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Others are starting to sound like GATA
Copyright 2000 www.LeMetropoleCafe.com
Not to be reproduced without the author's permission
Midas commentary for May 2, 2000
By Bill Murphy
Spot gold $275.40, up $2.20
Spot silver $5.01, 1 cent
Break those chains! Gold is a SCREAMING BUY. Only the
shackles of the Black Knights are keeping the price of
gold from exploding.
Gold came in $2 higher today and then tread water for
the rest of the Comex session, mainly as a result of
Goldman Sachs' selling right above the $2 higher on the
day mark. They also were buying puts. Do you remember
the old $2-up-day limit rule that was enforced by the
Hannibal Cannibals so that gold price action never
created any excitement for any given day? That was in
vogue for a very long time with the Black Knights and
was brought back again today.
The XAU is breaking out of a saucer bottom in smart
fashion. As for the CRB, it closed at 216.79, up
another point, and is just a point away from making a
new recovery high.
The gold shorts can huff and puff but they are in big
trouble. That is a line I have used for a long time, I
know, but the longer the price of gold is not allowed
to rise to a more natural supply/demand level, the
bigger problem the shorts are going to have to deal
with. That is cast in stone.
Spot gold closed on the downtrend line that began after
the February runup. The XAU explosion today finished
over that downtrend line.
Gold should spike up to the $290 area, and then we know
what ought to happen, but the gold market manipulators
have lost control of this market twice in eight months.
They are going to lose control again and there is going
to come a time when they lose control for good. Then we
head to $600-plus per ounce.
Goldman Sachs continues to accumulate silver. Funny
enough, I would not be surprised to see a short-term
silver squeeze now that it appears that Warren Buffet
is still long. His right-hand man, Charles Munger,
asked about silver the other day, said, quot;Holding silver
has not been a dull ride.quot;
Silver is due.
quot;The Swiss central bank finally kicked off the sale of
half its gold reserves, announcing it will offload a
first batch of 120 tonnes through September, which
ended speculation about the pace of the largest planned
gold sale,quot; according to a Bloomberg dispatch from
You have often heard me say that the gold market is
plagued with negative hysteria and disinformation
fostered by the Hannibal Cannibals and disseminated by
the unwary mainstream press. This is a good example.
The Washington Agreement allows the European central
banks to sell 400 tonnes of gold through next
September. The Dutch have sold 100 tonnes already, the
Austrians announced selling 30 tonnes already, and the
British announced that they will sell 150 tonnes during
this period. That leaves only 120 tonnes for the Swiss
to sell through September. All that is public
information. Yet this Bloomberg story makes it sound
like this number is a surprise. The Swiss announcement
could not have been anything BUT this number.
The Swiss National Bank announced it started the
process yesterday and that the Bank of International
Settlements was commissioned to do the actual selling.
This will most likely be another example of selling the
news and buying the fact -- giving impetus to a coming
gold price rally.
What bothers me is that this fact has been known since
last September, when the Washington Agreement was
announced, so what is the big deal about these Swiss
sales anyway? The Europeans factored all this in to the
gold supply equation last year. Recently the Cafe
reported that the Swiss announced they lent 179 tonnes
of gold last year. If they start calling in some of
those gold loans because they are selling half their
gold in the years to come, then gold supply will be
reduced more than expected by the Swiss in the months
Further, it is not unusual for a big Swiss bank to sell
a tonne of gold a day, which is all this is. Remember,
gold demand continues at a record pace around the
The lows in the CRB Index have been higher and higher
since last July. Ten times that index has corrected and
each time it has turned around before a new low was
made. I would call that a fairly significant trend. But
of course there is no inflation -- just look at the
price of gold.
The CRB Index is close to making a new high. Crude oil
closed today at $26.89, up $1 per barrel, which is
still a double over the past year. The employment cost
index was up 1.4 percent (50 percent over expectations),
far higher than all of the estimates. And now the
housing numbers come out today showing a 4.5 percent
increase last month. (Market analysts were looking for
The housing report was frightening, as the month-over-
month median home price rose from to $165,000 from
So food prices are going up sharply, wages are going up
sharply, oil is up sharply, and housing prices are
going up sharply. Maybe in the quot;new economyquot; world,
none of this matters, so who wants gold if those things
don't count to begin with?
This looney rationale that the stock bulls keep feeding
the investing public can't last much longer. Eating,
making money, riding in a car. and paying rent and
mortgages, along with buying a home, do count. Unless,
of course, you are a homeless vegetarian who bums money
to ride the subway in New York.
