(GATA News) Who selling gold to keep price from exploding ? Hello, Uncle Sam!
Subj: Midas - Diana Ross, Leanne Baker,
Egizio Bianchini, Victor Flores, John Hathaway, Caeser Bryan
Date: 12/28/99 9:54:10 PM EST
From: LePatron@LeMetropoleCafe.com
To: dougak
Le Metropole members,
Midas du Metropole has served commentary at The James Joyce Table.
The James Joyce Table
Discussion du Jour: Gold, Commodities, Midas du Metropole
Midas du Metropole
"The Gold Market and Precious Metals Commentary"
... to describe the gold scene is comatose.
Y2K unknowns are upon us
oil is just about back up to its multi-year high of $27 per barrel ($26.83)
price of copper has rallied 33% to 85 cents
bonds trade like they have a weight around their neck, yields nudging 6.5%
If you had been told of this scenario one year ago...
price prospects for gold... $425 bid... as it should be,
but that is an old story for us.
The good news is that this story will be an old story NEXT YEAR!
It (the good news) may not be here yet,
but it will be -
probably sooner than anyone thinks.
My theme song for this one comes from the Diana Ross and the Wiz -
"Can't You Feel a Brand New Day."
More on that for you before Feb. 1.
The Feb. gold contract traded at $292.50 this session, making a new high
for the move, albeit on very light volume. Any close above that level
should put a bit of fear in long term bears. The gold price has already
taken the moving averages out on the upside and now threatens to cut
deep into chart resistance.
This is a very important gold price resistance level from a chart
standpoint. Four times this area held in the October-November sell off.
Since then it has twice rebuffed price advances. Thus, a close above
today's high would give further impetus to the outside bullish technical
day of four trading sessions ago.
The low open interest of 155,896 contracts is further evidence that the
trade is covering its shorts.
A move above today's highs should give us a test of $300 and then who knows.
Goldman Sachs sold the close today after buying early with Credit Suisse.
The floor told us Goldman was trying to close Feb. gold below $291.40
(a key technical point), but failed to do so.
The bottom line is the same. The gold price should be $100, $200, $300
higher. Orchestrated forces have made sure the gold price stays at an
artificially low price. As far as we know, they are still doing their
thing, but are running out of maneuverability. Sources of gold supply to
hold down the gold price dwindle by the month: European opposition to
the gold price manipulation is clearly growing (Dutch FT Letter to the
Editor), bond yields and oil prices are making an obvious mockery to the
fraudulent "hold down gold" scam and GATA is going to put some heat on
the U.S. Fed/Treasury and their cronies that have consorted to make a
free trading gold market a thing of the past for the time being.
Gold closed higher so "the boys" made sure silver was a dud. Same ole
same ole as we have had for far too many years. 4 ole 9 years, maybe.
Fundamentals
The Dutch announced another 10 tonne gold sale today. That brings their
two week total to 23.5 tonnes or 23.5% of what they intend to sell for
the entire next year. The market has taken that news by rallying $10.
Now, it is possible the Dutch already sold this gold and are announcing
it now on instructions to do so to try and put as much bearish talk in
the market as possible, or they actually are selling this tonnage now
and the gold market is scooping it up with ease. Bullish either way.
If the Dutch announce 10 tonnes per week for the next 7 to 8 weeks,
they will be finished for 2000. The gold market is rising on this selling
(or news of selling). Who is going to replace the Dutch selling? Do not
forget that the monthly supply/demand deficit is running around 100-135
tonnes per month. The bears must be foaming at the mouth waiting for the
Swiss supply to come through. Will it?
Rumors continue to circulate that the producers continue to cover their
forward sales this quarter. Frank Veneroso would not be surprised to
find out that they covered as much as 500 tonnes of hedges this quarter.
Producers are supposed to be the ones forward selling and adding gold
supply to the market which suppresses the price. If they are buying,
who is supply gold then to keep the price from exploding again?
Hello, Uncle Sam!
Ahanti - ?. More grumblings that all is not well in Africa land.
Besides the Ivory Coast coup, the word is that the various Ashanti
factions can't work out a satisfactory deal:
John Jay - Sunday Times - December 26
ASHANTI GOLDFIELDS, once the most powerful company in sub-Saharan Africa
outside South Africa, is this weekend in crisis as its banks and investors
battle over attempts to organise a rescue refinancing.
