Northern Miner raises GATA''s issue

Section:

2a EDT Sunday, August 1, 1999

Dear Friend of GATA and Gold:

Here's an interesting editorial from The Northern
Miner. It mentions GATA and is more evidence that
GATA's complaint about the gold market has become
mainstream.

Thanks to egroup member Michel Paulin for calling it to
my attention.

Please post this as seems useful.

With good wishes.

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

* * *

Rumours swirl around gold sales -- fair or foul?

An editorial from The Northern Miner
Edition of August 2, 1999

Tony Blair is probably the toniest prime minister Great
Britain has ever had. He's Britain's answer to Bill
Clinton, equally polished and urbane, and equally eager
to build that proverbial bridge into the next century.
But in his rush to be modern and hip, some believe he's
turning his back on what has made Britain great.

More than a year ago, the U.S. news program 60 Minutes
poked fun at Blair's fascination with ultra-modernism.
To attract more high-tech ventures to the country, he
began playing down the historical traditions and
financial prudence that put the tiny island on the map
as a world power. Bowler-and-brolly conservatism was
being tossed out the window in favour of Cool
Britannia, represented by the Spice Girls and The Full
Monty.

Some argue that London's status as a world financial
centre has suffered as a result of this trend toward
trendiness. And the most powerful trends in financial
markets today are the "monetization" of hard and
tangible assets, whether they be gold or other
commodities, to create new financial "instruments" such
as derivatives, and currency and commodity speculation.

The proliferation of hedge funds engaged in such
activities is a testament to this global, non-
investment-grade financial spree.

Great Britain's announcement that it will sell more
than half of its gold reserves is viewed by many as
symbolic of Blair's efforts to lead his nation away
from investment-grade conservatism and into shark-
infested speculative waters. For these old-fashioned
types, the Barings Bank disaster is still too recent
and painful a memory. Some see a more sinister motive
at work, a conspiracy in which the gold price is held
down to benefit financial institutions that were short
hundreds of tons of borrowed gold.

It's difficult to know what to make of such theories,
particularly when they involve the murky world of
currency and commodity speculators. But the timing of
Britain's announcement, and its subsequent negative
effect on the gold price, has people wondering if there
may indeed be substance to such murmurings.

As Peter Munk, chairman of Barrick Gold, pointed out
during his speech at the World Economic Forum more than
a year ago, funds of all sizes have found shorting gold
to be a risk-free way to make millions. "All you have
to do is sell gold ounces and buy U.S. treasuries; you
have a positive spread of 3 percent because all you
have to pay to borrow gold is 2 percent, and collect
from the U.S. treasury 5 percent before you unwind the
contract to collect your additional capital gain."

That there has been a rush to short gold is without
question; how organized the rush is remains debatable.
There is no shortage of conspiracy rumours; indeed,
they are increasing in intensity and have sparked
debate in the British House of Commons.

Last June, opposition member Quentin Davis commented on
a persistent rumour concerning gold sales and the
position of international investment banks. "We cannot
allow the rumours to grow," he stated, "because they
are extremely dangerous to public confidence. It has
been suggested that the market is very short of gold,
that the short positions may be a substantial multiple
of the total amount of gold currently held by the Bank
of England, and that the bank's real motive is to save
the bacon of the firms that are running these short
positions. Has the government's whole plan been simply
to drive down the gold price by whatever means, fair or
foul, to save the position of certain figures in the
city which, apparently, are so such and potentially in
such trouble?" These insinuations have prompted some of
the world's leading gold producers to pester the
British government to issue a public denial or to
investigate them publicly. So far, mum's the word. In
the United States, the Gold Anti-Trust Action Committee
has retained a legal firm to assist in its
investigation of alleged manipulation of the gold
market.

An investigation into the matter is clearly warranted.
But equally worrisome is that, in today's
"sophisticated" financial markets, about half of all
bank profits result from trading (read gambling),
whether in currencies or stocks or derivatives.

Risky business, to be sure, but the banks don't appear
to be worried. And why should they be? The good times
are rolling and, through direct and indirect subsidies
enacted by law, ordinary citizens effectively guarantee
the banking system's balance sheet.

On the other hand, citizens would do well to remember
the savings and loan fiasco and the junk bond spree of
Ivan Boesky and Michael Milken in the 1980s. The good
times rolled then too, until the party came to a
screeching halt and the big boys ran off without paying
the bill.