Published on Gold Anti-Trust Action Committee (http://www.gata.org)

Action everywhere, most good for gold

By cpowell
Created 2000-02-10 08:00

10p EST Wednesday, February 9, 2000

Dear Friend of GATA and Gold:

Here's tonight's "Midas" commentary by GATA Chairman
Bill "Midas" Murphy at www.LeMetropoleCafe.com [1].

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

* * *


By Bill Murphy
February 9, 2000
www.LeMetropoleCafe.com [2]

Spot gold $305.50, up $6.90
Spot silver $5.35, up 9 cents

It's Midas ramble time.

Quite the day.

Barrick Gold's surprise press release spurred on the
gold market, as it reversed course just when most
everyone in the mainstream financial community had
turned bearish again.

This morning on CNBC a woman commentator did a very
good job of explaining what was going on. Amazingly,
she noted that "investor and analyst" pressure
influenced Barrick to commit itself more to the bullish
camp. The company did so, she said, and noted that the
gold market was moving up nicely, $13.20 at one point.

The close was not a good one -- $5.40 off the highs.
But none of that may matter in this market because gold
could open $50 higher on any given day and it can come
out of nowhere, as you have heard me say so often.

The gold market is unstable. That is why there is so
much volatility all of a sudden. Specs are buying.
Producers are covering. Who is selling? Very simple, as
you know: The forces that have been capping the gold
price for years. For the most part, it is certain
bullion dealers in combination with the U.S.

Without those forces, the gold price might have shot up
$30 today -- and should have with the bullish
announcement by Barrick and the unexpectedly strong

On top of that, events outside the gold market were
almost all bullish as they related to gold. The CRB
closed up 2.31 points and finished at 212.69, right off
its recent highs. Included in the big commodity day was
a new high close in crude oil, with March closing at
$28.77 per barrel -- up 75 cents on the day for a new
contract high close. Silver has turned back up while
platinum and palladium are headed for the moon as the
Cafe's John Brimelow predicted for you.

The dollar lost ground against the Yen and Euro.

But the big surprise was the bond market pulling its
own boomerang. The yields on 30-year Treasuries are now
back up to 6.31 percent, as they could not penetrate
and close above their 200 day moving average. Part of
that was due to the results on the 10-year note today.
The demand was the worst in 17 years. A disaster.

Stage left enter, Treasury Secretary Lawrence Summers!

The treasury secretary had the financial community
talking to itself this afternoon. Late last week I
related to you that Frank Veneroso had said that all
Summers had to do to alleviate some of the pressure on
the yield curve inversion was to make an announcement
that to reduce U.S debt along the entire curve, meaning
that any bond buybacks would be along the entire yield
curve, not just for the 30 year Treasury bonds. Icarus
said that would mean Summers would have to "eat crow"
and lose face.

When the 10-year note auction went so badly today, the
yield curve inversion was about to get wider, causing
more pain for those investment firms caught going the
wrong way. So Secretary Summers did what Frank Veneroso
said he would do and "lost face" by making that
announcement, which further stunned unsuspecting market
participants. The long bond dive bombed. The stock
market was especially rattled, as all the indices
headed lower and the Dow broke its 200-day moving
average to the downside.

This bond development and Summers turnabout has got to
hurt the secretary's reputation with the financial
community. He has credit market traders doing hoola-
hoops. One day "this," one day "that," one day
confirmation of "that," the next day a retraction of

All this is setting up an explosive gold and silver
market. I can't say "precious metals markets" because
platinum and palladium have already exploded. You know
where I come from in all of this: $600 gold and $12
silver. Those are my calls.

When might all that happen? Any day, any time. My guess
is one day we come in and find that the gold price is
up $35 right from the get-go, and then Katie, bar the

The gold market explosion is an accident waiting to

Maybe the catalyst will be the Ashanti hedge book
finally blowing up.

