Gold Fields and Franco-Nevada to merge


Copyright 2000,
Not to be reproduced without permission

By Bill Murphy
June 11, 2000

Spot gold $286.50, up $2.80
Spot silver $5.03, down 2 cents


They could not look better! A spike up from $270+ spot
gold to $292. Then a run of several one-day small
pullbacks, with the 200 day moving average holding like
a champ -- just where it HAD to. That action was
followed by today's advance with no immediate gap to

Volume was light; the bullish consensus is only 35
percent as buyers remain tentative knowing how powerful
$290 resistance has historically been.

The open interest on Comex contracted once again on
Friday to 136,376 contracts, down another 1,736
contracts. That tells us there are few spec longs at
the party yet. It is possible and very conceivable for
80,000 spec longs to jump in on the long side. If they
do, let Goldman Sachs sell them 30,000 more contracts.
Might be blinking time.

Gold is poised to move sharply higher if recent highs
are taken out above $292 spot.

Of course the manipulators have to be overpowered.

Right on cue, Goldman Sachs was the big seller today,
aided by Deutsche Bank. How many times do I have to
report on these clowns selling at the $290 area before
someone else joins in clamoring about the same thing?
This has been going on for 20 months now. It is mind-
boggling to me that almost no one else says anything
about this obvious pattern, which can be documented by
going to the Comex trading reports.

It so hard to comment on technicals when we know the
market is rigged. But my guess is that the manipulators
are going to lose control of their fraudulent game. If
not now, then soon. At some point, maybe in the near
future, the credit control departments of the banks are
going to say: No more gold derivatives, no more gold
lending. That will be sayonara for the bears.


Silver is being toyed with by the same crowd.


Oil, oil, oil!

Uptown she goes. Crude oil took off today as expected,
closing at $31.74 per barrel, up $1.54. That $30.50
print did the trick as the hedge funds DID pile in as
Cafe sources suggested they would in Saturday's Midas
commentary. Gasoline and heating oil also joined in on
the bullish hoopla. It would appear that Cafe
information that the Saudis are already pumping close
to full capacity is right on.

You might also like to note that the European Brent
crude is priced at a relatively narrow discount to the
U.S. benchmark, West Texas Intermediate Crude. Over the
past year the price of oil has risen sharply whenever
that has occurred.

Several Cafe members noted to me today how gasoline
prices are really jumping at the pump, and it HAS
caught their attention. The good news is that sort of
real-world price increase does not count in the
inflation numbers. The bad news is it does affect your

The CRB survived a big sell off in the grains due to
weekend rains in the key growing regions, finishing
down only .38 at 224.61. The uptrend in that index
remains intact and stout.

The Aussie dollar is also making a comeback as it
finished at 59.15, up 50 points. That is a bit of
positive news for gold as the higher Aussie dollar
lessens the likelihood of Aussie gold producer selling.

This comes from a Nevada resident about the state of
gold exploration there. It will give you some idea that
any future excess gold supply that could extinguish the
coming gold price explosion is MANY years away:

"Unless you have seen it, it is hard to explain the
despair rampant among the few professionals remaining
in the U.S. gold mining industry. This despair is also
obvious in the industry executives majors as well as
juniors. I don't know anyone who doesn't believe that
gold is dead. I have attached an Excel spreadsheet
summarizing the claim-staking activity in Nevada for
the current assessment year through May 31. The current
120,791 active claims in the state is the lowest number
of claims this late in the season that I have ever

"I believe it is time to move. If the current malaise
in gold continues through the summer there will be
wholesale abandonment of some of the highest-quality
gold-mining property in the world. This property can be
picked up for the cost of staking and filing the claims
with the Bureau of Land Management.

"I don't believe it is necessary to explain to you the
importance of Nevada to U.S. gold production. I would
like to say that it is my firm belief that Nevada has
only begun its production cycle. Assuming the price of
the commodity doesn't effectively go to zero or the
U.S. Government doesn't decide to shut down the
industry, Nevada will very likely become another South
Africa in gold production."

Anyone interested in talking to this knowledgeable
Nevada gold man and the properties that he owns?

Things are looking up on the gold coin side too.