Britain's Lonmin mining group, which owns 32% of Ashanti's shares, is a
key player, as is the Ghanaian government, which owns 19% and can block
any takeover.
Lonmin's chairman Sir John Craven has made one bid for Ashanti but this
was rejected by Ghana. Craven is now trying to forge a role in the
refinancing but he is thought to have rejected requests from Ashanti's
banks that Lonmin, the mining rump of Tiny Rowland's Lonrho combine,
inject fresh loans without taking security on the African company's
assets.
Ashanti's dollar-denominated shares stand at the equivalent of 185p,
down from a e17 peak in 1996, to value it at e205.5m. Lonrho offered a
share swap valuing it at about 433p a share but also including a fresh
e62m loan.
The Ashanti crisis blew up in October when the company came close to
insolvency as a result of derivatives losses. The company had been
speculating that the gold price would remain low, using the derivatives
market to boost its weakened profits. But a sudden surge left its
derivatives contracts deep in loss.
In November, Ashanti's derivatives counter-parties, which included
Goldman Sachs, its investment bank, agreed a standstill on margin
payments but demanded warrants over 15% of its shares. But the deal was
conditional on Ashanti producing a rescue plan, in particular a $125m (
e77.4m ) loan to finance the development of its Geita goldmining
prospect in Tanzania.
Two weeks ago the deadline on the rescue talks passed without a deal
but the 15-bank consortium agreed last Thursday to grant Ashanti further
time to refinance itself. Ashanti has asked Lonrho to put up $25m in
loans or loan guarantees as part of the $125m rescue package. But Craven
is believed to have told Richard Peprah, Ashanti's chairman and also a
Ghanaian government minister, that the British company will not
participate unless it gains pre-emption rights over the Geita project,
enabling it to match any outside offer.
Craven is also thought to have made a new attempt to negotiate a full
merger at 433p a share but he is thought to be willing to consider other
proposals that Ghana might find more attractive.
One option, which would still leave the Ghanaian government with a big
interest in gold mining in its country, would be to split the Ghanaian
assets from those outside the country. Under such a deal Lonmin would
take ownership of Geita but would continue to manage the Ghanaian gold
interests in return for management fees.
A failure to rescue Ashanti could have a profound affect on western
investment in sub- Saharan Africa. Since Ghana blocked the Lonmin
merger, despite the agreement of its own representatives on the Ashanti
board, inward investment in the region has frozen. End.
The gold industry and gold share industry is a disaster of sorts.
The XAU closed today at 67.53 down .28 on a $1.70 up day in gold.
This summer the average XAU price was around 64 with gold trading on
average around $256-$257. At one point, the XAU traded as high as 72.
The price of gold has rallied $35 and the XAU is up 3.5 points. No wonder
this recent move up in gold has produced so little excitement.
Could it be all year end tax selling of the senior gold shares
that has produced such a yawn?
Doubtful.
More likely it is stories as the Ashanti one above that is increasingly
having an effect. Generalist money mangers want no part of the gold
shares at the moment. They read about a horror story like Ashanti and
Cambior and then they hear.....
It has to confuse the heck out of generalist money managers.....
... Is it because that certain powerful forces of the world
and their colluding cohorts won't let them ? .....
It is bad enough that an industry leader like.....
... That sort of press is compounded by the likes of the
following article out of "The Press" in New Zealand:
GPG serves writs
Guinness Peat Group has served writs against Otter Gold Mines directors
over their gold hedging policies.
GPG's New Zealand director, Tony Gibbs, says the company is seeking for
the directors to "make good any losses Otter may suffer".
Otter's acting chairman, Tony Frankham, said the matters raised by GPG
did not have any substance and had been referred to Otter's solicitors.
The two sides are in conflict over control of the trans-Tasman gold miner.
Sir Ron Brierley's GPG has also formally called for special meetings
to vote on resolutions seeking to replace three of Otter's four directors
with GPG nominees.
The investment group owns 19.8 per cent of Otter, and with institutional
shareholder support, has already forced out the former chairman and
chief executive, Tony Radford.
In a statement on Friday, Otter said it believed that GPG "had a short term
view on the cash in value of the (gold) hedge book, and that this stance
is fundamentally different from that of an operating gold mining company
where hedging activities are used to support long term gold production".
