The most gold-friendly speech by a central banker since DeGaulle''s days


9:08p ET Tuesday, October 5, 2004

Dear Friend of GATA and Gold:

GATA supporter Dan Norcini, a professional commodities
trader, has written a wonderful essay about how the gold
market differs mysteriously from all other commodities
markets. Don't let the technical title scare you -- "The
Anomalous Open Interest Pattern of the Gold Market"
-- for the essay is really crystal clear and not all
that technical.

Using some simple charts, Norcini shows how the sellers
of gold on the commodities exchanges, unlike all other
sellers of commodities, never run out of money or product,
and thus must be very different from all other traders
on the commodity exchanges.

Norcini puts it this way:

"The simple truth is what far too many of the gold
'experts' are unable or unwilling to comprehend -- that
is, the single group of traders who have consistently
been on the short side of the gold market for the last
four years DO NOT RUN regardless of the price action.
No matter what the size of their paper losses, they
never seem to run. Losses that run into the
billion-dollar range seemingly do not matter.

"That is simply unheard-of in the realm of futures

"The proof of this assertion is contained in the Comex
gold continuous chart for the last four years.

"Keep in mind the axiom I have laid down: Losers
eventually run out of money and are forced to abandon
their positions due to insufficient capital to meet
margin calls. In the process of so doing, the open
interest begins to contract, revealing the exit of
these losing traders.

"With that in mind examine the gold chart below and
look at each peak in the gold price and then look at
the open interest graph directly above the chart. I
have drawn a dashed vertical line to facilitate the
analysis. Notice that at no time during the last four
years have we experienced anything remotely
resembling the soybean chart in our previous example.
Not once has the gold price moved sharply upward
while accompanied by FALLING OPEN INTEREST.

"Again, to repeat in a slightly different manner: Not
once in the last four years have those playing the short
side of the market been run out of the market while it
has powered upward. Without exception, the entire rise
in the price of gold has been met by FRESH SELLING."

In short, Norcini has documented surreptitious
intervention against gold by central banks -- the
only traders who never run out of money, because
they create the stuff out of thin air whenever they

Norcini also shows that this is no longer terribly
discouraging to the gold side:

"In spite of all their infernal meddling, gold
continues to power onward and upward. Their efforts
to derail it are proving as self-defeating as spitting
into a hurricane. Each time gold is knocked down, it
finds support at higher and higher levels.

"So go ahead, bullion banking boys, give it your best
shot. Go ahead and sell it down; we will be there to
buy it from you. The hundreds of thousands if not
millions of us who believe in the yellow metal will
have the last laugh and see the day when your defeat
is final and ignominious.

"You are losing; we are winning. Requiescat en pace!"

"Requiescat en pace"? Norcini is too charitable. Maybe:
"Exuro in abyssus." In any case, don't miss his essay.
You can find it at Gold-Eagle here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker



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