the amount of leased gold is far in excess of the physical supply available.
Some market participants fear central banks may start demanding their gold
back ahead of Y2K, and the supply won't be there, he added.
"There's loads of paper out there, but gold backing it up (isn't) there."
... most agree on is that the heyday in the gold leasing market is over.
"It's a changed scenario in which the bullion banks are operating now,"
said CPM Group's Christian. "I don't know if anybody is going to go back
to the cowboy trades that they were making six to eight months ago..." End.
Back to the gold market.
The bottom line for me is;
the gold market is being more manipulated than ever at the moment,
the manipulators will lose,
lease rates will start edging up again,
hedging will continue to contract,
more and more producers will cover their forward sales,
gold available for lease will shrink,
bullion banks have lost some credibility,
shareholders will revolt against the super hedgers on the next price rally,
physical demand for gold will eat up the paper crowd,
the gold shares (not the big hedgers) will fly on the next price run up,
bullion dealer gold scandals will become more prevalent,
the Dec. Comex gold contract could be squeezed,
the N.Y Fed and the U.S. Treasury will begin feeling the heat soon
about their gold market operations,
good times are coming.
As evidence of the coming trend, Midas presents: In today's FT:
Exposure to 'exotics' left Ashanti in a dire position by Jilian O'Conner
"Ahanti, the Ghanian gold mining company that almost defaulted last month,
brought to its knees by holding cheap high risk derivatives known as "exotics."
... investment banks, including Goldman Sachs, Ashanti's corporate advisor,
sold the exotics as an insurance policy against the falling gold price.
The affair has left Ashanti crippled and focuses attention on the multiple
roles of Goldman and other investment banks in the bullion market.
Goldman was a long standing corporate advisor to Ashanti.
It acted as one of the leading derivative counterparties..
Like other big investment banks, Goldman operates 'Chinese walls" to
avoid conflicts of interest in the middle of Ashanti's liquidity crisis.
Dr. Ewan Kirk - described as a rocket scientist in derivatives was sent
over the wall from the trading division to help Ashanti calculate its
losses.." End.
What a bunch of "Hannibal Lecter" bull crap. I already reported to you
that Sam Jonah, Ashanti Chairman, told sources he was being squeezed by
Goldman Sachs...
Was this the same rocket scientist who told the Goldman salesman to sell
the exotics to Ashanti? The same one who forgot to stress test an $80
rise in the price of gold in a short period of time?
"To avoid conflict of interest!!!!" The whole set up was one conflict of
interest. Goldman made a fortune on selling them these "exotics."
Goldman makes money selling hedge programs. No hedging, no business.
This thing stinks to high heaven.
Rosenthal and Jamieson have it right. A full inquiry is in order -
not only about Goldman, but what officialdoms did to bail them out.
What do you think Ashanti chairman, Sam Jonah, would tell you privately now,
or when this mess is sorted out?
... to the MORNING METAL MONITOR, the mess is far from being sorted out:
"Details of Ashanti's balance sheet have become available, and the
report provides some VERY interesting facts...BUT, that delta does NOT
take into account the...
Looking at the book we note ... The fact that volatility has been cut
in half, and that lease rates have been slammed back below 2% have been a
HUGE help, if not a manipulated one. The details of this report should
exert a positive influence on the market, as it suggest the credit
squeeze in NOT over."End.
... MANIPULATION OF THE GOLD MARKET IS ANOTHER ORCHESTRATED BAILOUT
OF THE BULLION BANKS. HOW WOULD YOU LIKE TO BE A FUTURE ATTORNEY FOR
ASHANTI OR FOR ASHANTI SHAREHOLDERS KNOWING ALL THIS? WHAT IS GOLDMAN
SACH'S LIABILITY FOR THEIR EGREGIOUS ACTIONS? WHAT WOULD THAT LIABILITY
LOOK LIKE AT $380 GOLD?
KUWAIT HISTORICALLY MANUEVERS QUIETLY IN THE FINANCIAL MARKETS.
WHY ANNOUNCE LENDING OF GOLD WHEN IT IS UNLIKE YOUR HISTORICAL BEHHAVIOR?...
... EXPOSE THIS "SAVE THE RICH AND PRIVILEGED AT THE EXPENSE OF...
"HANNIBAL LECTER," THE OTHER CANNIBALS AND THEIR SUGAR DADDIES DESERVE...
All the best,
Bill Murphy ( Midas )
Chairman, Gold Anti Trust Action (GATA) gata.org
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