Published on Gold Anti-Trust Action Committee (http://www.gata.org)

Murphy''s "Midas" commentary for August 31, 2000

By cpowell
Created 2000-08-31 07:00

12:05a EDT Thursday, August 31, 2000

Dear Friend of GATA and Gold:

In the last week Germany's leading newspaper,
Frankfurter Allgemeine Zeitung, has published two major
articles about GATA and the manipulation of the gold

Thanks to some German-speaking members of GATA
Chairman Bill Murphy's Internet site,
www.LeMetropoleCafe.com [1] -- Gus Broger, Reinhard
Deutsch, and Joerg Schroeder -- we're able to provide
you below with a partial translation of the first article,
published August 25, and a full translation of the second,
published August 30.

The FAZ articles are a pretty comprehensive account of
GATA's work and are remarkable because, while GATA has
distributed publicity and our Gold Derivatives Banking
Crisis report in Europe, we have had no direct contact with
the FAZ and had no idea these articles were coming.

GATA's most informed friends in Europe say the FAZ is
close to the Bundesbank and that Bundesbank sources
may have sparked the newspaper's interest in our work.
If so, this sudden and major recognition of the
manipulation of the gold market may be part of the
gathering effort to reverse the decline of the euro.

In any case the FAZ articles have just conferred
enormous legitmacy on GATA and the gold cause in
Europe. Big things may come from this soon.

We're so grateful to the Frankfurter Allgemeine Zeitung
for these articles, and to our many friends in Europe
and around the world who have taken up the cause with
us and have let the world know where we can be found
and why we should be listened to.

Please post this as seems useful.

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

* * *

August 25, 2000

FRANKFURT, Aug. 24 -- At first glance it is indeed
difficult to understand how a market, such as the gold
market, which shows a chronic production deficit, is
decaying over decades and how this results in prices
that force an ever-increasing number of gold producers
to abandon their business.

In the free market, which in the case of gold is being
"made" by the leading business and investment banks,
they have to take a good look at the solvency of their
own clients as well their counterparties, when trading
with derivatives.

It is GATA's opinion that there are indications
pointing to a conspiracy among financial institutions
to control the price of gold. The committee is intent
to show that such institutions and bullion banks have
accumulated enormous short positions in the precious
metals markets. For reasons of speculation they are
apparently short at least 10,000 tonnes of gold,
compared to an annual gold production of only 2,529
tonnes in 1998.

Based on the assumed manipulation of the gold market,
GATA concludes that this can pose a threat to the
international financial system. For this reason GATA
has distributed to the U.S. Congress a 118-page
document entitled "Gold Derivative Banking Crisis" and
requested a public investigation of the situation. The
document can be retrieved from GATA's website under
option "GDBC Report."

At the center of the committee's suspicions is the
assumption that, under adverse circumstances, the short
positions in gold derivatives of at least 10,000 tonnes
could lead to panic-driven coverings -- that is,
purchases that lead to more purchases. The committee
sees the explosive increase of $84 per ounce in the
gold price in the autumn last year as a prelude of what
the market would have to face, should panic-driven
short coverings occur. That price explosion got under
way after 15 European central banks declared on Sept.
26 1999, that they would limit their gold sales and
other precious metals operations for initially five

* * *

August 30, 2000

Is the gold price manipulated by large banks and the
American government?

Low gold price is helping large banks and hurts the
poor gold-producing countries / The conspiracy theory
of GATA (Part II)

FRANKFURT, August 29 -- The gold price is being
manipulated, and that may lead to a crisis in gold
derivatives, and subsequently to a crisis of the entire
world financial system.

This is, in essence, the theory of the American GATA
group. It has presented facts and assumptions to the
U.S. Congress and requested an investigation of the

The basis for GATA's argument is the fact that the
world demand for gold is significantly higher than
world production. But, according to GATA, prices are
kept down artificially by interested parties.

To emphasize the dimensions of the suspected
manipulations, GATA points out that according to the
U.S. Office of the Controller of the Currency the total
value of derivatives, which are not officially carried
on the balance sheets of the American money-center
banks, amount to about US$87 billion at the end of
1999. This would exceed the value of the entire gold
reserves of the United States of about 8,140 tonnes.

The assumed value of the non-balance sheet captured
derivatives of Morgan Guaranty Trust Co. alone has
ballooned from US$18.36 billion to US$31.8 billion. An
estimate by Venerosa Associates, a consulting firm
whose president, Frank Veneroso, is a member of GATA,
assumes that the gold lending of the private and public
sector amounted to 9,000-10,000 tonnes by the end of
last year. The world mining production of gold is
estimated at 2,579 tonnes for the year 1999. Hence the
assumption is that the shorting and lending of gold is
far in excess of world production, which will make it
difficult to unwind within a short period.

The US$84 rise of the gold price, which happened as a
reaction to the limits on gold sales agreed upon at the
Sept. 26, 1999 Washington meeting, was a result of a
panic. But that was only a precursor of the things to
come, in the opinion of GATA.

Alan Greenspan, chairman of the U.S. Federal Reserve,
and Larry Summers, U.S. secretary of the treasury, have
denied any involvement in the bullion markets,
according to the GATA document. But they declined to
comment whether the U.S. Exchange Stabilization Fund
was used to manipulate the gold price. Moreover, GATA
insists that several big-name gold trading houses
talked down the gold price whenever it started to rise.

GATA insists that official sources in Washington and
the gold-trading Banks have prodded governments of
other countries as well to sell their official reserves
into the physical market to depress the price. The
British National Accounting Office is reviewing the
decision of the Bank of England to dispose of more then
half its gold reserves.

In addition, GATA maintains Washington's balance sheet
is incorrectly reflecting the withdrawal of gold from
foreign sovereign institutions. These "exports" of the
New York Fed always show up when the gold price is

GATA raises the question as to why one could be
interested in depressing the gold price, and comes up
with two possible answers.

First, a low gold price provides a cheap capital
resource for New York bullion banks. They can borrow
gold at 1 percent interest per year. The gold is being
borrowed from the central banks and then sold in the
open market to raise cash. The proceeds are invested in
instruments with a significantly higher return than the
borrowing cost. As long as the gold price is at a low
level, the "gold carry trade" is lucrative business for
a selective few at the expense of the mainly poor gold-
producing nations. If, however, a rise in the gold
price would be allowed, the borrowing rate for gold
would increase prohibitively.

Second, a depressed gold price gives the impression of
a strong dollar as the international reserve currency
and distracts from inflation in the USA.

"We do know that there were extremely large gold sales
from official reserves, but we don't know the source,"
GATA says. The gold reserves of the official holders in
the world that have been reported to the International
Monetary Fund were less than 33,000 tons. Of this
amount the United States, IMF, and the 15 European
central banks that are signatories to the September
agreement are holding 26,000 tons. By deduction, only
the United States remain as the possible seller.

The leading role of Goldman Sachs in the bullion
markets and the close ties of the investment bank to
the U.S. government have increased rumors of official
U.S. sales. Since the Fed and the Treasury Department
have declared that there were no physical sales of
American gold reserves, it is the assumption of the
sources that identify the United States as the official
seller that the sales have taken place in the form of

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