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Copyright 2000 www.LeMetropoleCafe.com
Not to be distributed without permission

By Bill Murphy
www.LeMetropoleCafe.com
September 13, 2000

Spot gold $272.60, up 30 cents
Spot silver $4.86, down 1 cent

One of the more esteemed and knowledgeable people in
the gold industry called me today to say that he spoke
to a source of his at the Bank of International
Settlements in Switzerland who has derivative reporting
responsibility. That source told him that the BIS gold
derivative data reflects POSITION data, as reported by
Reg Howe, and NOT transaction data, as claimed by
Jessica Cross and the World Gold Council.

It is only a matter of time before this fact circulates
throughout the gold industry and becomes accepted
public knowledge. This is a blunder by Cross and the
World Gold Council. If the central point of her report
could be so completely wrong, the credibility of the
rest of the report has to be called into question.

This should infuriate gold producers, gold company
shareholders, and gold bullion holders, as the Cross
report has concealed the strong fundamentals for gold.

Answers must be forthcoming from all parties involved
to explain how such disinformation could be
disseminated so irresponsibly. How could this happen?

WHY might be the real question.

At the Paris Gold Conference I publicly challenged Gold
Fields Mineral Services to a debate over GATA's
contrasting views of the gold market. That challenge
was refused as I was told that GATA did not have "31
years of experience" as they had; that, in essence,
GATA and its "Gold Derivative Banking Crisis report
were not worthy.

After the World Gold Council report, "Gold Derivatives:
The Market View," was released on Sept. 4, GFMS wasted
little time to join the bandwagon chastising GATA.

On Sept. 5 Gold Fields Mineral Services issued a press
release headlined, "GFMS data on size of ledning market
confirmed by WGC study."

Here a few excerpts from that press release:

"Furthermore, and again confirming GFMS' long-held
view, the WGC report found no evidence for allegations
that several thousands of tonnes of borrowed gold were
required last year for the funding of speculative short
positions."

"The WGC study confirms the view held all along by
informed sources in the market, that the outrageous
claims made by a handful of conspiracy theorists could
not be substantiated and were plainly wrong."

In commenting on the study, GFMS Managing
Director Philip Klapwijk remarked: "We welcome the
commissioning by the WGC of this study into an area
where recent suggestions of misinformation have created
an unfortunate degree of uncertainty in the gold market.
The independent confirmation of data that GFMS
has compiled and reported over many years will no
doubt put many minds to rest."

(You have got to be kidding me, Mr. Klapwijk. This flawed
study may have created some of the greatest UNEASE in
gold market history.)

On Sept. 7 the Frankfurter Allgemeine Zeitung published
a story written by Bettina Schulz, a former employee of
bullion dealer Deutsche Bank, and headlined: "The Theory
of a Conspiracy of the Gold Market is Misleading and Wrong."

"World Gold Council and GFMS: Arguments are not
valid; misleading information of GATA criticized."

Some quotes from the FAZ article:

"Speaking about the US$243 billion total notional value
of gold derivatives reported by the BIS for the major
banks and dealers in the G-10 at year-end 1999, Ms.
Cross asserts: '[W]e believe that this outstanding
position should not be described as 'exposure,' as it
certainly could have negative if not alarmist
connotations."

"As proof to their theory, GATA points to, among other
things, the statistics of the U.S. Comptroller of
the Currency (OCC) and the Bank for International
Settlements -- their off-balance-sheet gold derivative
positions of large banks. According to experts,
however, GATA's mistake is that they conclude that the
strong rise in off-balance positions means that banks
are more engaged in the market and have higher open
positions. This is wrong, they say. Although a higher
volatility leads to a higher activity of banks in the
derivative market, it shows up in higher off balance
transactions of banks. However, this does not mean
banks increased their open positions in the market."

GFMS and WGC go on to slander GATA about the
information presented in the Gold Derivative Banking
Crisis report:

"It seems that to support the conspiracy theory of
GATA, statistical data are intentionally misinterpreted."

Au contraire. The statistical data presented by Reg
Howe and Frank Veneroso in the GDBC document was
first-class work and professionally presented with
exhaustive detail. To date, no one who has read the
report has singled out any specific data that was
factually incorrect. Criticism, by Jessica Cross, the
WGC, GFMS, and other critics of the work of the
GATA delegation that met with House Speaker Dennis
Hastert is always one of generalities. Contrast that with
Reg Howe's critique of the WGC/Cross report in his latest
essay, "Jessica Double-Cross Study Puts Q(uisling).E.D.
on the World Gold Council."

