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Swapping lies: Fed and Treasury officials hanging themselves

Section: Daily Dispatches

Copyright 2001,

By Bill Murphy

Note: Some of following material has been presented to you over the
past year, but it is essential that it be rehashed in order to lay
out the foundation of a most disturbing situation regarding the World
Gold Council and some of its most significant members.

The World Gold Council is an association of gold producers
headquartered in London ostensibly to promote gold demand and the
product of the corporations that fund its operation.

That funding is provided by those gold producers who are members. A
couple of years ago each member contributed $1 per ounce of their
gold production - with the total amounting to the $30 million plus

The World Gold Council has been so unsuccessful in their efforts that
the member producers decided to double their contributions this past
year to $2 an ounce of production.

If at first you don't succeed, then twice more of the same has to be
better - quot;double up on this dogquot; has become their motto. The WGC has
focused almost solely on promoting gold as jewelry and completely
ignored its store of value component as well as its spectacular
investment potential at these low price levels.

As a result, the price of gold closed out the 1997, 1998, and 1999 at
exactly $288 per ounce. Since then, it has consistently traded around
$266 per ounce, ad nauseum. The World Gold Council has made wonderful
progress, eh?

The most influential members in this council are among the world's
most productive gold producers as they contribute the most money. The
number one gold producer in the world is AngloGold. The number one
producer in North American is Barrick Gold.

The World Gold Council has bashed the Gold Anti-Trust Action
Committee every time they have an opportunity to do so. When two
extraordinary, back to back, late August 2001 articles appeared in
Germany's influential Frankfurter Algemeine Zietung, they felt
compelled to trash GATA by engineering a story of their own in the
same paper on September 6th:

quot;Die Verschwrungstheorie am Goldmarkt ist abwegig und falschquot;

(quot;The Theory of a Conspiracy of the Gold Market is Misleading and

The English translation of excerpts of that FAZ story:
The Gold Anti-Trust Action (GATA) Committee's conspiracy theory of
the Gold market is rebuffed by the World Gold Council and Gold Fields
Mineral Services (GFMS). Market analysis by gold expert Jessica Cross
for the World Gold Council (WGC) shows no hints of a conspiracy by
market participants or market machinations, says WGC. The WGC is an
association of interests of gold producing companies.

GFMS is an independent consulting company for the precious metals
market. If anybody feels he has proof of a conspiracy in the gold
market, he should start legal action immediately, says Jessica Cross
with regard to the accusations of GATA. However, it is known in the
market, that GATA up to now, could not find a known lawyer in
America, which takes their accusations seriously. GFMS also thinks,
that GATA is stirring up trouble in the gold market with misleading
information and that the assertion of a gold market conspiracy is
untenable and simply wrong.

The World Gold Council and GFMS each reported numbers about the
volume of gold leasing and short selling in the market, which are in
clear contrast to the numbers of GATA's estimations. GATA believes
that gold leasing of the official sector, this means central banks
and other official parties, was about 9,000 to 10,000 tonnes by the
end of 1999. But, data of WGC and GFMS show that official sector gold
leasing was 4750 tonnes.

If there was no conspiracy, the gold price would be much higher says
GATA. GATA tries to support their theory by pointing to the large
gold leasing of central banks and the massive rise in derivative
contracts of the bullion banks, warning that these actions are a risk
to the market. With their conspiracy theory, they accuse several
large German and American banks and also central banks and
institutions like the International Monetary Fund. quot;If we wanted to
organize a conspiracy, we would do it with fewer institutionsquot; was
the reaction of a banker to the accusations as he rejected the theory
of GATA as not serious.

One suspicion of the industry is that behind GATA and its chairman
Bill Murphy, there is a group of investors, hoping for rising gold
prices with long positions in gold, and contracts for future
delivery, which is now on the wrong side, because of the low price of
gold. The market could take the whole thing as a ridiculous case, if
they were not accusing important participants of the gold market. quot;We
appreciate a serious discussion of the gold market but not polemicsquot;,
they say to Murphy who represents as having achieved a good reception
of his conspiracy report, quot;Gold Derivative Banking Crisis,quot; by
representatives of the American Congress. These representatives later
insisted however on only having been polite to Murphy.

GATA is reproached for several misleading interpretations and
inconsequential assertions. For instance, GATA says the gold leasing
of banks is used by the conspirators for massive short selling. Even
so, gold leasing stood at 4750 tonnes by the end of 1999 with
speculative short selling of the market standing at less than 400
tonnes, according to the World Gold Council - which is peanuts for
the market. GFMS gives similar numbers.

