Gold - diesmal mehr als ein Strohfeuer! - 500 Beiträge pro Seite

[cyas]

Folgendes habe ich zu den Hintergründen des Goldpreisanstieges bei www.LeMetropoleCafe.com gefunden (Anmeldung erforderlich, aber kostenlos):

February 4, 2000 - Spot Gold $310 up $23 - Spot Silver $5.56 up 32 cents

Midas Special - The Year of the Golden Dragon

Friday`s Action

There is no point in reiterating, in any great detail, what set up the fireworks in Friday`s gold market, as it is covered in the Feb.3 Midas commentary. Suffice to say, Murphy`s Law made its way onto the
financial scene in typical fashion for the big gold shorts. Meaning that everything that could go wrong for them is doing so at the worst possible time.

Rumors continue to circulate that "Hannibal Lecter" (Goldman Sachs) and one of the other "Hannibal Cannibals" (Deutsche Bank) have suffered massive trading losses as a result of the sudden, sharp yield
curve inversion and swift move up in the bond market. It has hurt financial institutions that were "long" the short end of the curve and "short" the long end - or the 30 year Treasury bonds. It also hurt financial
institutions that were short Treasuries as a part of routine hedging practices.

A Café member European bond sales/dealer tells us:

"Persistent rumors are flowing in that three players are caught in playing mortgages against the govvies in the 30yrs in USD with a probable loss of 2 bln USD."

Another plugged in Café member told me Friday morning that he knows for a fact that a UBS asset backed mortgage package went underwater to the tune of 5 or 6 points. Massive losses have been
incurred. If it happened to UBS, it happened to many banking firms, according to our connected Café member. Simply put, UBS put a package of mortgages together by buying then with the intention of
selling that package. To hedge their interest rate risk, they sold 30 year Treasuries. When the Treasuries soared unexpectedly in price before the mortgage package was sold, their hedge went underwater.

Some financial institutions such as Goldman Sachs may have more complicated problems as a result of the surge in Treasuries. Word from another informed Café member is that Goldman was massively short
gold with the "carry trade" on. Reportedly, they sold millions ounces of gold they borrowed from central banks and took the proceeds and invested in a yield curve play of some sort. It appears they got
caught going the wrong way in the trade too by also being short Treasuries.

That fits. On Wednesday and Thursday, we reported to you that Goldman Sachs was by far the featured big gold buyer. That is when the losses in the yield curve trading trade began to really accelerate as
the Treasury bonds soared in price. If they were getting out of credit market trade gone bad, then it would make sense that they buy back some gold shorts too.

On Friday, when I sent out the "massive stops above the market" bulletin, I mentioned that our sources said Goldman was going to sell gold into those buy stops. Since the floor knew of these stops, it is now
obvious that Goldman planted that story as they were not sellers at all. Later in the day, Goldman was seen buying gold call options in frantic fashion.

More bad news for the shorts came Thursday night when the following story was released by Bridge News. It was an extremely bullish story for the gold market that, astonishingly, most of the wire services
did not even bother to put out to the public. Certain bullion dealers that we know and other gold industry types had no knowledge of this significant press release:

Milberg Weiss Announces Class Action Against Ashanti Goldfields Company Limited

"Notice is hereby given that a class action lawsuit was filed on February 3, 2000, in the United States District Court for the Eastern District of New York on behalf of all persons who purchased the common
stock of Ashanti Goldfields Company Limited, Inc. between July 28, 1999, and October 5, 1999, inclusive (the "Class period").

"If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact…..(www.milberg.com).

The complaint charges Ashanti and certain of its senior officers with violations of ….the Security Exchange Acton of 1934….. The complaint alleges that defendants issued a series of materially false
and misleading statements concerning the company`s hedging strategy, ostensibly designed to protect Ashanti against fluctuations in the price of gold. The complaint further alleges that
defendants` statements during the Class Period misrepresented and concealed the true risks presented in the Company`s hedging strategy, ostensibly designed to protect Ashanti against fluctuations in
the price of gold. The complaint further alleges that defendants` statements during the Class Period misrepresented and concealed the Company`s exposure to the volatility in the price of gold. On
October 6, 1999, the complaint alleges Ashanti announced that its hedge book had turned "negative" by over $450 million and that the Company would be required to meet massive margin calls which it did
not have the capital to meet. In response to the companies belated disclosures, the price of Ashanti common stock fell over 56% to close at $4.125 per share on October 6, 1999." End.

This is a major development for the gold industry and it was barely reported except by the likes of the Café Thursday night in our EXTRA EXTRA Midas. Tack that on to the other under reported
announcement last week that the European central banks may be required to send <>747 tonnes of their gold to the ECB as part of increased reserve requirements. The Café reported on this bullish
development, too, while the mainstream press and commonly quoted gold analysts went comatose and barely gave it wire service/press mention. This is potentially very bullish news because this decent
amount of gold tonnage will not be available for sale or lending in future years as the gold bears have claimed would be the case.

The Ashanti suit is extremely bullish news as it puts senior gold producer executives and board members on notice that they might be sued personally if overly aggressive hedges cause damage to a stock price
in a sharply rising gold market.

The Theatre of the Absurd again behind the scenes with this scenario: esteemed Board of Directors of heavily hedged gold producers "choking" because the gold price explodes for which they should be
thrilled. Think of how incomprehensible that would be for any other industry that sells a product.

In Thursday`s Midas, I pointed to how the yen move in 1998, the gold move of last September and the recent bond market have been violent, unprecedented and ruinous to certain financial firms. It appears
that the derivative LTCM blow up and subsequent bailout did little to stop the derivative trading frenzy for firms seeking greater and greater profits. Greed and hubris thrive.

Few market participants were prepared for the lightening speed in the yen, bond and gold moves. That is why there was so much pain for those on the wrong side of the trade. If there is anything to this "new
era" type of market talk, it is that the trillions of dollars of derivative trades out there are causing certain markets to move in a direction with force and speed like no one has ever seen before, or is prepared
to deal with.

Market meltdowns, or meltups, are likely to occur with even greater frequency. The leading candidate at this point in time is gold again.

Same basics that long time Café members are aware of: there is a 120 to 150 tonne monthly supply/demand deficit at $285 gold with around 10,000 tonnes of gold lent out by central banks.

The big shorts have been counting on producer forward sales every month to fill the monthly supply/demand gap. Placer Dome just announced they will deliver into forward sales as they come due, not sell
forward anymore as has been their practice. Gold shorts can color that future gold supply gone! Barrick may do the same. The pressure will be on other producers to follow suit.

The reason for the pressure on hedged gold producers could not be more obvious. Gold press reports all credited the Placer announcement as the reason for the big Friday $23 rally in the price of gold. Does
that mean if 5 other major gold producers announce the same thing, the gold price rallies $115? If just one announcement can have that dramatic effect on the gold price, shareholders will scream for all the
heavily hedged producers to the same thing.

Gold share prices soared on Friday. One has to wonder what has taken the producers so long to make moves such as Placer’s? Do gold producer shareholders want their firms to reduce hedging and have
their investments double in value - maybe triple - because of soaring gold share prices. Or, do they want what they had the past couple of years: big hedges on the books and share prices in the dumpster?
Talk about begging the question!

The pressure on Barrick Gold will be immense when it makes a financial presentation to analysts tomorrow.Placer President Jay Taylor said on Friday that "industry needs to do its part" - in essence "issuing a
challenge to other producers to rethink their hedging stances"(Reuters).