"Scott Ward here. I just posted this on Silicon
Investor's Gold Price Monitor. Thought it would be of

"I have been monitoring for many
weeks to get an idea of the premium being paid for gold
bullion coins. I've watched the price of 1-oz US gold
eagles move up from about $275 a few weeks ago to
tonight's high of $336 per coin (plus $7.50 for
shipping and insurance):
cgi/eBayISAPI.dll?ViewItem&item=347118042 With about an
hour to go, there were 20 bidders. The price was bid up
briskly throughout the evening.

"The bid of $336.00 is a hefty premium over Friday's
spot close of $283.50. John Q. Public knows something."

PGM specialist and long time palladium and platinum
bull, the Cafe's John Brimelow sends Cafe members his
take on the following excerpts from today's Bloomberg

* * *


David Andres, purchasing director for commodity metals
at GM, is a frantic man. Right after triggering a major
move in platinum prices by suggesting at London's
Platinum Week that the auto maker would aggressively
switch to Platinum away from palladium for catalysts,
he has turned to disparaging the outlook for his
industry in an effort to dampen down.

In an interview with Bloomberg's industrious Claudia
Carpenter, Andres suggested the vehicle market could
quickly soften some 17 percent to a 16mm annual rate.

"The stock would be down $3 if that were widely known,"
said a hedge fund friend of mine (GM closed at $67, up
7/16 today).

"Although Andres apparently made this doleful thought
the center of his bearish Palladium remarks, he has
other startling ideas. One is that the Russians are
nice." It is in their stabilize the
market at around $300 to $500." Why the owners of a
dwindling stockpile would not scale up their selling
price, knowing that the end of their inventory will cut
world supply by a third, was not explained. Another is
that high platinum prices are inexplicable. "There is
no real demand story" Any casual reader of Johnson
Matthey's knows of China's phenomenal 50 percent a year
growth in jewelry offtake, which is rumored to have
made it the biggest platinum user this year. Contacts
report Mr. Andres is far from a casual observer.

"One has to agree with charts: the PGMs are going

* * *


The XAU must close above 63 to spark the gold shares.
It finished today at 60.14 up only 1.60 on the day.
Sleepy, sleepy. Quiet before the storm?

In behalf of the Gold Anti-Trust Action Committee, I
would like to thank Bob Bishop of the Gold Mining Stock
Report for his consistent support over the past year.
One year ago he came up to Chris Powell and me at the
New York Gold Show to let us know how right he thought
we were. We had a luncheon meeting that day with some
Reuters, Bloomberg, Bridge reporters and others, and
Bob spoke up at the luncheon and let them know he
thought they should pay attention to what we had to
day. There were not too many others doing so at the
time. It didn't do any good with the wire service
reporters, who still refuse to acknowledge our
existence even though six major gold producers have
given GATA financial contributions.

Bob Bishop ( is highly
respected for his acumen in judging good mining
properties and best known for his astute prediction of
the Canadian diamond boom in 1992, as his followers
cleaned up. His Gold Mining Stock Report Fax-Alert
included the following today:

* * *

While the gold price is little changed from where it
was a year ago, it is difficult to overstate the
difference between the gold market then and the gold
market that confronts us today. Since the Washington
agreement was announced last September, the amount of
gold available for lending has been reduced, and the
$80 rally this sparked revealed to gold mining
companies and private speculators that significant risk
may be attached to short positions in the gold market.
Perma-bears viewed this spike as nothing more than a
short-covering rally; others, myself among them,
believe that a rally of this magnitude was reflective
of the size of the short positions that had built up in
the gold market in recent years.

"This point of view leans heavily on the conclusions of
supply/demand guru Frank Veneroso, and on the obvious
disequilibrium of the gold market. Gold doesn't rise
$80 over three days in a short covering rally,
resulting in the implosion of two major producers,
unless there are some structural problems within the
gold market.

"While gold miners adopted hedging strategies during
the industry's growth spurt in the 1980s, large private
capital pools, with the full cooperation of central
banks, crafted hedging strategies of their own in the
'90s. This added to the amount of gold in the market,
at the same time virtually guaranteeing a profitable
trade -- as long as gold was in decline. For some time
Veneroso had made the point that it required increasing
amounts of gold to prevent the market from rising, and
in a market where risk perceptions clearly were
changing, this posed problems for those choosing to
maintain short positions in a commodity that was
already trading below the production costs of most

Based on recent work by Reginald Howe, it appears this
problem was solved in the final quarter of 1999, not by
locating new physical gold with which to restrain
upward movement in the market, but rather by creating
huge derivative positions -- paper gold --that served
the same purpose. Howe's conclusions have been featured
at his own web site -- -- and at, the site hosted by Bill Murphy
of the Gold Anti-Trust Action Committee.

