Ted Arnold whistles past the graveyard


1a EDT Saturday, October 9, 1999

Dear Friend of GATA and Gold:

Here are the relevant parts of the "After The Close/The
Golden View from The Tower" commentary for Friday night
from www.usagold.com.

Gold Anti-Trust Action Committee

* * *


October 8, 1999

As they would say in Europe, "psychopaths" ruled the
day on Wall Street, so we won't even go there. There's
too much other news to be covered in its place anyway.

The People's Bank of China raised its price for selling
gold today in accordance with the overseas price of
gold. This is a recent (but ongoing now) operation
under a pilot plan for the reform China's domestic gold
market -- with imports purchased through Hong Kong.
This reform plan is surely unrelated to the recently
opened branch office of the Bank for International
Settlements in Hong Kong, wouldn't you agree?

There are some interesting comments from a Merrill
Lynch economist in this Bridge report from Johannesburg

"The Bank of England threw the trend and sent the gold
price plummeting when it announced it would sell its
gold reserves to finance debt relief for poorer
countries. It was put back on track when 15 European
central banks, including the Bank of England, announced
a surprise five-year moratorium on all new sales of
gold held in official reserves. Gold rose to a high of
US$338 per ounce."

[By the way, Greece announced today that it has no
plans to change their policy on gold reserves. Greece
was not a signatory to the moratorium because it was
not invited to play along.]

"'Is it a flash in the pan? No, not in the immediate
future. As long as commodities rise, gold will rise and
we could see it up to $400 next year,' Jos Gerson, an
economist with Merrill Lynch, told a seminar on the
economic outlook in Johannesburg today. He said gold
has always moved with, and sometimes led, commodities.
'Commodities are doing well because the world is waking
up. Asia and Europe are running again and the United
States is showing no sign of cooling. The world is
suddenly firing on all four pistons.'

"Gerson predicted, however, that the Dow Jones
industrial average will crack next year. 'This is the
major problem we face next year. What we have is one of
the most classic bubbles of the century,' he said,
although he believes there isn't the remotest chance of
a 1930s type crisis."

[That's right, where deflation was the problem. Can you
say INFLATION? I knew that you could.]

"Central banks have the ability to react to a crunch in
ways that they did not before. He says it's difficult
to predict the timing of a bubble bursting, but
believes it may happen before the middle of next year.
'When the Dow goes, all markets will correct,' he says.
'We must expect a roller coaster ride, but ride the
curve for the time being.'

Gold contracts were sold down today in some pre-holiday
paper(profit)-taking action by those licking their
chops over these recent and rapid gains. The December
contract price lost $2.60. The spot market took notice,
but lost only $2.30 to end with a $320 quote in New

The already high short-term gold lease rates rose today
by more than a half percent, demonstrating the
continuing difficulty among bullion banks in striking a
balance between those willing to lend gold and those
engaged in desperation borrowing. Today's numbers:

1-month 4.4375% +0.5215
2-month 4.5313% +0.4193
3-month 5.1875% +0.0115
6-month 4.8938% -0.0422
12-mnth 4.5000% -0.3188

The Tower cautions everyone to read the writing on the
wall. Look at it this way. If a standard bank suddenly
started offering you interest rates on cash savings
accounts that were many multiples higher than the norm
of only a few months ago, would you risk your cash for
that investment return (not to mention the return of
the principal too) even as the exchange rate markets
revealed your cash's value to be climbing on its own?

That is to say, your net value increases without the
risk of depositing it for lending to others. Such a
high interest rate as an enticement should be seen as
the warning sign that it is: that something is terribly
amiss. An asset that will grow while in your own hand
is worth much more than the promises of others to make
it grow for you if you'd only be willing to let them

Russia apparantly agrees with this "bird in the hand"
assessment of value, or else it is putting on a world-
scale demonstration of Gresham's Law. From Bridge we
learn that the foreign exchange and gold reserves of
the Central Bank of Russia as of Oct. 1 totaled $11.212
billion. Looking closer at the breakdown of assets, the
foreign exchange reserves ($6.634 billion) were dropped
by $190 million, while the gold reserves were up $172
million ($4.579 billion).

