February 13 – Gold
$420.40 – Silver $7.14
high-minded man must care more for the truth than for what people
think." – Aristotle
There were a couple of significant technical developments this past
week in the financial markets. The HUI gold index gave us an outside weekly
reversal to the upside. AND so did the CRB and silver.
My bet is what is taking place is a pretty big deal. The financial
market pundits have spent a fair amount of time this past year trying to
figure out whether inflation or deflation will rule the day. One can easily
make the case for either. My bet is the US and our Fed will go all out to
defeat deflation which means running the presses and creating
"helicopter money" which will lead to inflation. This week’s
technical developments may foreshadow what lies ahead.
The CRB has gone sideways since August:
While many commodity markets have been very much on the firm side, the
grain and oilseed complex have been weak. If they turn and move higher to any
degree, the CRB will quickly vault into new high ground. The odds of that
occurring are very high. The reason being is the odds of a serious weather
disturbance are high. There really hasn’t been one in the US which
affected the crops that much in a long time. Scares here and there yes.
Yields affected, yes, but no serious disasters like we have seen in
yesteryear. One is way overdue.
From a technical standpoint, we have a potential set-up for some
serious fireworks. Wheat, corn and beans have been sucking wind because of
some weak fundamentals from a supply/demand standpoint. This is all reflected
in their price charts. However, that is old news now. All have built powerful
bases. Should any of these markets encounter overdue weather problems, the
prices of any of these grains or oilseeds could rocket higher and send the
CRB well above 300.
Weekly soybean chart
Weekly corn chart
Weekly wheat chart
From beans to silver. Back in the hay day of inflation in the late
70’s, they were equated to each other for a time. If beans were up 20
cents, silver was likely to rise 20 cents. Those days are long gone.
What happened this week in silver is a BIG DEAL in my book. When silver
makes a move, it does it on its own. Forget gold, forget the dollar. I
remember in 1987, silver leaped $3 in a single week. It did so all by itself.
Today the silver fundamentals are better by an enormous degree versus 87,
thus there is no reason silver cannot go bananas in a similar fashion again
in the coming months.
Many in the silver bull camp have been calling for a huge silver move
for some time now because of the very favorable
fundamentals. We have been talking about a supply/demand deficit for what
seems like forever. Result: Nada. There have been no lasting moves to the
upside worth a dork. The action the past two days suggests we might finally
have our day.
Last Spring I reported from a European source that the Chinese had
tied up 75% of the silver production for 2005 via various derivatives
agreements. A little over a month ago I confirmed what I wrote from my source
and stated, that if true, the price of silver HAS to
go bonkers. There is no other option for the price should my information be
correct. The proof will be in the pudding and we should have some idea if we
have a tasty desert coming our way within a month or two.
When silver wants to move, it does so with gusto:
Weekly silver – a smart upside
If you are one who believes the shares lead the way, you must be
salivating this weekend. Talk about a dramatic reversal pattern:
My bet is what we saw this week from a technical standpoint is tres importante. Only
time will tell.
CARTEL CAPITULATION WATCH
The esteemed Richard Russell:
February 11, 2005 -- Odds and ends --
insisted that it had NO weapons of mass destruction. This was confirmed by
inspectors. The US
anyway. North Korea
comes out and announces that it definitely has nuclear weapons and
furthermore, it will not attend any more disarmament meetings. We think, we
wait, we ask China
to do something. ??
"Not since Napoleon tried to take Moscow
had there been such a flight of fancy among military planners, but it pales
in comparison to Washington's
plan to democratize the so-called Greater Mideast. The Greater Mideast is the
22 Arab counties, which include the northern half of Africa, plus the area
from Turkey to Pakistan. This
is 26 countries, 14.8 million square miles with a population of 620
million" -- from the "US and World Early Warning Report" by
Richard Maybury, (800)509-5400. (A very interesting
"The (economic) story is not a happy one. It is a tale of slumping
sales, falling orders and backlogs, plunging prices, building inventories, excess
capacities and job losses.. . The stock market's
detachment from reality has been a long-running show, longer than I care to
remember. However, this particular period's disconnect is as wide as any
other I've experienced in all the decades that I've followed tech." From
Fred Hickey's "The High-Tech Strategist," PO Box 3133, Nashua, NH 03061-3133.
this publication fascinating.
Normally, there would be no reason to do a MIDAS this weekend, however
this story out late on Friday blew me away as far as the World Gold Council
is concerned, the proverbial last straw:
Gold Firms Oppose IMF Gold Gale,
Citing Chance of Falling Prices
By Eric Onstad
Friday, February 11, 2005
JOHANNESBURG -- The world's
biggest gold firms are banding together against proposals to sell gold from
International Monetary Fund stockpiles, fearing tumbling gold prices.
"Already the gold price has fallen $10 an ounce as a result of their
announcement that they might be looking at it," said an official from
industry body the Chamber Mines in South Africa, the world's top
ranking gold producing nation.
On Thursday, the world's leading gold miner, U.S. Newmont Mining Corp., said
it would lobby U.S.
officials against the sale of IMF gold reserves to fund debt relief for the
world's poorest countries.
Mining companies argue that sales of some of the IMF's
103 million ounces of gold reserves would hurt developing countries that
depend on export revenue.
Harmony Gold urged officials to take a quick decision on IMF gold reserves,
the third biggest in the world, since uncertainty was hitting prices.