Some comments on this lame story orchestrated by the WGC:

*GATA had retained the highly regarded anti-trust Philadelphia law
firm of Berger amp; Montague. Ms. Cross did not have her facts straight
and misinformed the writer.

*GATA believes Frank Veneroso's gold loan numbers are the correct
ones and the latest estimate is 10,000 to 16,000 tonnes, up from
9,000 to 10,000 tonnes.

*What is wrong with being a gold investor hoping for a rise in the
price of gold?

*Congress just polite to GATA??? Thanks for the softball, WGC. As we
all know, literally hundreds of members of Congress are writing to
the Fed and the US Treasury asking for answers to some very serious
questions requested by GATA supporters.

So much so that desperate Alan Greenspan called on Fed counsel J.
Virgil Mattingly for help. It was Mattingly's January 1995 FOMC
comments, which were taken directly from quot;reviewedquot; transcripts by
the attendees, that were partly causing the commotion. In that
meeting Mattingly was asked about the precedence of using the ESF:

quot;It's pretty clear that these ESF operations are authorized. I don't
think there is a legal problem in terms of the authority. The statute
is very broadly worded in terms of words like 'credit' - it has
covered things like the gold swaps - and it confers broad authority.quot;

Mattingly, requested by Greenspan to respond to Kentucky Senator
Bunning's questions about what the Fed was up to in the gold market,
responded to Greenspan with: quot;I believe that my remarks, which were
intended as a general description of the authority possessed by the
Secretary of the Treasury to utilize the ESF, were inaccurately
transcribed or garbled.quot;

Very credible response, eh?

In a well crafted July 24 essay, Tim Wood of Mining Web said:

quot;The Federal Reserve may be on the brink of finding out, just like
the FBI, how quickly prestige can be tarnished. After a series of
embarrassing disclosures, the FBI has become a caricature of itself
and the Fed may be next after one of its top lawyers cast doubt on
the integrity of its record keeping.quot;

As a result of some exhaustive investigative work by GATA supporters,
we now have the credibility of the Federal Reserve Bank of the United
States at stake. Yet, the World Gold Council calls our case
ridiculous and with pitiful regularity harps on the conspiracy word
to denigrate GATA, instead of dealing with the overwhelming evidence
we have collected that proves that the gold price is manipulated.

It gets worse. Slander is the World Gold Council way. On March 1,
2001, I found myself writing World Gold Council CEO, Ms. Haruko
Fukuda, once again:

Dear Ms. Fukuda:

Last Friday there was an article in The Wall Street Journal by Neil
Behrmann titled, quot;World Gold Council Hopes to End Gold Price's 20-
Year Bear Market.quot; The article mentions Reginald Howe's complaint
filed in U.S. District Court in Boston and the Gold Anti-Trust Action
Committee, stating, quot;The complaint 'for damages and injunctive
relief' alleges manipulative activities in the gold market by central
banks and bullion banks to depress the gold price from 1994 to the
present.quot; It goes on to say the World Gold Council is distancing
themselves from the allegations:

quot;'We've thoroughly researched the allegations and don't find any
evidence of manipulation in both the gold and gold derivatives
markets,' said Ms. Leyland and Mr. Cruikshanks of the council.quot; ...


As always, Ms. Fakuda demonstrated her lack of professionalism and
did not bother to respond to my letter.

Therefore, I called Ms. Jill Leyland in early March and asked her for
a copy of the World Gold Council's thorough research on GATA.

I was told by Jill, who was most polite: quot;there is none.quot; I then
asked for a public retraction by the Wall Street Journal at the
request of the WGC. None was given.

Nope, none given. Instead, they upped the GATA bashing ante.

Coincidentally, right as we prepared to leave for the GATA African
Gold Summit, the World Gold Council released a report by Professor
Anthony Neuberger of the London Business School. The Financial Times
and Evening Standard in London just happened to come out with stories
that ridiculed us immediately thereafter.

An Excerpt from The Financial Times story by Gillian O'Connor on
Monday, May 7, 2001

quot;The London Business School has debunked the popular myth of an
international conspiracy to suppress the price of gold.quot;

Now to excerpts from the Evening Standard, London story on May 9,
2001 by Lauren Chambliss who wrote the story from Washington:

American investment banks and government officials are hoping for a
speedy end to a trial that accuses them of manipulating the gold
market, following a report from the London Business School. The
report has refuted the idea that US officials and Wall Street bankers
have conspired to keep down the price of gold.

