Is Deutsche Bank Sabotaging Washington Agreement?


Copyright 2000,
Not to be reproduced without permission


By Bill Murphy

Spot gold $273.90, up 90 cents
Spot silver $4.98, down 2 cents

As my namesake, Bob Murphy, said on CNBC about a year
ago, I cannot analyze the gold market using technical
analysis anymore because "t is manipulated.

It is a united Murphy camp on this one and painfully
obvious to us both.

The CRB was last at 233.34, up 1.34 points, making
another new high for the move. Platinum and palladium
remain firm and the base metals are moving up with
aluminum, nickel, and copper all in bull markets. The
U.S. trade deficit announced today for March was $30.2
billion (it was not long ago that $20 billion was
shocking). The U.S. stock markets were trashed. Credit
spreads are steadily widening, showing clear stress in
the financial system. Yet oversold gold could manage
only a rinky-dink rally, par for the course.

Demand for gold must be lousy, right?


I received this report Thursday from someone in the

"Yesterday we had record physical offtake. One trading
house told me they lost more than 5 tons of gold to
physical buyers. Can you believe that? That is only one
trade house. And gold still goes lower."

This same Cafe member talked to 10 traders (fund, CTA,
and trade types), and they are bearish, 10 out of 10.
It is understandable with market action like this.

But take heart.

It is my strong feeling that before the elections this
fall the price of gold is going to go hundreds of
dollars higher. Never has there been more important a
time to accumulate physical gold and junior gold share
positions. The gold derivative nuclear bomb will most
likely explode just when the public least expects it
to. It will be almost impossible to build any kind of
gold positions as the gold price moves higher with
cheetah-like, limit-up speed.

Don't let this extraordinary opportunity pass you by.
No more groaning by any of us! The gold collusion crowd
is handing us a once-in-a-lifetime gift.

Be grateful that they are giving you time to buy cheap
gold and shares of the smaller, quality gold companies
at bankruptcy price levels.

Thank you, gold cabal; thank you.

Now why am I so jubilant?

The evidence being assembled by the Gold Anti-Trust
Action Committee and the GATA delegation that visited
Congress last week does indeed lead us to believe that
a price explosion is coming in the gold market, the
likes of which no one has ever seen.

The evidence will be presented to you in the weeks and
months ahead. It commences in the near future as GATA
delegation member Reginald H. Howe has a bombshell that
he will soon offer at his web site, It subsequently will be
presented at and

Reg's brilliant effort will be enhanced in the near
future by Frank Veneroso, whom I believe has as superb
an analyical mind as there is in the financial world.
You will have evidence of my assessment soon.

Howe, who is fluent in French, will be attending the
Financial Times' Paris gold conference at the request
of the Gold Anti-Trust Action Committee. He will be
presenting his findings and I will be distributing
GATA's "Gold Derivative Banking Crisis" report, which
was delivered to all members of congressional banking
committee last week, as well as GATA's latest
advertisement in Roll Call. During our visit to France,
Howe and I will meet with as many members of the
financial press and gold producers as possible to alert
them to what is coming.

I notice that Terry Burgess, managing director of Delta
Gold Ltd.; Chris Thompson, chairman of Gold Fields
Ltd.; Jay Taylor, president of Placer Dome Inc.; and
Bernard Swanepoel, chief executive of Harmony Gold
Mining Ltd., are among the speakers.

There will be a gold derivative crisis and it will most
likely occur before the coming U.S. presidential
election. As a result, any gold producer that has
excessive hedges will be in financial jeopardy. The
last gold price rise of only $84 devastated Cambior and
Ashanti. What will a $284 rise do to the big hedgers?

Here is the big problem. Many gold producers are using
what they call exotic hedging strategies that enable
them to achieve forward gold prices for their future
mine supply that far exceed current prices. To do so,
many have written calls on their future production that
far exceed that production. Well-informed sources tell
me that many of the Australians, for example, are
effectively 7-1 leveraged to the higher prices on some
of these forward sales.

The bullion dealers sell these "exotic" strategies to
the gold producers. These Ivy League rocket scientists
employed by the dealers have sold many of the producers
option strategies extracted from "black box" models,
based on the historic volatility of the options used in
each tailored stategy. Ashanti and Cambior ran into
trouble because a $84 rise in the price of gold in a
matter of days was not factored into to those "black
box" hedging strategies. Margin calls ballooned very
quickly. Bullion bankers panicked and were on the case
round the clock.

All that hullabaloo and gold was trading at only $325.
What might happen at $525 gold -- and if the price went
there in a matter of days or weeks?

Information soon will surface from members of GATA's
Washington delegation that will give credence to our
view that a gold derivative price meltup is coming and
will dwarf last fall's moonshoot.