Gold slid to four-month lows of $410.50 an ounce this week on worries about
IMF sales, although spot gold had recovered to $418.45/419.20 an ounce by
1454 GMT on Friday.
"The gold market cannot suddenly handle the quantum of gold that we're
talking about here," Roger Baxter, the South African chamber's chief
economist, told Reuters.
The World Gold Council, which groups global gold producers, said it would
have to wait for specific proposals from the IMF conference in April to
assess possible effects, but was worried.
"We are very concerned at the effect these undefined proposals have
already had on the gold market, especially when bearing in mind that gold
exports are a substantial source of revenue to a number of developing
countries, including some of the poorest," the group said .
Opposition to the proposal also came from a dozen U.S. lawmakers, mostly from
mining states, who told Treasury Secretary John Snow to oppose sales of IMF
gold, a letter obtained by Reuters showed on Thursday.
Finance chiefs of the rich Group of Seven nations asked IMF Managing Director
Rodrigo Rato last weekend to report by April on
proposals for using IMF gold reserves to write off debts owed by the fund's
The South African Chamber of Mines, whose members include the world's second
largest gold producer AngloGold Ashanti and fourth-ranking Gold Fields, has
not issued a formal policy on the issue, but was due to plot strategy next
week, Baxter said.
The body would likely take a stance similar to one six years ago when a
similar IMF plan was floated, he added. Opposition from gold producers and
governments such as South
Africa was instrumental in sinking the
Mining Minister Phumzile Mlambo-Ngcuka
came out in opposition to IMF gold sales this week, even though her cabinet
colleague, Finance Minister Trevor Manuel had earlier voiced cautious
Harmony, which ranks sixth in global output, urged a quick move by the IMF,
whatever decision it took.
"Although we're against it, we would like certainty about it as well
because it does influence the market...it's like an overhang in shares,"
Marketing Director Ferdi Dippenaar
"If these guys are intent on selling, and will listen to nobody, what
they owe us is certainty as to how, in what quantities and over what time
they sell it."
Wait? For what, death? Somehow 12 US Senators got it in their craws
to decry the IMF gold sales for the most obvious of reasons, yet the World
Gold Council has to think about it. Think about what? How to destroy the
industry? They spend their time promoting gold in high fashion jewelry and then when they have a chance to speak out on
a matter which will materially affect the market, they spend their time
They are beyond pathetic. What is remarkable is you have an industry,
like gold, in which the formal organization in existence to promote it is
allied with those who want to suppress its price. Perhaps bizarre is a better
adjective to describe gold and the WGC?
There is a significant vacuum out there when it comes to gold advocacy
which is why it is time for some entity to step up to the plate. Seems that
entity is GATA, which is why GOLD RUSH 21 is a big deal. Right about that
time many of the world financial market leaders will be meeting in Jackson Hole, Wyoming.
It just might very well be the more important meeting will be in Dawson City
in the Yukon.
Too audacious a comment by me? I don’t think so. I say that
because gold is a tiny market which stands for so much. There is no one out
there as an advocacy group because the powers in the world want it that way. As
my colleague Chris Powell says, the World Gold Council exists to make sure
there is no real world gold council.
For many it is a lazy day Sunday, which brings me to the why for this
MIDAS. One of the main reasons for GATA’s Dawson City conference is to take our organization
to a higher level…to do what we can to make it a spokesorganization
for gold companies and gold shareholders around the world – silver too
- to fill that enormous vacuum.
As I mentioned the other day, the response thus far is already more
than encouraging, even though we are only in the early stages of sending out
invitations. There is no doubt in my mind we will be sold out. As this is a
new venture, we are learning as we go along on how to make this gathering in
a relaxed setting (no suits) the success we expect it to be. What strikes me
the most so far is the effect YOU can have by simply making a phone call to
your favorite gold company CEO and asking him, or
her, to consider attending the conference on behalf of shareholders. From the
feedback I have been receiving thus far, it is making a difference and has a
number of these CEOs paying serious attention.
I am sure all of you are aware of the enormous effort it takes to make
this international conference a world class affair. The GATA team will be
working every day for the next 7 months to get the job done. I am asking you
to give us a few MINUTES of effort to leave nothing to chance and assure us
(thus YOU) of success. Please call your gold company CEO about the
conference. Tell him what we are doing and why it is so important the firm be
properly represented in Dawson
City. I realize it
sounds strange, however the days when a gold company CEO would run from a
GATA picture will gradually end. As time goes by, those who are not involved
in what GATA is doing for the gold industry will seem Neanderthal.
MINUTES...that is all we ask of your time. If you are not happy with
your gold/silver investments of late because of what The Gold Cartel is doing
to you, then do something about it. Don’t just sit there and whine and
complain. Don’t let your fellow investors run with the ball all by
themselves. Here is a sample of what is being done, from fellow Café
February 11, 2005
Richard D. Caccavale
203 Pine Knot Trail
Hendersonville, NC 28739
Chief Executive Officer
Board of Directors
Re: GATA’s Gold Rush 21
Dear Sir or Madame:
As a shareholder with a significant position in your company, I have
suffered exceptional losses during the past year. Moreover, I have studied
the precious metals bullion markets on a daily basis and observed
disproportionate selling in a manner commensurate with price fixing. Seemingly,
this manipulation is conducted by a cartel of bullion banks, including but
not limited to: J.P. Morgan, Morgan Stanley, Goldman Sachs, Deutsche Bank,
Citibank, etc. Astute investors recognize this price fixing as the carry
trade in which central bank gold is leased to increase the perception of
supply. It is the proverbial elephant in the room that everyone notices, but
no one discusses. However, the tacit acceptance and long term silent
acquiescence to this price fixing can no longer be tolerated by producers,
because investors are being forced to cut their losses and reallocate their
portfolios to other hard asset groups, which are not manipulated.