Mr Frankham said GPG's continued actions "are doing nothing more than
distracting management from the proper running of this business and
costing all shareholders significant funds". End.
This combo is a nightmare for attracting gold share investors.....
... They have hurt the gold industry immeasurably by their arrogance.
They have confused so many that... and that has hurt less visible gold
companies as well as all of us gold share investors.
... has always basked in the glory of his PR triumphs.
He loves the limelight. He has it again.
This time it is for increased investor skepticism at his
lack of flexibility, truth telling and common sense.
... has his PR mouthpieces calling us nutcases of sorts just for telling
the truth. Comments like "we find a conspiracy under every pound of ore.
... GATA is out fighting to expose the truth about what is really going
on in the gold market so that his shareholders can be enriched.....
... sends his minions to insult us. Whacky to the utmost. It has taken
GATA time, but slowly the word is getting out about the gold market and
the 600 pound gorilla is getting nervous. That is why he is losing weight.
My take is that the gorilla is now an anorexic.
The dye is cast. Get with it.....
... BUY BACK - BUY BACK. - BEFORE it is too late.
BE A LEADER AGAIN. Time is running out on you!
This cacophony of what is going on in the gold market is drowning out
the fact that buying gold shares today is one of the great investment
plays of all time.. The risk reward ratio on the gold shares today is as
good as the risk reward ratio was for buying gold when it was trading in
the $250's this summer. Tax selling is over.... Time to be in it to win it.
In all my years of commodity trading, the "trade" is usually the last
to know what is really going on about the fundamentals. I have been
a part of 3 big commodity moves in my life - soybeans, cattle, and copper.
The trade did not "get it" in general at the bottom every time. Just the way
it is. Why should brainwashed gold producers and.....
Gold is at that point now. The fundamentals are extraordinarily bullish.
The 600 pound gorillas that have been sitting on the market are being
found out. They are beginning to lose weight, inexorably. My guess is
that "Fatso" is now down to about 300-400 pounds and losing weight by
the day. Soon, he will not be unable to smother the good guys anymore.
He will be overpowered and when that that becomes evident to the
marketplace the gold price will rocket ride. The $84 move of 3 months
ago will be viewed in retrospect as a trifling blip.
Potpourri and the Gold Shares
Many Cafe members sent me emails about this following Wall Street
Transcript release. I thought it's positive tone might be of much
interest to many of you. A good number of the esteemed participants
are all Cafe members.
Tuesday December 28, 9:10 am Eastern Time
Company Press Release
SOURCE: The Wall Street Transcript
The Wall Street Transcript Publishes Investing in Gold Companies Issue
NEW YORK, Dec. 28 /PRNewswire/ -- Five leading analysts and top
management from four Gold Companies examine the Gold sector in the
latest issue of The Wall Street Transcript (212-952-7433) or
twst.com
In a vital review of this sector for investors and industry
professionals, this valuable 48-page report features:
1) Investing in Gold Companies - In an in-depth Analyst Roundtable
(13,700 words), Leanne Baker, Director in the Equity Research Department
of Salomon Smith Barney, Egizio Bianchini, Vice President and Director
with Nesbitt Burns, Victor Flores, Senior Analyst with HSBC Securities,
John Hathaway, Senior Portfolio Manager with Tocqueville Asset
Management and Caesar Bryan, Senior Vice President with Gabelli Asset
Management examine investor concerns with hedging, supply issues,
new deposits, cost cutting measures, inflation fears, gold lending
practices, gold demand, exploration, mining hot spots, M&A horizon,
the Washington Agreement, the outlook for the sector and specific stock
recommendations.
2) In a year in which gold prices moved from the $250s to the $340s
and then back below $300, the most influential factors in determining
gold prices were, according to Bryan, ``issues of the amount and level
of producer hedging and hedge fund shorting, and the central bank
announcement (The Washington Agreement) that resulted in a short
covering squeeze.' Flores adds, ``Needless to say.....
But poor performance wasn't universal in the sector.....
... So a number of these names have provided decent returns.....
... there have been some winners this year.'
Bianchini concurs ... is one that stands out ... has been a very good
performer, and ... has been the best senior performer. I think the message
that the companies are going to have to embrace is that all of these
performances were related to.....
