Homestake remains among the unhedged good guys

Section:

11:30p EST Thursday, February 10, 2000

Dear Friend of GATA and Gold:

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

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

* * *

By BILL MURPHY
www.LeMetropoleCafe.com
February 10, 2000

Spot Gold $316.50, up $10.10
Spot Silver $5.35, unchanged

So much to say. Action everywhere.

For starters, gold gapped higher, stalled at $316, sold
off quickly, and then very steadily rose for the last
half of the trading session. The move up was about as
orderly as I have seen, as buyers came in on every
little dip.

Early in the day I received word that a bullion desk
was closing its operations because of some sort of
derivative disaster. The source is an old pro and is
reliable, not one to spread gossip. That does not mean
he is getting the right scoop. When the rumor came back
to me a second time, I sent it out to you after the close.

That wasn't the only hot story out there. The continuing
Ashanti saga has traders wondering whether the
government of Ghana will just nationalize those
assets and stick the bullion dealers with the hedge
positions, which are rapidly worsening. The rationale
would be that the bullion dealers were responsible for
the blowup and should be the ones to pay the piper.

That may not be in the cards at all. But Ashanti's
written calls with a 330 strike price are in the
picture. A move by gold above $330 would take these
calls into the money and effect a stampede of buying
that could turn into a panic, as no one seems to know
how the Ashanti workout will be resolved.

It might panic not only the liable bullion dealers but
other shorts that know what is likely to happen if $330
gold is breached to the upside.

Fireworks time?

Just in at 8 p.m. CST:

"Ghanian Government Launches Broadside Against
Ashanti."

Too much to get into now. Some goodies. Ashanti's hedge
book is under water to the tune of $570 million with a
$270 million margin call at present. Barclays Bank and
Chase Bank were going to lend the company $250 million
but withdrew the offer about six weeks ago.

What a mess!

Adding to the gold bears' woes were South Africa's
Anglogold and Western Areas. Anglogold announced that
it trimmed its hedge book by 10 tonnes in the fourth
quarter and that it would "continue to deliver into its
hedge" for the rest of 2000. Anglogold reiterated its
positive outlook for the gold price.

Western Areas announced that it has closed its forward
sales of gold for the next two years.

A banner day ... almost. For some inexplicable reason
Homestake Mining CEO Jack Thompson took this moment to
announce that Homestake, which is mostly unhedged,
would engage in hedging. What could he be thinking of?

The gold market is responding very positively to all
these announcements of hedging reductions, and Thompson
goes the other way at exactly the wrong time. Homestake
has been popular for staying away from hedging. Didn't
Thompson learn anything from Barrick CEO Randall
Oliphant, whose namby-pamby press release Monday did
not go far enough for the market about the company's
hedge plans and thus sent the gold price plunging?
Barrick had to backpeddle and put out a more positive
press release on Tuesday.

Bummer, Jack. Get with the program. Homestake has a
hundred years of practically no hedging, and just when
the anti-hedging tide is swelling, your company is
going to roll over? Not good; not good at all.

The Bank of England denied that it was going to halt
its future gold sales. Why should it? The bank needs to
average down its incredible loser trade of selling gold
and buying euros. The euro has gone down 10 to 15
percent while the gold price has soared after the bank
brilliantly sold gold at auction at prices from around
$255 to $289. Not good; not good at all.

According to Reuters, the European Union should soon
authorize the European Central Bank to double its paid-
in capital, ending months of behind-the-scenes
wrangling and smoothing the way for a similar increase
in its reserves, EU and ECB officials said today.

This could be a very constructive event for the gold
market if it means that the ECB requires the European
central banks to shift 747 tonnes of gold into the ECB.
If that happens, the moans of the gold bears will be
heard all over, as that gold will not be available for
sale or lending.

There was much action today in the all the markets, and
most of it was bullish for gold.

The CRB soared, closing at 215.03, a new high for the
move. Crude oil closed in new high contract ground, up
45 cents on the day, finishing at $29.42 per barrel.
Beans were up 6 cents, corn 3 cents, and wheat 6 cents.
Copper moved up a sharp 2.75 cents per pound to $84.85
as the base metals were very firm. The price of nickel
is soaring because certain suppliers cannot deliver and
have declared "force majeur." Ruthenium stormed to
price levels not seen since 1987, and there is a
rhodium shortage.

The oil chart is a beauty -- a near-term reverse head
and shoulders, and oil is breaking the neckline to the
upside. Both the fundamentals and technicals in oil are
very bullish.

Thirty-dollar oil, here we come.

Of course, there is no inflation.

The U.S. bond auction was a dud and bond yields climbed
vigorously and are back to 6.43 percent. The bond
vigilantes know there is inflation out there and gave
their vote on that by not bidding for the 30-year
Treasuries today. The bid to cover (a demand item) was
only 1.3. to 1, which I think is the lowest ever.

The bank stocks fell again as their index finished the
day at 711.35, not far from recent lows.

The rise in the gold price has been stunning, yet the
open interest on Comex is only 156,964 contracts. There
are few speculative longs. Not many players believe
that this rally will amount to anything. An anecdotal
delight for us gold bulls.

The senior North American gold shares are feeling the
lack of interest too. Today was extraordinary. Gold
went up $10 and the XAU could manage only a .75 gain
and finished at 68.34. Newmont Mining gained 3/4 of a
point, but Barrick Gold finished unchanged at 18 7/16.
During the summer Newmont and Barrick were trading at
the same price.

I was informed today that Barrick CEO Oliphant blamed
the Gold Anti-Trust Action Committee for his company's
poor stock performance. From the podium at a New York
presentation today, he cited the "conspiracy forces" as
the main reason why Barrick stock is performing so
poorly.

First Treasury Secretary Lawrence Summers, then Fed
Chairman Alan Greenspan, then "Hannibal Cannibal"
Chase, now Barrick. All have responded to GATA. We
can't be all bad.

More on that soon.

Unusual events late in the day. Right before the gold
close, April was $319 bid. Goldman Sachs knocked it
back down to make sure $319 was not violated. Then
there were sell imbalances on the senior North American
gold shares and the XAU was hit for more than a point
going into the close.

I guess portfolio managers are selling their gold
shares to get back into the high-tech mania.

One-month gold lease rates hit a new low. No takers.

The price of gold should rocket. The sharks know that a
bleeding Ashanti is there for the kill, etc. The
Barrick calls go in the money at $319. The specs have
not bought in yet. The shorts now know that the
producers are serious about reducing future gold
supply. Inflation is on the move. You know the rest.

Who is selling? The gold market will roar unless the
increasingly desperate manipulation crowd comes on the
scene again.