The Challenge Facing GATA, Plus a PS re. Bema Gold


Dear Friends of GATA and Gold,

Here is a four-in-one posting of
with Answers from GATA secretary Chris Powell, mainly.

As a fifth item, I have included an account of an exchange of e-mails
between Jeffrey M. Christian, Managing Director of the CPM Group and
myself concerning a posting on 24 March that needs correction.

There have been several positive feedbacks to the essay The Challenge
Facing GATA, which was posted yesterday. I shall collate the responses
into a posting for tomorrow, 31 March, or the day after. So if you have
VIEWPOINTS to share on this posting, please send them as soon as

For now,
GO GATA, Go Gold,

Boudewijn Wegerif (Bodwin)
Moderator GATA E-mail Group

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Jude Wanniski, former editor of the WSJ, has a provocative essay on the
role of gold in the deflationary currents of our existing world economy.
September 25, 1998, can be read at, along with others
on related subjects. He is obviously well connected in "Big Media"
circles and has a link to "The Drudge Report" listed (ahead of the link
to the Washington Post!!!) on his home page.

If GATA is correct, and I'm not convinced myself yet, the story should
easily be the next big scandal for Matt Drudge. He almost got Clinton
removed from office. Maybe he'd be able to scoop the mainstream media on
this one, too. If Drudge is good enough for Wanniski you may want to
consider giving him a call.

One of the major problems with most efforts such as GATA is the failure
of the insiders to boil the issues down to facts that are clear,
irrefutable, and understood by the general public. I know this is not
easy to do with subjects as abstract and complex as world politics and
economics. Much of what gets written is endless whining about political
hypocrisy and esoteric controversies.

You could do much more to help me become a supporter of GATA by taking
the Jude Wanniski essay and critiquing his main points about the role of

I do hope you are correct and wish you all the best of luck in your

GO GATA COMMENT: There is always room for improvement, Draggon Tooth. I
like much of what Jude Wanniski writes. However, in reading the price of
gold as a barometer of deflationary and inflationary pressures, as in
the essay you point to, I don't read Wanniski allowing for the
artificial price suppression that GATA is addressing.

Remember, we are all volunteers on the GATA E-mail Group. I have too
little time to spare right now for wording a fair critique. Maybe you,
or another GATA activist, would like to do it, and then I will post it
to members.

Regarding Matt Drudge, yes GATA members, the URL is, and the address for your newsworthy e-mails is Spare a few minutes to let Drudge know that you
are a GATA member and why. That way, the way will have been cleared for
him to follow up the leads when Berger and Montague and and PR outfit
are brought into play.

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GATA Secretary Chris Powell Answers:

Q - What happens to central bank gold that is leased?

A - Sometimes borrowers take possession of it. Sometimes
they don't but leave it with the lender and sell paper
secured by the leased gold.

Q - What happens to central bank gold that is leased?

A - Sometimes borrowers take possession of it. Sometimes
they don't but leave it with the lender and sell paper
secured by the leased gold.

Q - Is the leased gold transferred from the central
bank's vault and actually sent somewhere?

A - Sometimes.

Q - Is there merely a paper transferrence of ownership
while the gold still sits in the central bank's vault?

A - Not for leased gold; ownership doesn't change with
leased gold. But ownership of gold sometimes changes
even as the actual bullion remains in the central
bank's vault or the vault of the Federal Reserve Bank
in New York.

Q - Will coin sales eventually eat into central bank
gold reserves?

A - Insofar as central banks have sold gold in recent years
and are always selling gold somewhere, transferring
gold from vaults to the marketplace, yes, this is
already happening to some extent. However, figures from
the Free Market Money and Gold Report
show only 9 per cent of about 110 000 tonnes of above
ground gold stock is made up of private bar and coin,
compared to 31 percent government monetary gold reserves,
31 percent monetary jewelry, 19 percent fashion jewelry
and and 10 percent for denistry and industrial use.

Q - Can central banks that have leased gold get left
high and dry?

A - Yes. It has happened. Borrowers of central bank gold
have defaulted sometimes.

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Not having an in depth understanding of gold and the economy, I have a
question that may seem silly. If the price of gold is trully being held
down by individuals that stand to loose much by an increase in the price
of gold because they must make loan payments based on a "floating"
interest rate tied to the price of gold --- why wouldn't these
individuals hedge by buying tons of gold commodity call options and let
the price of gold rise and make tons more money on the options, because
of leveraging, than any increase on their current gold loans. Please
send response to


It's quite possible that gold's enemies ARE buying call options as well
as pushing the gold price down and making money in both directions
within a range. But gold's enemies are in the paper money business and
their wealth depends on the general suppression of hard money. With call
options they might make some money on an increase in the price of gold,
but if a rising gold price deflated the stock and bond markets, they
would lose a lot more than they made.

GATA chairman Bill Murphy comments: This is a very complicated subject.
At some point, those who have been going short might change the
direction of play, but only they know when. The latest CFTC numbers show
that the commercials are long again in a big way.