If just Placer Dome`s announcement can move the price of gold up that much, then how can Barrick tell financial analysts that they will not change their policy? My guess is that if that happens, many of the
attending financial analysts will just go home and sell Barrick stock. It would be a disastrous decision by Barrick and probably would only be made if the call comes in from Washington to do so, which would
be further evidence of U.S. "officialdom" meddling in the gold price.

One more thing. Let us bring back Ashanti and their hedge book with its hundreds of millions of dollars in losses. What is to be done about that? If their hedges have not been covered, then losses are
mounting again. How many other Ashantis or Cambiors are out there? There have to be other overly hedged, and therefore exposed, gold company blow ups ready to surface on the next sharp rise in the
price of gold. With this Ashanti class action suit now a reality, top brass at these companies are going to freak when they realize the implications of the new law suit.

That is just one more reason why the Barrick top brass had better get their act together and start making decisions that at least "look" responsible. If they do not follow Placer on Monday and also curtail their
hedging and the price of gold explodes creating Barrick hedge problems accompanied by a faltering Barrick share price, the Barrick big shots will be in scalding hot water.

That is a NO BRAINER and the Bushs and Mulroneys and other big names on the Barrick board will be getting their own wake up call, if they have not been given one already.

Barrick Chairman, Peter Munk, is supposed to be on CNBC on Tuesday morning. That should be a smile.

Here is some additional input from the www.kitco.com web site about what Barrick will do on Monday:

Copyright © 1999 Gambler/Kitco Inc. All rights reserved

There`s a rumour that Barrick is suspending their hedging activities as posted by GATA . This rumour is completely true!

I was hoping to post this information on Tuesday but was too busy.

I had lunch with a client/friend of mine who has a brother in Barrick management. The brother told his sister to buy Barrick calls because an announcement would be made the following week about the
suspension. The real news is that not only has Barrick decided to suspend its hedging, it has reversed course and has been in the process of COVERING a portion of its forward sales. The last gold rise in
September spooked management and of course inspired investor dissension. The brother could not be more specific about the amount covered and was very uncomfortable spilling the beans that they HAD
COVERED.

A similar situation occurred back in January 93 when a different client/friend and I were having lunch with her brother, Vice President of Upjohn. He encouraged his sister to buy calls as Upjohn was going to
make an important announcement concerning an AIDs inhibitor drug. I bought thousands of out of the money calls, but the announcement didn`t come until a week later on CNBC and it turned out they didn`t
get the FDA approval. So sometimes even hearing the news from the horse`s mouth is no guarantee!

It is not just Placer Dome that has issued a challenge to other gold producers.

Gold Fields slams industry hedge addiction
Reuters Story - February 03, 2000 13:11
Jump to first matched term
By Darren Schuettler

JOHANNESBURG, Feb 3 (Reuters) - Gold Fields Ltd, the world`s second biggest gold producer, said on Thursday it was insane for companies to keep major hedge books that had depressed
gold prices and made new projects uneconomic.

Gold Fields, which bought back the bulk of its hedges last year, also urged institutional investors to pressure companies to ween themselves off hedging.

"I don`t think hedging is appropriate at the level and the scale it has developed in the mining industry," Thompson told analysts after releasing the company`s quarterly results.

"To sell ounces in the ground at $270-$280 (an ounce) when the price of replacing them is $350 (an ounce) or better is just insane."

Thompson has publicly criticised the industry`s hedging practices since Gold Fields repurchased most of the 1.8 million ounces committed to forward sales and call options.

The company still has about 200,000 ounces of forward sales required for its Tarkwa gold project in Ghana.

Thompson said he was not opposed to hedging to protect particular assets or if it were required by lenders to fund a project. But the industry`s level of hedging was out of control.

"When it gets to a scale where the top 10 mining companies in the world have over 70 million ounces hedged...it has led to a lower and lower gold price.

"If we collectively continue to do that, we`re going to ensure that no new mines are developed and...you actually have to write down reserves."

Gold Fields had seen its mineral reserves fall to about 74 million ounces from more than 90 million due to the lower gold price, he said.

"I think it`s time the institutional investment community point that out to the mines, that they shouldn`t do it. It`s not in our interest."

Thompson said the industry should take a broader view of the market. "It involves looking at overall industry and community attitudes to gold and the image of gold."

He said it was still very difficult for the public to buy gold, noting that the recent UK gold auction was largely restricted to institutions.

"There is a lot we need to do as an industry to start to look at making gold available to the public and create a market for it," he said. End

This type of talk is what Barrick is going to hear from the gold fund managers attending their financial meeting on Monday.

Three days ago most of the establishment gold analysts were all neutral to bearish about the price prospects for gold. You could find nary a soul in the media citing very bullish gold market commentary.
Now, the establishment crowd is scrambling to try and come up with reasons for the new bullish scenario. Placer Dome`s announcement is about the best they can do.

Normal markets do not trade as gold has done these past 4 months. Trade into oblivion in the $250`s - explode $84 - go back to dullsville trading $50 off its October highs - and then trade up $23 in a day
out of nowhere.

If you don`t understand, or start from the premise, that the gold market has been manipulated by certain bullion dealers and, most likely, the U.S. "officialdom" in some sort of fashion, then you are clueless
about what is really going on here. Like navigating a ship without a compass.

Unfortunately, that encompasses almost all of mainstream gold analysts and gold market press. We know that is the case because even the possibility of a gold market manipulation is never mentioned and
they won`t even print the name GATA.

As proof to what I am suggesting is on the money, we can note what two of recent gold price run ups have in common. Both revolve around events that affected the bullion dealers. The first run up was due to
the surprise Washington Agreement that limited future European gold sales and lending and the second was accompanied by the omnipresent market talk that two of the most important bullion dealers involved
in the manipulation (Goldman Sachs and Deutsche Bank) had massive bond trading losses because of the swift inversion of the yield curve.

As reported Friday, Goldman was buying gold futures and gold options in panic fashion. Why?

From Café member John M.:

I heard from the guys at Bema that they heard that a fight broke out between Goldman`s traders and another group of traders. Goldman was trying, trying to buy Gold and the other group, possibly Mitsu, was
trying to keep a lid on the price and knock it??? But fighting on the commodity floor may be normal, I don`t know.

The reason for the bullion dealers manipulating the gold price is that they have been making a fortune with the gold carry trade over these past years. Borrowing gold from central banks at 1% interest rates,
selling the gold in the physical market and investing the proceeds in the financial markets. Rumors surfaced yesterday that the Goldman carry trade was blowing up.

From a Café member in South Africa, this also came in:

Strong rumours abound that Goldman has taken over the Ashanti hedge book and has started to dismantle it....

(Goldman Sachs was Ashanti`s main investment advisor and received very negative publicity in the Financial Times for their conflict of interest role in the Ashanti matter, so who else do you think is on the
hook in the end for the Ashanti`s problems. Remember, way back in October and days after the Ashanti blow up, I reported to you that Sam Jonah, Ashanti Chairman, told a Café colleague that "Goldman" is
squeezing our b`s. That won`t be forgotten

Time and time again, you have heard me say that $290 gold was key because most of the gold loans were rolled over at around that price, or a bit less, over the past two years. A move above that price by
more than $10 makes the gold loans expensive. A $50 move up is a catastrophe. At $310 gold, the gold carry trade is now becoming a bummer as occurred in last Fall, before the market was cajoled back
down by "the orchestraters."