In a strange development today, a Ghanian court froze
the assets of Ashanti, Africa's third largest gold
producer, which was threatened with bankruptcy late
last year when its hedge trading strategy backfired.

The press reports out of Ghana today were particularly

"Accra, Feb 9 (Reuters) -- A court in Accra on
Wednesday ordered Ashanti Goldfields Co Ltd to convene
in an extraordinary general session to consider the
composition of its board in a ruling which Ashanti
lawyers said could destroy the company.

"They were particularly worried by the court's order to
Ghana's biggest company to refrain from new financial
undertakings until after this meeting, which must be
called within 21 days....

"Ashanti has been in negotiations with its bullion
banks for more than four months now. The only known
result of the negotiations so far is this court order
resulting from a group of shareholders led by Adryx
Mining & Metals who are trying to get Chairman Sam
Jonah and Co. out because of their disastrous hedging

When this announcement was made today, Reuters reported
that Ashanti representatives in the courtroom were
visibly shocked by the decision.

With frightening good reason. The other gold producers
are covering shorts, and Barrick Gold has 9 million
ounces of gold calls that someone is liable for at
$319+. That is when they go in the money. Ashanti is
reported to be still short 9 million ounces of gold in
its hedge book, which bullion dealers have on their
books. Between the two of them, that is 18 million
ounces or about 560 tonnes of gold.

Yearly world mine supply was around 2,559 tonnes for

That is some gold exposure right above the market --
and that represents only two gold corporations. The
hedge funds like George Soros' must know this. What if
they come in with a bull market raid and Barrick's
calls go in the money? A portion of that call exposure
has been hedged, but not nearly all of it.

As a matter of fact, word to me today was that the
bullion dealers sold the Barrick calls they wrote to a
big option player who at first failed to hedge them.
That is, he was naked and exposed financially to gold
prices moving higher. The Hannibal Cannibals know this
and we heard they bought the gold market early today,
causing this option dealer to come in finally buy and
cover part of his exposure. The Cannibals sold him
futures on the rally -- up to $314 -- and then drove
the price down again so he would have to sell. It is my
understanding that this happened twice today. More
collusion by the same slimers.

Of course the manipulation crowd does not want gold to
go above $319 to $330 because then the rally might not
stop until $400 or $500 or $600. Who knows?

Meanwhile back at the ranch, press reports indicate
that Ashanti's hedged gold position has been frozen. In
my experience markets don't stop because of the Ghanian
courts. Man, could this gold market go ballistic. Just
like that!

By the time the court order is vacated so the shorts
can cover, gold might be $365 bid.

The XAU finished the day today showing a bit of
strength, as the stock market was battered. The XAU
finished at 67.59, up 3.97. Yet it still trails the
performance of bullion by a noticeable degree. Last
summer, with gold trading down in the $250s, the XAU
traded around 65.

There are still few believers that gold can really make
a run for it. That is understandable, as generalist
portfolio mangers are fed disinformation by the bullion
dealer crowd.

Take Lehman Brothers. Their target for gold in
September was $200. Now they are just looking for gold
to make new lows. Most of other mainstream analysts
tell fund managers that if gold really gets going it
might reach $325. No wonder they don't want to buy the
gold shares.

Combine that with gold company hedge book disasters and
a press presentation like Barrick Gold just made and
one can understand why the gold shares are doing so


The market cap of all the gold companies is about that
of ICG, an Internet incubator company. This is a good
one I got from Frank Veneroso today. ICG is a holding
company for Internet startups. The companies backed by
ICG had revenues the past year of only $20 million --
not earnings. All the Internet startups lost money. The
accountants have given them inflated asset values of $4
billion. And yet ICG has a market cap of $48 billion,
or about the market cap of all the gold companies
combined. This also means that ICG is valued at 2,400
times revenues.

Mindboggling! What mania?

