Text of Murphy talk on S. African radio


11:35p EDT Tuesday, October 5, 1999

Dear Friend of GATA and Gold:

I'm sending you the whole of GATA Chairman Bill
Murphy's "Midas" commentary tonight at
www.lemetropolecafe.com in the hope of letting
everyone know that any momentary calm in the
gold market only masks the panic that continues
backstage. The short squeeze is just beginning.

Please post this as seems useful.

Gold Anti-Trust Action Committee Inc.

* * *


By Bill Murphy

Spot Gold $324.40 up $8 Spot
Silver $5.55 down 3 cents


"Vox populi, vox Dei" -- "The voice of the people is
the voice God."

The gold market continues its rocket ride. Today the
December futures contract traded as high as $339 early
this morning before selling off going into the Comex
open. The gold market is on fire.

When gold was trading in the $250s, Midas told you that
we had the shorts "right where we want them." Many of
you believed in what I had to say and loaded up on gold
call options. Congratulations. While some of you were
buying calls, futures, gold stocks, etc., the bullion
dealer camp was laughing at us. We knew then that we
had them, and we know know that we do.

Some of the bullion dealers, overhedged gold companies,
and gold-borrowing funds are in big trouble. Last night
I sent out commentary that included this statement:
"Our camp will be more gracious than the Hannibals have
been. We will show mercy on them and let them out of
the back end of our 'enveloping horn.' When the price
of gold hits $340, we will accept their surrender."

I never meant to suggest that I would be happy with
$340 gold. This morning I did a radio interview about
GATA with the well-known Alec Hogge of South African
radio. When asked where I thought the price of gold was
going, I told his listeners that, in my opinion, the
proper equilibrium price is a bit north of $600.

Anyway, never have I received such an onslaught of the
same sort of feedback. Such as:

"As the man at the BIS said ... Gold will take no

"What do you mean that you will accept their surrender
at $340? Peanuts to you."

"Why take prisoners? These jokers have shown no mercy
for the past 10 years! Most of my mining stocks are
still a fraction of what I paid, at least one is in
Chapter 11, and another one (Benguet B) has not traded
over 25 cents (yes, cents) for the past year. (The
story of how it stays listed on the Big Board is the
subject of another investigation.) Gold goes up 25
bucks and you want to be Mr. Nice Guy. Give us a

The Cafe and the Internet have spoken. In earlier Midas
commentary I suggested that what we would eventually
have is a "fight to the death" in the gold market. In
the Roman Coliseum days the gladiators battled until
one beat the other. The victorious gladiator would look
up to the adjudicator to see if he would get a "thumbs
up" or "thumbs down" on whether to finish off his
vanquished foe. The adjudicator would often listen to
the crowd for direction. It was called "Vox populi, vox

You have been resounding. Thumbs down to Hannibal
Lecter and the Hannibal Cannibals.

That can happen in many ways. One of them I told you
about this summer. Do you remember when I mentioned
that one of the Cafe's most plugged-in sources told me
that plans were being set in place to squeeze the
December Comex gold contract? That plan is still intact
and gaining advocates. At the time I noted that squeeze
artists were buying the December gold contract and
selling April and June.

The open interest on Comex is 222,031 contracts, having
gone up 7,449 contracts more yesterday. The December
open interest rose 6,263 contracts and now stands at
136,022 contracts or 13.6 million ounces. There are
less than a million ounces of gold in the Comex
warehouses. Of course most of the specs do not want to
take delivery, but not all the gold in the warehouses
is available either, as much it just sits there for
margin purposes.

The August futures contract was almost squeezed
recently, but one bullion dealer let the shorts off the
hook for a $2 or $3 premium over the contract price.
You might recall that Goldman Sachs took delivery of
more than 90 percent of the August deliveries. Our camp
speculated at that time that they were trying to get
their hands on as much physical gold as possible
(either for themselves or for clients) in case of times
such as we have now.

If the August contract was almost squeezed in a dull,
glacier-like gold environment, what do you think they
will do to the December contract in this new blazing-
hot environment? As we head into the late fall, the
gold shorts are going to have to deal with the monster
call option position that is now only $65 above today's
close, restricted gold lending by the central banks and
building Y2K fears. The recipe for a gold short squeeze
will get better and better.

The gold shorts and the Hannibal Cannibal bullion
dealers have had it their way for years. It is payback
time. Big-time!

Don't be too stressed that silver has not taken off
like gold yet. Many of the hedge funds were long silver
and short gold. They are buying back their gold and
selling silver now. In a recent Midas you were informed
that sources had told us that Moore Capital could be
short as much as 25 million ounces of gold. Moore was
the big silver seller today. They must have tremendous
margin call pressure and need to sell to shore up their
balance sheet.

$9.78 silver coming.


