BIS official''s comments interpreted as responding to GATA


'Midas' commentary for August 29, 2001

By Bill Murphy
August 29, 2001

Gold $273.60 up $1.70
Silver $4.18 unchanged

Surprise! Gold is not going down as the pundits
said it would due to the overpositioning of specs
on the long side. Pleasant surprise for me too.

The open interest has contracted all the way down
to 120,128 contracts, which is a drop of 12,000
contracts from its recent high. The price of gold
has fallen back too, but has not collapsed as most
analysts predicted -- especially the bullion
dealer analysts.

Reports came in from London today that some of the
big shorts were covering and that some of the
longs were much stronger hands than first thought
and that the big shorts now know that. The gold
action on Comex today also diverged from that of
the dollar, which is also a plus.

The Gold Cartel still may trash gold in the days
to come, but when the really big gold move
commences, the specs will be very long, just as
they are now.

Commentary from John Brimelow:

"Indian ex-duty premiums: AM $5.04, PM $4.97, with
world gold at $272.80 and $273. Adequate for legal
imports. India seems to be a steady buyer at these

"A number of observers have expressed surprise
thatgold has held this week, given the ominous
CFTC data, steadying dollar, and slack lease
rates. This is because they neglect the Indian

"Friends of the PGMs will have noted the metals do
not seem minded to give up their gains. UBS
Warburg has expressed the view that the Russian
delay is genuine.

"This is certainly consistent with the noisy
efforts of Japanese traders to convince the
newswires that it is not -- their record of lying
is unsurpassed. With the Bullish Consensus still
only 27% (gold's is 59%), a serious PGM rally
looks possible."

* * *

The following appeared in Tim Wood's latest
commentary at

"Again, there is no lack of precedent. An old hand
in the gold business, active when the London Gold
Pool was functioning (those evil Gnomes of
Zurich), reminded me last week how there are so
many similarities between then and now. The Gold
Pool was about manipulation, as has been every
other government pawing of gold. The only surprise
is that we should be shocked, just shocked, that
governments fiddle with the gold price.

"Intrinsic value is not enough, though. We have to
face the fact that monetarist policies have beaten
intrinsic value handsomely for many years now. Can
it last? That's the hope.

"The same old hand told me that a recent secretive
gathering of central bankers had been alarmed by
reports that new mine production of gold is
falling precipitously. The steady accretion of
reserves over the last decade has come to a halt.
The suggestion is that without a steady 2,500
tonnes coming to market each year, someone has to
make up the difference to maintain the illusion of
oversupply. Is it an illusion? Who knows anymore,
but it is Kafkaesque."

I bring this to your attention because it confirms
information that came my way months ago. David
Hale is a very respected economist and was the
keynote speaker at the Indaba gold conference last
February in Cape Town, South Africa. Associates of
mine have reasons to believe that higher-ups in
the U.S. government receive feedback from David
about world economic issues, especially those of
strategic importance.

It was not long ago that David contacted one of my
GATA colleagues inquiring about gold mine supply.
The comment passed on to me at the time was that
there was concern about mine supply dropping. The
query was to learn as much as possible about what
the future gold production picture looked like.

Tim Wood is correct. The Gold Cartel is very
concerned about how they are going to continue
"the illusion of oversupply."

* * *

There has been a great deal of commentary this
past year about Fed Chairman Alan Greenspan and
his apparent reversal regarding gold. The rigging
of the gold market these past years seemed to be
at odds with his earlier writings.

On June 25, 2001 Greenspan wrote to Kentucky Sen.
Jim Bunning as follows:

"I would like to take this opportunity to confirm
the statements I made last year regarding the
Federal Reserve and gold in a letter to one of
your colleagues, Sen. Joseph Lieberman. In that
letter I said:

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

* * *

The following email was sent to me by sleuth Andrew. Perhaps it
sheds some light on the subject:

"I was reading the March 1995 minutes of the
Federal Open Market Committee and came across an
interesting statement from Greenspan. On Page 9 he
says, 'In other words, we have gone to a market
relationship and basically to an arm's-length
approach where feasible in an effort to make
certain that we don't inadvertently get caught up
in some of the Treasury initiatives that they want
us to get involved in. Most of the time we say

"Greenspan might be alluding here to initiatives
involving interventions in the gold market. If so,
this comment would indicate that he isn't
comfortable with the Fed involving itself in the
gold market and that he'd rather leave that to the

* * *

James Turk sees it this way in an email to Chris

"The quote from the March 1995 FOMC transcript is
accurate. However, it is purely speculative to
suggest that Greenspan was referring to gold

"The FOMC was talking about warehousing
transactions the Fed was doing for the Exchange
Stabilization Fund, and specifically in regard to
the Mexican bailout then under way. And Greenspan
used the words 'Treasury initiatives' in a general
way, basically saying that he would like to keep
an arm's-length relationship between the Fed and
the Treasury so that the Fed can say yes or no to
any scheme (i.e., initiative) the Treasury dreams

"However, there was one thing interesting about
this part of the FOMC meeting. The discussion
seemed to be that the Treasury should use private
market participants (instead of the Fed) for the
Treasury's 'initiatives,' and that basically the
Fed should be used only if there are good reasons
for doing so. One of these 'good reasons' cited by
Greenspan was that if the transaction contemplated
by the Treasury was too big for any private market
participants to handle. Therefore, my reading of
this passage gives credibility to the notion that
the Treasury may be using private market
participants (Morgan-Chase, Citibank, et al.) to
handle Treasury initiatives in the gold market.

"I thought my perspective may be useful. Others
may have a different interpretation."

* * *

Chris Powell fired back with:

"Hi, James:

"Thanks so much for the research and analysis of
that Greenspan quote. I'm with you. Given your
perspective on it, I think it's important.
Whatever Greenspan was talking about, it shows
that he doesn't always want to be a part of what
Treasury is doing -- and it sheds light on his
letter to Senator Lieberman on January 19, 2000,
where he renounced intervention in the gold

* * *

Chris met with Senator Lieberman today in

So will the real Alan Greenspan please stand up?
And when he does, would someone please ask him
what the conversation in the Fed minutes regarding
"gold swaps" was all about?