Bianchini states, ``Gold continues to be a financial asset, and gold has
a role in today's financial world. But more importantly, the banks, to a
large degree, are going to stand behind gold. Indirectly, one of the
messages that the central bankers are sending is that if in the future
the short sellers come into the market and excessively lean on the
price, they have the capacity to bring things back into line.'
For a free interview excerpt in which Hathaway lists reasons
he believes gold could spike over $600 see
archive.twst.com
Bryan calls Hathaway the 'world's acknowledged expert on the
hedging activities of the gold producers.'
For a free interview excerpt in which Hathaway calls Ashanti's
(NYSE: ASL - news) management 'Goldman Sachs roadkill' see
archive.twst.com
There has been disdain by investors for gold hedging firms, Bianchini
asserts, ``I think that the niche and the lot in life for gold producers
is to be warrants on gold. As warrants go they should be good warrants,
well-managed warrants, with low costs, good management and foresight.'
Bianchini continues, ``Many investors believe that hedging goes against
this concept. Not all, but many types of hedging cap the upside, and
thus they cap the value of the warrant. Many generalist fund managers
have told us, 'If I buy a gold stock I want leverage to gold. I don't
want an Ashanti or Cambior (AMEX: CBJ - news) where my value has gone
down as the gold price goes up. There is a second reason behind the
disdain for hedging: that is that the level of disclosure by the
producers regarding their hedge positions was woefully lacking.``
Bianchini says, ``Now, there has been much improvement in the last month.
... I think disclosure will continue to improve. There is a movement afoot
in Australia to standardize disclosure regarding derivatives. FASB 133 and
other initiatives by the SEC and FASB will also help with disclosure.
There are similar initiatives in Canada. Better disclosure will help to
bring back investors to the sector.'
The panel goes on to offer recommendations about which sector stocks
are most likely to reward investors.
Bianchini states, ``I just want to mention two companies I particularly
like that are doing some good things. One is.....
... The other one is ... represent a situation of lightning striking twice.
One of the principals in the company is Catherine Leod, who was involved
with ... which was subsequently bought by ... Maybe she can do it again.
These types of companies are once again beginning to crop up, albeit on
a very limited basis. I am encouraged.'
Bryan states, ``The first of the three largest positions in the
portfolio that I manage is.....
Hathaway states, ``... is a great exploration play. The company, in
terms of its hedge book, is relatively light, although they've done some
recently, I understand, basically imposed by their bankers. It still
offers great leverage to the gold price. It's a one-deposit company.
Management really knows it well and operates a very tight ship. But you
have to say, it's very difficult for an investor to pick any single gold
stock. I recommend buying a diversified basket that our fund or another
well-managed fund would manage.'
Baker says, ``We also in September upgraded ... to a Buy. The leverage
that is provided by its development projects, we think, gives an
intriguing aspect to the upside. We also continue to stress .....
Hathaway says, ``We own.....
This 48-page Investing in Gold Companies Issue also includes:
3) The TWST confidential Off-The-Record survey of management performance
at 17 Gold firms asked market insiders about the ability of management
teams to create shareholder value. In a sector where many management
teams are rated on the basis of their M&A and also hedging activity,
some CEOs are chastised for overpaying for acquisitions.
4) Firms reviewed in Off-The-Record include:.....
3) Four (average 2,500 words) CEO Interviews with top management from
the following sector firms discussing their future plans and outlook for
their firm and the Gold sector: .....
To obtain a copy of this insightful 48-page report, see
twst.com or call 212-952-7433.
This special section is also included in the NATURAL RESOURCES Sector
of TWST Online at twst.com
The Wall Street Transcript is a premier weekly investment publication
interviewing market professionals for serious investors for over 35 years.
Available at twst.com TWST Online provides free interview
excerpts. For highlights, recent recommendations by analysts and money
managers and business news, visit twst.com
Good times a comin.
Midas
Bill Murphy ( Midas )
For new readers, the above mention of GATA is as follows.
Bill Murphy, Chairman, Gold Anti Trust Action (GATA) gata.org
Also, GATA related articles can be obtained at the pay for view site.
Bill Murphy, Le Patron, Le Metropole Cafe lemetropolecafe.com |