The big story of the day for most was Ashanti
Goldfields. They have been one of the leading
proponents of hedging and have massive forward sale
positions. The other day they announced that they had
restructured their hedges. The marketplace took that to
mean they covered their hedges. The Cafe's John
Brimelow was not fooled and told me so at the time. The
bullion dealer camp was spreading the word that had
Ashanti had covered and the gold market had taken the
company's buying well. But Brimelow doubted that they
had covered and was proved right today as it was
disclosed that Ashanti's hedge book still represents a
net hedge of 10 million ounces. That shocked industry

More from today's Platts: "The sharp rise in the gold
price since the Sept. 26 announcement of gold sale
restrictions by the 15 European central banks 'has
resulted in a substantial increase in the value of
Ashanti's unhedged reserves,' the company noted. The
rise in prices and increased volatility 'has led to
certain counterparties being entitled to margin calls,'
the company said. Ashanti 'has entered into a joint
arrangement with its major hedging partners for
continuing support,' it added."

The market told Ashanti today what it thought of this
announcement. Ashanti stock sank to something like 5
1/2 from 9 3/8 with the price of gold going up $8. What

Ashanti and its bullion dealers, that is what. Sources
told me today that Ashanti has big problems relating to
maturity mismatches, margin call pressures, and forward
sale buyback liquidity problems, and are suffering from
faulty hedging programs laid on them by certain
consultants and bullion dealers.

I was informed today that Ashanti had a $300 million
margin gap with its bullion dealers. I am told that
Goldman Sachs is Ashanti's main dealer. That means that
the bullion dealers front the first $300 million of
margin calls. Of course that is no picnic for the
bullion dealer. Stress surfaces in all quarters and
that stress feeds on itself throughout the bullion
dealer and gold producer camps.

Another source told me that Ashanti started to reel at
$280 gold, much less $325 gold. Ashanti is hedged as
much as 10 years out. There is not a big market for
getting out of forward-sale 10-year-out gold positions.

Ashanti has significant problems that are likely to

With every Midas now I try to explain that gold is
exploding when almost no one thought it would because
the industry was working from disinformation supplied
by the bullion dealer camp -- many of them old Hannibal
Cannibals. Their allies too. For instance, note these
comments by Barrick Gold's Jamie Sokalsky in a Dow
Jones story:

"'Gold producers account for perhaps 3,000 tonnes of
short positions, about two-thirds of the market total,'
according to Jamie Sokalsky, chief financial officer of
Toronto's Barrick Gold, one of the world's largest

"Gold producers took short positions to hedge against
falling prices, essentially locking in sales prices
before gold is even mined. Now, with gold prices
soaring, those short positions are money-losers, and
the market is bracing for massive unwinding by

"'This is only the first round or two of short
covering,' one commodities analyst said."

Sokalsky is telling everyone that the total number of
gold loans is only 4,500 tonnes (two-thirds of 4,500 is
3,000). He is using Gold Field Mineral Service numbers.
GFMS is a Hannibal apologist. The Cafe uses Frank
Veneroso's numbers and they tell us that the gold loans
are probably a bit greater than 10,000 tonnes.

Who is right? Well, if GFMS was right and the loans
were only 4,500 tonnes, the gold market would not be
doing what it is doing today. Case closed. Yet Barrick,
one of the most heavily hedged gold companies in the
world, continues to spout the Hannibal line. Barrick is
becoming a sad case. Its stock was hit today too as the
Ashanti news has run up the red-flag warning signs of
the companies that have overhedged.

Wake up, Barrick! You have been in the penthouse in
public esteem. If you tarry too long, you might end up
in the outhouse.

There might have been a much bigger story today. More
from Sequin, who put this up at the Kitco gold site:

"The big big rumor today is about the Fed bailing out
Goldman on 10 million ounces. The market is all excited
about it: THEY are doing something. Since it is the
role of the FED (as painful as it might be for us) to
prevent a systemic collapse, there might be some basis
for the rumor.

"Still, I would be surprised, since the Fed hasn't been
seen in the lease market for ages.

"Yes, they get some other CBs to do the dirty stuff for
them. But they are limited by status. So it would be
interesting to know to what extent they are at liberty
to do that.

"Technically, leasing is not selling. However, at 10
million ounces a clip, we might not see them every
other day.

"Today is the day to speak about black holes.

"You know, if you happen to fly in their vicinity, you
get sucked in, but you won't care, since at this point
the whole spaceship will not even be the size of a
grain of sand.

"Well, there is a black hole in our universe and it is
called the 390 December call. It is traded on Comex and
yesterday the open position was a tad above 55,000.

"That's a nice 5.5 million ounces and change. When you
know that major market makers show $3 wide on 10,000
ounces, you can bet on some fun in case we go in the
low 360's.

"Let me explain. As we go close to the strike, the
shorts, who usually are option market makers, will have
to adjust their delta. (The delta is the sensitivity of
an option to spot moves.)

"Hence, the higher the spot goes, the more they will
have to buy. In such an illiquid market a few million
ounces will push it through the strike in seconds.

