World Gold Council starts talking about gold as money


Copyright 2001,
Not to be reproduced without permission


By Bill Murphy
September 27, 2001

Gold $290.95 down 80 cents
Silver $4.58 unchanged

The United States has made it clear the past couple of
weeks that the G-10 central banking community is going
to maintain stability in the financial markets.

It could not be more obvious that they are doing just
that. They are keeping gold below $292. The stock
market recovers miraculously every day with the Dow
trading above where it reopened a week ago Monday. The
dollar has gained ground since its early bashing after
the terrorist attack in the United States.

You can be sure that former Treasury Secretary Robert
Rubin instructed Congress what had to be done during
his recent visit to Washington. After all, it was he
who created the gold and interest rate volatility bombs
and he wants to save his butt. Rubin knows the
financial ramifications of what he created. The only
way to keep the derivative bombs from blowing now is to
calm down the financial markets. That can be done by
holding up the stock market, intervening to keep the
dollar strong, and keeping gold below $300.

A great "free market" system we have here in America.

If they did this only during times of crisis, it would
be fine. But, as we all know, one thing leads to
another -- and then, before you know it, there is no
free market. That is what happened to gold.

Without rehashing everything again, the big problem for
Gold Czar Rubin and the Gold Cartel is that they are
going to run out of physical gold to keep the gold scam
going. That could happen at any time.

I would love to be on the fly on the wall and catch
Rubin's expression when this shows up:

* * * -- Make way for a new "Spirit of America"
coin commemorating victims of the Sept. 11 terrorist
attacks. House Republican Conference Chairman J.C.
Watts, R-Okla., and Rep. Eliot Engel, D-N.Y., said they
plan to introduce a bill creating a coin depicting the
American flag, the Pentagon, and the World Trade Center
towers. "This coin will serve not only as a reminder of
the tragedies inflicted upon our nation, but more
importantly, capture forever the spirit of American --
one of a united people whose belief in freedom has
never swayed," Watts said in a statement. The
legislation would authorize the U.S. Treasury to mint a
limited number of gold coins and an unlimited number of
silver and clad coins, with all proceeds going to a
fund for victims and their families.

* * *

One of the problems the Gold Anti-Trust Action
Committee has had over the years in explaining our
position is that much of the evidence is very

But finally an article has surfaced that ties together
much of what GATA has presented about the size of the
gold loans. It is only a few paragraphs long, but says
it all.

GATA has maintained all along that the U.S. Treasury,
Federal Reserve Chairman Alan Greenspan, the bullion
banks, and the spokesmen for the gold industry have
been disingenuous about the gold loans, with most being
outright liars.

To set the scene: Cafe member Andrew H. sends us the

* * *


If I'm not mistaken, the Bank for International
Settlements official who was quoted by the Financial
Times said that ECB countries had lent approximately
2,200 tonnes of gold and that total lending amounted to
5,200 tonnes. It might be a good idea to assume for a
moment that he was telling the truth, at least from a
technical perspective. From that, we know that total
loans are 5,200 tonnes.

Added on to that would be all the swaps, repos, and
deposits that are still outstanding (that is, the
central bank that originally owned the gold hasn't
recovered it).

One question that needs answering is the following: If
a central bank does a gold swap with another central
bank, and the receiving central bank sells the gold,
has a loan taken place at all?

From my vantage point the answer is no, as only a swap
and a subsequent on-sell have occurred. If this sort of
activity was prevalent among central banks, many more
thousands of tonnes could be added to the 5,200 number
offered by the BIS official. Effectively, 5,200 tonnes
is the floor level of total gold transactions that are
not outright sales but where bullion leaves the vaults
and enters the physical market.

I think deposits and repos would work in a somewhat
similar manner (no loan taking place at all), though
I'm not certain of that and will defer to the experts.

One more thing I should mention: For every member
country the International Monetary Fund publishes
"Official Reserves and Foreign Currency Liquidity." The
fourth asset listed for each country is "gold
(including gold deposits and, if appropriate, gold
swapped)." Only if gold swaps were somewhat pervasive
would this even be listed. Moreover, both deposits and
swaps were never included in that BIS official's

Best regards,


* * *

I think that what Andrew says is straightforward. It is
a way to account for GATA's claims that the gold loan
loans are really two to three times the number given by
gold industry spokesmen and the BIS. The gold swaps can
account for the physical gold not counted in the
official "gold loan" statistics.

That takes us to the IMF meeting in Santiago, Chile, in
October 1999. Mike Bolser found the minutes of this
meeting, part of which was dedicated to explaining how
gold transactions should be accounted for. I call it
the Gold Cartel's Manifesto.

Which brings us to Cafe member Steve Hickel, who
somehow located the following story in The Manila
Bulletin. It basically a very dry Philippines business
story -- except for the last four paragraphs.

* * *

Balance of payments incurs
$309 million deficit in January

The Manila Bulletin
Wednesday, February 16, 2000

For the first time since the currency crisis, the
country's balance of payments (BOP) position yielded a
deficit of $309 million for the month of January this
year from a surplus of $298.28 in December

Bangko Sentral ng Pilipinas (BSP) Officer-in-charge and
Deputy Governor for bank supervision and examination
Alberto Reyes said the BOP figure was mainly the change
in net international reserves (NIR).

Reyes disclosed that NIR as of end January stood at
$11.5 billion.

