Paul,
Good words and well said. It appears I will be bidding adieu to this thread soon. GATA is building so much and there is so much to do about that. My time will be concentrated on positive issues. Many of my associates cannot understand the negative diatribe that has somehow come about here and why there is such animosity towards GATA and our efforts. This is my latest Midas for your perusal"
Midas du Metropole
"The Gold Market and Precious Metals Commentary"
April 9 1999 - Spot Gold $281.70 up $1 - Spot Silver $4.93 up 4 cents
Technicals -
The most bullish set up in the history of the gold market! The CFTC Commitment of Traders Report was released after the close today and it was a whopper and even more bullish than we told you it would be yesterday. The large specs were net short 88,363 contracts as of last Tuesday. The small specs net short 3,327 contracts. That total, 91,690 contracts, was as of last Tuesday. We know that the specs continued to sell throughout the rest of the week so it would be safe to say that number is about 100,000 contracts as of tonight's close. The total open interest is 197,696 contracts, a very high number, and the commercials were reported net long 91,690 contracts as of last Tuesday.
This is the most short the speculators have ever been. At the same time, the sentiment among those that follow the gold market has never been so dismal. Midas got a call this morning from one of the most committed and knowledgeable gold investors I know. He appreciated yesterday's Midas and thanked our camp for fighting the fight about the gold market acknowledging that almost everyone else had given up. The point of telling you that is there never has been a set up for a big move like we have now. I will go over that below. That does not mean we WILL GET that move, but what a set up!
The silver market bounced back a bit today and it is the same story. Quality buying and fund selling. The premiums in India went up close to 14% today which is the highest I have ever seen. That indicates great demand for silver in that silver devouring country. The bullish consensus is only 24 and bearish talk runs rampant. A close above $5.03 would hand the technical baton back to the bulls. Silver should finally regain its footing and do just that.
Fundamentals -
Down and dirty. This is how we see it. On March 12, the large specs were short 70,000 contracts. We know that Goldman Sachs and cronies were big buyers around $285. The market runs up and stops in the mid $290's. We reported to you that Goldman Sachs was running around the countryside telling all the producers to sell. "Liquidity" suddenly was everywhere. On March 26, the next report shows that the entire short position was taken out and reversed a bit on a move of only $9. Extraordinary. Gasps were heard through the internet. Midas put out commentary that down was ahead of us. Down we went and $285 was taken out easily. So was $280. New lows for the move.
All of a sudden the "squad" led by Goldman Sachs are big buyers again. We have reported that to you. They have been buying around the $280 area. So have their compadres. That is why the commercials are so long ( bullion dealers are listed as commercials ).
So now we have a similar set up to that of a month ago, except it is much more bullish. The specs are net short 30,000 more contracts, the market is completely demoralized and some of the selling that stopped the last move up in the mid $290's is out of the way. Some of those same sellers ( certain producers ) won't be there this time. THEY HAVE ALREADY SOLD.
100,000 net spec shorts is 10,000,000 ounces of gold. That is on Comex only. Followers of the gold market will tell you that the OTC market ( which is basically unregulated and has no position limits like Comex ) is 5 to 10 times larger. That is the market where the gold borrowing crowd operates. If we use the more conservative number of 5 times Comex, we now have a spec short position of 50,000,000 ounces of gold. That is about 1560 tonnes of gold. Mine supply in 1998 was 2529 tonnes.
The price of gold does not have to go up from here, but if it does, and the technicals turn positive, the shorts will cover. In times past, when the gold market was not manipulated, the specs would cover, and once that was done, many would go just as long. That could mean at least another 1,000 tonnes of buying. The total buying ( 2560 tonnes ) is one year's mine supply. That kind of buying, and set up that we have now, should drive the price of gold up $50 to $70. That is what has happened over and over again in the past and should happen again.
UNLESS, the "squad" and friends is setting up the market to be sold once more. There have been rumors that Goldfields, a South African gold producer, has been running around to the dealers about a hedge program that they are going to put on. We hear they have denied those rumors publicly. However, they could be a possible recruit to assist in stifling a gold rally.
One thing for sure. If we go up and the price of gold does not fly, it will be the surest sign of manipulation that anyone could ever see. This ying yang activity can only occur if the big buys are concertedly manipulating the market for the reasons we have laid out to you in previous commentaries.