When the generalist money managers finally realize that
they have been misinformed by the mainstream gold
analysts about the gold market (as in this Lehman
comment two days ago: "The risk/reward ratio for gold
stocks remains unfavorable"), they will all try to get
in the gold play at the same time. There just won't be
enough supply to fill that instant demand. The move in
the gold shares will be more astounding than that of
the Internet stocks. What a kick that is going to be!

A quid-pro-quo for all our tough times inflicted by the
manipulation of the gold market.

It blows my mind how few gold industry people really
understand the gold market. They have no clue that the
gold market has been manipulated, that the gold loans
are 10,000 tonnes or more, that there is a monthly
supply/demand deficit of 100 tonnes or more, and that
the market could rocket sharply higher at any time.

What a pity.

My favorite gold stock, Golden Star Resources (GSR on
the Amex) finished at 1 7/16 today, up 3/8, as longer-
term and tired shareholders continued to sell into its
advance. Boy, are they making an investment mistake of
a lifetime.

Just got off the phone with Frank Veneroso. Soon he
will be coming out with new gold loan numbers that are
a good percentage greater than his10,000-tonnes
estimate. That means the shorts are even more desperate
that even we thought they were. They cannot cover; they
are trapped. Frank also says it should surprise no one
if all of a sudden there is a peculiar announcement
that will creates negative gold sentiment -- like
another Bank of England-type of announcement. If it
does come, the effect might be dramatic, but he thinks
very short-lived.

That will give further credence of U.S. official
sector involvement in the manipulation of the gold
market. Desperate people call for desperate measures.
If that does happen, the calls for a full-scale
investigation of U.S. Treasury Department and Exchange
Stabilization Fund gold trading activity will build to
a crescendo.

The gold market is becoming more and more unstable. No
matter what happens to the price of gold in the short
term, Frank and I believe that gold is headed for $600
per ounce and it could do so in ONE day.

Seem like a stretch? Check your quote machine. April
platinum: $529.60 up $31.10. March palladium: $590.15
with a $598 high today.

What an amazing time for the gold market. The producers
are reducing their short positions, gold is spiking
higher in robust fashion and there is little spec
excitement. The open interest on Comex is a puny
153,976 contacts. That leaves room for 80,000 contracts
of new spec longs that could enter before the gold open
interest would be a little big for its britches.

This is a spectacular bullish setup, as gold has
rallied $25 off its recent lows, just weeks ago, and so
few players are long.

How many gold companies will blow up when the gold-
buying panic kicks in? Cambior is one that is still
living a nightmare because of the last one.

Cambior was caught in a vise when gold spiked to
$339/oz last October. The company took a US$33-million
hit when it was forced to buy back gold on the open
market. Debt swelled to $212-million and a group of 13
lenders took control. All options were on the table,
including the potential sale of the company's key
asset, the Doyon gold mine in northern Quebec. The
company's search for a new identity became a funeral

Aur Resources Inc. is bidding for Cambior at a fire-
sale price. Aur's bid is Cambior's only option at the
moment and the mood is somber at this once highly
regarded gold producer.

From the oil market:

"Spot horror stories still dot East Coast; record
prices paid.

"Feb. 8. Spot prices for heating oil and diesel may
calm down a notch in the next 48 hours, but supply
sources stress that widespread outages and dislocations
of product are rampant along the East Coast. Some
incredible numbers were paid by buyers desperate to
find oil in front of this past weekend."

Sure enough. Oil set back a tad before roaring today.
You know how bullish I am on the oil market. Looks like
a go.

A Hannibal Cannibal comment from Bridge News after the
Placer Dome announcement last week:

"In a briefing note to its clients yesterday, Credit
Suisse First Boston noted that Placer's 2 million
ounce, or 62-tonne, drop in its hedging book was
`dwarfed' by the anticipated 500 million tonnes of
official sector sales that we can expect in 2000."

More bearish spin by the bullion dealers. Like a broken

South Africa's Anglogold Ltd. (AU), the world's biggest
gold miner, said Monday it has been consistently
reducing its hedge book over the past few quarters.

