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11:45p EST Monday, December 7, 1999

Dear Friend of GATA and Gold:

If you've been misreading the good news as bad
news for gold, you'll need to read another insightful
analysis by Reginald H. Howe, Harvard-trained lawyer
and former mining company executive, posted tonight
at and contained below.

Please post this as seems useful.

Gold Anti-Trust Action Committee Inc.

* * *


By Reginald H. Howe
December 7, 1999

Western central banks are in panic mode. No other
interpretation can be put on the announcement yesterday
of further Dutch gold sales of 300 metric tons.

European central bankers should have spent last weekend
preparing to announce gold purchases and a Euro truly
independent of the dollar. Instead they used the time
to cobble together another bailout for the Fed, the
Bank of England, and the mostly Anglo-American bullion
banks sinking, or so it would appear, into deeper

The Dutch announcement basically uses up all the slack
left in the Washington Agreement, which provided for
central bank gold sales of 2,000 tons over the next
five years, including 1,300 tons by the Swiss and the
365 tons then remaining in the planned British
disposals of 415 tons, leaving only 335 tons of
possible additional sales. That gap has now been almost
entirely filled by the Dutch.

The gold banking crisis that unfolded rapidly in the
wake of the Washington Agreement on Sept. 26, 1999, has
resulted in some rather unusual gold disposals.

First, Kuwait announced that it was making its entire
official reserves of 79 tons available for lease
through the Bank of England. Not long afterwards it was
revealed that Jordan had sold 10 tons from its official
reserves of 26 tons. This depletion of long-held
official gold reserves by two Middle Eastern nations
easily subjected to Anglo-American pressure pretty much
speaks for itself, particularly when followed by
disclosure of additional U.S. military spending for
Kuwait. What is more, a rumor -- quickly denied -- of a
possible reduction or halt in British gold sales caused
an immediate almost $10 spike in the gold price.

The Dutch announcement itself is notable in three

1) The sales will be arranged through the Bank for
International Settlements; no public auctions for the

2) Nevertheless, the sales were announced in advance,
which is not a smart way to get the best price,
especially on the first year's planned sales of 100

And 3) the Dutch emphasized that even after the sale,
"the Netherlands will remain a significant gold-holding
country with a gold stock of more than 700 tons."

In fact, the Dutch gold sales may be no more than an
advance on the proposed Swiss sales. The Swiss have
been slow to complete all necessary preparations for
their sales, which were probably intended, among other
things, to provide the European safety valve on the
gold market. Certainly the Netherlands could repurchase
from Switzerland later whatever gold it sells now, and
it may well have already received some assurances on
this point. For that matter, maybe most of the 100 tons
the Dutch plan to sell in the first year is necessary
to repay Kuwait's loan to the Bank of England, a loan
that reportedly has been the subject of much criticism
in Kuwait.

The World Gold Council's press release on the Dutch
sale is yet another example of that organization's
unfortunate tendency to serve as apologist for the
central banks instead of advocate for the gold
industry. Admitting that "the timing of the
announcement ... may have caused a ripple in the
market," the World Gold Council then accepts
uncritically a reported private assertion by the Dutch
central bank that the decision to sell was made in July
but delayed to participate in the Washington Agreement.

Why, then, wasn't the proposed Dutch sale included in
the agreement? Why didn't the Dutch sell on the price
rally after announcement of the agreement? Was there
any connection between the timing of the Dutch
announcement and the continuing problems of the bullion
banks, the Kuwaiti gold loan, and the Jordanian sale?

Apparently these are all questions that the World Gold
Council neglected to ask in its private discussions
with the Dutch central bank. Speaking only for myself,
and it pains me to say it, Haruko Fukuda, the new chief
excecutive of the WGC, is rapidly losing both her halo
and her credibility.

Central bankers are generally a clubby and prudent
sort, not given to unnecessary risk taking. Given the
uncertainties of the Y2K changeover, Anglo-American and
European central bankers may have arrived at an
informal truce or agreement designed to push resolution
of the gold banking crisis into the new year. In this
connection it would not be surprising to see Anglo-
American intervention in support of the Euro should it
threaten to break below parity. Indeed, if the European
central bankers did not obtain a commitment of this
sort as a condition of the Dutch gold sale, they should
all be fired. Yesterday's surge in the Euro may not be
solely attributable to the good German factory report.

But make no mistake: the day of reckoning is rapidly
drawing near for both the Euro and the bullion banks.
The European Monetary Union and the European Central
Bank cannot provide further gold to the market without
destroying their own credibility and undermining the
whole notion of the Euro as a truly independent
currency and alternative to the dollar.

As for the bullion banks and their protectors at the
Fed and the Bank of England, they must know that they
cannot count on others to bail them out forever.
Ultimately there can be no lender of last resort in a
gold banking crisis.

Citizens of the Euro Area should be asking themselves
tonight whether their central bankers have merely gone
the last mile to help the British and the Americans
with their gold banking crisis, or whether the European
Central Bank and its allied central banks and finance
ministers are about to, as a former British prime
minister once put it, "go wobbly."