Hello Bobby,
Today, as you may know by know I spent some time
talking to the Staff Director of the Congressional
Joint Economic Committee. He is waiting to read this
Midas du Metropole in the morning and hopes to see me
in Washington. Spread the word.
Jim Saxton says the gold loans make no sense. Just
reduce the interest rate to these countries and get
the gold price up which will benefit the mineral rich,
but poor, African countries.
Bill
March 17, 1999 - Spot Gold $283.70 up 20 cents - Spot Silver $5.035 unchanged
Technicals -
The mother of manipulations. Never has collusion been pulled off so swiftly and done with such surgical precision. The price of gold was driven up close to its 200 day moving average around $296 and through key technical resistance points above $290. The highly regarded Martin Pring and other technicians of the world called for a gold breakout. The gold price "colluders" orchestrated buying so that 70,000 large specs on Comex alone covered their shorts and some went long. Then the "Good Squad" went short and blasted the market. The gold market dropped $10 and the new spec longs blew out as the open interest shrank and now stands at around 165,622 contracts, down from the recent high of around 196,000 contracts.
Strong support was taken out basis spot at $285 and the technicals turned from bullish to bearish very quickly. However, we think the bears did not get nearly as much bang for the buck as they had hoped for. The volume yesterday was 122,000 contracts. Whenever we have had this type of heavy volume, it has been an inflexion point and the market has turned to go the other way within a short period of time. The other positive technical indicator was the XAU did not react all to the downside trashing of the gold market. It's "hold the fort", do not close below 60 action, may be a tip off that the bears have indeed made a "last hurrah", failed attempt to really bury gold. Today the XAU closed at 62.49 up .32.
The silver market was trashed too. Warren Buffet said nothing about his silver position in his letter to his shareholders. Because the big boys knew what was coming in the gold market, they let into silver as soon as Australia opened on Monday morning. The selling was merciless and took the market all the way back to where the recent run up started around $4.95. The lease rates have come way off, but are still 2 to 3 times higher than normal. This sell off changes nothing in our view in that we will still see $9.78 silver by year end. Silver being silver could move $3 higher in just one week in the months to come.
Fundamentals -
The deck appears to be stacked here to say the least against gold bulls. But worse, this may be one of the big scandals in U. S. history. There are big problems behind the scenes for certain large financial institutions in the United States. The Long Term Capital Management bailout was effected because of "systemic risk" problems. It is our opinion that those systemic risks still lurk out there at some of the major financial institutions and with various hedge funds.
Our Federal reserve has been pumping out paper money like it is going out of style. In doing so it has created a financial asset bubble. The stock market is 25% overvalued by the Fed's own valuation models. They are petrified that this bubble will burst. Part of the reason for the bubble is the greed of some of the major N.Y. financial institutions and the greed of certain hedge funds. The greed cabal is a big one and extends to certain central banks. We know that is so because the Central Bank of Italy was found to be investing in Long Term Capital Management ( which they initially denied and then sheepishly admitted to ). Part of the strategy of the "colluding cabal" has been to hold down the price of gold at all costs and to take any measures necessary to accomplish their greedy goals. If free market principles must be abandoned, tough toogies, jettison them. If laws are broken in doing so, so what, "we are too big and too important for anyone to question our modus operundi". The Fed wants the price of gold to stay down for many reasons. One is that they do not want the world to look into "reserves" other than King Dollar ( see China story below ). They want countries and investors to sell gold to buy dollar based financial instruments. Second, they believe a squashed gold price is proof of what a great job they are doing as central bankers ( a report card of sorts ). Third, they fear a rising gold price will focus the investment community on money supply growth and raise future inflation fears, thereby causing interest rates to rise. And fourth, they know of the big potential disasters that are lurking right around the corner. They know certain big name financial institutions are borrowing gold at 1% interest rates, dumping the gold into the physical market thereby adding supply, and using the proceeds to bail out and finance losing derivative trades.
The issue is complex and this is only a thumbnail sketch of what is going on. But, I hope that you get the gist of it. This has been going on for some time, but now they are running into some big problems with this "manipulation". There is a large natural supply demand deficit ( some say 1600 tonnes ) which must be met by gold sales or gold borrowings. The lower the price gold, the greater demand for gold around the world. The schemers have to "dance as fast as they can" now. Gold loans must be rolled over. As the price of gold goes down the risk of the borrowing gets bigger and bigger. A big move up in the price of gold, could be ruinous to the greedmongers. Thus, they must create the notion that gold is worthless, encourage people to sell gold, breed despair among the gold community. They have done this over and over again the past couple of years. Now, however, it appears they are becoming more desperate and running out of bear bullets to fire at the market. We say this because of the incredulous and obvious manipulation of the gold market these past two weeks accompanied by a barrage of public announcements about gold. It goes like this:
The colluders tried to beak the market a few weeks ago. The open interest was growing. The speculative net short positions were mammoth. 70,000 contracts on Comex- maybe 10 times that OTC. Everyone knew the market was susceptible to a big short covering rally if gold could rise above $291 or so. The shorts hatched a plan. Prior to the move above $290, Goldman Sachs was a huge buyer. A well advertised buyer. A big hedge fund was pronounced to have joined the buy party. A big gold producer went out of his way to tell a well known money manager that they were going to go after the specs and did not like being associated with the bullion dealers about "collusion talk".