Kelvin Williams, Anglogold's marketing director, said,
"We have been in a process of trimming our hedge."

The gold world will be waiting to see what Anglogold
has to say about the gold market, hedging, etc.,
Thursday morning at 10 a.m. EST.

After the Barrick PR fiasco this week, it is hard for
me to imagine Anglo not coming out with positive
remarks on its hedging plans. Anglogold is at the top
of the industry. The gold industry needs more and more
leadership and positive reinforcement. Anglo can
deliver tomorrow. Let us hope they come through.

To wrap up tonight, I want to thank so many of you for
the email and faxes you sent to Barrick protesting its
announcement on Monday. And what a spectacular result
you helped to effect. Great effort!

I also would like to thank you for the many kind words
you sent my way and to Chris Powell. The Gold Anti-
Trust Action Committee Inc. is a year old. Right from
the beginning we planned to create this sort of
"shareholder revolt." It was laid out in the
"enveloping horn" battle plan fashioned after the South
African Zulu warrior chieftain, Shaka. The right flank
of that "enveloping horn" was to try to influence the
gold companies to support GATA, to urge them to reduce
their hedges, and to encourage a shareholder revolt
against those that continued unreasonable forward sale

It is now obvious that the tactics of the "right flank"
of the GATA army have been very effective and have the
manipulation crowd bewildered a bit, in modest retreat.

GATA will not let up until they are in full retreat and
then surrounded again by the rest of the GATA army.

There were so many wonderful emails that I thought I
would share a few with you. This one is from Navy
George C:

"Excellent pep talk! But you probably have guessed by
now that I made the decision to `hang in there til the
last horn blows when I sent you the $99 check, which I
consider already a much more than fair exchange. The
price/performance of your organization is a first in my
travels. I didn't need the two-week trial; I needed
only two days to decide that this was a skirmish that I
would enjoy observing. If I were to lose my total
investment in this ball game, I could come away saying,
"At least I had the excitement of entering the fray.

"Because of your data, it's very easy to look at the
down blips in the curve and not spook-out, because you
allow us to understand what is happening. Without your
continuous info I possibly would have spooked after the
initial spurt in the gold market receded. I have had a
number of juniors for quite a few years. And I have
picked up on several new ones because I continue to
feel that this is a battle that David will most
probably win. And the most beautiful part of all this
is that when David achieves his win, an incredible
number of folks will benefit from David's win.

"Should you have any doubting Thomases out there who
might be spooking, you have my agreement to share these
thoughts with them if you think it might assist them
and your team."

From another Cafe member:

"I sincerely hope that you and Chris receive full
credit someday for the incredible work you have done. I
am a lifetime HSLM, and you are an asset to the world
investment community.

"One big comment regarding the actions of Barrick
Monday 2/7 and Tuesday 2/8. Obviously I would never be
a Barrick shareholder, or want to be. But I do think
something has been missing from everyone's focus.

"You, along with the help of people like Arthur Hailey,
have nailed them, and they know (and feel it) !

"They are caught in the trap. If they had completely
changed their hedge program, their book is so big that
it would have propelled the price of gold so high that
it would wipe them out. They now need to unwind, as
best they can, to minimize the damage.

"I sure wouldn't want to be in their shoes right now!

"Their actions over Monday and Tuesday were so
incredibly bullish for gold. We are soooooooooooo

"A million thanks."

And from an Australian Cafe member:

"Interesting observation. In Australia the share price
of the vast majority of gold majors is in a tailspin
with the odd spike up, but at the small end of the
market, the share prices of the good unhedged gold
producers and explorers are trending up well.
Conclusion --shareholders who want to benefit from a
rising price of gold are voting with their feet. I
wonder how long it will take before the more hedge fund
than gold-producing Aussie majors wake up. This is a
brilliant tactic of yours and all goldbugs. Keep at

Source URL: