John Crudele on rigging the market

Section:

11:10p EDT Friday, October 22, 1999

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy is back from the Denver Gold
Group conference and is grateful for the many faxes
that were sent by gold company shareholders to mining
company executives at the conference hotel, calling
their attention to the gold hedging problem. The
hedging issue, Bill says, indeed was much on people's
minds there, and he was able to meet many executives
and press GATA's case for support from the industry.

Otherwise this seems to have been a quiet week in gold
-- perhaps the quiet before the next storm, since the
moratorium on Ashanti Gold's margin calls is said to be
expiring Monday evening.

Since I don't have a lot to share with you tonight, I'll
include with this my correspondence today with Phil,
a GATA member in Australia, in the hope that it's
better than nothing.

With good wishes.

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

* * *

Dear Chris:

Things are quiet, are they not?

Not much happening until we supposedly test this
magical $298 area, eh?

It looks like our mate Steven Kaplan
(www.goldminingoutlook.com) really got it right.
Everyone castigated Kaplan when he sold out on Sept.
28, but he nailed it beautifully. You've got to take
notice of results, eh?

Kaplan says he'll be grabbing gold stocks hand over
fist when all the "longs" have been destroyed as gold
slips below $300, although he notes it could reach
about $286 before the next serious rise in the price.
This should be interesting. What does our team have to
say about this?

My real reason for writing was to tell you that a
highly regarded (business) radio station here in
Australia announced this morning that the Kuwaitis had
actually lent their gold to the Bank of England. I
can't find any confirmation of this. Is this true? If
it is, it would have to be huge news. Why would the
Bank of England want gold when it's trying to get rid
of its own?

Phil

* * *

Dear Phil:

Thanks for your note, but I think things are still
bubbling.

There seem to be two ideas about the Kuwaiti
announcement.

1) That the U.S. government prevailed on Kuwait, given
the sheikdom's enormous war obligation to the United
States, to add a little liquidity to the gold lending
market and loosen things up for the U.S. brokerage
houses as they scramble to cover their shorts.

2) That the Kuwaiti transaction is part of a scheme by
which Kuwait will take control of Ashanti Gold, using
the national gold to relieve Ashanti of its hedge
position, with the Kuwaiti gold secured by the gold
Ashanti still has in the ground.

I don't know if either is right, but simply that Kuwait
made an announcement of something that ordinarily would
not be announced is an indication that the shorts are
in trouble and that the Kuwaiti move is meant somehow
to rescue someone who is short. Will it be enough?

It doesn't seem to have pushed the price of gold down
very much, so I doubt its effect. But it well may buy
someone a little time.

The news services say that the Ashanti margin call
moratorium expires Monday evening, so presumably that
is the deadline for a deal on its hedge book and some
disposition of the whole company. We'll see. But in any
case I think we've seen gold's low for the year and
probably for the next decade. That probably matters
more than anything else.

As for Steve Kaplan, over the last few weeks I have
found myself defending him a little against some
vehement adherents of gold who not only don't like what
he has been saying since the rally but also seem not to
want to hear ANYTHING that contradicts their hopes.
This strikes me as very unwise; I think we always
should test our views against the contrary views of
others.

Yes, Kaplan called the most recent top in the XAU
almost to the hour, and he well may be right about the
next optimum entry point. But we tend to forget all the
times he has been WRONG in the short term over the last
year, on both the XAU and the general market. Like me,
he has been predicting the Great Crash in equities and
the great explosion in gold almost every day for the
last year or more. Like stopped clocks, even people
like us are going to be right once in a while, and it
really isn't all that impressive.

Kaplan's philosophy seems to be that the majority is
always wrong. But the majority was RIGHT most of this
year in being invested in general U.S. equities, even
as Kaplan mocked the majority day after day. Like me,
on most days this year Kaplan has been wrong about
where to be invested. We both look a lot better if we
overlook January through September.

In any case Kaplan is playing the short-term trader
here, and if the gold situation is as explosive as some
of us think it is, the risk of playing short-term and
missing the next explosion are too great for me. If I
can identify the general trend reversal and capture the
bulk of the (I hope) impending rise in the price of
gold over the next few years and not get shaken out by
margin calls, I'll be well-rewarded too.

Another problem with Kaplan: I think he relies too much
on Comex market statistics. Most gold trading is done
elsewhere.

My guess is that Kaplan may be off a bit as to gold's
bottom in the current retracement. This week makes it
look like the bottom may be above $300, not below. But
Kaplan is a much better short-term trader than I am.
Anyone else is!

With good wishes.

CHRIS POWELL, Secretary