Gold miners are closing hedges faster than central banks are selling

Section:

Plunge protection and rallying shares

By Anthony Hilton
Evening Standard, London
March 18, 2003
http://www.thisislondon.com/news/business/articles/timid60605

Stock markets rallied last week because it looked as if war
with Iraq was going to be postponed. Yesterday the markets
rallied because it looked like the war was about to begin.

The two reasons contradict each other. The explanations do
not make sense unless the markets are being rigged.

And who might want to do that?

Well, the U.S. government would. The last thing President
George W. Bush needs is for his invasion of Iraq to set off
a stock market crash, a collapse in the price of the dollar,
a rush into gold, or a spike in the price of oil. It is the
kind of distraction that could be very unsettling.

The American public's support for Bush's Middle East
adventure is not so cast-iron strong that he wants to tempt
fate. So, according to the conspiracy theorists, the U.S.
authorities have been intervening anonymously in the
markets to move them in the direction they want and
to burn out any short-term speculators positioned the
other way.

So do we believe the conspiracy story?

Well, it is known that America has a secret standing
committee known unofficially as the "plunge protection
team" which consists of the President, the Secretary of
the Treasury, the Federal Reserve chairman Alan
Greenspan, various other senior administration officials
and the leading movers and shakers of Wall Street.

The official purpose of this committee, as detailed a few
years ago in the Washington Post, is to stabilise unruly
markets for the greater good of the U.S. as a whole.
Seeking to prevent a military operation being undermined
by panic in the financial markets would appear to be well
within its brief.

The conspiracy theory also seems to fit the facts. The
more astute watchers of markets say that the only
explanation for what began last week and continued
yesterday was a U.S. government-inspired support
action to get markets where they wanted before the
outbreak of hostilities.

The trick about buying and selling in markets is to
complete the trade without moving the price. The
massive and sudden surge of activity last week and
yesterday made sense only if it was intended to shift
the price.

Last week and again precisely at 3.30 pm yesterday,
massive selling undermined the euro on the currency
markets and made the dollar correspondingly stronger.
To the minute, there was similar sudden heavy selling
in the gold market.

Last week this bashed the metal's price from $350 to
nearer $330 and yesterday it killed off the recovery. So
much for gold as a safe haven in times of war.

Last week again, heavy selling and officially-inspired
rumours of a fleet of loaded Saudi tankers heading this
way brought the price of crude back from its peak.
Yesterday the price was undermined by helpful rumours
that the U.S. government would release some of its
vast strategic oil stockpile.

All very convenient, as was the rally in equities led
by the New York's Dow Jones Industrial Average. The
Dow, surprisingly, is one of the world's least
sophisticated indices. It is composed of 30 shares but
these are not weighted for market capitalisation, so the
Dow's value is much easier to manipulate than Wall
Street's size and importance would suggest. Because
its shares sell for more than $130, one company, 3M,
accounts for more than 10 percent of the Dow's value.
IBM is another such heavyweight. Aggressive buying of
these two companies has a remarkable effect on the
index -- certainly enough to create a bandwagon on to
which others will jump. Needless to say, 3M has seen
huge volume in recent days.

Convinced?

We may not know what really happened for months,
or even years. But there has been some astonishingly
ham-fisted dealing in recent days if it was not deliberate
market manipulation. And given that truth is the first
casualty in war, why should we expect markets to be
a no-go area for the architects of spin and the
conditioners of expectations?

These markets are no place for innocents or innocence.