Hi Fuller & all..... This might help:-)
10:30p EST Tuesday, November 16, 1999
Dear Friend of GATA and Gold:
I haven't had much to share with you for the last week,
so GATA Chairman Bill Murphy has agreed to my
distributing his latest "Midas" commentary at
www.LeMetropoleCafe.com. It follows. Please post this
as seems useful.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
"MIDAS" COMMENTARY FOR NOVEMBER 16, 1999
BY BILL MURPHY, www.LeMetropoleCafe.com
November 16, 1999
Spot Gold $294.30 up $2.90
Spot Silver $5.14 up 6 cents
Technicals
The $288 floor. For the fourth or fifth time, gold
retreated to $288 only to bounce off that solid support
level. It still feels like this market is sold out in a
big-picture sense. Many of the $290 December call
option holders took delivery of December futures
positions as that option closed well in the money.
Yesterday's early market activity was an attempt by the
bears to flush out these new longs. The December Comex
contract sold off $2 in the morning to $290.10 before
rallying back to close 40 cents higher on the day. That
move down would have been enough so scare off weak new
longs.
Today's price action was unusual. In recent years the
manipulators of the gold price have kept the gold price
steady to lower ahead of most financially related
announcements. Today gold came out of the box very
strongly and stayed that way ahead of and through the
Federal Reserve Borad's 25-basis-point rate hike
announcement. That is very encouraging. Maybe the New
York Fed is beginning to realize it makes no sense to
hold the price of gold down at such unsustainable low
levels when the Fed is raising interest rates due to
inflationary pressures -- or is that a stretch on my
part?
The open interest pattern is interesting. On Friday the
open interest shrank some 18,407 contracts, with the
December contract declining to 59,904 contracts.
Yesterday the December open interest rose 4,760
contracts bringing the total back up to 64,664
contracts. My take on that is that the trade does not
want to be short the December contract because it could
be squeezed, so they are covering shorts and not
rolling over their positions at the moment -- hence the
big Friday reduction. The increase yesterday (even
after the morning bear raid) in the December contract
might be due to longs who want to take delivery, or at
least hold on to the December contract while they view
the delivery and price action during the month of
December.
There are only five full trading days until the U.S.
Thanksgiving Day recess. The Comex is closed on
Thursday and Friday next week while Wednesday is a half
day of diminished, pre-holiday trading activity. That
brings us back to the gold game on Monday, November
29, and the next Bank of England auction followed by
first notice day for the December Comex gold contract
on Tuesday, November 30.
Let the fireworks begin.
Silver is doing its diddle thing. "The wrong kind of
funds are now short." As previously stated, our floor
sources tell us that these outfits are almost always
wrong in their silver trading. Looks like they will be
so again.
I cannot stress this enough: Silver is a different
trading animal. It probably will rally $2 to $4 over a
brief time, just when you think it will stay right
about $5 forever.
Fundamentals
On that note, Bob Hoye of Institutional Advisers sent
me this oil/silver chart with silver trading about
$5.06. It enunciates some key silver buy signals as
related to oil. He has another one and Bob presents the
following chart for your perusual:
(CHART WAS HERE)
Spot crude oil closed in new high ground once again
today. December finished this session at $25.70 per
barrel, up 57 cents. Of course there is no inflation
anywhere to be seen, according to most of the
mainstream pundits.
A comment on oil technicals. During the Iraqi war, oil
spiked to $42 when it took out $27 per barrel. There is
little technical resistance if $27 is taken out. If
there are serious Y2K pipeline breakdowns, $42 is not
an unreasonable price objective.
Just in: Oil statistics announced after the close are
very bullish. Crude oil is now trading above $26 per
barrel as the API stocks were down an unexpected 2.49
million barrels. Gasoline stocks were down 4.94 million
barrels. Even the heating oil stocks (with this very
warm fall season thus far) were reduced by .93 million
barrels.
By all accounts the U.S money supply has exploded
recently. According to the St. Louis Federal Reserve,
the Adjusted Monetary Base has been rising 20.1 percent
since Sept. 8, while the Adjusted Reserves have been
rising at a compounded annualized rate of 78.5 percent.
Geez, a zooming money supply, soaring oil prices, the
Fed hiking rates, strong physical gold demand. Why is
the gold price not approaching $400 instead of $300?
