1 p.m. EDT Sunday, May 16, 1999

Dear Friends of GATA and Gold:

You may be interested in New York Post columnist John
Dizard's commentary today about gold and implicitly about
GATA, and my reply. They follow.

GATA is now making the national and international press
in a substantial way. We haven't persuaded the world
yet, but we're coming to the world's attention, which
is the prerequisite.

Secretary, Gold Anti-Trust Action Committee Inc.

* * *


New York Post
Sunday, May 16, 1999

There's something very comforting about conspiracy
theories. Yes, if they're true, the world is run by
evil, all-knowing geniuses to whom human life is
worthless, but at least you have order and certainty.
Events have an explanation, though one the conspirators
would prefer to keep hidden.

In my experience, unfortunately, much more can be
explained by incompetence and unwillingness to admit
error. The world isn't run by geniuses, evil or
otherwise; it's run by hacks and timeservers who were
appointed, elected, or hired for reasons everyone has

This matters because there's been a lot of conspiracy
talk going around the gold market in the past two
weeks. The focus is the May 7th announcement that the
Bank of England would sell off most of its gold
reserves over the next three years. The amount of the
sale, 415 tonnes, was significant - but not as
significant as it would be if it were anyone other than
the Bank, which is supposed to know everything about
the gold market.

Here's the conspiracy thesis: The major gold-dealing
houses, in particular Goldman Sachs, have huge short
positions in gold. That is, they would profit from a
decline in the gold price. Goldman, the story goes, has
close, high-level contacts in both the British and U.S.
governments, and is using these contacts to ensure the
gold price is kept weak. The story continues that
Goldman is net short about 1,000 metric tonnes of gold,
which is between $8 billion to $9 billion. But I don't
believe it.

Just before the Bank of England announcement, the chart
freaks, or, if you prefer, technical analysts, were
pointing with excitement to a "breakout" of the gold
price and the prices of gold shares. Gold has been in a
slump for years - decades, really - and the goldbugs
hoped that the "basing pattern," the politically
correct goldbug term, had finally been broken. But,
instead of a breakout, the gold longs were at the
receiving end of multiple cruise missile impacts. The
closing price went from $289 May 6 to $282 May 7.

That was the end of the technical rally.

The Bank didn't even blame the ensuing price crash on
out-of-date maps. The damage was as thorough as
anything done to any embassies in Belgrade; gold didn't
even rally on Friday's high inflation news. It closed
at $275.60.

"The European central bankers are absolutely furious,"
says one of my friends among the gold dealers. "The
decline in the gold price cost them $5 billion in
losses on their balance sheets. It cost the poor
countries who will get the money from IMF sales $120
million. They wanted to sell gold themselves, but the
Bank of England got out ahead of them."

There are really two questions here: Why did the
British Government decide to dump the "precious" metal,
and why did they decide to announce the sale, rather
than proceeding quietly and announcing it after the

The decision to sell wasn't the Bank of England's.
Prime Minister Tony Blair and his Chancellor of the
Exchequer Gordon Brown have the power to dispose of the
country's reserve assets.

"Brown hates gold," says a well-informed Brit friend of
mine. "He thinks of it as the preserve of right wingers
and capitalists in top hats."

The conspiracy theorists note that Gavyn Davies, a
Goldman economist, is a close adviser to the

The timing of the sales, and the public announcement
ahead of the fact, was probably left up to the Bank of
England, here acting as the agent for Blair and Brown.

"They no longer have the expertise they did when Terry
Smeeton was in charge of gold reserves and regulation,"
says another gold-market friend of mine. The people who
took his place just decided that they could avoid
responsibility by announcing the sales, calling it
"transparency," and blaming any decline on market

For now, that's the explanation I buy. It fits in with
my incompetence-not-conspiracy world view. But you can
count on an antitrust suit making the opposite case.

* * *

Sunday, May 16, 1999

John Dizard
New York Post

Dear John:

I hope you'll pardon my familiarity because I've read
and admired your writing for some time. I'd like to
reply briefly to your column in the Post today about
what's happening with gold.

OK, I come from the conspiracy camp, as much as I hate
the conspiracy view of the world. And I admit that the
world of gold is full of ideologues and nuts and worse.
Yes, I admit it: At least half my friends in this are
crazy, and I have to work at not being crazy too. (And
since I like your stuff, YOU might be in trouble as

But before you dismiss the possibility of conspiracy
against gold, consider:

1) We seem to agree that most central bankers hate gold
-- because gold is competition in money and represents
some accountability for THEIR money, currencies.

2) There is a revolving door between central banks and
the big investment houses. The investment houses end up
staffing the central banks, and they are always working

3) Fed Chairman Alan Greenspan told Congress last year
that central banks were ready to lease gold into the
market to suppress its price. That does seem to be what
has happened since then. Greenspan's suggestion was
that of unified international policy. Greenspan's
statement well may have been taken by the investment
houses as insurance that their shorting of gold would
be officially rewarded and protected. But there has to
be a limit; look at what happened to Long-Term Capital
Management. Does Goldman Sachs also have the right to a
federal government bailout, a right to tap into Fort
Knox, if the firm's shorting gold gets out of hand?

4) Is it so implausible that people of like mind,
background, and association would talk to each other
about gold and possibly act in tandem? Just the other
day, I believe, the Justice Department announced an
investigation of price fixing on the exchanges. That's
the big C word -- conspiracy. And just a few months ago
you yourself wrote compellingly about the New York Fed
official who each day was exchanging information with
these same investment houses on the New York Stock
Exchange. You yourself suggested impropriety and
conspiracy. Why might not this be happening with gold

Maybe "conspiracy" is too strong a word for it. The
Gold Anti-Trust Action Committee has been calling it
"collusion." And if there has been collusion in
suppressing the price of gold -- a development that
certainly benefits currencies as well as the big
investment houses, which are long equities and short
gold -- it has been anything but "incompetent." If
there is collusion, it has helped drive gold to a 20-
year low even as the central banks are flooding the
world with cash to avert deflation and depression.

Anyway, thanks again for your work and thanks for

With good wishes.

Secretary, Gold Anti-Trust Action Committee Inc.