As I indicated some time ago (FA#159), I believe GATA
is on the right track with its conclusions about the
gold market, and that the gold market is much more
advanced for GATA's efforts.

* * *

Who is that guy -- GATA's Agent W? He is none other
than Wayne Wagner of Washington, D.C.

Wayne has degrees in engineering and physics from
Washington University in St. Louis and Catholic
University in Washington. His science research has
included an investigation of the corrosion of ceramics
and platinum alloys by molten radioactive waste
glasses. On leave from his university, he is currently
a private investor and consultant.

Wayne is officially representing GATA at the
International Precious Metals Institute Conference in
Williamsburg, Va. Yesterday he sent me a little
feedback from that conference and I am passing it on:

"To my surprise, New York Governor George Pataki is a
very interesting speaker. As with any successful
politician, he managed to list his administration's
accomplishments for his state while discussing the
title theme of his speech, environment.

"Just about everyone attending the conference was
there; I guess it was too hot for golf, too hot even
for the swimming pool. I chose a seat in the middle of
the auditorium.

"The governor of New York co-chairs the Port Authority
of New Jersey and New York. Acting on impulse. I raised
my hand during the Q&A session, identified myself as
speaking for GATA, and asked this question:

"'This past week we have uncovered irregularities in
gold transfers in and out of New York City. The thought
occurs that the Port Authority of New Jersey and New
York should have collected millions in revenues over
several decades. Are you interested in pursuing this

"Indeed the governor was, and asked me to speak with
him after and hand him the details. Lacking a letter
from Census or the Fed, I handed him (my only copy!) of
your commentary from last week about my conversations
with N.Y. Fed officials and a copy of the GATA circular
you emailed to me.

"Governor Pataki thanked me very much; he had not heard
of GATA. But he explained that although the Port
Authority does not collect import duties, the federal
government does. I think you can expect a call from his
office fairly soon.

"I am arranging with IPMI to collect the photograph of
myself with Governor Pataki."

Great work, Wayne. If you get the picture, send me a
copy and I will show it to your fellow Caf members.

Jorge Nascimento Rodrigues, a Portuguese journalist, is
doing a story on GATA and our "Gold Derivative Banking
Crisis" report posted at the web site. I
am especially pleased at this interview because he will
be attending the OPEC meeting and the Financial Times
gold conference in Paris.

In partial response to Neil Behrman's GATA story in about the gold derivative situation,
I will serve up my feedback to the Cafe that was sent
to Jorge in response to two of his questions:

"1. In this 'war' some banks are nominated for the
manipulation awards, like Goldman Sachs, Chase, etc.
What are the truth on these allegations?

"2. But are they alone? If the market deficit is
understated by 800 or 900 tonnes, who is beside the

I replied as follows:

GATA believes that a cabal of bullion banks and U.S.
government agencies has orchestrated the manipulation
of the gold market.

Nominees for the "gold collusion awards" go to: Goldman
Sachs, Deutsche Bank, UBS, Morgan Bank, Chase Bank, and
possibly Morgan Stanley. For the U.S. government
nominee, we believe it is coming from either the U.S.
Treasury Department's Exchange Stabilization Fund or
the New York Fed.

The issue of manipulation is in some ways very simple
to ascertain, yet, at the same time, it is extremely

The motive for the investment banks and their clients
is that for years now they have been able to borrow
gold from central banks at 1 percent interest rates,
sell that physical gold in the market, and then invest
the proceeds in other financial instruments such as
U.S. Treasury bonds, etc.

A pretty sweet deal. How would your readers like to go
to their bank and borrow money at those rates --
practically interest-free? There is one catch. When the
borrower of the gold goes to pay back the loan, the
borrower must pay the market price of gold. If the
price of gold were to skyrocket, the effective interest
rate of the loan would soar into loan shark rate

That is the motive for the banks to make sure the gold
price does not rise past $290, which is where most of
the loans have been priced in recent years. That is why
the gold price is always pushed back below $290 every
time it rises above that mark, or gets close to it.