Accordingly, I strongly suggest that you proactively address this
precious metal price fixing and become involved in the marketing of your
product in a manner comparable to other industries. Otherwise you risk the
total disgust of your investors and their capitulation of share ownership.
In this connection, you now have a fantastic opportunity to
exponentially increase the amount of consumers of your product, as well as
having a public relations promotional campaign that will serve to expose and
eliminate this sinister, covert price fixing. This is a win, win situation
for the producer and investor, because substantial increases in product
consumption at a much higher price will benefit both.
Accordingly, I urge you to attend, or otherwise support, GATA’s Gold Rush 21 conference being held on August
8th and 9th, 2005 in Dawson
City, Yukon, Canada. I have provided a link to
the conference’s web site (www. goldrush21.com), which will describe the
agenda and guest speakers. In the event that you are unaware of GATA (Gold
Anti Trust Action Committee), suffice it to say that they are a non-profit,
educational organization, whose sole purpose is to make the public aware of
the price manipulation of gold, and the greatly diminished supply of bullion
due to the carry trade leasing. Additionally, GATA promotes precious metals
bullion as a currency, which is both a safe harbor
investment and hedge against inflation. That message better serves both the
investor and producer because it markets the bullion product to a much
greater audience than the existing jewelry
consumer. Imagine the phenomenal financial benefit that you could achieve if
every equity and bond investors’ portfolio consisted of just a five
percent holding of bullion.
For the past six years GATA has stood alone, with minimal corporate
support, battling the cartel of bullion banks as they manipulated the bullion
price. Moreover, GATA has denounced the disinformation campaign by the World
Gold Council, which relegates precious metal ownership to only jewelry applications, and also aligns itself with the
hedging producers; who both are rewarded by lower bullion prices.
In closing, please take advantage of this watershed event and learn
what GATA can do for you. Even if you can not attend this conference and
directly benefit by the message of the renowned guest speakers, I implore you
to utilize GATA as your industry representative so we both can enjoy a more
Richard D. Caccavale
Peter, good speaking with you briefly today regarding the Gold Rush 21
summit being hosted by Bill Murphy, Chris Powell and the folks at GATA.
I am a shareholder in both WHT and GG and look forward to holding
these shares in the combined company. Congratulations on the 1st
vote; my WHT shares have been tendered. I look forward to the 2nd
As Rob McEwen is frequently quoted, "Gold is Money." I am
also a firm believer in this position. What bothers me today is the constant
manipulation that occurs by the activities promoting their alternatives to
real money. This manipulation has a highly leveraged negative impact on the
price of our shares. There are many ramifications that I could go into but I
doubt there is anything new that I can offer as you’re better versed in
this market than most.
I would like to request that you and Ian Telfer
support this conference by attending. We need executives like yourself to
understand and work together to expose the behind-the-scene manipulation. I
believe that ending this price manipulation will have a far greater impact on
our share price than any operational efficiency, merger of other activity.
I am attaching the brief from GATA below in case you have not seen it.
Please discuss this request with Ian when he is back in the office.
GATA Gold Conference
August 8 & 9, 2005
Dawson City, Yukon, Canada
Website Information l Email
The Gold Anti-Trust Action Committee is pleased to announce that we
will be hosting an international conference on August 8 and 9 in Dawson
City in Canada's
Yukon, the center of the Klondike Gold Rush at the turn of the 19th
Since it represents the golden excitement of the past, this historic
location is just the place for our conference as we enter a new time of
excitement for gold. So we will call our gathering GOLD RUSH 21 and here's
what we aim to do there:
Expand GATA's role as an
advocate for the precious metals industry.
Offer the mining industry and precious metals
investors an alternative to the World Gold Council, which represents no more
than 20 gold companies and has done so little for those it purports to
represent. GATA will seek to include more of the industry, and we will not
align ourselves with the bullion banks and jewelry
interests, which want precious metals prices suppressed. More than 40 mining
and precious metals-related companies have supported GATA in recent years. We believe we can raise
that total to 200.
Spread GATA's message that
the gold and silver markets are not free and not fair, and develop ways to
change that. Renowned gold experts from five continents will explain and
discuss the price manipulation committed by the gold and silver cartels. We
will cover who has done it, why they did it, and what can be done about it.
Give conference participants a memorable trip to
Klondike Gold Rush country so they can see what a gold rush was and what one
might be again. We expect that conference participants will forge some
Receive suggestions from conference participants
about how GATA can best build long-term support from the precious metals
The speakers at GOLD RUSH 21 will include:
Ferdinand Lips of Zurich, Switzerland. He has been
managing director of Rothschild Bank AG in Zurich, CEO of his own private bank (Bank
Lips), and a director of Randgold Resources, Durban
Roodeport Deep, and Aflease.
Now he is chairman and manager of the Top-Gold Fund, based in Liechtenstein.
He has written four books on the gold market, his latest being "Gold
Peter George of Cape Town, South Africa. A graduate of Oxford University
in England and the University of Cape Town,
where he received his MBA, George was a member of the Johannesburg Stock
Exchange from 1969-1981 and was senior partner of the Johannesburg stockbrokerage Saunders &
Taylor. He became known as South
Africa's "Mister Gold," during
that period. Peter helped organize the GATA African Gold Summit in Durban, South
Africa, in May 2001. Five sub-Saharan
African nations attended that conference, along with representatives of major
South African gold producers and the South African mine workers union. The
summit was heavily reported by the South African Broadcasting Co.
