What can you do for gold? Buy some on Comex, and TAKE DELIVERY

Section:

8:34p ET Monday, December 16, 2002

Dear Friend of GATA and Gold:

Nobody in the gold world is more brilliant that GATA
consultant Frank Veneroso, and he has kindly
consented to reproduction of the paper he and
Declan Costelloe presented to the Fifth International
Gold Symposium in Lima, Peru, on May 17 this
year. In that paper Veneroso and Costelloe spelled
out in laymen's terms the extensive statistical and
anecdotal evidence that 1) the gold short position
is far greater than consensus estimates,
2) governments have been trying to manage the
gold price surreptitiously, and 3) this management
will fail eventually.

Here's a great excerpt from the Veneroso/Costelloe
paper:

The existence of a positive flow of borrowed
gold requires a "deficit" in the gold market. When
this happens, the women of the world become the
ultimate longs in a market in which speculators
and mining companies are the shorts. The shorts
do not realize the women of the world are the longs.
Nor do the women themselves. What do those
longs do when the gold price rises? In aggregate,
nothing. Some cash in their gold; but others are
inclined to value gold more and buy more. So the
women of the world, the longs, are not inclined
to deliver their gold to the shorts.

In effect, gold lending led to an inadvertent corner
in the gold market by the women of the world.
The shorts didn't realize this, the bullion banks
didn't realize it, the lending central banks didn't
realize it either. In effect, they jointly acted to
create unwittingly a "prison of the shorts."

But, you may ask, how have the shorts in the
futures and forward market, in aggregate, been
greatly reduced? How can that be? Very simply,
the official sector has recognized the existence of
this inadvertent corner, this prison of the shorts,
and it has had to intervene. It has quietly taken
the gold shorts from private speculators and
producers and transferred them to their books. In
other words, the official sector intervened to
prevent an explosive gold derivative crisis.

We conclude from our argument, based on the
development of an inadvertent corner in the gold
markets, from a "prison of the shorts," that, since
the Long-Term Capital Management crisis in late
1998, the official sector has been managing the
price of gold.

You can read the Veneroso/Costelloe paper at
the GATA Internet site here:

http://www.gata.org/Veneroso1202.html

Show it to people who claim that there is no evidence
of official suppression of the gold price. There's
plenty of evidence here, provided by a renowned gold
market analyst.

CHRIS POWELL, Secretary/Treasurer