Midas commentary for April 26, 2000

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Copyright 2000 / www.LeMetropoleCafe.com.
Not to be reproduced without the author's permission
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MIDAS COMMENTARY FOR APRIL 25, 2000

By Bill Murphy
www.LeMetropoleCafe.com

Spot gold, $278.25, down $1.40
Spot silver, $5, up 6 cents

Right after my "Gold Market Mystery" presentation to
the spring dinner meeting of the Committee for Monetary
Research and Education in New York, a mystery guest
named Jack Eckstine stood up during the question period
to take issue with my comments about Goldman Sachs. He
felt they were too accusatory. Later I asked for Mr.
Eckstine's business card, and he gave me one with no
phone or fax numbers or email address.

Yes, I strongly believe that Goldman Sachs is the
ringleader in not allowing the gold price to rise.
Goldman Sachs was in there today, pounding away on the
sell side, probing for stops below the market. In
addition to reporting on Goldman's price-capping
selling at strategic moments over the past 19 months,
its link with the U.S. Federal Reserve, U.S. Treasury
Department, Exchange Stabilization Fund, and Bank of
England is fairly synchronistic:

* Former Treasury Secretary Robert Rubin, who ran the
ESF as well as the Treasury Department, is a former
Goldman Sachs CEO.

* Treasury Undersecretary Gensler is a former bond
trader at Goldman Sachs.

* Former New York Fed Governor Ed Corrigan is a senior
partner at Goldman Sachs.

* London-based senior partner Gavyn Davies is Goldman
Sach's international economist and has close ties to
British Prime Minister Tony Blair. Davies' wife, Susan
Nye, is office manager for the chancellor of the
exchequer.

* Dr. Sushil Wadhwani, former director of equity
strategy at Goldman Sachs International (1991-95), sits
on the Bank of England's Monetary Policy Committee. The
committee's duties include determining the bank's
objectives and strategy, ensuring the effective
discharge of the bank's functions, and ensuring the
most efficient use of the bank's resources.

* Jon Corzine, former Goldman Sachs CEO, has close ties
to John Meriwether, chairman of Long-Term Capital
Management, which was bailed out in part by Goldman
Sachs.

* Former Fed Vice Chairman David Mullins was a partner
in Long-Term Capital Management.

Irrespective of what I have to say, Goldman Sachs has
found ways this past year to be criticized all over the
world for its ways of doing business:

"LONDON, April 20 (Reuters) -- Investment banking giant
Goldman Sachs could be dropped as a financial adviser
to the Japanese government on privatisations, the
Financial Times reported Thursday.

"The newspaper said the Finance Ministry in Tokyo was
alarmed at the way Goldman had managed some recent
international share issues.

"Goldman is currently the adviser in the government's
share sale in Japanese telecom group NTT.

"The Financial Times said the government was
particularly concerned about Goldman's involvement in
the $2.9 billion share offering of World Online, the
Dutch Internet group.

"Controversy was triggered when it emerged that World
Online founder and chairman Nina Brink sold most of her
9.5 percent stake before the offer. The transfer was
included in the prospectus but she did not spell it out
to the media. Brink resigned last Thursday.

"Goldman and joint adviser ABN Amro Rothschild are now
facing compensation claims from some World Online's
shareholders, who have seen the shares fall from a list
price of 43 euros to 14.80 euros on Wednesday.

"'There have been four of five initial public offerings
where Goldman Sachs has been the adviser and the best
that can be said is that there was a lack of judgment
involved,' the newspaper quoted an unnamed Ministry
official as saying."

The Financial Times goes on to say, "Goldman will take
a long time to live down that debacle."

Then this FT follow-up:

"Goldman Sachs has changed the team advising Softbank
on its planned acquisition of Nippon Credit Bank, the
nationalized bank, after the Japanese government
complained that the U.S. bank faced a potential
conflict of interest.

"The government temporarily halted the sale of NCB last
month, partly because the U.S. bank initially refused
to change its team.

"The government's concerns arose because Goldman Sachs
also advised the government last year on the sale of
Long-Term Credit Bank. LTCB and NCB were both
nationalized in 1998, and the sale of LTCB is acting as
a model for NCB.

"Goldman Sachs and the Financial Reconstruction
Commission, the government body overseeing the sale of
NCB, have refused to comment. However, the issue has
contributed to a deterioration in relations between the
Ministry of Finance and Goldman Sachs."

This is the same Goldman Sachs that was also publicly
chastised by the Financial Times for its conflict of
interest in its work for Ashanti Gold, for which
Goldman was a leading investment advisor and
consultant.