John Embry of Toronto. Just as George
is known as "Mister Gold" in South
Africa, Embry is becoming known as "Mister
Gold" in Canada.
After an illustrious career at the Royal Bank of Canada, where he oversaw $5
billion in mutual fund assets and recorded an astounding return of 153
percent in 2002, in
2003 Embry became chief investment strategist at Sprott
Asset Management. He was co-author of Sprott's
important research study, "Not Free, Not Fair: The Long-Term
Manipulation of the Gold Price," which validated GATA's
work. There is no more admired figure in the mining industry.
Hugo Salinas Price, who may be regarded as Mexico's
"Mister Silver." Salinas Price is leading the campaign to remonetize silver in his country, the world's foremost
producer of silver. Last November governors of all 31 Mexican states sent a
letter to the Ways and Means Committee of the Mexican House of
Representatives to urge approval of legislation to remonetize
silver. Nearly 200 Mexican journalists signed a declaration in support of the
legislation. A poll by the Mexican television network TV Azteca
found that 96 percent of viewers approved the remonetization
of silver. It seems that the only major opponent of the silver legislation in
Mexico is Mexico's
Reginald H. Howe of Massachusetts. A successful trial lawyer
in Boston and proprietor of the
GoldenSextant.com Internet site, Howe took on the entire Gold Cartel in U.S.
District Court in Boston
in 2001 by suing the Bank for International Settlements, the U.S. Federal
Reserve Board, the U.S. Treasury Department, J.P. Morgan & Co., Chase
Manhattan Corp., Citigroup, Goldman Sachs Group, and Deutsche Bank AG. Howe
stood against more than a dozen of the highest-powered lawyers in the world. His
lawsuit has been renewed by Blanchard Coin & Bullion's suit against J.P.
Morgan Chase and Barrick Gold in U.S. District
Court in New Orleans.
James Turk of New
Hampshire. Turk, a former banker and
manager of the commodity department of the Abu Dhabi Investment Authority, is
editor of the Freemarket Gold & Money Report
and founder of GoldMoney.com. He is also the co-author of "The Coming
Collapse of the Dollar," just published by Doubleday.
I am proud to call these distinguished men my friends. They fight
every day for you gold and silver investors and the mining companies
exhibiting in the next room.
Facilities in Dawson
City are very limited,
so we will have to restrict invitations to mining company executives and
investment fund managers, the people who are in the best position to help us
push the industry forward. Mining company executives and fund managers who
would like to attend GOLD RUSH 21 should write to us by e-mail at GATAComm@GOLDRUSH21.com and we'll send
confirmations soon after that. More information about the conference can be
found at its Internet site: http://www.goldrush21.com/
GATA extends its profound gratitude to Samex
Mining and Klondike Star for their exceptional efforts behind the scenes to
make this international conference a huge success.
GOLD ANTI-TRUST ACTION COMMITTEE
February 14, 2005
Ian Telfer, CEO
Wheaton River Minerals, Ltd.
200 Burard Street, Suite 1560
V6C 3L6 Canada
Dear Mr. Telfer:
As a shareholder of Goldcorp as well as Wheaton River, may I say that I'm
delighted at the turn of events that will place you in Goldcorp's driver's
seat one of these days soon. I cast my 5000 share proxy at GG for the Wheaton acquisition,
needless to say, and will be voting my 5000 shares of WHT in the same
Of course anyone as savvy as you obviously are would necessarily be aware of
the price of gold manipulation, and therefore GATA's
heroic work in attempting to correct this malfeasance. To use street
vernacular, we gold shareholders are being 'ripped off', royally, and that
the mining companies would repeatedly turn the other cheek is a never ending
source of amazement to me.
While Rob McEwan has done a brilliant job in taking
Goldcorp as far as he has, it's time for a more aggressive CEO and, bless his
heart, he knows it. Some months ago, I wrote to him about the gold
suppression scheme and accompanying cartel, to no avail as I never received a
reply. "Well," I said to myself recently, "I'll bet Ian Telfer will take action!" You have, after all, made Wheaton grow
exponentially, much to your credit.
So I am writing to urge you to attend an international conference August 8
and 9, 2005, entitled Gold Rush 21, in Dawson, Yukon. Presented by GATA, such
luminaries in the precious metals world as James Turk, Ferdinand Lips, John
Embry, Hugo Salinas Price, Reginald H. Howe will be speakers. Let's see some
solidarity in the world of mining; let's see all of you put your heads
together, resolving to eliminate the criminality involved in manipulating the
price of gold and silver. Please see: http://www.goldrush21.com
Your shareholders need you to be in attendance at this conference in August. (Off
the record, word has it that the former chairman of Harmony
Gold, Adam Fleming, as well as Neal Froneman of Aflease in SA have offered their support.) I
should be interested in learning of your own intention, Mr. Telfer.
Marilyn A. Guinnane
973 Mirror Lake Drive
Reno, Nevada 89511
While the brain-dead World Gold Council contemplates
whether IMF selling gold might be negative for our market, others with half a
brain know in a nanosecond such a move would be negative for the price and
sub-Saharan economies for some time. While the cowardly timid WGC remains
mute on the issue, GATA has been jumping up and down and blasting the
initiative for many weeks now. Why gold companies pay over $60 million to
this useless outfit is beyond me. Heck, look how the Congressional Black
Caucus responded to the same initiative nearly 6 years ago:
of the CONGRESSIONAL BLACK
CAUCUS and GOLD BELOW:
Congress of the United States
Washington, DC, June 30, 1999.