I think Bridgewater has it right:
In the Bridgewater Daily Observations: quot;It seems like
traders are so used to low and falling inflation that
they can't accept the new reality of rising inflation.
The combination of recent experience with low inflation
and the acceptance of 'new economy' theories that
justify its perpetuation seems a lot like the
experience of high inflation and the now-defunct
theories that justified its perpetuation back in the
Oh, yes, gasoline rose 5.5 cents today, and copper now
trades north of 81 cents. Hello, Ted Arnold.
Love this one:
quot;Amsterdam, May 2 (Reuters) -- Dutch pension fund PGGM,
the country's second biggest, said on Tuesday it
planned to enter the commodities markets for the first
time this year, investing 3-5 percent of its portfolio.
quot;Based on the fund's investments at the end of last
year of 111.3 billion guilders ($46.01 billion), this
would mean an injection of $1.38 billion into
That's a pleasant switch for a pension fund story.
Potpourri and the Gold Shares
Today's really big story was the XAU, as it soared to
61.02, up 5.47, 10 percent higher.
The Toronto Stock Exhange's gold and precious metals
index, which houses some of the world's top gold
companies, also was very strong, as it closed up 324.49
points, or 7.7 percent.
Well-known market technician Martin Pring turned very
positive on the senior gold shares as a result of
tonight's close. His key technical XAU points were 57
and 61, both of which were taken out.
Reports came to me of very significant volume in all
the senior shares from Cafe members all over North
America. It has been some time since we have seen this
kind of action. In the past a move such as the XAU's
today would presage a move up in the bullion price.
Newmont was up 3 9/16 and closed at 27. Barrick was up
1 5/8 to 18 5/8. And Placer Dome rose to 9, up 11/16.
Newmont is pulling away from Barrick big-time, and has
been pulling away ever since GATA supporters made a big
stink over Barrick's hedging policies and suggested
that shareholders dump Barrick until it mended its
ways. Last summer Barrick and Newmont were trading
about the same price. Have they diverged or what? This
past Sunday's New York Times reports that unhedged gold
companies are doing better than the hedgers. Newmont's
lead over Barrick is proof of that.
This is very significant as it may put pressure on
Barrick to cover some of its forwards. The call options
the company purchased last year are all expiring
worthless, a waste of money so far.
Come on, Barrick -- get GATA behind you. Your
shareholders cannot be happy campers. What will Newmont
trade over Barrick when the gold price finally goes
where it ought to? Gold share players know what
happened to Cambior and Ashanti because they were too
hedged. Barrick, you are scaring shareholders away.
Being too hedged was yesterday's winning gold producer
game. But not today's. I will be able to hear the
howling up from your shareholders in Toronto all the
way down here in Dallas if it takes you too long to
understand that simple fact.
To our heavily hedged Australian friends down under:
Time for you to wake up too.
From Reuters about the Monday stock price action in
quot;Australia's benchmark gold index fell to a seven-year
low yesterday as declining gold prices prompted
investors to shed stocks in mining companies.
quot;Newcrest Mining Ltd, Delta Gold Ltd., Lihir Gold Ltd.,
and Normandy Mining Ltd. let the index down. According
to Australian Gold Council Chief Executive Greg Barns,
'The market is skittish at the moment and a lot of
people are selling off well-performing stocks to make
some money, given that a lot of people have taken a hit
Steve Armitage, group treasurer for Delta Gold, took
exception to some information generated from Cafe
material that he felt was inaccurate and expressed a
desire for a correction, so I am doing so. This is from
quot;I refer to an article on your web site that referred
to Delta Gold in a comment on producer hedge books. The
comment, while ambiguous, had negative connotations
based on inaccurate information. Delta is Australia's
lowest-cost producer and its smallest hedger, with a
hedge book oriented toward an increasing gold price. We
have had this policy consistently for more than 10
years and stated it publicly. Our shareholders have
more than 75 percent of annual production exposed to
increases in the gold price. We therefore deeply resent
ill-informed comments that lump us in with speculators
such as Ashanti.quot;
The Cafe has many Australian friends and members. They
are some of our staunchest friends. It is a great
country and I am fond of most all the Australians I
have met. The policies of their big hedgers is another
Hedging is a wonderful management tool at times, but
enough is enough and now is not the time to be
substantially hedged. I have knowledge of some of the
exotic derivative hedges that some Australian producers
have on. They could be very dangerous. Shareholders
Talk is around the New York gold world that Morgan
Guaranty, Goldman Sachs, and Morgan Stanley are going
to try to find a way to take business away from the
Comex and make it less interesting to go to the Comex
floor to trade. That one has to fail. What a revolting
thought. Things are bad enough now. What will gold
trading be about if quot;Hannibal Lecterquot; himself is a gold
casino owner along with two of the great Cannibals.
Here is a big positive for you, though. This comes
after Anglogold announced that it will establish a
gold-selling web site adventure with Morgan Bank. Gold
items are low-margin items. These big players know the
big move is coming and are positioning themselves to
make money on wide bid/offer spreads that are also
coming. It is very positive news that these gold
gorillas are thinking this way.
How many reasons will the quot;Casino Gold Commissionquot; need
not to grant Goldman Sachs a license?
From Cafe member Horst, who sent me this from Germany
about Goldman Sachs:
quot;One of our leading Sunday papers, Welt am Sonntag,
published this weekend an article, 'Bei Goldmann Sachs
blettert der Lack ab,' meaning the finish is pealing
off at Goldmann Sachs.
quot;The article mentioned the latest negative results with
Netherlands issues like Lycus Pixelpark etc. Further,
the debacle with the new issue World Online in the
quot;Another point is the placement of Petro China and the
problem with the government in Japan.
quot;Finally the advisory job of Goldman for Dresdner Bank
in the merger with Deutsche Bank.quot;
What is going on with Mitsui? This worldly bullion
dealer that has a special presence in Tokyo used to
update its commentary from its various departments all
over the world on a daily basis via its mitsui-gold.com
web site. Australia has been down since February and
London down since April 26. In the past they have been
perfunctory with their analysis, except when there was
great turmoil in the market or their position was going
against them. Then suddenly they would be silent at
times. Is trouble brewing for another high-flying
bullion dealer? Is another one downsizing? Does another
one really know the gold fireworks that are coming and
is running for the hills while it can?
Here is some gold industry feedback I thought you might
quot;I have read several of your gold commentaries and find
them most useful and informative. The following
anecdote might be worth summarizing and you can quote
me if you would care to.
quot;I have been in the resource and investment businesses
for more than 30 years and have a company, Augen
Capital Corp. (www.augencc.com), that acts as a venture
capitalist for emerging resource companies, many of
which have gold exploration and development projects.
My background is applied geology and mining
engineering, and in the 1970's was a rated mining
analyst with a major Canadian investment dealer. In the
past 30 years I have visited, analyzed, and invested in
dozens of gold companies. This long introduction is the
give the reader a better idea of the situation I will
now describe (and why I was so aghast!).
quot;While vacationing in New Zealand in February this
year, my wife and I happened to be sitting opposite a
couple from the United States (we were at a large Maori
'Hangi'). The gentleman was a visiting professor from
the United States, his specialty being organic
chemistry. When he found out my occupation, we began a
heated discussion, initiated by him, on the merits of
gold production. His allegations were;
quot;-- There are no significant industrial applications
quot;-- Gold production destroys the landscape and the
environment (particularly poisoning by cyanide).
quot;-- Central banks are therefore justified in conspiring
to drive the price of gold down!
quot;Here was a well-educated professor from an Ivy League
university with an incredible knowledge deficit in a
subject in which he held such strong opinions. The
statement about industrial demand needs no further
comment (it was too easy to refute). But it is
incredible that an organic chemist did not know that
cyanide can be broken down by hydrogen peroxide (which
is how gold tailings are treated), nor that it breaks
down in 24 hours when exposed to sunlight.
quot;The significance of this is how easily even educated
people can be mislead by extremists of any kind, be
they gold bears or environmentalists. Public opinion
has clearly been deliberately manipulated against gold
and mining development in particular. Further, it is
also obvious that the mining industry has done an
abysmal job of defending itself against such tirades.
quot;I welcome correspondence from your associates and
readers on these subjects.
quot;Best wishes, Augen Capital Corp., J. David Mason, CEO,
Some great GATA news to finish up with.
A gold producer came through today and GATA now has the
funds to place another advertisement in Roll Call in
Washington. A GATA open letter will be addressed to the
Banking Committee members in Congress about our looming
gold banking derivative crisis,quot; a document that I am
going to deliver when I go to Washington. In addition,
I will be taking this document for distribution at the
Financial Times Gold Conference in Paris in June. I
will distribute it as widely as I can.
This is a very gratifying development for GATA. This
means that five major gold producers are quietly
supporting GATA with contributions, as are 10 smaller
gold companies. We will not let our supporters down. We
ARE going to win the day.