That means that the manipulation crowd has, for the moment, lost control of their scheme once again. Maybe for good this time. Only a staggering central bank bailout will save big gold shorts butts if I am
right.

Can that happen, a la the obviously politically inspired Bank of England announcement? Sure, but GATA is breathing down their throats this time. Congress is starting to be all over this fraudulent scam. If our
"officialdom" increases its role in the gold market manipulation, there will be hell to pay down the road. Someone will most likely have to pay a price for the ruse by going to go jail at some point.

Just today, Chris Powell (GATA Treasurer/Secretary) and I received this:

"Dear Mr. Powell,

"I am an investor who has a number of positions in the precious metals. Thus, I have an interest in the success of GATA re: possible manipulation of the Gold Market. To that end, I may be able to assist your
efforts." " I represent my friend Speaker Hastert in the Illinois General Assembly…………I know Denny is a very busy man, but I can probably arrange time for you and possibly other GATA members to
meet with him and prevail upon the Speaker of House of Representatives to get answers for the questions you have raised. …"

That is on top of Senators Lieberman, Dodd, and Gramm and other Congressmen all asking the same questions and looking for answers.

It is not just Congress that has been made aware of collusion in the gold market. Dow Jones Theory guru, Richard Russell, said this on Friday to his subscribers:

Remember this -- rising gold is the LAST thing the Fed wants to see. Rising gold, although nobody seemed to have noticed it today, will be in the financial headlines if it continues. Rising gold is the market`s
way of saying that inflation is in the hopper. Greenie knows what rising gold means, and if gold continues higher you can most definitely expect higher rates out of the Fed. Rising gold is a red flag waving under
the nose of the Green man.

Can the Fed stop gold from advancing, maybe through sales of futures via its Stabilization Fund? I don`t think so, not if the primary trend of gold is actually in the process of turning up. The situation is
now very interesting. And gold, it seems, has finally awakened from its long, long sleep.

From hawkeye Marshall Auerback in London:

Read what the largest bond fund manager in the world, Bill Gross, from PIMCO has to say in his Feb. 3 commentary about Greenspan underwriting stock markets. See particularly pages 3-4 on their web
site: http://www.pimco.com

"Stocks and therefore bonds are the object of policy and not the tools of implementation."

Bill Gross virtually says that Greenspan has rigged the bond and stock market! This is extraordinary copy. If Bill Gross is correct, is it not clear that "officialdom" is manipulating the gold market too to achieve
their misguided goals.

Gross`s statements are to the stock and bond market what GATA`S statements have been to the gold market.

Almost lost in the commotion on Friday was that silver rallied 32 cents to close at $5.56. Sky could be the limit for silver as Midas has been saying for one year. This strong rally is of particular note because it
may signify the manipulation crowd is in trouble. On the late Sep. run-up, silver went higher but with a great struggle.

Silver was no great shakes this Friday either. until the Placer Dome news broke. Then it rocked. That is what makes me think some of the collusion crowd knows the jig is up and may have decided to
abandon their silver scheme of selling silver on rallies so as not to encourage buying in the gold market.

Not only was silver strong, but the CRB closed in high ground at 213, a new high for the move. March crude oil closed in contract high ground at $28.70 per barrel with the crude products just as firm. The
average hour earning index and prices paid component for prices paid are also on the upswing. All of this has inflation watchers rightfully concerned.

This will make any manipulation of the gold market and holding down the gold price increasingly more difficult.

So what does all this mean for the gold price and for the share prices of the gold companies of your choice? Many of you are concerned this move up on Friday will just be another blip.

Let me begin by prefacing what my thoughts are with this email from Café member Peter S:

“Recently I`ve noticed that the lease rate is very low, 0.5%, which suggests that plenty of gold is available for lease (possibly from the US Treasury) but their are few takers.

As memory serves me, this is quite the opposite of the last spike in gold which occurred when lease rates were much higher. This suggests that the latest gold spike is due to a dearth of lessees willing to take
the risk of runaway gold prices rather than the first spike that was due to the perception that the amount of leased gold was going to dry up. This is an important difference that in no small part has come about
as the result of GATA and LeMetropoleCafe. You have changed the market perception in a major way.”

Pete is right on. The risk of borrowing gold becomes more apparent by the day. Who cares if the lease rate is .4% or 1%. None of that matters if the gold price can go bonkers to the upside in hours and
thereby turn a 1% gold loan into a prohibitive 25% gold loan - or worse (due to having to pay the gold back at a higher price than it was borrowed).

The "such a deal" gold loan is becoming a dinosaur. The supply hitting the market from those trades will disappear.

That is a big blow to the manipulation crowd that is going to only get more painful for them in the days and months to come.

There is no reason we could not see $365 gold this coming week. Why not? Friday`s action was more explosive early in the move than in late September.

That may, or may not, happen, but I stick with my big picture outlook. It is my opinion that a fair supply/demand equilibrium price for gold today (with the manipulation game players exiting stage left) is
around $600 per ounce. That is the gold price I expect to see flashing up on the scoreboard before the end of the year if the manipulation buggers have to run for the hills.

As far as the price of silver goes, $9.78 was the silver price target all last year. Since it has been held, too much silver has been devoured at too cheap a price. Could see $12 silver this year.

The investment game plan all along has had that price in mind as a realistic target. It will come. And that is why it is I stayed stay with my favorite gold and silver investments all this time. The risk reward ratio
does not get any better.

The Gold Shares

Tuesday, a Deutchse Bank (one of the "Hannibal Cannibals") analyst DOWNGRADED Placer Dome!! And it soared 24% on Friday!

Great call!

Until Friday, the gold shares were given up for mortsville. Nobody wanted them. My, how things change in a day. Well, not really yet. But, very very soon gold shares will be the "in" thing to be "in."

Some of the reasons for the horrible performance of the gold shares is that big gold funds are being dismantled while portfolio managers who invested in the gold shares are being fired. An entire 6 man crew in
the Ohio State Pension Fund was let go, for example. They loved the future for gold shares - Homestake in particular - and were canned for it.

I have had many queries the past two months. What is wrong with Homestake? What was wrong was the money managers who inherited the Ohio State Pension Fund gold share equities had been selling
since $10 and drove the stock price down to right above $6. Nothing wrong with the company, just the misinformed judgment of those who fired the portfolio managers.

That is another anecdotal sign of a major, major BOTTOM in the gold shares.

I am partial to the junior golds and smaller gold companies. Many have been priced at near bankruptcy prices. Even with Friday`s dramatic gold price rise, there was very little relative interest in the smaller
gold stocks with some players using the gold price rally to unload shares into. Because of mainstream press reports, the investing public does not believe a big gold market move can happen. Boy, are they in
for a surprise! Investors will have 10 to 20 baggers in their portfolios if they locate the right smaller gold companies. The share price moves up of the quality baby gold stocks will, in time, make the moves of
some of the internet stocks look "rinky dink."

More on that in future Midas`.

There are so many good juniors out there. My favorite is still Golden Star Resources (GSR) on the AMEX. Highly regarded generalist money manager, Julian Snyder, of Snyder Capital Management in San
Francisco, told CBS Market Watch early last week that the stock was a triple, or would be fairly priced at $3 with gold at $300 and he felt it was a $10 stock if gold went to $400.

Well, gold is now at $310 and GSR closed at only 1 7/16 on Friday. That makes GSR 100% undervalued as of Friday`s close using Synder`s rationale.

I must say that I am even more bullish on GSR than the conservative Snyder is.