NIR refers to the gross international reserves (GIR)
less BSP's short-term liabilities.

Despite this development, it still signals that the
economy could be slowly perking up.

A declining BOP as well as current account position is
an indication that there are more business activities,
particularly import demands.

Last year the BOP netted a surplus $3.839 billion, more
than double the $1.359 billion surplus posted the
previous year.

On the other hand, Reyes reported the country's GIR
dropped to $14.78 billion for January compared to $15.1
billion registered in December last year.

At this level, the GIR can answer for about 4.3 months
worth of country's import bills of goods and services.

Reyes traced the 2.2 percent decline in the GIR to the
higher debt service payments of the national government
for its maturing obligations.

In fact, the Estrada economic managers have already
jacked up by almost 20 percent the national
government's debt service payments for this year.

Based on the approved General Appropriations Act (GAA),
the national government's debt service payments for its
obligations falling due for this year stood at P127
billion, up by about P21 billion against the
preliminary interest payments for 1999, placed at
P106.3 billion.

Reyes explained that the lower GIR for the period in
review was also due to the revised accounting of
international reserves as recommended by the
International Monetary Fund (IMF) starting January of
this year.

The IMF wants member countries like the Philippines to
adhere to the new procedure, particularly relating to
the new treatment of gold swaps -- gold under a swap
arrangement with a non-central bank remains part of

However, a liability is deemed incurred corresponding
to the proceeds of the swap.

Before this, the arrangement was considered as sale of
gold with commitment to repurchase.

* * *

Gotcha, Gold Cartel, gotcha!

Simply put, gold that is swapped out and sold is still
to be counted on the books of the Philippines, which no
longer has it. The Philippines then has to record the
liability of the transaction on its books. Yet the gold
remains as part of its reserves as well.

So much for greater transparency in the financial

As this became the new IMF Manifesto in October 1999,
it indicates that is what all the central bankers are
doing in countries that belong to the IMF. That can
explain how GATA and Frank Veneroso come out with gold
loan numbers of 10,500 to 16,500 tonnes, loans two to
three times the estimates of the gold industry. All we
have to do know is revise our terminology a bit and say
tonnes of "loans/swaps."

This is the tidy little secret that the gold world is
trying to keep everyone from finding out. But, alas,
the Gold Cartel now HAS been found out.

Another Cafe member sent me an interview that Gold
Fields Chairman Chris Thompson did with Alex Hoggs of in South Africa. Following are

* * *

MONEYWEB: Michael in Johannesburg.

MICHAEL: Chris, I just want to follow up on what you
just mentioned about the hedge. I'm an amateur
technical analyst and I've perused the web quite
extensively, especially a site called Gold-Eagle, and
they've been pushing this whole conspiracy theory about
a guy taking big derivative positions.

Apparently there's a rumour floating around that if
gold does bolt through $300, $325, a company like
AngloGold will be in big trouble. Barrick was in a
similar position and they went for Homestake, and the
rumour goes that if gold does bullet through that $300-
$325 level, you could become a target for AngloGold.
... and when you were trying to do that deal with
Franco-Nevada, apparently the advisers to the
government, being J.P. Morgan, prevented that deal from
taking place, and opening the doors for AngloGold.
Could I get some comment?

CHRIS THOMPSON: Let me start with the conspiracy
theory, which has got a fair bit of exposure. Most of
the case that is being created in the conspiracy theory
is in my view mostly circumstantial. I don't think any
hard evidence has ever been produced, and the producer
community has always been a little bit chary of this
whole theory. The GATA group, which is the Gold Anti-
Trust Action Committee, have launched a suit against
individuals of the U.S. government, aiming frankly to
get into what's called discovery ... where they are
then allowed by law to go into all the files and see if
they can prove a case. That's under way. Whether it
will ever turn into anything, I don't know. I'm not
particularly hopeful. Regarding Anglo's hedges at
higher gold prices. ... Anglo's hedges are mostly
margin-free. So I would be very surprised if you would
ever get them into any trouble. ... I think they would
just be concerned about rolling them. But to say they
would get into trouble would be a stretch.

* * *

How disappointing! Another important gold executive
weenies out. What Chris Thompson just said is like
saying the evidence against Osama bin Laden is only
circumstantial, so why has America declared war? Or
that the United States has not presented to the press a
memo from bin Ladin to the terrorists that says: "We
shall strike the United States with plane bombs on
September 11."

GATA has nothing but hard evidence if you can add 2
plus 2. In America a jury need only be convinced beyond
a reasonable doubt to convict a defendant. Many
convictions are based on circumstantial evidence. GATA
has enough evidence against the Gold Cartel to send
them to the electric chair if it was a murder case.

To this day no one in the gold industry has refuted our
claims against the Gold Cartel on a specific basis. How
come? Oh well.

Well, to have someone of Thomson's stature say that
GATA has compelling evidence might be too much of a
shock for me anyway.

Speaking of shock:

Dow Jones reported that a technical report by J.P.
Morgan now says to buy silver and gold on dips. That
was a quick switch that must fry Morgan's cabal

From John Brimelow:

"In essence gold is pinned between the most
geographically diverse physical offtake in 20 years,
and suspiciously resolute selling around $292. COMEX
volume estimated at 18,000 today was quite heavy for a
still abbreviated session and a semi-holiday. As usual,
a large proportion (45 percent) occurred in the last
hour, as gold was trying to rally."


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