The cafe's John Brimelow attended the Johnson Matthey
platinum/palladium gathering this morning. John will
have more for us later. For now: Demand for both
platinum and palladium is very strong, Russian supplies
are in doubt, Chinese platinum demand is very robust.
John sees both platinum and palladium challenging $500.
Hello gold! Hello silver! Shake a tail feather here.
Overpower the conspiracy crowd again.
Goldman Sachs makes no sense. James Riley, their top
commodity guy, touts $375 gold next year. He must have
shaken the politicos at Goldman that know the New York
Fed and some of the Goldman crowd have been trying of
late to hold DOWN the gold price. That is probably why
they called on Steve Strongin, a former Fed official
and the director of commodities research at Goldman
Sachs, to counter Riley with the following statement
last Thursday:
"LONDON (Reuters) -- Commodities investors seeking to
profit from the projected rise in global growth should
look to oil, base metals, and farm commodities rather
than gold, U.S. bankers Goldman Sachs said on Thursday.
"'The gold market has been and likely will continue to
be driven by central bank actions. I tend to view those
as unforecastable,' Steve Strongin told an analysis
briefing.
"'The core issue remains how fast the central banks
dispose of those assets. That's likely to be a long
process.'"
What central banks, Mr. Steve, Former Fed Official? Did
you not hear about the European central bank
communique? Who has enough gold to supply the 125-tonne
monthly deficit that is ongoing? Can you name the
selling central banks for us, please? Are you referring
to your former colleagues? If that is the case, don't
you think the American public should be advised that
the U.S. gold reserves might be a part of a giant
giveaway to protect the bullion dealer crowd and the
big New York banks? Scandal is coming, Steve. Will you
be called to testify about these remarks when the
manipulation game blows up?
Potpourri and the Gold Shares
Recently I pointed out that the gold trading volume is
much greater on up days than on down days, on balance.
Joe Granville, the on-balance volume guru, says the
same is true of the leading gold stocks.
Lehman Brothers, which is more bearish about the gold
market than any other Wall Street firm (that is saying
something), downgraded Barrick Gold today. Even the
bears see no reason to own the super-hedged company.
Perhaps that is why stocks like Newmont Mining are
outperforming Barrick. Over the summer Barrick and
Newmont were trading around the same price. Today's
closes: Newmont 22 3/4, Barrick. 17 3/4.
GATA's fax campaign and common sense are prevailing.
Why own a company like a Barrick if you are bullish on
the gold market? One of these days Barrick CEO Randall
Oliphant is going to wake up. I wonder if it will be
before the price of gold goes $350 bid.
I received word from the Comex floor today that hedge
funds were on the buy side. Could the latest and
greatest hedge fund trade be to go long gold futures
and sell Barrick Gold? That would make sense. I spoke
with some big-time gold share money managers and asked
if they still owned some Barrick. Sheephishly, one said
yes, but just in case, he might buy back his hedge
positions. He reasoned that would cause the stock to
fly. Most likely it would, as the gold industry would
be ignited. But for that to happen, gold futures would
go up that much more than Barrick, so the trade appears
to be well conceived -- especially with Barrick STILL
espousing the virtues of being so hedged. If Barrick
does not cover, shareholders will rightly become
concerned as more hedge fiascoes surface on the next
big gold price rise.
Hold that Tiger! Scratch that. Pitch that Tiger! Cafe
sources told you months ago that $6 billion in
redemptions were going to plague this one high-flying
hedge fund. It was a Cafe bulletin. The bulletin spread
around the internet and reached Wall Street. Tiger was
confronted by CNBC and Julian Robertson's response was
that our information was "obscene."
It was not our information that was obscene; it was the
performance of his hedge fund. Last night the news
services reported that Tiger's assets had sunk to $5.3
billion at the end of September. That compares to $9.69
billion at the end of June. Before the June numbers
were announced, Tiger was supposed to have around $11.5
billion in assets, which was down from its all-time
high of around $22 bullion.
The source that gave us the news on Tiger months ago
was the same source who told the Cafe this summer about
government-to-government negotiations that would boost
the gold price, not long before the European central
banks' announcement.
There are several points to be noted here. One, you
have to wonder how this horrendous performance from
this once- revered outfit will affect other hedge
funds. Two, it was also reported that Tiger sold 90
percent of its Intel position after hiring the Merrill
Lynch high-tech guru. Wonder why? Midas' guess: They
got murdered in a short gold position and had to sell
what was liquid to accommodate their redemptions.