There is also a little gem in Canada - Wheaton River Minerals Ltd. - their share price has outperformed almost all the smaller gold producers over the past year. This debt free company is turning in handsome
profits (19 cents per share) and yet only sells around 2.5 times earnings. They are a profitable gold producer in Canada and are going to swing into operation in Costa Rica soon. A class operation.

For a pure exploration play there is Samex Mining Corp. They have been aggressively acquiring gold properties in South America.

From a recent corporate press release:

"The property is drill-ready and SAMEX and Chalice are planning a drill program, the details of which, will be announced in a forthcoming news release.
The Sora Sora property lies within the Oruro-Patacamaya polymetallic mineral belt, one of the richest precious metals regions in Bolivia. This belt was exploited for silver and gold in the Inca period and, on a
much wider scale ,during Spanish Colonial times. The property is situated along the Coniri Structural Trend which also hosts the world-class Kori Kollo gold mine, situated 60 kilometers to the southeast."

I met Jeffrey Dahl, their Vice Chairman, on my trip last year to Vancouver on behalf of GATA. Very bright guy and big GATA supporter. I received this email from him this past week.

Fortsetzung folgt ...

[cyas]

Leider konnte ich im ersten Posting nicht alles unterbringen:

Bill & Chris,
We`ve just received our Alain Despert "GATA" print! Wow! The picture on the web site hardly does it justice! This is a REAL work of Art. It communicates so very well the struggle that "free-market"
proponents are up against over gold. But the light has begun to penetrate the dark (secret!) recesses of the banking world (i.e. of all shapes & sizes), exposing the imbalances that have been engineered to
extort inequitable returns for a select few! We thank you for your tireless, often unrecognized, efforts to reveal the truth. Please keep up the solid efforts, the rewards will be great.
We are proud to display the GATA flag in our SAMEX office, and we pledge to continue to help when able!
Best Regards,
Jeffrey Dahl
Vice Chairman
SAMEX MINING CORP.

Time to "rap" this up.

From Café member THC in Japan:

Happy Chinese New Year!!!!!!!!!

It may be interesting to note that we just entered the year of the GOLDEN DRAGON!!!!

I wonder what this will bring about in the gold market???

Good luck to all in the New Year

Midas

February 3, 2000 - Spot Gold $286.60 up $2.30 - Spot Silver $5.24 up 5 cents

Midas Special

Here is what we hear is going on out there in financial land. Treasury bond yields have collapsed, dropping from 6.76% to 6.06% before settling at the end of the day today at 6.15 %. The yield curve has
inverted sharply meaning that long term yields are now less than shorter dated notes. Ten year notes closed today 30 to 40 basis points higher than Treasuries.

The incredible speed at which this has occurred has rocked traders and investment houses in the credit market trading game. I alerted the Café what was going on last week on all of this, but because of the
tremendous financial market implications, I will touch on what has been set in motion again very briefly.

The U.S.Treasury has made a decision to restrict the supply of 30 year bonds. This sudden change in policy has caused a surge in price of the 30 year Treasuries as demand has overwhelmed supply, much of
it due to technical considerations. This dramatic rise in the price of bonds and reduction in long term yields has caused a rapid inversion of the yield curve. A good number of financial institutions have been
caught with wrong way trades on. These institutions have been "long" the short dated instruments and "short" the Treasuries. Now, those trades are underwater as the Treasury market has exploded up in
lightning speed.

This development is not good for most banks either, as by the natural course of their business, they are borrowing short and lending long. This quick inversion has to negatively affect all bank profits.

Rumors began flying about mid morning that a major bond dealer was in trouble. I heard this very early from a Denver, Colorado, source. Then, I was told it was Bank of America from a Canadian source.
That was followed up by a New York source identifying Goldman Sachs as the one in trouble. A Chicago source told me the same thing. Then, a European bond dealer told me the rumors flying around the
squawk boxes over there kept bringing up Deutsche Bank and Goldman Sachs.

The Chicago source said the size of the problem was astronomical - a derivative blow up. That same source who has long term Washington sources also told me that the Fed was in emergency session,
contrary to what they said to the public today.

More of the same just in from another Café member:

"I have very good (trading floor based) connections in the CBOT. According to my sources, Deutsche Bank is the bond dealer in trouble. Your recent bulletin indicated the Fed denied calling a meeting to
address the dealer`s troubles, and that may be an accurate answer on the part of the Fed. Rather than calling an emergency meeting for the dealer, I have heard the Fed called the meeting to discuss the
condition of two hedge funds who are in very deep trouble due to the change in the yield curve. Those two firms would, according to my sources, be Merrill Lynch (very interesting, given their recent bailout
from the commodities business) and the traders that left LTCM to form their own fund. I can`t swear by the stories that I`ve conveyed, but personally I know the sources and have good reason to believe
them. Just thought you might be interested."

Not sure what our source means by Merrill Lynch - hedge fund - but this would not be the first time Merrill Lynch got themselves in trouble with fixed income trading. Remember Orange County! Would that
not be something if the LTCM crowd and Mr. Meriwether are right back in the soup again. Another LTCM type bailout? I would hope not. How many chances should this guy and his hapless crew get?

A Fed denial should be no surprise to any of us. Somewhere, in one of my old Midas`, I have a Wall Street Journal quote from Allen Binder, former Fed official and now a Princeton professor, who said
something like - the last role of a central bank is to tell the truth to the public.

Just in - headlines hot off the Bridge News wires:

Goldman shares slip on talk of fixed income loss
Sources dismiss rumors of abnormal bond losses at Goldman

Goldman Sach`s share price closed the day at 85 3/8 down 5 3/4 while the general market closed much higher.

In addition, Goldman Sachs has been the big gold buyer the past two dealers with gold rallying around $5. Does it have something to do with their rumored fixed income problems? Too early to tell, but if they
do have some serious bond related financial problems it would make sense that they would have to pare back on short gold positions. Their CFO would see to that.

Ironically, Goldman was finding it hard to buy gold today. They would come in and bid and the offers would dry up - the reason being is that they have become such a big factor on Comex that the traders all
want to go with them. Looks like they may be a bit too big for their britches at the moment.

However, collusion crowd - not too much fear, just yet. Right at the close "Hannibal Cannibals Chase Bank and J.P. Morgan sold the market down. That makes sense too. Goldman has to lighten their short
gold positions on their books so fellow "cabalites" Chase and Morgan pick up the slack at the higher end of the recent gold trading range.

More on gold later.

Crude oil closed at $28.10 right off a contract high close with both heating oil and gasoline closing up around 2 cents per gallon. This was an impressive close. Crude had reached $28.40 per gallon when the
World Bank put out the following headline to the press: OPEC to increase supply and increase quotas next month. The price of oil immediately swooned before coming back to close up 48 cents per barrel
on the day.

All the oil stories the Café is receiving from all over tell us the oil product market is incredibly tight. Here are some excerpts from those stories:

www. greespun.com 2000-02-02 15:40:39 EST

***OUTAGES OF NORTHEASTERN OIL WORSEN;

SPOT PRICES SOAR

Pay no attention to that March NYMEX price today. It is not indicative of the soaring prices being paid for prompt heating oil, diesel, jet and kerosene at northeastern bulk locations. Prices this afternoon
have soared to 40-50cts gal over the NYMEX and there are many many instances of terminals with no fuel for oil-starved jobbers, retailers, and end-users.

NYMEX March heating oil futures ended the day around 75.40cts gal, showing a loss of 1.79cts gal on the session. But some spot prices in the northeast are up 20-25cts gal on the day, with desperate
buyers not finding product even at the elevated prices.