GATA now believes that a nightmare problem for the
bullion banks has developed. It is our opinion that the
gold loans (which the bullion banks have borrowed from
the central banks) now exceed 11,000 tonnes. Mine
supply for 1999 was only 2,579 tonnes. Worse, most of
that "loaned gold" is not lent but sold. It cannot be
retrieved because it has been converted to jewelry form
and is being worn by the people of India, Hong Kong,

The manipulation crowd knows they have a big problem on
their hands in the sense that there just is not enough
physical gold to be had if the gold price rises and a
number of the gold loans are called in. That is the
motive for the manipulation. It is our guess that the
gold market was not initially manipulated at all, but
when the above mentioned players realized how bad the
situation was, an effort to hold down the gold price
was begun.

As a result of the incredible buildup in gold
derivatives at Deutsche Bank and, to a much lesser
degree at Dresdner Bank, we now think that the Germans
may have been co-opted into the manipulation scheme --
at least for the time being. In late September 1999, 15
European central banks announced an agreement to
curtail European central bank gold sales to 400 tonnes
per annum and to cap future gold lending at present

The price of gold exploded $84 in a couple of weeks.
That price reaction by gold players to the Washington
Agreement revealed a short position far larger than the
signatory European central banks anticipated. Facing a
melt-up in gold prices and possible defaults on their
own outstanding gold loans, these banks -- probably
further prodded by Anglo-American pressure -- permitted
the two German banks to participate in a rescue
operation as the price of gold was forced lower once

That may not be the case, but it sure looks like that
is what happened.

We now have some public evidence that supports our
contentions. A gold derivative is just a financial
instrument that is related to gold bullion. A put,
call, or futures contract is a derivative. Over the
past many months commodity prices have been steadily
rising and the oil price in the U.S. is over $30 once
again. Historically, that would be constructive for the
gold price. At the same time, major producers like
Normandy Mining Ltd. of Australia are delivering into
their forward hedges, not selling gold into the market,
which means world gold supply has been reduced

Why is the gold price not going up? It is a bit
complicated but it is not physical gold that is holding
down the price of gold, but PAPER gold, or gold
derivatives. There are facts out there in the public
arena that support the Gold Anti-Trust Action
Committee's contentions and those of Reginald H. Howe

According to the findings of the Office of the
Controller of the Currency in its March 31, 2000

* The notional off-balance-sheet gold derivatives on
the books of J.P. Morgan increased to $36.3 billion
from $18.1 billion as of July 1, 1999.

* Chase Bank increased their gold derivative position
by more than 40 percent to $31.5 billion from $22
billion. It took Chase 14 years to get to $22 billion.

* Deutsche Bank's gold derivative growth is just plain
stunning in the speed and magnitude of its growth, as
it went from almost nothing in 1996 to a total notional
value of over US$50 billion, or nearly 5,000 tonnes of
gold, at the end of 1999. Even more remarkable is that
this position exploded to $51.2 from only $16.2 billion
in one year.

At the same time, GATA delegate and braintrust Reginald
Howe points out that the latest Bank of International
Settlement figures from Basle, Switzerland, show that
"gold deposits by central banks fell almost 12 percent
from 927 tonnes to 819 tonnes, and gold assets also
fell by 108 tonnes to 1,018 tonnes. However, gold held
in bars declined almost 20 percent. from 813 tonnes to
658 tonnes. At the same time, total gold lending
increased 47 tonnes to 360 tonnes, and accounted for
over 35 percent of total gold assets versus 28 percent
the prior year."

One cannot help to come to the conclusion that there is
great stress in the physical gold market. Physical gold
supply is diminishing, lending is up, gold derivatives
have risen sharply. Those are the facts. The Gold Anti-
Trust Action Committee believes that a gold price
explosion is coming when these facts are understood by
the investing world.

* * *

The great novelist and GATA supporter, Arthur Hailey,
has re-released his best selling book, "The
Moneychangers," in its original 1976 version. I have
read this book and thoroughly enjoyed it. A very good
and easy read that extols the virtues of gold.