Hon. William Jefferson Clinton,
Of America, Washington, D.C.
Dear President Clinton: South
Africa has just inaugurated its second
democratically elected President, Thabo Mbeki. Among
the many challenges he faces is an immediate crisis--the terrible shock to
his country's economy caused by the dramatic drop in the price of gold over
the past three months. The many other gold
-producing countries in sub-Saharan Africa
are struggling with the same blow to their emerging economies.
Ironically, tragically, the $30 decline in the price of gold can be traced in
part to announcements of support for the sale of some of the IMF's gold reserves to fund debt relief for some of these
very countries. The IMF announcement, coupled with the proposal by the
British government to sell some 14 million ounces of their gold reserves, saw
the price of gold plummet in just a few days from nearly $290 an ounce to
below $260. This drop has already reduced the export earnings of the gold
-producing Heavily Indebted Poor Countries (HIPCs)
by more than $150 million per year.
While we cannot change the decision of the British government to sell its
gold reserves, we can prevent the IMF from further damaging the economies of
the very countries it seeks to help. The IMF cannot sell any portion of its
gold reserves without approval of the US representative to the IMF . And the Treasury Department must obtain
Congressional authorization before the US representative can approve
such a sale. When this proposal comes before Congress for consideration, we
will oppose it vigorously. Make no mistake, we believe strongly in debt
relief, and we intend to pursue every avenue to provide as much real relief
as quickly as possible. However, selling gold reserves is the worst possible
method of financing debt relief.
Gold mineral reserves are a large part of the natural wealth of many poor
countries, and is therefore one of the few avenues for economic development. More
than three fourths of the HIPC nations targeted for the IMF debt relief plan
are gold producers, and gold plays a crucial role in the economies of 10 of
those countries. Since the mining industry draws much of its workforce from
the poorest and most rural communities in the subcontinent, often 10 people
or more are dependent on the earnings of each miner. If the price of gold
remains at the current 20-year low price of about $258, 40% of South Africa's
gold production will become unprofitable, more than 80,000 miners will lose
their jobs, and upwards of 800,000 Africans will be plunged into absolute
Debt relief does not require IMF gold sales in order to be effective. In
fact, the proceeds from the gold sales which are actually targeted to debt
relief are virtually nil. According to one
calculation, there would be less than $60 million per year available to
retire the estimated $220 Billion HIPC debt. There are alternatives to gold
sales which would provide more debt relief in a shorter period of time.
We will not support central bank gold sales; we will oppose them in whatever
form they are presented to the Congress. We intend to examine more realistic,
more productive, and less harmful alternatives. We hope you will join us.
James Clyburn, Sanford Bishop, Eva M. Clayton, Robert Scott, Bennie G.
Thompson, Albert R. Wynn, Eddie Bernice Johnson, Melvin Watt, Edolphus Towns, Bobby Rush, Carolyn Kilpatrick, Danny K.
Davis, Elijah E. Cummings, John Conyers, Juanita Millender-McDonald, Harold
Ford, Jr., Earl Hilliard, Gregory Meeks, Carrie
Meek, Charles B. Rangel, Major R. Owens, Stephanie Tubbs Jones, Alcee L.
Hastings, Julian Dixon, Sheila Jackson-Lee, John Lewis.
IMF GOLD SALE PROPOSAL -- HON. BENNIE G. THOMPSON
(Extension of Remarks - July 21, 1999)
*Mr. THOMPSON of Mississippi.
Mr. Speaker, on Saturday, there will be an historic march in Pretoria, South
Africa. For the first time ever, gold
miners will march shoulder to shoulder with the management of the gold mining
companies which employ more than 250,000 union miners. They will march from
the National Union of Mineworkers Building to the British Embassy and to the
Swiss Embassy to protest gold sales from those countries' central banks. Just
the threat of central bank gold sales has caused the price of gold on the
world market to plunge to 20-year lows over the past two months, endangering more
than 80,000 jobs and the means of support of almost a million sub-Saharan
*James Motlatsi, president of the NUM, and Bobby Godsell, head of the Chamber of Mines, will return from London--where they are
petitioning the Bank of England to stop further sales--to lead the march.
*Mr. Speaker, Mr. Motlatsi and Godsell
came to Washington
two weeks ago to warn of the dreadful consequences for their miners and their
continent of central bank gold sales. They came here to tell us that the
well-meaning efforts of many of the world's greatest powers, including the US, would
cause some of the world's poorest countries to suffer needlessly.
*The proposal, endorsed by the G-7 last month, to sell some of the gold
reserves of the International Monetary Fund to provide a token contribution
to debt relief for the poorest countries, is totally misguided and must be
stopped. Because of the weighted voting structure of the IMF, it cannot sell
any of its gold without the support of the US representative to the IMF. And,
law, our IMF representative cannot support any gold sale without first
obtaining approval of Congress.
*Mr. Speaker, we here in Congress do not have the ability to stop the sale of
gold from other central banks, although we can make our disapproval manifest.
However, we can stop the sale of IMF gold , and we
need to do it now. Our disapproval of the gold sale is not an obstacle to
debt relief--there are many ways to deal with debt relief without IMF gold
*Mr. Speaker, Members of the House on both sides of the aisle have written to
the Treasury Department and to President Clinton stating our unequivocal
opposition to gold sales by the IMF , and without objection, I would like to
enter into the record copies of those letters.