Latest word indicated that buyers had paid 45cts gal over the NYMEX for prompt heating oil, or more than $1.20 gal. Buyers were bidding but not finding low sulfur diesel in New York Harbor at $1.22 gal
and kerosene buyers couldn`t find product at 50cts gal over the NYMEX.

Outages were more the rule than the exception. There was no No. 2 oil in New Haven and Providence was about to run out, sources said. Boston was very low on diesel and heating oil, with virtually no
kerosene. There was no diesel or heating oil to be found at Long Island terminals and Newark had barely any low sulfur diesel at its numerous terminals. End.

2000-02-03 10:55:32 EST ***NEW YORK UP ANOTHER 5-15CTS GAL AS DESPERATE BUYING PERSISTS

2/3 - (10:45 A.M. EST) - More record prices have been witnessed in the N.Y. Harbor spot market this morning as desperate buyers try to get product to terminals before the weekend. Premiums to the
NYMEX have advanced to almost burlesque levels, pushing absolute values for heating oil and diesel to nearly $1.40 gal. Outages persist throughout the northeastern system, and dislocations are extended
spider-like to areas in western Pennsylvania, Virginia, the Carolinas and southward. End.

Oil is a very important commodity. Historically, it has had a great influence on the gold price. If it continues to truck on higher as I have been saying for months now that I thought it would, it will attract more
buyers to the gold market, making it harder and harder for the collusion crowd to continue their manipulation game.

Now that there is a problem for many firms in the fixed income arena, the last thing our Fed/Treasury bullion banking crowd wants to see is a sharply rising gold price - signifying to the world a clear signal
there really are problems in banking land.

They will make another of their desperate stands to stop the price of gold from accelerating higher as spot gold trends towards $290. We know that. But, they lost control of the gold market before and they
will lose control again - maybe next time for good.

All the signs are pointing to a loss of that control to be sooner rather than later. The Fed just raised rates and announced publicly that inflation is a concern. The 30 yr. bond yield collapse makes no sense
until you understand there is a short squeeze out there that has nothing to do with fundamentals.

The Fed and Treasury have a Frick and Frack routine going here.

The lower bond yields means lower mortgage rates which should stimulate the economy just fine. Great! - the Fed raises rates (to slow an overheated economy down) while the Treasury initiates a bond
buying panic that is will produce just the opposite result that the Fed says it intends to effect. Meanwhile, the swiftly inverted yield curve creates some serious unintended consequences. Rumors of massive
trading losses by big bond dealers are worldwide. That creates a big positive for the NASDAQ which goes berserk to the upside as stock investors now believe the Fed cannot raise rates anymore in this
environment. The "too big to fail scenario" asserts itself one more time. The moral hazard stock market melt-up continues.

The stock market wealth effect continues to create more confidence in the stock market investing U.S. public that has depleted its savings to a record low amount. Financial safety backstops are a thing of the
past. Put all your money in the stock market or be left financially behind is the feeling of the times. As the stock market goes up, the public will probably keep on binge spending, again contrary to what
yesterday`s Fed interest rate increase is trying to accomplish.

What this means to me is that the day of the gold reckoning is coming closer and closer. The volatility in markets is really picking up - except managed gold of course. The insanity of markets is going bonkers.
Take Amazon.com for example. Frank Veneroso told me today that Amazon reported $184 million in losses compared to $22 million one year ago. That was to the public. But, to the SEC under GAAP,
they reported $323 million in losses compared to $46 million last year. That was on $676 million in revenue compared to $250 million last year.

What am I missing? The more this company grows, the more they lose with competition in their business field growing like crazy all around them.

Nutsville! The more money a stock loses, the greater it is valued: makes no sense and the more it is removed from traditional stock market valuation practices, the more traders pile into it.

Many of the contributors to the Café, focus on the out of control credit growth and derivative markets in this country. For good reason. The gold market rally exploded in unprecedented speed to the upside
when it was announced in late September that gold lending would be curtailed. The speed of the gold move up was exacerbated by too many derivative positions on gold producer`s books that had extreme
upside market exposure. Excessive derivative exposure also led to the crushing yen move up in 1998 and now in this most recent bond move. Model T Ford market moves of days of old now move at the
speed of souped up Ferraris.

The big shorts in the gold market have a big, big problem in a big picture sense which I have discussed ad nauseum. What is exciting is that recent market action and the lunacy of so many markets is bringing
their day of reckoning closer by the day.

Here is the typical gold mentality of the establishment, mainstream brokerage firm about gold:

Market commentary from one of them on gold today: "Steady, led by near term tech action. Comments out of U.K. Treasury on gold sales and talk about India looking at higher yield equity investments not
having the desired effect." That is how obvious the manipulation game has become, even though they will have nothing to do with that concept and have mocked GATA for over a year for exposing what is
really going on to the media.

And again, that is why the generalist money mangers won`t buy the big cap US gold companies. The XAU could only manage a .16 gain today and closed at 60.83, less than 2 points off recent lows.

Reginald Howe`s gold market commentary (Two Bills: Scandal and Opportunity in Gold?) is getting well deserved wide circulation; it was presented today on the www. Lew Rockwell.com. Reginald
shrewdly focus`s on the Exchange Stabilization Fund in his piece. That was the first question that GATA asked Chairman Greenspan and Secretary Summers in our open letter to them in Roll Call on
December 9, 1999.

It read:

"Does the Federal Reserve or the Treasury Department either on their own behalf or on behalf of others, including government agencies, such as the Exchange Stabilization Fund, lend gold or silver, facilitate
the lending of gold and silver, or trade in any securities, such as futures contracts and call and put options, involving gold and silver?"

We are still waiting to hear from Secretary Summers and Chris Powell, GATA Secretary/Treasurer, has already written back to Senators Dodd and Lieberman to find out why Secretary Summers has not
responded as Chairman Greenspan did. Chris made special mention once again of the Exchange Stabilization Fund.

The Europeans raised rates today. Our bond yields cratered. The overvalued U.S. dollar was stronger earlier in the day then sold off sharply against the Euro and Swiss Franc. About time. Technically, the
dollar looks very bearish short term.

Alan Greenspan was confirmed today by the Senate to continue his role as Fed Chairman. The four no votes were cast by Democrats Paul Wellstone of Minnesota, Tom Harkin of Iowa, Byron Dorgan of
North Dakota and Harry Reid of Nevada.

They will be hearing from GATA soon.

The following is an excerpt from an email I received the other day.:

"I am Mr. Armstrong`s son, Martin Jr. He informed me of your conversations and expressed a need to talk to you again. As you know he has been put into prison due to our wonderful justice system. Oh
yeah, I`m sure you know they have also taken away the funds to his lawyers... what a country! Anyway, I feel a strong need to bring to light the actions against my father."

"I have finally been able to meet with father this past Friday (he was put in solitary confinement for a week and a half until the criminal judge requested his move into general population. The funny thing is until
the judges` order the jail was "too crowded" for such a move)."

Chris Powell and I have no opinion on Martin Sr.`s innocence or guilt, but we feel most strongly that he should be accorded the right of every American to defend himself and not be treated like a guilty
criminal without a trial. More later.

The Ashanti verdict was due in today. We heard nothing. South Africa`s Anglogold has jumped into the bidding for some of Ashanti`s prized assets according to sources close to the affair. The outcome of
what happens to Ashanti could affect the gold market in a material way. What happens to their hedge book? Will a good part of it have to be closed out? Will Goldman`s new bond market problems influence
the Ashanti outcome?