The suit alleges US government, the Bank for International
Settlements and big investment banks 'coordinated the sale and
leasing of gold and the sale of gold derivatives' to keep the price
low as part of a long-term strategy to stem institutional losses,
prop up the dollar and minimize inflation in the US and Europe.

Associate Professor Anthony Neuberger of the London Business School,
however, reviewed gold market data over the past decade and found no
unusual activity that would point to market manipulation.

quot;The GATA people are out of their minds and the London Business
School report shows it,quot; said a spokesperson for a major US
investment bank, who asked not to be named. quot;A conspiracy between the
German Bundesbank, the BIS, the Treasury, the Fed, and five big Wall
Street banks? Come on. We hope for a speedy dismissal.quot;


The fact that one of Neuberger's previous research papers was
financed by bullion dealer, Morgan Stanley, was never disclosed by
the World Gold Council.

The World Gold Council says, quot; We appreciate a serious discussion of
the gold market but not polemics.quot;

Yet, Frank Veneroso, who has advised many governments, the World Bank
and many highly regarded money management operations, offered his
gold market research to the World Gold Council. Their response:
SILENCE. They refused to even consider his calculations and how he
put them together.

Frank went way out of his way on May 10th to speak at the GATA
African Gold Summit in Durban, South Africa. (As did James Turk, Reg
Howe and myself) All of the members of the World Gold Council were
invited to attend, as was the World Gold Council itself. Only a few
did and the rest did not even have the courtesy to decline to their

It is most prescient how Frank Veneroso began his presentation titled,

Facts, Evidence and Logical Inference
A Presentation On Gold Supply/Demand, Gold Derivatives and Gold Loans

Frank A. J. Veneroso

You might want to know why I have come all the way down here to
participate in this conference. I find it extremely annoying that
there is a hell of a lot of obvious evidence out there that something
is happening in the gold market---that there are very large supplies
coming into the market---larger than the consensus would claim---and
no one is willing to discuss it.

I have had interviews with the press. After the interviews, it has
always turned out that the articles were killed. I have requested
debates with Goldfields Mineral Services and they have refused to
show up. I have asked the World Gold Council to fund pertinent
research studies and they have not responded. I never get a response
that counters the evidence that I can bring forward. I simply get
extreme silence.

Only GATA has looked at this evidence and taken it to the public, and
so, as a result, I feel it is incumbent on me to present it once
again in their forum because I think that it represents evidence of
very large undisclosed official supplies in the market that is
systematically ignored. If there are any producers here who have
influence on organizations like the Gold Council---if you find this
persuasive---you should go to them and say, quot;Hey, listen, this guy
has real evidence. He may not be right but it poses serious
questions. It should be addressed. Why isn't it being addressed?quot;


What reward did the presenters receive for their unpaid efforts to go
all the way to Durban, South Africa from the World Gold Council's
biggest contributor, AngloGold?

Steve Lenahan, a nice enough chap, told South Africa's Business Day
that ,quot; Reg Howe is wrong on one of his charges which makes all his
other claims suspect. quot;

Yet, Lenahan did not explain to the press nor to any of the GATA camp
what Reg what he was wrong about and Anglogold has not yet responded
to me about the matter.

Why did Lenahan not bring this up during the Qamp;A period? We were
there to help THEM. To my utmost regret, I am forced to come to the
conclusion that the AngloGold senior management are not only the most
cowardly of folk, but they would sell their soul to the devil to
perpetuate the visions of The Gold Cartel.

In February, 2001 Reg Howe and I attended a prominent gold conference
in Capetown, South Africa. Well known AngloGold Marketing Manager,
Kelvin Williams, launched into his presentation to an impressive
crowd of attendees by mocking the quot;conspiracyquot; crowd.

I had hoped that GATA's sincere effort to lay our cards on the table
in Durban would elicit some serious query and follow up probing from
Anglogold because of the profoundness of what the speakers had to say.

Instead, AngloGold, the World Gold Council's single largest
contributor, used the opportunity to bash us in the South African
business press.

SO BE IT. Remember those words AngloGold!

Which brings me to the other most visible hedger, Barrick Gold.