Then we have this from Sir Peter Tapsell (known to be
referring to Goldman Sachs when he made these comments
in the House of Commons a month after the Bank of
England gold sale announcement last year):

"But it is often said that some of those famous foreign
finance houses have shorted gold to a huge amount --
vastly greater than the tonnage of sales contemplated
by the Bank of England -- and that it was therefore
vital for them for the gold price to fall substantially
so that they could close their positions and take huge
profits. I do not know whether that is true, although I
think that there is no doubt that several finance
houses have been shorting gold in a very large amount,
so I suspect that the financial press will pursue that
point with vigour in the days and weeks to come."

From Christopher Fildes' column in the London
Spectator, reflecting on Goldman Sachs:

"Could today's chancellor make any of these claims? In
the BP debate, Chancellor Lawson rounded on his
critics: 'The Labour Party is simply the friend of
Goldman Sachs.' Now there's a thing."

This from a July 8 column in the South African Business
Report by columnist David Gleason:

"This is probably the reason some of the banks --
specifically Goldman Sachs -- are able to offer five-
year lines of credit to inconsequential North American
producers. The only conclusion to be drawn from lending
of this kind is that Goldman Sachs must be satisfied
that the risk element in the loans is virtually zero.
How does any bank arrive at that position? Because it
knows or is very confident that it is able to influence
profoundly what might otherwise be an uncertain
future."

Goldman Sachs just cannot stay out of the limelight.
The following was published about a year ago by Bridge
News:

"Justice Department investigates Goldman on
underwriting fees.

"By Jeff Pines and Cameron Dueck

"Washington, April 30 -- The U.S. Department of Justice
served investment bank Goldman Sachs & Co. with a civil
investigative demand Thursday requesting information
concerning an `alleged conspiracy among securities
underwriters to fix underwriting fees,' according to a
Securities and Exchange Commission filing from Goldman
Sachs released today."

Where there is this much smoke, there probably is fire
-- especially when it comes to gold. As you have heard
me say so many times, what is the big stretch about
GATA's assertion that the gold market is being
manipulated by Goldman Sachs and others? Shorting gold
and investing gold from gold carry trades has been one
of the great winning financial moves of all time, yet
no one will even admit to putting that trade on. Pretty
strange, eh?

In my last report, I cited this FT April 18 story:

"UK watchdog to look at Treasury's auctions of gold.

"The Treasury's sale of more than half of Britain's
gold reserves is to be investigated by the National
Audit Office....

"It said it would examine whether taxpayers had
received 'value for money' from the sale.

"In particular, it will consider whether the government
did what it could to maximize the proceeds from the
sale, what advice the Treasury took and the effect on
the auction process paid by bidders."

Sources tell me that the National Audit Office would
like to know if that advice came from Goldman Sachs.

And as I also mentioned recently, another source told
me that the Gold Anti-Trust Action Committee had finally
"thoroughly pissed off" Goldman Sachs. Well, what they
have seen so far is only "jacks for openers." GATA and
our supporters around the world are "upping the ante."
Mr. GATA goes to Washington and this GS material goes
with us.

Moving right along with feedback from a Cafe member
over past government activity in the market:

"Back in the '60s and '70s, when bank funding was
largely obtained in the CD market and a bank would
find itself shut off because its name had been
besmirched, we would hear that a major player, usually
Morgan, would, with a wink and a nod from the Fed,
actively borrow on behalf of the leper. Nothing ever
confirmed in print, of course."

"During the period of the Treasury-Fed accord ('50s),
the New York Stock Exchange called Solomon to ask what
they were doing lifting U.S. Treasury offerings at the
close (tape painting being a specifically banned
practice). Treasuries used to trade at the NYSE. My
dear departed friend used to enjoy relating how he told
the exchange to call the customer -- the New York Fed."

During the past two years, two Cafe members were told
by business acquaintances that Wayne Angell had told
them that the Fed was responsible for Belgium's selling
its gold.

So it was no surprise to get this confirming email:

"When I was still working in the financial community I
and one of my associates had a private meeting with
Bear Stearns chief economist Wayne Angell. This was in
1994 or 1995. Gold was not the primary topic, but it
did come up briefly. And I recall Angell (a former member
of the Board of Governors) saying the Fed was largely
responsible for the decision of either the Dutch or
Belgians (I forget which) to start selling gold in the
early 1990s.

"And we all recall Alan Greenspan's infamous statement
that 'central banks stand ready to lease gold in
increasing quantities should the price rise.'"