*Before the South Africans begin their march on Saturday, I urge the
President to respond to this crisis by withdrawing his support for IMF gold
sales, and withdrawing Treasury's request for authorization to support it. The
countries we are pledging to help should not be cursed by our misguided
*Stop the gold sales now.
END OF CONGRESSIONAL RECORD
And the World Gold Council has to think about what to say about the
IMF gold sales. What a joke. GO GATA! To get to the point:
Weird thing... today when thoughts of the Gold Cartel crossed my mind, I
found myself spontaneously singing or humming...
Nah Nah Nah Nah
Nah Nah Nah Nah
Hey Hey Hey
Wondering if anyone else experienced the same phenomena?
Might as well throw the WGC into the same tune.
GATA BE IN IT TO WIN IT!
A blast from the past below. I bring this to your attention again
because it highlights the kind of effort GATA has given to the gold world
compared to what the World Gold Council does with all their money. The WGC
promotes high fashion jewelry to the wealthy. GATA
pounds the table for you gold owners and gold shareholders.
1/29/00 (with gold at $280)
The Gold Conspiracy Question
GATA Provokes Interesting Responses From the Fed and Treasury
Veneroso Associates is a global
investment strategy firm. We seek to identify markets that are in extreme
disequilibrium, understand the dynamics generating such disequilibria and
identify turning points in these dynamics.
Veneroso Associates provides global
economic analysis to an array of money managers, governments, and
FRANK A. J. VENEROSO
Mr. Veneroso is currently the head of Veneroso Associates. Formerly he was a partner of Omega
Advisors, where he was responsible for investment policy formulation. Prior
to this, acting through his own firm, Mr. Veneroso
has been an economic consultant and investment strategy advisor to
governments, international agencies, financial institutions, and corporations
around the world. He acted as an economic policy advisor to international
agencies and governments in the areas of money and banking, financial
instability and crisis, privatization, and the development and globalization
of emerging securities markets. His clients have included the World Bank, the
International Finance Corporation, and the Organization of American States. He
has been an advisor to the governments of Bahrain,
Brazil, Chile, Ecuador,
Korea, Mexico, Portugal,
and the United Arab Emeritus. Mr. Veneroso
graduated cum laude from Harvard
University and has
authored several articles on subjects in international finance.
The Gold Conspiracy Question
GATA Provokes Interesting Responses From the Fed and
The Senate and Congress Question the Fed and
Treasury About Gold Price Manipulation
Issues A Blanket Denial
The Fed's Denial Provides Grounds for Suspecting
Large Undisclosed Official Supplies Reversed the
Fall 1999 Gold Price Rally
If Such Supplies Are From Scattered Central Banks,
the Gold Price Will Explode Sooner
If Such Supplies Are From the US
Authorities, It Will Explode Later But More Violently
At the beginning of this year we decided to discuss the issue of
whether the US Federal Reserve or the Treasury was intervening in the gold
market. For us, the question is posed by a simple process of inference.
All of the price and income determinants of gold demand suggest a
strong recovery in demand should have occurred since mid 1998. World Gold
Council demand surveys provide confirmation. Scrap supply from distress
selling in the Far East has stopped. Mine
supply has been flat. With such a dramatic improvement in the market's
overall supply/demand framework, the price of gold should have recovered like
oil, copper and most other commodity prices. It has not. One must posit a
very large undisclosed supply of gold to explain current depressed prices.
In the past, we could attribute such a supply to short selling by
funds, bullion banks and producers. Because of the Washington agreement
reached by the fifteen European central banks in September 1999 and the
subsequent upside explosion in the gold price, these former private sector
short sellers no longer regard selling short gold as a one way bet; their
risk perceptions have changed. There is a great deal of evidence that
producers have been reducing hedge positions. There is evidence as well that
funds and bullion banks have moved to reduce short positions. Therefore,
former private sector short sellers in aggregate have been buyers, not
sellers. This implies the existence of large official supplies. The Netherlands
has sold 64 tonnes since late September. The UK has sold 50 tonnes. Some
additional small official sales have been reported. We hear rumors that Brazil may have sold all of its
gold in recent months (perhaps 200 tonnes). Gold Fields Mineral Services has
reported that two large holders who presumably do not report to the IMF were
significant sellers in the fourth quarter. These quantities taken together
may or may not explain the implied large undisclosed selling of recent
months. The Washington Agreement of September 1999 makes it unlikely that
there were additional substantial official supplies of European origin.
There are only 6000 tonnes of official gold held by countries outside
Europe and North America that are reported
to the IMF. Much of it has been lent out. Most of these countries are not
likely candidates for large official gold sales. Furthermore, the expressed
intention of the Washington Accord was to improve gold market sentiment,
reduce gold supplies, and thereby raise the gold price. Why would other
central banks, who surely must be aware of this, become massive sellers of
gold at current depressed price levels?
We believe there are perhaps 2000 to 3000 tonnes of official gold held
by Saudi Arabia, the Vatican, Brunei,
and others that have not been disclosed to the IMF, and which could be under
liquidation. The current high oil price removes any direct financial
requirement for oil exporting nations like Saudi
Arabia or Brunei to sell gold. These
official bodies must also know the intentions of the fifteen European central
banks regarding the gold market. A sudden avalanche of selling by these
parties at current depressed prices amid rising global demand and commodity
prices makes little sense.