CHRIS POWELL EXPLAINS: The CFTC is the Commodities Futures Trading
Commission, which is in charge of basic honesty in the commodities
exchanges in the United States. CFTC's weekly figures show that
commercial institutions -- companies that trade in gold and use it in
business -- now have taken more contracts to buy gold than they have
issued contracts to sell gold. (The others buying and selling contracts
are speculators.) The general rule is that the longer commercials are,
the more likely the price is to rise.

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Hugo from Switzerland thinks that miners should take a cue from OPEC and
join together to regulate supply. A nice idea if the big mining groups
Anglo Gold et al saw advantage to it, which IS UNLIKELY. However. . .


With the recent OPEC meeting in mind , I had the thought of forming a
similar mining cartel.Not that I am a friend of cartels (we are fighting
against one), but mining companies have lost all power to banks.


And this damned "hedging" is the opposite of gold miners interests so
why not stop it, say in chorus "the prices are too low to sell, and too
low to produce, it will erode the gold price too much, which is not our

So the target must be to reajust the supply/demand like the OPEC does.
Not that gold is a commodity but the basic economy applies here too. You
can't mine like hell amid falling prices. For example , stockpile it,
and sell at higher prices, something which DeBeers does (I think) . I
know this may sound a bit idealistic, and there is certainly an ironic
tone in it to speak of a supply excess in a 12000 tonne short market.
But it would put some more fire on those shorts. And it is now time for
the miners to stand up and fight for their basic interest. If we lose
the mining industry gold will die!


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I have had an e-mail from Jeffrey M. Christian, managing director of CPM
Group. CPM Group was founded in 1986 when the Commodities Research Group
of Goldman, Sachs & Co. spun off from Goldman Sachs. The Group
advertises that it is "the world's premier precious metals and
commodities research and consulting company" and that it is
"independent of all mining companies, fabricators, bullion banks, and
other companies that have commercial positions in the commodities
markets." This "allows CPM Group to have a completely unbiased view of
these markets."

Mr Christian took exception to the posting last Tuesday, 24 March, which
carried an extract from the Le Metropole Cafe, in which Bill Murphy, as
Midas, tells about the meeting between a journalist and then Fed
Governor Wayne Angell 11 years ago.

"Whoever gave you the information regarding US gold sales in 1987
1988 is entirely wrong," wrote Jeff Christian. "Every ounce of gold sold
at that time from US Treasury stocks was sold in the form of US Eagle
and commemorative coins-- and every ounce so used and sold was replaced
later by gold bought in the market! There were no 548,000 ounces of gold
sold!. (Anyone who ever has spoken with Wayne Angell would understand
why he did not respond to the insipid question: He did not have a clue
as to what the person was referring to.)

"US gold stocks followed this path:

end-1986 260.4 million ounces
end Sept. 1987 262.29 MM oz
end Dec. 1987 262.38 MM oz
end March 1988 262.01 MM oz

"So, you can see that in the months immediately following the Oct. stock
market crash Treasury gold stocks actually rose 90,000 ounces. Again,
that change only reflected the Treasury's Mint's activities viz. using
Treasury gold stocks as working inventory for the coin program."

Although the unknown journalist of the article that had been sent to
Midas may have written his article more in ignorance that out of lying
intent, I agree with Jeff that by repeating a "fabrication related to
events 12 years ago," GATA has helped to give credence to what could be
read as a lie. Therefore, GATA is obviously grateful for the correction.

Jeff Christian also sent me a chart showing the enormous volume of
interbank trades in gold relative to the underlying supply and demand
flows. The chart supports the view that the interbank trades have much
to say about gold price trends and levels. However, Mr Christian adds,
"the chart does not per se support the view, which we find silly, that
the banks collude or conspire regarding prices."

He went on to write that "this entire issue is discussed in detail in
CPM Group's Gold Survey 1998, released 2 November 1998 and available
from CPM Group for $80 per copy. That report also discusses the issue of
collusion versus a meeting of minds: These traders, almost universally,
are technically based, and use the same computer systems and charts.
There is no need to conspire, since they all use the same technical buy
and sell points. . . . The report also includes extensive discussion on
central bank selling."

Jeff Christian agrees that there is a problem, not only with gold but
with all financial markets, in that the proprietary traders and banks
and brokers exert undue and inappropriate behavior through their
activities. However, "As advisors to many monetary authorities, we can
assure you that you are completely misplaced in your views regarding
central bank and treasury attitudes and activities regarding gold." And
he adds magnaminously, "We would welcome the opportunity to provide you
and your associates with accurate information and analysis related to
these critical issues in the markets, and to help focus your attention
on the important points, not the distractions."

I am glad to say Jeff Christian and I have come to be on good terms
enough for him to share with me how he came to hear about and read the
GATA E-mail Group postings.

He wrote, "One of the services CPM Group provides its clients --
producers,investors, users, institutional investors, central banks, and
others -- is to provide reactions to news and information the clients
receive via the market. For example, when a mining company client
receives a proposed hedging strategy from a bank, it often will ask us
to analyze the proposal and suggest improvements. Thus, we have had
several GATA documents forwarded to us for comment from clients. I am
not sure if they came directly from people who had received them from
you, or already were third-hand. There seems to be a sizable
recirculation of your documents in cyberspace."

For more information on the CPM Group visit
or e-mail Jeffrey M. Christian at
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