"I submit that the Fed almost certainly is extensively
involved in efforts to trash gold. Not so much via its
own actions, but rather by what it pressures compliant
foreign central banks to do.

"I suggest that GATA have its friends in Congress
submit the following to Greenspan to be answered
under oath:

"Has the Fed, the New York Fed, the Board of Governors,
the Federal Open Market Committee, or any individual
members of the Board of Governors or the Federal Open
Market Committee ever tried to influence in any way
foreign central bank decisions to sell or lease gold
during your tenure as chairman?"

Speaking of London gold talk.... Love this from Reg
Howe's latest:

"Another gold mining executive asserted that there is
no credible evidence of gold price manipulation by
governments or bullion bankers over the past year, a view
confirmed by a third as that generally held in the industry.
But ask any of them why the British and the Swiss are
selling half their gold reserves, and at best you will
get a blank stare. They cannot tell you because neither
they nor the World Gold Council has made any judgment
on the true reasons for these sales notwithstanding the
complete failure of either the British or Swiss
governments to put forward any genuinely plausible ones
of their own.

"Nowhere is this suspension of judgment more obvious
than in the World Gold Council's own publications. The
April issue of the WGC's 'Gold in the Official Sector'
(www.gold.org/Gra/Gios/11/Contents.htm) contains
articles on the Swiss, British, and Dutch gold sales.
The main point of the first is that Swiss do not yet
have any clear idea of what to do with proceeds. A
child would ask (but not the WGC): Why are the Swiss
in a rush to sell gold at multi-year lows if they have
no current use for the proceeds?"

From Cafe member Riley Conklin, who responded last week
to the commentary by London gold bear Ted Arnold,
regarding his very bearish base metals 18-month
forecast:

"I was just reading today's Midas and thought I would
pass on some interesting information (or what I think
is interesting) regarding current conditions in
commodities such as copper and construction materials
for several industries I am involved in. I have
contacts in the semi-conductor business, and in
conversations over the weekend they told me that
conditions for acquiring raw materials like copper for
use in electroplating operations were desperate; there
is a real shortage in supply.

"They are bringing in copper from Oregon for use in
California operations, the first time they have ever
had this problem, even at the height of the semi-
conductor business a number of years ago. In addition,
my contacts in the heavy construction industry have
been telling me for months that construction materials
like steel, aluminum, etc. have shot up nearly 40
percent.

"I am involved with several Canadian juniors with
promising gold properties and have been keeping the
faith for last three years. Enjoy your site. Keep it
up."

May Copper closed at 79.90 cents today, up 2.40 cents.
By the way, spot platinum traded at $800 today on the
Merc. There must have been a serious delivery problem
in New York.

Ken S. in Australia reports concerns in the news down
there that the Zimbabwe racial strife will spread to
South Africa.

Thought you might like to read this one too:

"Just getting up to speed with the events of the last
10 days. I was aboard a yacht in the Galapagos Islands.
(I thoroughly recommend it as a getaway.) I followed as
best I could the antics of the Plunge Protection Team
via shortwave radio, BBC, and VOA. Amazingly, after
Black Friday a Voice Of America (shortwave) guest
suggesting buying resource stocks as an alternative to
the Techs. I could hardly believe my ears, especially
from a mouthpiece of the American government.

"Two other things I wanted to pass on to you:

"Routinely I buy gold coins (Krugers or fractions
thereof) when I leave South Africa with the notes I
have left over, rather than enriching the banks with
fees, charges, etc. for exchanging them. This time ABSA
bank in the departure terminal at Cape Town was out of
gold. They said they couldn't keep it in stock.

"Here in Ecuador where I am writing this they are
attempting to dollarize the economy. The sucre is
pegged at 25,000 sucres to the dollar. When I was here
in September 1998 it was 6,000 to the dollar. Now it's
difficult to find a restaurant where the entrees are
more than $2 US, and beer is 30-50 cents for a quart
bottle. Gasoline is about 50 cents a gallon. For
Ecuadorians things are very tough. Inflation is still
galloping along in spite of dollarization and many
people are at their wits' end.

"The country is flooded with Columbians buying canned
goods, furniture, etc., and taking it all across the
border because they are so cheap. Stores within 100 km
of the border have empty shelves 10-20 minutes after
opening.

"I am staying with a university professor who showed me
an advertisement to work in the USA as a lecturer for
the grand sum of $28,000 US per year, which he thinks
is a fortune. Much more than his present salary. He
doesn't realize that this would be a poverty existence
in the US. This is how things get very badly out-of-
kilter with economies. I am convinced though that
chaining themselves to the almighty US buck will be the
Ecuadorians' final undoing. What a terrible shame for
such a wonderful bunch of people.

