The gold train will be the last train out



By Bill Murphy

Gold $277.50 down $1.50
Silver $4.55 down 4 cents

The Gold Cartel gave it everything they had trying to
break gold down below the critical breakout $275 area
on Friday. That major resistance point has become a
major support point.

The battle between the Gold Syndicate and the Gold
Cartel should be in full fury this week. The cabal's
desperation to keep gold from holding any kind of rally
is beginning to show to the world. The Russian story
was a blatant distortion of fact to orchestrate the
price of gold lower. The latest:

* * *

Putin says Russia plans no gold sales for flood aid

Yerevan, May 25 (Reuters) -- President Vladimir Putin
said Russia had no plans to sell gold to raise funds to
help victims of floods in Siberia`s Yakutiya region.

Russian news agencies on Thursday quoted Putin as
saying he intended to sign a decree on gold and diamond
sales if a clear scheme was presented to him "to help
people now on the streets."

But Putin told a news conference in the Armenian
capital, Yerevan, where he is attending a CIS security
summit, "You misunderstood me."

"I didn`t say that Russia intends to sell gold. I
reacted positively to a proposal on the possibility of
a mutual settlement of debt on a so-called gold loan
that Yakutiya took from Russian authorities," he said.

* * *

The big news this week could come out of the Comex. All
eyes will be on the June open interest, which stands at
50,347 contracts with only two trading days left until
first notice day on Thursday.

While there are 827,000 ounces of gold in the Comex
warehouses, only 367,000 ounces are eligible for
delivery. Each June gold contract is 100 ounces, which
means there are still more than 5 million ounces of
longs that could compete for only 367,000 ounces of
gold available for delivery.

The June open interest is going to come down sharply in
the next two days, but 50,000 contracts is a BIG number
for this late into the delivery period, especially
since the overall open interest is very small at only
140,722 contracts.

There may be some other kinds of bars around, but Comex
requires 100-ounces bars with a .9999 fineness. Central
bank bars are 400 ounces -- so one cannot just call on
Fed Chairman Alan Greenspan to help out on this one.

The last time there was a squeeze potential was in
August 1999, which I reported on. Scotia bailed out the
shorts by coming up with deliverable gold at a hefty
premium. But the big news there was that the Federal
Reserve called up Refco and asked it to request that
its clients not stand for delivery -- the same Fed that
continues to deny any interest in gold.

The chronically high lease rates tell us that physical
gold has become tighter all over the world. If there is
a squeeze on the June Comex contract, it could set off
some serious fireworks.

I know of one Comex clearing firm that is standing for
delivery for a client for some of the remaining Comex

If there is a squeeze coming, throw out all the
technical jargon being bandied about. It will be
meaningless. In 1994, I think, Phibro was planning a
silver squeeze. They had it all figured out. They had
tied up much of the available physical silver for
delivery and purchased a huge amount of 520 silver
calls. Silver expired at around $5 going into the
option expiry. When silver closed at $5 the eve of the
expiry, the option writers breathed a sigh of relief
and were pleased with the money they had made off of

Their joy did not last very long. Phibro announced that
it was exercising its 520 calls. The next day the price
of silver went berserk, way up. The shorts were caught
with their pants down and were slaughtered.

The gold market is very tight. Anything can happen from
here on.

It is not an everyday occurrence to get letters from
the White House. My eyes surely lit up on Saturday when
I saw the White House envelope. This is the second one
from Lawrence Lindsey, economic adviser to The
president, to GATA in three months. This means that the
Bush administration is taking our allegations very
seriously. President Bush's economic adviser has better
things to do than to write to me.

I am convinced that the new Republican administration
is either ending the gold fraud or tying to figure out
how to do so without creating a financial debacle that
was handed off by the Clinton administration.

I found the date on the letter, May 30, to be most
peculiar. Could it have anything to do with what Bob
Chapman reported -- that Greenspan gave the bullion
dealers until to the end of May to clean up their
participation in the Clinton administration's rigging
of the gold price?