YES! A night for just ins:

CLASS ACTION LAWSUIT FILED AGAINST ASHANTI OFFICERS AND BOARD OF DIRECTORS

A class action lawsuit was filed today by a New York law firm against the Board of Directors and officers of Ashanti Goldfields Co. in Ghana, Africa. It is for shareholders that purchased Ashanti stock
between July and October of last year. The details will be all over the press tomorrow.

This is a big event for the gold market. In essence, the suit was filed because of their excessive hedging policies. That now puts all Board of Directors of gold producers that they are on notice that they will
be held accountable if the hedging policies of their firms are overly aggressive and subject the shareholder to penalties as a result of a rising gold price.

YEAH!

If the supposed smartest minds in the gold world - the investment bankers led by Goldman Sachs were advisors to Ashanti - and they blew it - how can any Board of Director of any gold company be
comfortable with any kind of excessive hedging structure for a company that they oversee? Almost no one thought the $84 price rise in late September was possible. That fast a price rise was not even put in
the computer models that were presented to the Ashanti officers for option volatilities by its Goldman Sachs advisors.

Yes, indeedy. This is big news for the big picture. With 10,000 tonnes of gold loans outstanding, what are the shorts going to do if a bond market run up like today occurs in the gold market again? Another
yen type move! Another $84 gold type blitzkrieg move. What if that move is $284 in gold next time? Yen could be found. Money can be printed. Gold? Is the United States willing to donate the 8,000 tonnes
we supposedly have in Fort Knox (or under Fed/Treasury auspices) to bailout the collusion bullion dealer crowd? How will Greenspan and Summers explain that to the Congress and the American public?
How will the dollar fare in that type of scenario? Yikes!

Hello, Barrick Gold. I have a question. When is your next hedging seminar planned for your Board of Directors?

Speaking of upside risk for gold shorts: sources tell us that two hedge funds in particular have put the gold carry trade back on in major league fashion and are risking $2 to $4 higher than tonight`s close. In
toto, we hear they are short over 7,000 contracts.

The trade is understandable. Go heavily short using the "collusion crowd`s` $290+ defense point as a stop out number. Recent bond trade problems in the bullion banking arena and this Ashanti news may be
"Murphy`s Law" going into effect against that trade.

One last Ashanti note. A birdie told that new D-Day for Ashanti is one week to one week and one half from today.

Gold one month lease rates hit a new low today- .25 Bid

More conclusive evidence of how the manipulation of the gold market has waned interest in the gold market: the open interest figures on calls continue to drop. They are down from 611,000 in October to
413,000 at the end of January. This has to be a bullish sign. Markets tend to make the really big moves up just when most everyone has given up on that ever happening.

Want to really get mad. Spot platinum closed at $504.50. Spot palladium $509. Kudos to the Café`s John Brimelow. Right as rain on these two commodities. I say mad because if the gold market were not
being held down as it is by the "collusion crowd," these are the numbers that we would be talking about in the gold market. What would those kind of prices do for your gold share investments? Yep, I am
getting madder by the day.

For those of you out there that say I am a part of GATA because my gold share investments have done so poorly and I am a poor loser: Your dang tootin I am mad - thoroughly disgusted at the scandalous
fraud perpetuated on all of us that thought we were investing in companies involved in a free market. If finding out that I have been playing a game that was rigged against me so that others could make fortunes
at my expense makes me a poor loser, then yes, I am a very poor loser and also a quid pro quo man. Tit for tat. They had their way. GATA is going to find a way to have ours.

Somehow, someway, they are going to pay for their arrogance. Mission not impossible.

Back to platinum and palladium. The Defense Logistics Agency has asked the U.S Mint to return 200,000 ounces of platinum that it lent the U.S. mint in 1997. The reason: it has no platinum left and cannot
fulfill a 4,500 ounce commitment for fiscal 2000 at the moment. The mint says that if it returns the platinum, it presents a threat to its American Eagle bullion program.

Meanwhile, South African sources are looking for $600 palladium soon. The Russians are looking for $800. Reason: the palladium they put out for bid was scooped up so quickly they know how desperate
buyers are to get palladium supply.

Remind me sometime to tell you about some hilarious stories about a former Russian partner (from Leningrad) of mine during my Shearson brokerage days.

OK. That is it. All I can think of when I hear these $500-$600 PGM numbers is that should be us talking about the gold price. That is where the gold price would be if the "the goon squad" were not allowed
to get away with holding down the gold price by U.S. officialdom. Many times throughout precious metals trading, palladium and platinum have forecasted the direction of the future price of gold.

I expect that they have done so again.

Midas

Bill Murphy ( Midas )

After graduating from Cornell University, Bill was a starting wide receiver with the Patriots of the old American Football League and has been around the financial and commodities markets ever since. He
owned a futures firm in N. Y. that specialized in precious metals and was a contributor to Veneroso Associates, a global strategic investment firm and producer of the 1998 Gold Book Annual.

Disclaimer notice: Midas du Metropole does not look like an investment advisor, nor is he one. Any comments about any gold and silver shares by Midas or any of the Cafe members are for your information
and entertainment only. They should not be regarded as advice and should be treated like comments passed on at any other Cafe. We are only relating as to what we like for our own accounts.

[Goldhotline]

Hallo cyas,

Danke für die guten Infos.

Vielleicht kannst Du die wichtigsten Punkte einmal übersetzten. Das würde vielen hier im Board weiterhelfen, da sie mit der Materie nicht so vertraut sind.

Vielen Dank, die Goldhotline

[cyas]

Sorry, leider keine Zeit für eine Übersetzung ...

Aber wesentlich erscheint mir die Manipulation des Goldpreises durch regierungsnahe Stellen, um Gold den Status als Inflationsindikator zu nehmen.

Auslöser ist jetzt wohl die Abkehr von der Hedging-Politik durch die Minengesellschaften, verbunden mit der Angst der Manager, von den Anlegern zur Verantwortung gezogen zu werden, wenn bei steigendem Goldpreis der Kurs der Aktie fällt.

cyas

[cyas]

Weiter gehts mit hochinteressanten Fakten, Meinungen, Spekulationen ...

Gold Watch
Veneroso Associates
January 29, 2000
Issue 01.02

The Gold Conspiracy Question
GATA Provokes Interesting Responses From the Fed and Treasury

Summary
? The Senate and Congress Question the Fed and Treasury About Gold Price Manipulation
? The US Issues A Blanket Denial
? The Fed’s Denial Provides Grounds for Suspecting Official Intervention
? 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, China, 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 reasons.

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 points.

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
to hold.”

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?

Conclusion

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 forth above.

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 case. ?



The Honorable Joseph L. Lieberman
United States Senate
Washington, D.C. 20510

Dear Senator:

Thank you for your recent letter from your constituent, Chris Powell, concerning the open letter published in the Thursday, December 9, 1999, edition of Roll Call.

The letter asserts that the Federal Reserve has been seeking to manipulate the price of gold by intervening in or otherwise interfering with the free market in gold. This is not true.

The Federal Reserve owns no gold and therefore could not sell or lease gold to influence its price. Likewise, the Federal Reserve does not engage in financial transactions related to gold, such as trading in
gold options or other derivatives.

Most importantly, the Federal Reserve is in complete agreement with the proposition that any such transactions on our part, aimed at manipulating the price of gold or otherwise interfering in the free trade of
gold, would be wholly inappropriate.