It is possible that numerous official holders have sold large
quantities of gold over the last four months and that very little of such
selling has been disclosed. But it is equally possible they have not. Given
this, by a process of elimination one must consider it possible that the US is the
undisclosed seller as it may be the only official body with the resources to
sustain the supplies implied by the prevailing supply/demand framework. This
possibility is strengthened by the US open policy in recent years of
encouraging a lower gold price. When most of the European signatories to the Washington accord were
planning last summer to act to improve gold market sentiment and restrict
gold supply, the US Treasury was aggressively pushing for IMF gold sales,
knowing full well that its words and actions were depressing market sentiment
and the gold price. Clearly, the objectives of the US Treasury were very
different from those of the Europeans who must have made their views and
objectives known to the US.
Lastly, there are persistent reports that Goldman Sachs has been the featured
seller in the gold market on price rallies. In the past, Goldman Sachs has
not been the lead dealer for official sales, reducing the odds that the large
undisclosed selling of recent months has been from one or more central banks
outside Europe and North America. The
dominant role of a US
dealer with close connections to the current administration increases the
possibility of the US
as the source of undisclosed official selling in the gold market.
Because of the obvious logic of the above argument and because more
and more market participants have been discussing possible US
manipulation of the gold market, we decided to consider this issue in a
straight forward fashion as of the beginning of this year. In the past, we
argued against such intervention on the grounds that it made little sense for
the US Treasury or Federal Reserve to intervene in the gold market. In
effect, we lacked a compelling motive. We suggested that, if the gold market
were under manipulation by the US authorities, it would have to
be part of a broader policy of management of expectations in more important
markets. For that reason, we distributed to clients an analysis of the public
record on possible Fed or Treasury intervention in the stock market. We concluded
that the public record suggested such intervention was possible, though it
did not provide strong evidence of such intervention.
Since our last Gold Watch on this subject, there have been several
inquiries along these lines made by the US
senators, Senator Dodd and Senator Lieberman of Connecticut. It has also come to light
that Representative Canady posed similar questions last fall. Unlike the
questions posed by representative Ron Paul on possible Fed or Treasury
intervention in the stock market, where the Treasury failed to respond for
more than a year, these inquiries received prompt responses. In the case of
Canady's inquiry, across the board denials were provided by both the Fed and
Treasury. Only the Treasury responded to Dodd. So far, only the Fed has
responded to Lieberman. Though the individual responses ignore or avoid some
aspects of these questions, taken together they look like an across the board
blanket denial of any Fed or Treasury intervention in all markets: stocks,
bonds, commodities or gold.
Does this finally settle the issue? At first, we thought it might. However,
on review we have concluded that it does not for the following reasons.
1) The questions posed by Senators Dodd and Lieberman and
Representative Canady were provided by the Gold Anti Trust Action Committee
(GATA). We understand that several other House and Senate members have taken
an interest in this issue. According to GATA Texas senator Phil Gramm, Chairman of the Senate Banking Committee, has
prepared similar questions for the Fed and the Treasury. Also, Congressman
Jim Ryun from Kansas
has contacted GATA for information in order to prepare similar questions in
response to demand from constituents for answers. This surprises us. The United States
is a responsive representative democracy. GATA has been very active in the
pursuit of its objectives. Nonetheless, it strikes us as unusual that so many
House and Senate members would have responded to GATA's
efforts with repeated questions to the Fed and Treasury. First, posing such
questions that have already been answered in response to an earlier inquiry
implies that the Senators and Representatives involved believe that it is
possible the prior Fed or Treasury responses have not been completely
straightforward. Second, their willingness to pose such questions suggests
that there is considerable interest among their constituents on this issue. Suspicions
apparently extend beyond those of GATA. Lastly, it is possible that the
government has intervened in markets in the past at times of crises and that
it informed key members of the legislature who were bound to secrecy. Therefore,
such interventions may seem more plausible to members of the House and Senate
than to the general public.
2) The Treasury and Fed have provided blanket denials of intervention
in the stock market. Their blanket denials encompass 1987. It is well known
that many market participants claim to know of such an intervention at the
time of the stock market crash of in October 1987. For such market participants,
the blanket nature of these denials places these overall denials of the Fed
and Treasury in doubt.
3) Lastly, Chairman Greenspan of the Fed responded directly to Senator
Lieberman in a signed letter which is available on the gata.org web site. In
this letter he responds to a question about a statement he made in
congressional testimony to the effect that "central banks stand ready to
lease gold in increasing quantities should the gold price rise." Greenspan
argued that his testimony was in the context of hearings on the regulation of
over-the-counter derivatives and has been taken out of context. We have made
this very point in past reports in which we concluded that Fed or Treasury
involvement in the gold market was not likely. However, we find Greenspan's
explanation of his remarks open to serious question for the following
a) In this most recent response on the issue Greenspan states that he
presumed that everyone would know that his statement was not referring to the
Federal Reserve since (in the words of Greenspan) the Fed's "own public
balance sheets indicate no ownership of gold…I did not think it was
necessary to indicate that the Federal Reserve was not part of the group of
central banks who do lease gold since the Federal Reserve owns no gold."
In some countries such as the UK
the Treasury legally owns official gold. However, it is common parlance that
it is also the central bank's gold since it is classified as a reserve asset.
In addition, such common parlance has considerable justification. If one
looks at the Fed's own balance sheet, there is a line item on the asset side labeled "gold stock". Its total is $11 billion.