I use the world "slander" intentionally. The following
Internet posting was recently sent to me:

"A good way to discredit someone in German is to use
the word 'Verschwrung,' 'conspiracy.' It is often used
in the new FAZ article. 'Manipulation' was the word in
the first two FAZ articles (which were very positive
about GATA)."

Clearly, there has been an all-out attempt to discredit
the GATA camp in every way imaginable. Unfortunately
for the anti-gold crew, that effort is backfiring. As we have
said all along, we have the truth on our side. That is why
we will win the day in the end.

I suspect holy heck is breaking loose behind the
scenes. Let me go a little further. I know it is. A
couple of tidbits for you -- of which more extensive
details cannot be revealed at this time.

GATA knows that the Bank of England and the United
States flooded the market with borrowed gold following
the $84 rise in price last September and October. They
were in a panic, as were many bullion dealers, as they
thought the price of gold was going to surge to $400.
All stops were pulled out to beat the price of gold back
down below $290 again. Bullion dealers were given very
generous lending terms to borrow gold and bomb the
physical gold market. In addition, gold was called in
from Kuwait, Jordan, and any other sources they could
lean on.

No one has been able to explain to GATA why the
notional value of the gold derivatives exploded this
past year on the books of J.P. Morgan ($18 billion
to $36.5 billion), Chase Bank ($11 billion to $22 billion)
and Deutsche Bank (15 to $50 billion), while they have
been stable on the books of other banks, such as UBS
Warburg.

Allow me to do so: Closely held trading units of these
firms knew the fix was in on gold and that it was being
sent back down in the most collusive orchestration
imaginable. Derivatives such as futures, puts, and naked
calls were all used to bomb gold. That was on top
of the borrowed gold. The key here is that no one in
his right mind would have been so aggressive a seller
at that time, unless he KNEW the gold price could
go only down.

GATA has fingered Morgan, Chase, and Deutsche Bank,
along with ringleader Goldman Sachs, for almost two
years now as gold cabal members. That is the reason
gold derivatives went way up on their books and not
on the books of other bullion banks. They knew the
United States and Britain were backstopping their trades
and the short side. Slowly but surely, recognition of this
is dawning in the right places; that is, the bad guys are
being found out.

GATA discovered the gold derivative data that
GATA paid an investigator to uncover would be a
disaster for the bullion dealers. Recently, GATA
received further specific confirmation of that
assessment. Now Reg Howe has brilliantly run
with the ball and is proving this out.

Could it be that this disclosure and coming debacle have
prompted the BIS itself to rethink its ways? We know
that the BIS was handed four copies of GATA's "Gold
Derivative Banking Crisis" report in May.

* * *

BIS announces share buyout

From FT.com, Sept. 11

The Bank for International Settlements, the Basle-based
central bankers' bank, has announced plans to spend $700m to
buy back the 13.73 percent of its shares which remain
in private hands. Andrew Crockett, BIS general manager,
on Monday said: "We want to make it clear that BIS is
representing international central bank holders and is
acting in the interest of the public shareholder."

He said the move would "ease the underlying
inconsistency of being a joint-stock company with
public interest functions. Playing a global role in
promoting financial stability is not wholly consistent
with shareholder value."

* * *

Does this mean the BIS wants to cut further derivative
disclosures to the likes of Reg Howe and GATA? Why a
move like this now?

The bottom line:

The Cross/WGC report has about as much credibility as
Firestone tires, and the recall of this "defective"
report will most likely be just as extensive as the recall
of those tires. The gold producers will distance themselves
from this report just as Ford is trying to flee Firestone.

Jessica Cross and the WGC have stated that if Reg Howe
and GATA were correct, the situation would be "alarming."
Well, we ARE right and gold is dangerously explosive. That
is what we told U.S. Rep. Spencer Bachus, chairman of the
Subcommittee on Domestic and International Monetary
Policy of the U.S. House of Representatives, in the Capitol
in Washington. That is what GATA presented via its Gold
Derivative Banking Crisis report to every House and Senate
banking committee member.

One day the price of gold will just take off out of nowhere
and will make the dramatic move after the Washington
Agreement look rinky-dink. This bull market rocket ship
ride will be one of the greatest moon shots of all time.
Don't miss it.