Something tells me this letter to GATA is most
important. It certainly provides cover for the Bush
administration, indicating that it is behaving
deliberately but with market awareness, for it surely
has to know what is coming. However, the new
administration really has no choice but to gradually
expose the scandal or take the blame itself down the
road. If it does so, the problem will be even bigger as
the gold loans grow by 1,000-2,000 tonnes a year to
meet the natural supply/demand deficit.

The administration's timing could not be better if it
wants to pay back the Democrats for winning over
Senator Jeffords and taking control of the U.S. Senate.

One thing for sure. Word is out about the manipulation
of the gold market all over the world.

GATA supporter Jay Taylor in his J. Taylor's Gold &
Technology Stocks Weekly Telephone Hotline reported the
following in yesterday's dispatch to subscribers:

* * *

Watch the Dollar for an Indication of Doom

On March 6 and 7 there was a meeting of top Russian
politicians, bankers, and economists in Moscow.
Sponsored by an agency of the Russia government, the
meeting focused on the U.S. economy. The conference
attracted some 200 investment bankers, scholars,
diplomats, economists, and members of the Russian
parliament. The two main concerns addressed at the
conference were the following:

1) If the U.S. economy crashes, how does the rest of
the world keep from crashing too?

2) Given the ever-more-obvious weaknesses in the U.S.
economy, what can Europe and the industrialized world
do to achieve a measure of independence?

The Russian conference, which of course was not even
mentioned in the U.S. press, is just another example of
a growing awareness around the world that something is
terribly wrong with the global economy and that an
overvalued U.S. dollar is at the heart of the problem.

Interestingly, the manipulation of the U.S. gold
markets by the Fed, Goldman Sachs, and Robert Rubin was
openly discussed at the Russian conference. Ironically,
the scholars at the Russian conference appeared to have
a clearer idea that the U.S. economy is in trouble and
why than do establishment U.S. analysts, who seem to
know less about free markets than do the Russians.
Someone is telling our media not to cover the gold
manipulation story.

After Ron Insanna covered it initially when Bill Murphy
launched GATA, the U.S. press has marginalized any of
us who stand up for GATA on the merits of its
arguments. I think that may be about to change, but for
now, the merits of the GATA case are simply not being
given the light of day in America, though GATA is
credibility overseas.

The strength in the gold shares on Friday was striking.
Volume in the general stock market was the lightest of
the year, yet the volume in the gold shares was very
heavy in a rising gold share market that diverged from
a weak bullion market. Physical gold was lower to
sharply lower all day. The senior gold shares barely
blinked and were firm all day. The XAU finished at
60.99, up 1.66 or 2.8 percent, while the general market
sold off. The Gold Cartel dropped gold $20 from its
explosion highs, but the shares are not far off their
highs. A very positive sign.

It is nice to see gold companies like Claimstaker
Resources and Samex show their support for GATA. I have
met both companies' CEOs -- Nick Ferris of Claimstaker
and Jeff Dahl of Samex. Both are first-class guys and
know their stuff.

As long-time Cafe members know, a good deal of my
investment funds are tied up in Golden Star Resources.
Someone keeps bopping it down on rallies. Must be a
stale long who wants out. That is not uncommon, as many
money managers who invested in gold shares have been
fired. Their holdings are often inherited. The new
money manger who has no interest in gold or goldshares
usually waits for rallies like we just had to sell.

GSR CEO Peter Bradford is doing a marvelous job in
these very tough times (an understatement) for
junior/exploration gold companies.

"DENVER, May 24 /PRNewswire/ -- Golden Star Resources
Ltd. is pleased to announce that it has reached an
agreement with Prestea Gold Resources Limited that
paves the way for the acquisition of the Prestea
surface concession in Ghana."

It looks like GSR will pick up five to 10 years' more
of gold supply to feed its mill. This is very important
as this mill in Ghana makes the company cash-flow
positive at around $275 gold. That supports its
maintenance its superb gold exploration finds in the
Guyana Shield.

All I can say is that you know the kind of analysis
that Frank Veneroso does. Few are more thorough. Golden
Star Resources is his No. 1 stock pick. It is a steal
at these prices.