Valued at its "official" value of $42 an ounce, it appears to
encompass the entire US
official gold reserve. It has been explained to us by James Turk that this
gold stock refers to gold certificates held by the Fed, which are
"paper" claims on the Treasury's bullion holdings. However, this
would not be apparent to most observers from a reading of the Fed's balance
sheet and its accompanying notes. Chairman Greenspan is surely aware of these
The following statement comes from the legislation that created the
Fed in 1913. It appears to involve the Fed directly in the gold market and
authorized the lending of gold. We understand that, in the opinion of GATA's lawyers, Berger and Montague, this clause is still
applicable, despite changes in monetary regimes since 1913.
"Every Federal reserve bank shall have power to
deal in gold coin and bullion at home and abroad, to make loans thereon,
exchange Federal Reserve notes for gold, gold coin, or gold certificates, and
to contact for loans of gold coin or bullion giving therefor,
when necessary, acceptable security, including the hypothecation of United
States bonds or other securities which Federal reserve banks are authorized
We presume that Chairman Greenspan is aware of this as well. We
conclude that Chairman Greenspan's explanation of his statement that
"central banks stand ready to lease gold in increasing quantities should
the gold price rise" is close to a ruse.
b) There is no evidence we know of which suggests that central banks
stand ready to lease gold in increasing quantities should the gold price
rise. Central banks who admit to leasing gold indicate they do so to earn
interest on an otherwise barren asset. Earning interest is their avowed
motivation. The lease rate on gold has always fallen on gold price rallies. Therefore,
the propensity of central banks to lease gold should fall, not rise, on such
rallies. The Chairman says that he was not referring to the Fed but only to
"more than one central bank" other than the Fed that stand ready to
lease gold. Since September of 1999, this statement no longer applies to the
fifteen European signatories to the Washington Accord. How does Greenspan
know that other such central banks stand ready to lease gold in
"increasing quantities should the price rise"?
c) In his congressional testimony regarding possible CFTC regulation
of OTC derivatives markets, Greenspan was apparently referring to the
possible manipulation of commodity markets by "private counter
parties" who might "restrict supplies". Greenspan appeared to
be arguing that there was no need to extend CFTC powers to the OTC gold
market since a Hunt-type manipulation of the gold market could be prevented
by the authorities through the leasing of gold. However, even if central
banks stand ready to lease gold in increasing quantities should the price rise, this will not in and of itself curb any rise in the
gold price due to a restriction of supplies by private counter parties. Though
central banks might be willing to lease gold on a price rise, there must be
willing parties to borrow that gold if the increased propensity to lease of
these central banks it is to matter in any way to the gold market.
The historical record suggests that, when the gold price rises,
private market participants in aggregate do not add to short positions. Producers
sometimes do add to short positions on a scale up, but speculators almost
always cover short positions and go long. The fact that lease rates fall on
price rallies suggests that private market participants, taken in the
aggregate, reduce rather than increase short positions when the gold price
rises. Therefore, the increased propensity of "more than one"
central bank to lease gold in increasing quantities would not tend to curb a
Hunt-like manipulation of the gold market. Only if another central bank was
willing to borrow such gold and sell it into the market would increased lending
frustrate a Hunt-type manipulation.
It seems to us that there is a hidden implication in Greenspan's
remarks that some central banks stand ready to borrow gold leased by other
central banks should the gold price rise. Greenspan is arguing that CFTC regulation
of the OTC gold market is not necessary because central banks can handle
possible manipulations. How would Greenspan know about such official short
selling of increased gold available for lease? Is there an implication here
that the Fed knows of such contingency measures to preserve gold price
stability that the market is unaware of? Is there an implication that the US need not extend CFTC supervision to the OTC
gold market because other US
government bodies (the Fed, the Treasury?) stand willing to sell leased
official gold should the gold price rise?
The debate about whether the Fed is part of a manipulation of the gold
market has now blown wide open. Despite Fed and Treasury denials, we remain
open to the possibility of such intervention for the reasons we have set
We are more certain than ever that our supply/demand framework for the
gold market is correct. That means that there have been large undisclosed
official sales depressing the gold price. If these sales have been by
official bodies outside Europe and North America, such as Saudi Arabia, the
Vatican etc., the current large gold market deficit and the new propensity to
cover gold shorts by private market participants will exhaust these supplies
sooner rather than later and the gold price will explode.
If these supplies involve coordinated
intervention by bullion banks with official support, possibly from the US, the price
will be contained for a longer period of time. If the US Fed or Treasury is
manipulating the gold price, our supply/demand analysis suggests they will
eventually fail and in a fairly spectacular fashion. We could conceive of no
outcome that could be more bullish for gold. If the Fed or Treasury thought
gold was so important as to manipulate its price,
the disclosure of its manipulation would lend greater luster to gold. When
the manipulation was eventually overwhelmed by market forces, the failure of
the clandestine official effort would lend greater luster to gold. If this
all occurred amid a bursting of the US stock market bubble and the long and
deep decline of the dollar that inevitably must follow in the wake of a
record US current account deficit, yet greater luster would be restored to
gold. Under such circumstances, investment demand for gold, which we have
always disparaged, would probably soar. It might well eclipse the commodity
case for gold that we have always made---which will prevail in the end in any
By : Bill Murphy
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Bill Murphy is chairman of
the Gold Anti-Trust Action Committee and proprietor of www.LeMetropoleCafe.com, an Internet site devoted to
financial commentary with emphasis on the precious metals. He can be reached