My testimony before the House Banking Committee and the Senate Agricultural Committee in July 1998 was concerned with the regulation of over-the-counter derivatives and included a phrase at the end of
the statement below that has been wrongly interpreted.

The statement merely means that more than one central bank stands ready to lease gold. It does not say that all central banks do so, and, indeed, I presumed it would be understood that the statement was not
referring to the Federal Reserve, whose 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.

"To be sure, there are a limited number of OTC derivative contracts that apply to nonfinancial underlying assets. There is a significant business in oil-based derivatives, for example. But unlike farm crops,
especially near the end of a crop season, private counterparties in oil contracts have virtually no ability to restrict the worldwide supply of this commodity. Even OPEC has been less than successful over the
years. Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over- the-counter, where central banks stand ready to lease gold in increasing quantities
should the price rise."

The final clause of this statement, highlighted in italics above, was quoted in the Roll Call letter. In their original context, these words obviously do not assert that the Federal Reserve itself participates in the
gold market in any way. The observation simply describes the limited capacity of private parties to influence the gold market by restricting the supply of gold, given the observed willingness of some foreign
central banks -- not the Federal Reserve -- to lease gold in response to price increases.

The answers to the 11 questions posed in the open letter are straightforward:

As for Question 1, the Federal Reserve does not, either on its own behalf or on behalf of others, including other government agencies, lend gold or silver, facilitate the lending of gold and silver, or trade in any
securities, such as futures contracts and call and put options, involving gold and silver. Thus, Questions 2 through 8 are inapplicable because they presuppose an affirmative answer to Question 1.

Question 9 asks whether the Federal Reserve ever owns or deals in derivatives that are connected with precious metals and whether any other agencies write call options against the Federal Reserve`s gold
holdings. The answer to Question 9 is no; in particular, the Federal Reserve has no gold holdings, as noted above. Question 10 is inapplicable because it presupposes an affirmative answer to Question 9.

Question 11 asks whether the Federal Reserve, either directly or through its management of foreign custody accounts, collaborated with the Bank for International Settlements, the Bank of England, or any
other central bank with a view to managing, smoothing, or otherwise affecting the market price of gold. The answer to Question 11 is no.

I hope this information is helpful. Please let me know if I can be of further assistance.

ALAN GREENSPAN
Chairman

[cyas]

Auch wenn sich vieles wiederholt, eines wird immer deutlicher:

Der Goldpreis wird weiter steigen, wer noch unter $300 zugreifen kann, sollte dies tun!

Weitere Artikel aus der obigen Quelle:

Gold Watch
Veneroso Associates
[e-mail]

The Second Gold Explosion
The Prison of the Shorts Reconsidered

The gold price has exploded once again. The ultimate cause of the September/October explosion as well as the one on Friday is the unstable structure of the gold market. The gold market is in a huge deficit
and it has a large outstanding short position. Any rise off a two year base in the gold price tends to reverse the flows of borrowed gold that have held the gold price below $300 over this period.

The market’s instability is continually increasing for two reasons:

1) gold demand is rising with recoveries in incomes in Asia and the Middle East and

2) perceptions of risk associated with being short the gold market are rising as speculators, producers, and bullion banks have come to realize the unstable and ultimately long term bullish structure of the gold
market.

Every time there is an upside move in the gold price, as occurred last September/October and this past Friday, a price explosion on the order of hundreds of dollars is immediately threatened. Why? Because
of what we call the prison of the shorts. The gold market has a large derivative structure characterized by forward longs and forward shorts. What makes the gold derivatives market different from other
derivative markets is that it has a net short position equal to the outstanding stock of borrowed gold. This stock of borrowed gold is a physical short: to reduce this aggregate short position physical bars of
gold must be returned to central banks. This requires a physical surplus of mine and scrap supply over fabrication demand and bar hoarding. It would take a several hundred dollar rise in the gold price to
create a significant physical surplus in the market. Even if such a surplus was created, its flow rate could be small relative to the short position outstanding. A 100 tonne per month surplus would be very large
(1200 tonnes at an annual rate) but a several hundred tonne surplus over several months would not make an appreciable dent in the market’s outstanding physical short position of perhaps 9,000 to 10,000
tonnes.

It is for this reason that we say that the gold market’s shorts are in a prison. If they try to cover en masse, they can not. Therefore, any gold price rise, if it changes market expectations, is always in danger of
becoming uncontrollable on the upside. Only massive selling by the official sector can stop such uncontrollable upside dynamics.

Such explosive dynamics were set in motion in September/October of last year. Because the risk perceptions of private market participants changed at the time, these parties moved to cover, not to increase,
their shorts. It follows that huge official selling of some sort materialized and reversed the rally. Once again the risk perceptions of private market participants are shifting. Producers are moving to cover
forwards; funds are trying to reverse shorts and go long. In the aggregate, these market participants cannot reduce their shorts significantly because of the prison of the shorts. Only massive official selling can
stop the rally.

Now that a violent rally has been set into motion it should carry through explosively. If it does not it will be due to equally powerful official selling. Because of patterns in the gold market over the last year and
a half, we cannot forecast the near term price outlook. However, if official selling caps the gold price now, the eventual rally that must materialize will be more powerful. ?

Frank Veneroso
John Brimelow

Gold Watch
Veneroso Associates
[e-mail]

The Second Gold Explosion
Proximal Causes

Summary

Once again the gold price has begun to explode. Its ultimate cause is the huge instability in the gold market due to a massive supply/demand deficit and a huge physical short position unique to the gold market.
A delayed response to changing perceptions of risk associated with going short the gold market is the proximal cause of Friday’s rally. We consider these very short run dynamics in this note. Our intermediate
run assessment is presented in a companion piece, “The Prison of the Shorts Reconsidered”. Our longer run very bullish view, which will eventually prevail, is presented in the Gold Book Annual 1998.

The gold price should now explode to the upside. If it does not, it will be because of massive official sector selling. We consider this possibility, which we judge to be a very real one, in two longer pieces on
this subject.

Producer Hedging

Friday’s $23 explosion in gold had the following proximal causes from the producer sector;

1. On Thursday, Gold Fields of South Africa exhorted gold mining companies to stop hedging and thereby lift the gold price.

2. A class action lawsuit against the Ashanti management for imprudent hedging by a leading law firm reinforced widespread shareholder pressures on the managements of mining companies to reduce hedges.

3. Placer Dome announced it would cease hedging and deliver mine production against 2,000,000 ounces of outstanding forwards this year.

4. There have been rumors that Barrick would announce a similar decision to Placer’s.

We have been of the opinion that producer perceptions of hedging risks have soared since September/October of last year and that net producer hedging was highly negative in the fourth quarter of 1999.
Placer’s announcement that it added to hedges on the September/October rally surprised us. Perhaps there was more knee-jerk hedging on that rally than we have thought and that net producer hedging fell
by less than the many hundreds of tonnes we have been estimating. In any case, producer perceptions of hedging risks have clearly increased and it is likely that Friday’s rally triggered significant covering of
producer hedges.

Fund Buying

The Comex funds were short but apparently not to the degree they have been in the past after comparable steep price declines. The same probably applies to OTC short positions by hedge funds. Because of
the size of Friday’s price rise, fund short selling probably turned into outright buying during the day. Very substantial overall fund buying must have been compressed into one trading day.