Stay tuned.

Oh yes, one fact that seems to be lost at sea at the
moment: The concern about gold derivatives has come
about because GATA hired an investigator who discovered
this information was available, and GATA made it known.

As a result of GATA's revelations, Anglogold, the
world's largest gold producer and a fairly good-sized
hedger, has just retained a specialist to make a fast
study of the gold derivative market. This is big news,
because once Anglogold's specialist knows what we know,
the company most likely will cover its forward gold
sale hedges ASAP.

Now contrast Anglo with Barrick Gold.

This is the latest from the big Toronto-based gold
producer and mega-hedger:

* * *

Barrick's Munk flies to defence of hedging.

By Keith Damsell
May 17, 2000

Peter Munk, chairman of Barrick Gold Corp., gave an
emotional defence of the company's hedging strategy on
May 16, a forward-selling gold program that has
generated profit and controversy for the Toronto mining

"Don't let yourself be taken in by confusion and
propaganda," Munk told shareholders at the company's
annual meeting in Toronto. "There's lots of talk of
hedging and how it benefits Barrick and hurts the
industry. It does the opposite. It's the only means to
regain the confidence of the capital markets," he said.

Hedging has come under severe criticism thanks to the
woes of Montreal's Cambior and Ashanti Goldfields.
Gold's sudden rally to $339 per ounce last October
forced the two companies to unload assets to cover
massive hedging debts.

The crisis tainted the entire industry, including
hedging pioneer Barrick. In February, a handful of
Canadian producers dramatically reduced their hedging
positions, including Placer Dome. Barrick followed
suit, trimming its hedging program from 18.8-million
ounces to its current 13.4 million ounces. The company
is guaranteed a minimum price of $360 per ounce, about
$80 more than the current price.

Despite promises the programme is risk-free, Barrick
shares tumbled to a low of C$22.50 in March. The
stock's 52-week high is $38.20. "This very hedging,
after a decade of proven performance, has come under a
serious cloud," said Munk.

"The only risk [a gold producer] takes is if it fails
to deliver gold. A company like Barrick has for 15-
years, day in and day out, week in and week out, month
in and month out, year in and year out, never missed a

Hedging has generated more than $1.5 billion of extra
profit for Barrick, earnings that have made the firm
the world's most profitable gold producer. Over the
past six years, the company has produced 16-million
ounces of gold and earned about $1 billion profit. In
comparison, the rest of the Western world has produced
140-million ounces and lost $1 billion during the same
period. "No one will be able to get a higher gold price
than Barrick under any scenario," said Munk. "Barrick
can always offer you the higher of the spot price or
the hedge price."

For the company, 1999 was another record year. Key
mining operations in the United States and Peru boosted
production to 3.6 million ounces.

The opening of mines in Nevada, Chile, Argentina and
Tanzania are expected to increase production to five
million ounces by 2003 at an estimated cash cost of
$145 per ounce. Earnings, cash flow and reserves all
rose last year and the company continued to lower
production costs.

* * *

Barrick still does not get it, even after all the flack
they have received on this issue. One must ask why and
what is going on here.

This is my take on Barrick. They are in on the gold
market manipulation and have been for some time. In
many of Barrick's gold seminars, "Hannibal Cannibal"
Frank Arisman of J.P. Morgan is the one who has
presented Barrick's hedging strategies to shareholders,
gold analysts, etc. After the recently completed World
Gold Conference in London, Martin Stokes, head of J.P.
Morgan's bullion operation and Arisman's boss, was
asked about Morgan's $38 billion gold derivative
position at the end of 1999, what it represented, and
why it grew $20 billion from the middle of 1999 to the
end of the year.


The only reason I can think that Barrick is so
obnoxious about its hedging is that the company doesn't
believe that the gold manipulators will lose control of
their collusion game. They never figured on GATA
showing up and taking our information to Congress. In
their arrogance they still will not admit we are right.
Or, worse, it might be like the Mafia. Because they
have played along for too long with the bullion bank
and U.S. government cabal, they are afraid to cross
them and cover.

If either is the case, they have put on their
shareholder equity at risk. Barrick shareholders,
beware. Your worst nightmare might be an explosion in
the price of gold.

Only one bullion bank asked for a copy of GATA's "Gold
Derivative Banking Crisis" report:

Vincent Cirulli, Vice President
CFA Market Risk Review (ARR)
850 Third Ave.
New York, NY 10022

Could former Treasury Secretary Robert Rubin, who is
now at Citigroup, be on the GATA delegation's case?