Except for the 200 day moving average, all the key technical points happened to be right above $290 ( where many of the recent gold loans were taken out ). It is clear that the word was put out to buy enough gold to cause the big technical shorts ( and those not in the loop ) to cover their positions. The "Squad" knew some would reverse right away and go long. We have described this orchestration to you in " Outrage-Gold Scandale 2" at the Matisse Table.
When the world learned after the close last Friday, that not only had the specs covered as of Tuesday, March 9, but by the following Friday they must be long, the "Goon Squad" went to work. They had made $5 to $8 on the upside move ( or reduced a short term loss ) by selling into the technical specs and others who were exiting their positions by buying back their shorts. Now, with the gold market prime for a bashing, the colluders could maul gold some more. And they all did so as gold crashed Monday and Tuesday.
Never has anything like this happened before, in such a short time and with such finesse. Now the gold market has broken $285 support, the dangerous 70,000 net large spec short position on Comex is history, and they think they can play with the gold market as their private domain again- regardless of how many gold companies go under or gold shareholders lose money, or how many miners it puts out of work, or whatever chaos it causes many countries in southern and western Africa.
Here is the public pronouncement part of the orchestration:
1. We heard and reported to you that the writers of options and the shorts on Comex were complaining that too much of their capital was tide up as a result of the big Y2K call position that has been put on. The next thing we know, last Thursday the requirements for gold options are dropped from $20 to $10 and the silver options are dropped from $31 to $10 - rather dramatic % changes.
Until last Friday, gold had rallied 6 days in a row. Goldman Sachs came out selling with a vengeance that day and gold sold off $2. Then, the incredulous Commitment of Traders Report was released after the close.
2. When gold trading resumes on Monday ( and out of nowhere ), French President Jacques Chirac comes out and says," We must also find a solution for multilateral debt for those that need it, without excluding, if necessary, selling part of the IMF's gold reserves". Think of the timing of this. According to Jessica Cross, head of Virtual Gold Research and Consulting UK, ( Reuters), "Chirac's remarks were significant marking the first time a modern French statesmen had spoken approvingly of any official gold sale".
3. The same day, the German Finance ministry said that Bonn supported international debt writeoffs for poor countries, but would only back sales of IMF gold to fund such a step with the approval of the Bundesbank. Fortunately, a Bundesbank spokesman said the German central bank had not dropped its skeptical attitude to IMF gold sales. According to this Reuters report, the Bundesbank fears that such a move might set a precedent for the Bonn government to lay its hands to some of the central bank's own gold reserves to finance policies.
4. Then yesterday, March 16, President Clinton jumps into the act calling for debt relief for poor countries as he spoke to African government ministers in Washington. Of course, he made sure to throw in a one liner to call on the "International Monetary Fund to sell some of its gold reserves". This pronouncement created more headlines and the price of gold continued to sink under this public relations onslaught against the gold market.
5. Then for the coup d' grace and for the third day in a row, we have a public sell gold pronouncement by Treasury secretary and former Goldman Sachs honcho, Robert Rubin: Reuters - March 17- "The International Monetary Fund will probably sell 5-10 million ounces of gold to fund a program of debt relief but will not disrupt the markets with its sales". Excuse me, Mr. Rubin. You and your old crowd have done NOTHING BUT disrupt the gold market. What you all are doing is truly an outrage. Prior you to bumping up the amount to maybe 10 million ounces, the former amount mentioned to be sold was 5 million ounces or around $1.5 billion. The IMF just anted up $40 billion for Brazil. Why not $41.5 and give offer debt relief to the poor countries that need it? Instead, you orchestrate this PR, sell gold propaganda which demoralizes all those associated with the industry-including those African countries that need a higher gold price to bring their miners back to work. Tens of thousands of miners are idle and that idleness is subverting Nelson Mandela's regime in South Africa and hurting the economies of other African countries. These people need the opportunity to work, not just take your handouts. Hypocrisy on the grandest scale. It stinks to high heaven.
We heard from a very sophisticated trader today that her gold trading clients were completely demoralized. The "sell gold" talk was working. The comments to her were something like," why fight this crowd and their manipulation?". "How can we win?"
NM Rothschild & Sons Limited in London issued some commentary today called, "Gold and the IMF". In that report, they said, " We believe recent comments and public speculation have been far more damaging to the gold price than the ultimate impact of any sale".
Well, as you know by now, GATA is mad as hell and we are not going to take it anymore. Neither should you. In the weeks to come, we expect to announce that we have retained on of the premier anti-trust law firms in the United States, Berger & Montague. The Berger & Montague attorneys that want to work on our investigation of collusion in the gold market are as good as they come anywhere in this country. The CEO of Edelman Public Relations Worldwide likes what he hears about GATA and is waiting to hear from us. One of their other big clients is Microsoft. It is time that we strike back with the truth and tell the world about what really is going on here.