"Since the law of maximum pain applies these days in
gold, I would not be completely surprised to see a
seriously punishing run-up there and higher. This is of
course without taking the OTC derivatives into account.

"Only five weeks to go, but I know a few options
dealers who are not going to sleep that much."

Sequin is obviously a pro; he knows his stuff. It is
interesting how he is commenting on the December $390
calls too. If he and I are jumping up and down about
it, so are a lot of others. This is explosive!

But what may be more explosive is what Sequin says
about Goldman Sachs and the Fed. How many times have
you heard Midas pound away on this theme? It extends to
the core of the Bank of England sale, etc. And it is
supportive commentary of the "Bombshell" I delivered to
you last Friday in Midas commentary. The key point from
that Midas:

"Two days ago I received information that a futures
commission merchant (a Refco-type firm) was told by
another futures commission merchant that it was not
prepared to deliver gold on its gold forward or futures
contract obligations that were expected by a client of
the firm that was standing for delivery. In essence,
the shorts were declaring force majeure: 'We cannot

"This is not a Comex problem as far as I know. From
what I am hearing it is an OTC problem, where few
people really know what is really going on behind the
scenes. The firm that expected delivery was stunned. It
was about to be 'floored.' According to our sources,
this firm then got a phone call from the Federal
Reserve requesting that it not pressure the shorts into
making delivery and asserting that the Fed would make
sure that the longs received their gold. I am not privy
as to exactly how that would happen.

"According to another source, there were actually a
couple of firms that told the longs that they were not
prepared to deliver forward contract gold in the size
expected. Goldman Sachs is one of the firms mentioned
that is not prepared to fulfill its obligations. That
is what my sources are telling me."

Now two days later the word on The Street is that
Goldman was fed 10 million ounces by the Fed. Don't you
think that our "Bombshell" story should gain
credibility and get some legs?

Potpourri and the Gold Shares

The XAU retreated today to close at 84.61 down $4.20.
Gold was strong all day, so the XAU was perplexing to
many. But it isn't really perplexing. We have told you
about the hedge funds being short gold. We have even
told you about the hedge funds being long the big cap
gold stocks. The hedge fund gold shorts are covering
their gold shorts, so they are selling their gold
stocks. They have to get out.

In addition, the Ashanti issue has many money managers
reassessing their gold stock allocations.

From Reuters: "Gold trading in Pakistan, one of the
largest importers, has largely come to a halt as rising
international prices have left several major players
unable to deliver their commitments, traders said on

The gold premiums in Asia are holding up surprisingly
well on this mega move up for gold.

Cambior is a great little gold producer, but it's
shares fell 21 percent today, its biggest loss in 4
years on concerns that is too has overly hedged.

Funny, a couple of months ago the Hannibals strongly
suggested that the likes of Newmont sell a good deal of
forward production for fear of losing its credit
ratings. Now the price of gold rallies sharply and the
companies that have stuck their toe too much in the
hedging waters might lose their credit ratings anyway
because they hedged TOO MUCH, not too little. What an

Anglogold came out with a strong press release today
announcing that it "has no gold lease rate exposure at
all before early 2000 (and limited exposure
thereafter), and this has contributed substantially to
the stability of its hedged position." In other words,
Anglogold's bullion dealers have the "roll risk," not

Tiger Watch: This hedge fund continues to stink up the
place. Its net assets have slumped from some $22
billion down to $8 billion. The fund lost another 6.7
percent for September and is now down 23 percent for
the year. I wonder how many illiquid positions Tiger
still has on its books and is stuck with.

More bullion dealer hedging problem news from Reuters:

"A bullion trading source said market talk that an
Australian bank was facing huge losses from recent
sharp gains in bullion prices triggered fresh buying as
the bank would be forced to cover its position soon.
Banking sources in bullion markets in Australia said
most Australian banks running gold books were short to
some degree.

"One source said the hedge book of Bankers Trust,
recently acquired by Australia's Macquarie Bank Ltd.
was in 'pretty dismal shape.'"

The gold investment game has changed overnight. I think
the coming play in the gold share sector will be the
small junior companies that have found gold resources
or reserves. They have gold in the ground and no or few
hedges if they are gold producers too. I am picking up
some of these babies.

One of my bigger gold stock positions is one such
company: Golden Star Resources on the AMEX. GSR is
trading right below 1. It once traded at 21. It is a
Frank Veneroso favorite and has six properties (most in
the Guyana Shield) that could become significant mines.
I found out today that two highly regarded hedge fund
managers are bidding for the stock.

The prices of many of the little-guy gold stocks are
nowhere near where they should be. That is because some
long-time shareholders of size are selling now. They
can get out easily for the first time in a long time.
These people do not believe that the gold move is for
real, so they are practically giving the stock away
practically. They will be very sorry. As the price of
gold moves up from these levels, these little golden
jewels should shine as investments.

Gold price dips can, and will, occur at any time. They
present buying opportunities.