From Cafe member Jim Cullinane:

"I too believe that the precious metals markets are
rigged. I suspect the Clintons to have meddled in stock
markets. I recall an attempt by Rubin to get control of
both fiscal and monetary policy but he was rebuffed by
Congress. In fact Rubin resigned shortly after his
attempt failed.

"But as the heat seems to have been turned up, the
shorters have shown no signs of weakening. Maybe the
stakes are so high that they realize they must not

"Which reminds me of the 89 men plus 36 more in the the
sick beds of the makeshift hospital of B Company, 2nd
Battalion, 24th Regiment, South Wales Borderers, who
held ranks against a Zulu impi of more htan 4,000
warriors on 22 January 1879 at an place called Rorke's
Drift on the Buffalo River. The Zulus, after suffering
many dead at the hands of the small band, led by
Lieutenants Chard and Bromhead and Colour Sergeant
Bourne, withdrew. News of the stand at Rorke's Drift
gave an emotional lift to the troops, and Lord
Chelmsford defeated the Zulus on 4 July 1879 on the
Plains of Ulundi. Eleven Victoria Crosses were awarded
to the men who held at Rorke's Drift. Queen Victoria
herself made the trip to the hospital to pin the VC on
Private Hitch when he was returned to England to

"Of course, my paranoia might be misplaced. After all,
Lt. G. Bromhead was an Irishman."

"Zulu" with Michael Caine is one of my favorite movies.
What great music. This defeat of the Zulus happened
after Shaka, their great warrior chief, was killed. The
new guy must have been a lousy general with the
"enveloping horn."

From another Cafe member on this subject:

"Thanks for your efforts.

"I found the following link yesterday:

"This long and excellent article (and many of its
predecessors available at the same site) really turned
on some lights in my head. Perhaps you are already
familiar with all this. When I think about the points
Dr. Goldman makes in this article, then add in the
results of GATA's research about gold price
manipulation, it all makes perfect sense. Of course the
government colluded to keep gold prices low. It
couldn't afford to have gold go up any more than it
could afford to have the other events chronicled in the
article get out of hand.

"I'll bet your readers would enjoy and learn from how
gold price manipulation goes hand in hand with Dr.
Goldman's stuff."

While the gold price in Aussie dollars has resulted in
a stronger Aussie dollar, thereby probably encouraging
some Aussie hedgers to pull the forward sale trigger,
the gold price in Indian rupees is at multi-year lows.
That is good news, as demand from that gold-devouring
country remains very strong even though there is a
drought in one region that will retard gold demand.

One must not lose sight of recent developments in
Indonesia, where gold production could be curtailed. A
recent Reuters story:

* * *

Indonesia's mining firms no longer on solid ground

Foreign mining firms have found themselves on
increasingly shaky ground as Indonesia's changing
political landscape presents new obstacles, and
analysts warn some firms may decide the country is not
worth the risk.

Protests, legal conflicts and environmental battles
have hit several foreign mining firms in Indonesia, and
one issue stands at the heart of the disparate
challenges they face -- Indonesia's drive towards
greater democracy and regional autonomy.

* * *

From Platt's, May 15: "Residents angry over land
compensation issues have again blocked access to the
Kellan gold mine on Borneo in Indonesia's Kalimantan

Stress is showing up in the financial system. The
Cafe's David Tice, Charles Peabody, Doug Noland,
Marshall Auerback, Dr. Neville Bennett, and many of our
guest contributors all have expounded on the coming big
financial shakeout. One theme for a long time was the
coming collapse of the dot-coms.

Yesterday's latest:

" Calls In Receivers, Heightening Web Worries

"London: Group Ltd., an Internet retailer that
counted the Benetton family and Christian Dior SA's
chairman among its investors, went out of business,
saying it could not raise additional cash to cover its

"Co-founders Ernst Malmsten and Kajsa Leander brought
in KPMG International to liquidate the London-based
company, saying their 'strenuous efforts' to raise more
cash had failed."

This is important, because when stress makes its way to
the bullion banks, it is going to affect their gold
lending operations. Our camp now believes the gold
loans well exceed 11,000 tonnes. It is only too easy to
understand what is going to happen to the price of gold
when a good number of them are called in.

A note from Cafe member Yukon Ken:

"Support a fellow gold advocate and GATA soldier....


"Josh Wright of Gold WorldNet site has given us another
venue to vent and share info at. Gold World is not in
competition with Michael Kosares and USAGold, so we may
want to drop in and leave a comment or two. To my way
of thinking there's never too many places for Gold Bugs
to hang out and this is just one more. I'm sure we can
all support this effort and see where it leads. Just
another Trail in the Gold Hills. Go GATA."

Tick, tick, tick, tick, tick.