"Don't get disheartened by the lack of upward movement
in the gold price. I am convinced nothing will happen
until the masses are turned from the Dark Side (to
paraphrase from 'Star Wars'). NASDAQ is as fragile as a
soap bubble right now and we could see another plunge
this coming week. I am holding gold, investing in gold,
and exploring for gold because I don't want to find
myself one day a victim of a currency meltdown. All
Clinton's smoke and mirrors can't erase America's trade
deficit, the debt load of individuals, businesses and
municipalities etc. It will come home to roost as it
has done in Ecuador. If the markets go as predicted the
US buck will lose safe haven status and gold will be
the only alternative. However, expect lots of
shennanigans before that day comes.

"As regards big mining companies and their lack of
mettle for the metal, they are an ultra-conservative
bunch like ostriches with heads stuck in the sand. This
is why it is so easy for people like me to run circles
around them in the exploration game. I have fought for
years to get companies to take a stand against
environmental activist Luddites, but they all follow a
policy of damage control rather than being active
and let themselves be victimized. My brother, a
Canadian-trained doctor, told me that no medical
association would ever lie down and let itself be
walked over as the mining industry does. I don't
believe for a minute that senior mining company
execs are grim-faced Stoics who accept the market as it
is. They are sharing pillow talk with the Hannibals --
Barrick et. al -- using their forward production as a
slush fund for derivatives and other sorts of
conjuring.

"As I said last year in a posting on the Cafe, gold
mining, of all man's endeavors has the greatest
propensity to create true wealth; more than cocaine
smuggling, and it's legal!

"When I get the chance will send you a 100-sucre coin.
It is worth 1/250th of a US cent but still is in common
circulation here in Ecuador.

"P.S. I saw my old university professor a few weeks ago
and he said you got a standing ovation at the Alaska
miners meeting. He was in the audience. Says yours was
the most talked-about speech of the meeting."

This wire story from a Cafe member who is a Normandy
Mining supporter:

"Normandy-managed companies did not commit to any
new or replacement hedging during the quarter.

"Consequently, the hedge book declined by 356,000
ounces through delivery into previously established
contracts where the gold was sold in prior periods.
Only 1,000 ounces of production for the quarter was
sold into the physical market at spot.

"After period end, Normandy became responsible for
the Great Central Mines hedge book, which will
progressively be aligned with Normandy hedging policy.

"Given the substantial position, it is unlikely that
any additional hedging will be established for the
combined group next quarter. At current gold prices,
the majority of production next quarter is expected to
be delivered into maturing contracts.

"Who on earth is selling all this gold that keeps
depressing the price?" our Cafe member asks.

Ask Morgan Bank! They must have some idea as a result
of that $20 billion in gold derivatives that ended up
on their books the last six months of last year. That
brought them to more than $38 billion in total by the
end of the year. I wonder what the number is up to now.

This struck me in Bob Chapman's latest:

"Today North American gold funds have only $2 billion
in assets and a combined market capitalization of .14
percent of the S&P 500 index. The capitalization of the
global gold industry is under $40 billion, with only
nine companies having capitalization of more than $1
billion. Return on equity has declined from 13 percent
in 1987 to zero in 1999. The average of the S&P
industrials is above 20 percent. That means that only
low-cost elephants will be put into production."

When gold makes its big move, the gold share prices
will go bananas. Gold is a worldwide investment. There
are too few places (companies) for the coming herd of
investors to park their dough in. A lot of wealth has
been created over the past years, while the number of
gold companies diminishes by the month.

Will finish this on an upbeat note.

I told you that my 44-year-old cousin was running in
the London Marathon and dedicating his run first to
Leukemia awareness and then to GATA awareness.
This is what he sent me after the race:

"London was a great race. The weather was terrific, and
the race was the best organized I have ever run in. I
ran about what I ran in New York -- that is 2:42:03 (a
6:13 per mile pace), which was good for 271st place
among 37,000 runners.

"My guess is that I can run about 5 minutes faster. I
was too tentative early on in the race and really did
not get into the rhythm of the event at all. This being
only my fourth marathon, experience will help. Next
time I'll just hang it out there and hope that I don't
crash and burn after 18 miles. I really had too much
left at the end."

Thanks for thinking of me. Cousin Danny."

Congrats, Cousin. Well done. We in the gold world know
all about marathons.