And then there is a most pleasant development. Reuters - March 17 -Washington
U.S. LAWMAKER SAXTON SEES NO BROAD CONGRESSIONAL SUPPORT FOR IMF GOLD SALES
SAXTON SAYS MAY TIE IMF GOLD SALES TO REFORMS AT LENDING INSTITUTION
IMF GOLD SALES SET FOR STRUGGLE IN CONGRESS-SAXTON
The idea of selling gold from IMF reserves is set to face opposition in the U.S. Congress and Lawmakers may call for IMF reforms as a condition for approving any sales, a senior lawmaker said Wednesday.
Jim Saxton, likely to be confirmed as vice chairman of Congress's Joint Economic Committee in the coming weeks, said there was no broad congressional backing for the idea of selling gold, a proposal floated by President Bill Clinton on Tuesday as a way to fund debt relief for poor countries.
I suggest we let Jim Saxton know the real story of what is going on here. The poor in south and west Africa that Clinton says he wants to help are being hurt badly by the low gold price while the greedy rich N.Y. financial institutions enjoy a free lunch via the gold carry trade as a result of the wink and nod by our Treasury and politicos in Washington.
Congressman Saxton, who has been on the Hill since 1984, has a website. house.gov. His office phone is 202 225 4765 and his fax is 202 225 0778.
His State office is: 100 High Street, Mount Holly, NJ 08060; phone number 609 261 5800 and his District Representative is Sandra Condit.
I contacted Jim Saxson's office today in Washington. They could not have been nicer and said the Joint Economic Committee was working on the gold issue as we speak. I told her that we had a story to tell him about that I would like to come down to Washington to let Jim Saxon and the Committee know what was really going on in the gold market. She said they would call me tomorrow.
Congressman react to popular opinions and react to faxes and phone calls. If you have some time tomorrow, it would be great if you could give his office a call or send a fax asking that we be heard. This is the time to act and make our voice heard. Reuters - March 17 - "The House Banking Committee said it was waiting for an authorization request from Treasury before deciding whether it needed to schedule hearings on the gold sales".
If we can give them feedback with reasons why we should be heard and the selling of U.S. gold is not popular, we can get those hearings and we can tell our story about this outrageous gold scandal in front of Congress. This is another moment to seize the day. Spread this around to all the gold shareholders that you know via the internet. Get them to respond to Congressman Saxxton, if they feel this is an important issue.
As Midas goes to press, I just received a call back from a very bright staffer of the Congressional Joint Economic Committee. He told me that they would have another release tomorrow on this subject and that it was important that Congressman Saxton receive feedback from the American public about their opinions on this matter. He also said he was going to review www.gata.org to become more familiar with what that is all about and that he was looking forward to receiving this Midas du Metropole commentary which will be on his desk in the morning.
Potpourri and the Gold Shares
Word came us this past week that central bank gold lending soared. That is where all the gold supply came from to knock the price down. It had to soar. Physical demand for gold is very strong and became so strong on this break that a dealer we know could not even talk to has associates in Geneva as they were too busy handling orders.
The gold premiums firmed up all around the world indicating demand was very healthy on this price break. In India the gold premium was all the way up to 11.8% and the silver premium zoomed up to 11.4%. The Hong Kong Tael premium is 40 cents which is the highest in months.
The news about official Chinese buying is good. We have alerted Café followers that China has been buying gold on price dips, which is their style. In addition, The World Gold Council has an extensive network in China and has a very good handle on what is going on there. Their manager for China, Emily Li, said the following on Monday according to Platts:
"China's current gold reserves amount to about 3% of total reserves and the central bank, the People's Bank of China, has recommended raising the gold reserves to 15%".
The 3 % proportion contrasts sharply with the US' gold reserves ratio of 30% and Germany's 34%. A 10% gold reserve is equivalent to 1,000-1,500 mt. "This will rebalance the world's gold equation and affect gold prices," Li said, adding that China is likely to raise its gold reserves as indicated by the Gold Economic and Development Research Center deputy director, Liu Shanen recently. The Café's John Brimelow notes that this is a surprisingly forthright statement.
Super silver bear, Martin Armstrong sold 1,000 silver contracts near the close today. Expect him to "sweep", or hit the bids, on the access market tonite.
Speaking of silver. Much commentary was made about Warren Buffet's lack of commentary about silver. What is the big deal? His style is to invest in something for fundamental reasons for 3 to 4 years. He rarely lets on what he is doing unless he has to and he has PLENTY of cash. He is known for his patience. We doubt he sold any of his silver and we are glad to be on going his way on this one. The best comment we heard was from Oppenheimers's Thomas McNamara, "I find silver's reaction to the Buffett's annual report absolutely absurd. It is unbelievable to me that people actually think that Buffet, the ultimate long-term investor, will sell at the bottom of the commodity cycle. He's in it for the long term and I think he'll outlast most of these traders, who typically harbor time horizons that could be measured in fractions of fruit fly life spans."
Midas
Bill Murphy ( Midas )
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