Spend the junk and hold the good stuff. It's that easy.

Once again we'll let Bridge News walk us through the
thoughts of traders.

"NY Precious Metals Review: Dec gold down $2.6 on

"By Tina Petersen, Bridge News

"Washington, Oct. 8 -- COMEX Dec gold futures settled
down $2.60 at $321.70 per ounce on profit-taking amid
choppy, range-bound trading. Traders said the gold
market also was pressured lower on a stronger stock
market and a firmer dollar versus the euro.

"Traders and analysts said the precious metals markets
are seeing typical profit-taking ahead of the weekend.
They said there is little new news moving the markets.
An analyst said the fact that the markets eased off
from their highs 'gave everyone reason to take their
profits before the weekend.'

"December gold continues to range trade amid choppy
conditions. December moved lower at the opening to a
low of $317.5 following overnight Chinese selling, then
moved up to a high of $326.50 in the mid-morning
session on fund buying. It then continued to drift
lower throughout the afternoon session on profit-
taking. Traders said the market saw good two-way

"'It continues to be stuck in a range of $315-330,'
said a trader. 'People are buying at the lower end and
selling at the upper end. It seems to have good support
at the lows and resistance at the highs.' He said that
'if December breaks higher, the shorts will cover, and
if it breaks lower, the longs will sell off.'

"Traders said they continue to see support at the $315
level and near-term resistance at $330. Many said they
viewed today's downward pressure as a consolidation
before the next move higher on continued short covering
over the next couple of weeks.

"'There's still a lot of short covering left to be
done,' one trader said. Traders and analysts said
pressuring the market lower was the fact that the
unemployment rate remained unchanged. 'It confirmed
that the Fed might have been right in leaving interest
rates unchanged,' an analyst said. 'It's good for the
stock market and good for the dollar but bad for
precious metals.'

"December silver continues to follow gold but without
the underlying bullish fundamentals that gold has.
December settled down 4.5 cents at $5.55 per ounce."

There was also this report by Bridge:

"New York, Oct. 8 -- The New York Mercantile Exchange
said today it will increase the margins on its gold
futures contracts to $2,000 from $1,600 for clearing
members, members and hedgers; and to $2,700 from $2,160
for speculators. The changes are effective as of the
close of business Monday."

The commitments of traders in COMEX gold futures was
released today for postions as of Oct. 5. (Changes
given are from Sept. 28) Among the non-commercial
traders with only long or short positions (no spreads),
20,646 new long postions were added for a total of
47,881. On the short side, only 2,881 short postions
were closed, leaving 62,196 contracts held short among
this same classification of traders.

There was modest movement again today in the
Scotia Mocatta vault, one of COMEX's two active gold
depositories (Republic National Bank of New York being
the other). Nearly an eighth of a tonne of gold was
withdrawn from Scotia's guardianship -- 3,997 troy
ounces, to be exact. Of that total 2,187 ounces were
taken from the Eligible stock (of which 86,404 oz
remain), and 1,810 ounces were withdrawn from
Registered stock (leaving 834,233 oz).

As news made wider rounds today of the survey we
reported yesterday showing that OPEC compliance with
production cuts had slipped in September, yesterday's
loss of 82 cents was extended today by another $1.55.
The November crude contract closed at $20.90 by the
time the dust cleared on a flurry of fund liquidations.

Adding weakness to the price was comments by America's
chief executive regarding the possibility of selling
off some crude oil stored in the Strategic Petroleum
Reserve to help keep oil prices from rising too much as
the winter heating season arrives. (And to think that
you thought only gold suffered these bouts of "official
interference" in the marketplace!) One broker said of
the prices, "Basically we got a little overdone and
funds wanted to take some profits so right now we're at
a nice medium compromise. But I think that in the long
term we will go back up."

Well, it all depends ... on what the dollar will buy.
Oil is oil. Gold is gold. A dollar is a concept wrapped
in shifting confidence.