Gold may climb on higher oil costs, lower dollar, Bloomberg survey says


From "Midas" commentary
for Sunday, October 10, 2004

By Bill Murphy

GATA has struck paydirt once again. The following is an
exchange between a supporter in our GATA army and
Rainer Widera, head of international financial statistics
for the Bank for International Settlements.

* * *

Dear Sir:

I am looking for some information on the gold market.

It has been noted by some gold market observers that
for the fourth quarter of 2001, Gold Fields Mineral
Services reported that the delta-adjusted hedge book
for gold stood at 2,924 tonnes. At this point, the
notional value of gold derivatives reported to the Bank
for International Settlements was $231 billion. But as
of December 31, 2003, the BIS reports gold derivatives
of $344 billion. Meanwhile, producer hedging declined
from 2001 to reach 2,166 tonnes at the end of 2003.

How is this possible?

It has always been claimed that the derivative position
reflects the hedging of physical gold by the producers.
How then can the derivatives position increase while
the physical hedge position decreases? Can this be
explained by an increase in speculative short
positions unrelated to mining hedge books?


-- (Name Withheld)

* *

Dear ----:

Thank you for your question on the relationship
between producer hedging in gold and the BIS
data on open contracts in gold derivatives.

Please note that the BIS data are collected from
banks and that their open gold derivative contracts
reflect trading in the forward gold market not only
with producers of gold but with other commercial
banks and central banks as well.

It is therefore not possible to establish a 1:1
relationship between the BIS data and the hedge
book of producers for gold published by GFMS.

Best regards,

Rainer Widera
Head of International Financial Statistics
Monetary and Economic Department
Bank for International Settlements
Basel, Switzerland

* * *

This is the key to understanding the real gold market,
what GATA has discovered over the years, how the
Gold Cartel has suppressed the gold price for years.
It is the key to understanding what the gold fraud is
all about.

It seems that GFMS and the World Gold Council
are really fronts for the Gold Cartel. They have refused
to deal with the gold price suppression scheme --
refused to acknowledge that the central banks have
surreptitiously dumped more than 13,000 tonnes of
gold to keep the price far lower than it would have
been if allowed to trade freely.

How else to explain the silence and unwillingness of
GFMS and the World Gold Council to confront such
blatant contradictions to their year-after-year reporting?

Here are some comments on what makes the specifics
of this BIS statement so significant:

"Please note that the BIS data are collected from banks
and that their open gold derivative contracts reflect
trading in the forward gold market not only with producers
of gold but with other commercial banks and central
banks as well."

This statement confirms what GATA has been saying all
along. GATA's conclusion has now been validated not
only by the market (outstanding derivatives are growing
even as producer hedge books are being reduced) but
now by the BIS, which is telling us that banks are using
derivatives and that they are using them for their own
books -- their own proprietary trading and position taking.

GMFS numbers are flawed because they do not account
for the banks that are short gold -- that is, the gold
liabilities of the banks.

"It is therefore not possible to establish a 1:1 relationship
between the BIS data and the hedge book of producers for
gold published by GFMS."

So the gold industry has it wrong. They can't explain the
derivatives numbers. They can't explain the huge amounts
of gold mobilized from the Federal Reserve Bank of New
York and the United Kingdom, which by themselves dwarf
the industry consensus and don't even take into
consideration the gold mobilized from Switzerland and
other financial centers from which hard numbers are not

That GFMS and the World Gold Council refuse to deal with
this blatant contradiction reveals their lack of intellectual
integrity. Both these organizations have done incalculable
harm to gold investors, gold companies and their
shareholders, and the poor people of sub-Saharan
gold-producing countries. Both these disgraceful operations
should be disbanded.

Any company supporting these organizations should be
ashamed of itself for contributing to a shallow hoax. Why
aren't gold producers up in arms over the scam perpetuated
by the World Gold Council and Gold Fields Mineral Services?


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Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112

Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889

178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Fax: 514-875-6484

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
Ed Lee, Proprietor

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker



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