We will monitor the market activity very closely. Even if the colluders intend to squash a rally between $288 and $296, they still could lose control of the situation. The Chinese cannot be too happy that they have been prevented from joining The World Trade Organization. Yeltsin and the Rooskies are making noises about a World War. The oil price came right back in the bears face and is gunning for $17+ per barrel again. Aluminum and nickel prices have firmed and the CRB made a dramatic u turn to the upside today closing above 190 again.
This is the great bull gold set up of all time and Midas' reasoning has to do with what Greg Pickup said in his piece, "Pop Goes the Weasel" at the Dos Passos Table. Alan Greenspan has created the feeling to the US public and to the world that there are no more risks in the markets. As Charles Peabody has told you, Mr. "White Hand" seems to always show up at the right time. Well, that sort of complacency is what leads to the great commodity moves in all of history. Out of nowhere "control is lost". We may or may not get the big move this time. But, with the gold borrowings out there around 10,000 tonnes, the specs the most short in history, and gold regarded as the bad kid in the family, we do have an extraordinary set up. The time bomb is ticking. It is just a matter of time.
Potpourri and the Gold Shares
After the CFTC numbers were announced, the XAU roared forward and closed very nicely at 59.23 up 2.21. A close above 60 would turn the technicals bullish and a move above 63 would be very significant as the downtrend line would be broken. We expect that to occur quickly. If the price of gold does shoot up and the XAU struggles, look out, something is very wrong, and we know what the wrong would be.
A follow up to our comments yesterday about Morgan Stanley and the perceptions of the high and mighty:
Rome - April 9 - Bloomberg: Italy's audit court rebuked the Officio Italiano Cambi, or UIC-- the body that manages Italy's foreign exchange reserves on the Bank of Italy's behalf -- for its investment in Long-Term Capital Management LP, the U. S. hedge fund that almost collapsed last year, newspaper II Sole/24 Ore reported. "We cannot avoid to note that the LTCM investment was a high risk transaction hardly compatible with the body's role, " the court told UIC.
There is a scheduled Tuesday meeting for a congressional subcommittee about Africa. We were informed today that two of the world's leading gold producers were quite concerned about this meeting and assumed the IMF gold sale subject would come up. So, I decided to do some checking into the matter.
My congressional sources tell me the subcommittee is headed up by Ed Rolfe, an ultra conservative Republican who disdains the IMF. My source used to work for him, so he knows. If anything, my guy said, he will trash the IMF on that subject, if is brought up. I have passed my info on to the producers. My source also told me that Dick Armey, Majority Leader of the Senate, recently asked Jim Saxton, the Chairman of the Joint Economic Committee, to get him up to speed on the IMF gold sale issue. That is subtle big news. The IMF gold sale issue has taken on greater political overtones.
On that same subject. GATA is making real headway. As I have told you in the past, a meeting with Jim Saxton, is being arranged. They are looking forward to hearing our views as to the real reasons why IMF gold sales are being promoted . It gets better. They have put me in touch with a House Banking Sub Committee staff member. This Committee would be the one to look into GATA's allegations that one of the bigger scandals in American history is taking place right now in the gold market ( that is exactly how I phrased it to him ). The staff member was very impressed when he heard GATA was going to retain Berger & Montague on that issue. He suggested I send an official letter so that they could review our contentions. We discussed the strong possibility of me also seeing this committee when I made my trip to Washington.
Here is GATA's plan. Congress wants to know more about the IMF gold sale issue. We intend to let them know what the real issue is all about, ( and it is not the poor people ). We will tell the banking committee that something is "rotten in the State of Denmark ( and the State of the Bullion Banks ) and we think the gold loans ( to speculators ) have risen to such high dangerous levels that a sharp move up in the gold price could now create "systemic problems". We will suggest that the "BANKING COMMITTEE" contact certain bullion banks and investment banking houses that we have identified as some of the biggest culprits and just ask them to disclose what their gold book looks like. Just for precautionary purposes. No fanfare. No hype. Just write about 20 letters and see what responses come back about the size of their gold loans.
More on this to come. Stay tuned.
Midas
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