Three, last June Midas speculated that the emergency
secret banking meeting in Philadelphia concerned
serious hedge fund problems and was just another reason
to cap the gold price. That was just our hunch -- Tiger
is a reality. Intel was easy to dump. What about
Tiger's exotic, illiquid investment positions? Who
wants to be the last man out the Tiger door?
Nesbitt Burns and Scotia McCleod lit into Cambior
because of the company's current exposure to a rising
gold price. They both state that the recent gold price
spike has created risks that investors should be aware
of -- meaning the company's ability to negotiate a
satisfactory resolution of its debt problems with its
banks and counterparties is in jeopardy.
Ashanti update: Refco reports there may be some
political challenges in Ghana over Ahsanti.
The former mining minister of Ghana, Fred Ohene-Kena,
demanded an open investigation to determine if there is
any wrongdoing over Ashanti Goldfields as it relates to
President Jerry Rawlings and his political advisers.
Ohene-Kena, who was dismissed recently as minister for
mines, was replying to accusations made by President
Rawlings when he accused some Ghanaians of
collaborating with foreigners to manipulate the gold
industry.
This is another example of how twisted the gold share
investment arena is. A once highly regarded gold
producer is downgraded because the gold price went UP.
No wonder the XAU went down 1.14 today and closed at
69.94. Confusion about gold companies still reigns.
Goldfields Ltd. and AngloGold stepped up to the plate
at the last Bank of England gold auction. Newmont
shareholders should urge CEO Wayne Murdy and crew to
bid this time. It would be a great public relations
move and could make up for their mistake of listening
to Hannibal Cannibal Chase Bank and selling at the
bottom of the gold market.
Anglogold is on the hunt for assets.
"SYDNEY (Reuters) Nov. 16 -- South African miner
Anglogold Ltd. on Tuesday gave its strongest indication
yet that it was on the acquisition trail in Australia.
"Anglogold has made its first foray into the Australian
gold mining sector with a share swap bid for Acacia
Resources Ltd., a half-million-ounce-a-year producer,
less than a month's output for the South African miner.
"'Acacia is certainly the first word. I don't think it
will be the last word,' chief executive officer Bobby
Godsell told Reuters."
I had a nice chat at the Jim Blanchard New Orleans
Investment conference with long-time GATA supporter Bob
Bishop. He sent me his recent Gold Mining Stock Report
today and I picked out a couple of highlights for you.
He expects there to be strong demand at the upcoming
Bank of England gold auction and he also expects gold
mining companies to be in there bidding.
Bob says: "Having been in Vancouver for most of the
past week, I can confirm what I have known for some
time: that we're looking at an exceedingly selective
market that is very much dependent on the next leg up
in gold. This is compounded by the annual event known
as tax loss season, which is characterized by extremely
low liquidity and a virtual news blackout on most
companies. There are some exceptions, but as a general
rule, companies with gold news to share with the market
have little incentive to share it at this time,
principally because it will simply mean that someone
taking a tax loss gets to sell stock at a higher price.
Good news has a much better chance of producing
sustainable gains after the first of the year, so don't
expect too much news between now and year-end. The
reality is that it is simply not in the interest of
most companies to be wasting good news in the current
environment."
This highly regarded natural resources vet is so right.
Today was a good example. Golden Star Resources
reported an $18 million loss, or 65 cents a share,
compared to a loss of 6 cents a share last year. Sounds
like a sinking ship, eh? In fact, that could not be
further from what is really going on. I learned today
from good sources that GSR cash flowed over $1 million
in the company's new Bogosu gold mining operation in
Ghana. The company, after its burn rate, actually
netted about $500,000 cash flow for October, the first
monthly profit in the company's 15-year history. GSR
has already found six future gold mines. Now it is
becoming a successful producer. That means certain
financial institutions can add this stock to their
portfolios. Yet if one just read the November tax-
selling time headlines, one would say "ouch."
>From Cafe member Benduki:
"I don't know if you watch Durban Deep (DROOY), but
somebody wants that stock. It has been under incredible
accumulation for a week. If gold ever takes off, that
one is going to be a rocket ship. It has been out
trading them all."
If one is bullish on gold, Durban Deep is a goodie. So
is Harmony Gold, a South African gold producer that is
unhedged. A couple of winners in my book.
-END-
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