Bullion Bank Buying

Bullion bankers have longe denied they have taken outright short positions. The rally in September/October provided evidence that they have in fact carried large net short positions. We have received reports
of outright net short positions on the order of hundreds of tonnes per bullion bank prior to that rally. These short positions are governed by value at risk strategies. Such strategies called for reductions in such
short positions after the price explosion of September/October. We assume that bullion bank short positions (not associated with the positions of official entities) have been reduced since last October.

There is a rumor that the extremely rapid rise in 30-year Treasury bond prices has caused hedge funds and bullion banks with large leveraged spread trades in Treasuries to suffer large losses. The coincidence
of the explosions in the 30-year Treasury bond price and the gold price is striking. It is argued that losses in Treasury spread trades caused these same traders to reduce leveraged short positions in gold.
There is probably some truth to this.

There are reports that Goldman Sachs, the dominant player in the gold market over the last year and a half, has suffered huge losses on both Treasury spreads and short gold positions. There is also a belief
that Treasury spread losses create a threat of systemic financial risk. We doubt both.

First, the steep inversion of the treasury yield curve is an anomaly created by an announcement of Treasury debt reduction at the very long end of this maturity spectrum. Such a price anomaly is easy to
correct. If it threatens banks and funds, the Treasury can easily eliminate the threat by announcing that it will reduce Treasury debt across the yield curve spectrum.

Second, regarding huge exposures at Goldman Sachs, we can only repeat that, to the best of our knowledge, Goldman Sachs has the best risk controls in the business. Their proprietary trading losses in 1994
tightened up these controls. The gold price explosion of last fall must have done the same. In addition such positions do not seem characteristic of their bullion department. From what we can tell, Jim Riley, the
head trader and partner in charge, is basically a flow trader who places a high a value on liquidity.

Conclusion

A delayed response to changing perceptions of risk by former short side participants in the gold market has fueled the gold market rally. The overall market environment ($30 oil, rising commodity prices,
incipient wage pressures, etc.) is not supportive of short side gold positions. The constructive chart is causing funds to cover shorts and go long. Physical demand has been on the rise, which has also been
supportive.

As we explain in a companion piece, “The Prison of the Shorts Reconsidered”, the upside price dynamics in the gold market are now explosive. They were as well in September/October of 1999. Official
selling of an undisclosed nature reversed last fall’s rally. If this price rise stalls, it will only be due to renewed official selling on a massive scale. If official selling reverses the gold price rise, as it did last fall, a yet
stronger price explosion will eventually materialize.?

[cyas]

Weiter gehts:

INSTANT ANALYSIS OF BARRICK HEDGE REVISION

By Ted Butler
Monday, February 7, 2000
www.kitco.com

This Barrick announcement was a stunner. I`ll probably
have more to say as time goes by, but I feel like I`m
playing chess with these guys.

This was a good move, almost the best they could make
under the circumstances. They bought a chunk of short-
term calls (one to two years) for $68 million, reducing
their short exposure for the term of these calls by
about 50 percent.

They also reduced slightly their forward sales and
long-term short calls.

This is no doubt a good move for shareholders. ABX is
in a better position as a result of this move.

As an aside, I stated from the get-go that it was my
goal to force Barrick to cover its shorts. I feel that
I have accomplished that goal to a large degree. That`s
the power of the Internet. That`s the good news.

The bad news is that Barrick doesn`t dress in drag
anymore. These guys are a pure hedge fund now. They
knew they couldn`t cover their shorts on a straight
metal buyback basis without blasting the market upward,
so they bought protection in the form of the short-term
calls.

They still say they believe in hedging (for legal
purposes, what else can they say?), but their actions
indicate otherwise. They`re still arrogant and try to
explain things in a schoolteacher-to-student manner,
but it remains they couldn`t buy back exactly what they
sold short because the market wouldn`t accommodate
them. So they put a hedge on their hedge. That`s great
for a hedge fund but not for a miner.

John Hathaway asked a great question on the conference
call: Who sold them the 6.8 million calls?

Barrick`s Oliphant said it was confidential, but it was
bullion banks.

Hathaway`s question was good because it goes right to
the heart of the matter -- that is, that Barrick couldn`t
have bought physical (which it sold short) or long-term
calls or COMEX paper without impacting the price, so
they turned to the scum at Morgan, Chase, and
Goldman to bail them out with completely non-
transparent OTC short-term calls.

All Barrick did was slip through the door first. The
other short miners have lost their hedging poster boy.
Let`s see what they do now.

I said how Placer was dumb as dirt for announcing they
would be buying back before actually buying back.
Barrick ain`t dumb, and didn`t do that -- but this
drama ain`t over for them either. It`ll take a while
for it to sink in, but Barrick didn`t straight-cover
their shorts cause they couldn`t. That`s because
leasing/forward selling is still inherently crooked.
How can you return collateral that`s been sold?

All Barrick did was transfer more gold liability to
Chase, Goldman, Morgan, et al. -- the financial system
-- in an attempt to prolong the manipulation. That`s
just great and what we were all hoping for.

[cyas]

WHO SOLD BARRICK THE CALLS?

By Reginald H. Howe
www.GoldenSextant.com
February 8, 2000

Yesterday Barrick Gold made its much-anticipated
announcement on hedging. As of the end of third
quarter, as reported at its website, Barrick had 14
million ounces of gold sold forward and had written
long-term call options on another 4 million ounces.

According to yesterday`s release, Barrick has: 1)
reduced its exposure on call options written to 2.7
million ounces; 2) stretched out the delivery schedule
on its its spot-deferred contracts, which now cover a
total of 13.6 million ounces; and 3) engaged in "an
important new dimension" by purchasing call options on
6.8 million ounces. It adds that the new purchased call
options "cover 100 percent of production from March 1,
2000, through 2001" at strike prices of $319/oz. in
2000 and $335/oz. in 2001.

Thus Barrick`s hedging program, according to the
release, "has been reduced from 18.8 million ounces at
the end of the third quarter to a net 9.8 million
ounces at year-end 1999."

While the numbers do not fully jibe with the prior
quarter`s, the net reduction in its hedge book of some
9 million ounces consists of 400,000 ounces delivered
under forward contracts, a reduction of 1.3 million
ounces in written calls, and the purchase of new calls
for 6.8 million ounces. Yet here is how this
announcement was interpreted by one allegedly competent
gold analyst (www.goldminingoutlook.com):

"The fact that Barrick was able to close nearly half of
its huge hedged position in the fourth quarter of 1999
(a total of 280 tonnes of gold were closed out by
Barrick in less than two months) without pushing the
gold price up by even a penny must have come as a shock
to a substantial portion of current gold long-side
speculators, many of whom assumed that Barrick was
`trapped` because it couldn`t possibly lift its hedges
(so this argument went) without causing a sharp spike
in the gold price."

But if Barrick had closed out its forward contracts by
the amount of its new purchased calls (6.8 million
ounces or 212 tonnes), it most certainly would have
caused a spike in gold because Barrick would have had
to buy physical gold.

That is not what Barrick did.

No, Barrick bought paper gold -- virtual gold -- from
someone who is either crazy or possessed of deep
pockets and a strong desire to cap gold.

Frankly, under current circumstances in the gold
market, it is difficult to imagine anyone but the U.S.
Treasury Department`s Exchange Stabilization Fund
willing to backstop call options on more than 200
tonnes at strike prices from $319 to $335.

What a day the sellers of those calls must have had
last Friday!

As for investing in Barrick, my advice would be to
identify the counterparties to those calls first. For
every $100 over the strike price, they are looking at a
$680 million loss.

[cyas]

!

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