Gold Newsletter recognizes GATA


12:20p EST Wednesday, March 8, 2000

Dear Friend of GATA and Gold:

The Wall Street Journal noticed gold and GATA today,
and in the process suggested that the price of gold
should be higher. This is largely because of GATA's
hectoring the newspaper in recent weeks. We hope the
paper will stay interested and begin pressing the
U.S. Treasury Department for answers to our
questions about the Exchange Stabilization Fund and
surreptitious government intervention in the
precious metals and equities markets.

Please post this as seems useful.

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

* * *


By Peter A. McKay
The Wall Street Journal
March 8, 2000

By most measures, gold ought to be golden again.

Demand for the metal surged 21 percent last year,
economists are worried about rising inflation, and
other commodity prices -- especially oil -- are
increasing, all of which have been bullish signs for
gold in the past. Volatile stock markets such as
the current one have also historically sent some
investors to the haven of gold.

But after a run-up to above $300 an ounce a few
weeks ago that had many analysts predicting gold
finally had recovered from its long slump, gold
prices have fallen and stalled near $290 an ounce.

Why isn't this a golden age?

Two reasons emerge, one having to do with
fundamentals, the other with perception. Concerns
that there is too much supply in the gold market has
hamstrung prices. Meanwhile, psychologically,
investors just have been finding other places to put
their money, shying away from gold as a haven.

Since the summer, when prices surged from 20-year
lows caused by over-supply worries, especially the
Bank of England's plan to dump a large amount of
gold on the market, the metal has been boosted
several times by one-time events. But invariably
gold has then given back most of the gains.

As usual in the gold market some conspiracy
theories, especially of price manipulation by
governments and gold borrowers, are gaining
popularity among a portion of investors to explain
the moribund gold price. Many industry analysts and
traders, on the other hand, explain the price
stagnation as simply further evidence of the metal's
ever-weakening role as a refuge from inflation.

"Basically, we're right back where we started," says
George Gero, a veteran gold trader at Prudential
Securities Inc., New York. "There's been some good
news (for prices), but we still don't have all the
ingredients in place to call this a true bull
market" for gold.

That much is clear. The latest rally began Feb. 4
after Canadian mining firm Placer Dome announced
that it would halt its gold hedging program, and
then several other major producers followed. That
meant there would be less metal on the market, since
gold producers' hedging usually involves selling the
commodity "forward" to lock in the current price in
case it takes a downturn later.

Gold futures immediately jumped $22.62 to $310 an
ounce. But prices have steadily inched down since,
closing at $292.20 yesterday on the Comex division
of the New York Mercantile Exchange, up $4.30 for
the day, but down $19 from the peak so far this year
of $312.70, on Feb. 7.

An even more extreme "false top" occurred in
September, when 15 European government banks
announced they would cap their gold sales. The metal
leapt $42.25 or 15 percent, climbing to $324.50 in
the next few weeks.

No one is expecting the metal to fall back to the
$250 levels seen this summer, although some analysts
have been forecasting the gold price to increase
since at least the European banks' announcement.

The metal is "hitting ascending bottoms right now,"
said gold-fund manager Harry Bingham, of Van Eck
Global in New York. "What it's going to take to
really bring up gold is time and a fundamental
perception change among investors. Everybody can't
get rich by buying stocks, retiring, and becoming a
day trader."

So far, though, just the opposite conclusion has
been built into gold prices, much to the chagrin of
bullish gold bugs.

Traders and analysts mostly shrugged off last
month's hedging cutoffs as a industry-specific
phenomenon, and then took heart in the dollar's
strength overseas and the Federal Reserve's recent
interest-rate increases as ample protection against

The conspiracy theorists are seizing on the time of
gold's plateaus as evidence of foul play in the
market. Such theorists are given a bit of credence
in the gold market, which is less transparent than
the stock market.

"Historically, people would tell you that any time
gold is trading at a price less than 12-to-1 to the
price of oil, it's a bargain," says Bill Murphy,
chairman of the Gold Anti-Trust Action Committee, an
investor group that communicates online and gets
some funding from gold companies. "Right now we're
at less than 10-to-1, and no one's saying anything"
about the phenomenon.

Mr. Murphy's organization has been lobbying the
federal government to investigate whether major gold
borrowers, including some gold companies, are
manipulating the metal's price so they can use
leased gold to make other investments, then repay
their loans with cheap metal later.

Most Wall Street gold-industry analysts don't buy
into the theory outright, although many say the
metal's fundamentals are more positive than its
current price might suggest.

World gold demand increased 21 percent to a record
3,278.4 tons in 1999, according to a recent report
by the World Gold Council trade group.

And World Gold Council analyst George Milling-
Stanley says the industry organization doesn't
expect any major production increases in the near
future, which would indicate that gold's price
should eventually increase.

However, he said recent episodes of producer hedging
and central-bank sales cannot entirely explain the
latest trends in the metal's price. Rather, he said
gold's very identity is undergoing a seismic shift
perhaps not seen since the 1970s when the United
States stopped pegging the dollar to gold and began
allowing private ownership of it.

Mr. Milling-Stanley said the metal's value now is
more affected by speculative trading, increasingly
complex hedging programs, and foreign-exchange rates
in the newly global, electronic economy.

He characterized the fall announcement by the
central banks as a step toward eliminating just one
specter hanging over the gold market, albeit an
important one.

"You have to look at this as a whole set of
circumstances," Mr. Milling-Stanley said. "The
market had believed that there was going to be a
major series of central-bank gold sales, but with
that fear eliminated by the September agreement,
gold is no longer a one-way bet."