Like AngloGold, they have taken every public opportunity to give GATA
the zinger. At a New York analyst gathering last year, their
spokesman said that GATA was partly responsible for their stock
price's poor performance because we said there was a conspiracy to
hold down the gold price. I suggest that there are other reasons that
the share price of Barrick is not performing well.

The following revelation should scare the pants off Barrick

Harvey O sent me the following email on Friday:

quot;Jamie Sokalsky was on CNBC today and he totally lied about total
demand for gold. He stipulated it is about 10% higher than supply.

quot;He was questioned by Mark Haynes and Haynes thought that central
banks are supplying the excess gold to meet the demand. Solalsky said
that central bank sales and leasing only represent 10% or about 250
tonnes. You could tell on the screen that he was nervous in his
response to Haynes.quot;

I happened to catch the same interview. Sokalsky was on as Barrick
reported earnings a penny below expectations. I could not believe
what I heard either.

This is a man who is supposed to be a NUMBERS genius. Randall
Oliphant is now the Barrick President, promoted from his financial
officer position. Solalsky succeeded Oliphant to that position. They
have both told the investment community that their massive hedge
position is 100%quot;bullet proof.quot; They are on record for that statement
during conference calls and during public gold analyst presentations.

OK, maybe that is so, but Harvey O is also right. Sokalsky was either
lying on CNBC or he is a dummy. According to the official statistics,
mine gold supply is around 2500 tonnes and scrap supply is around 600
tonnes - for a total of 3100 tonnes. According to their own numbers,
the WGC says that gold demand is around 4000 tonnes. That means that
the answer to Mark Haynes' question should have been around 33%, not
10%. Frank Veneroso and GATA say those numbers are way too low.

Frank's work shows demand numbers closer to a total of 4900 tonnes.

If Frank is right, mathematical guru Sokalsky is only off by 62%.
That figure is derived by dividing mine supply of 2500 tonnes into
Frank's demand over supply number of 1800 tonnes, minus his 10%

Now, if Sokalsky can be THAT WRONG in making a statement about the
supply of gold being fed by the central banks to hold down the gold
price on CNBC, how wrong could he and Oliphant be about the quot;sancro-
sanctityquot; of their forward sale positions? What if they are 33% to
62% off in their calculations on that too?

If they are, kiss Barrick bye-bye when the inevitable gold price
explosion arrives.

Recent developments regarding the threatened strike by the National
Union of Mineworkers in South Africa are unfortunately adding fuel to
the fire that the World Gold Council and some of its leading
contributors are savaging the gold market world. Regard:

New mining deals chip at strike threat
From Bloomberg
July 28 2001 at 08:01AM
Johannesburg - Top coal miners BHP Billiton and Anglo American and
leading gold miner AngloGold yesterday averted strikes even as more
than 80 000 mineworkers at other gold mines threatened to walk out on

The National Union of Mineworkers (NUM) agreed to call off a strike
pencilled in for tomorrow night by 18 000 coal miners, and one due on
Tuesday at mines operated by AngloGold and Placer Dome, employer
representatives said. That leaves Gold Fields, Harmony and smaller
gold miners still at risks.


More consternation! AngloGold and Placer Dome quot;ollie ollie in freequot; -
wasn't that the OK signal when we played quot;TAGquot; as kids?

The latest from Placer Dome from a recent press story:

quot;Placer continues to hedge aggressively and added 400'000 ounces to
its book in the second quarter. It has 8 million ounces hedged over a
14 year period at an average price of $438 per ounce.

quot;During a conference call, management said it would continue to hedge
whenever it was quot;opportunequot; and said the long-term contango made it


It appears that Placer Dome now wants to catch up with AngloGold and
Barrick as regards to hedging. 14 years out????

So hedgers AngloGold and Placer Dome have settled with the Union, but
relative non SA hedgers Goldfields, Harmony and Durban Deep are left
out in the cold?

This is most serious. All along GATA has claimed that the AngloGold's
and Barrick's of the world were in on the gold market collusion so
that they could wipe out high cost producers, non-hedgers, etc, and
take over their assets as they were forced out of the gold business.
That would put them in most favorable positions for the coming gold
quantum leap in price.

Sorry to say, but what GATA has predicted for years now may be

Regard once more:

JOHANNESBURG - Durban Roodepoort Deep [NASDAQ:DROOY; JSE:DUR] chief
executive, Mark Wellesley-Wood, said he would be forced to hand the
company over to liquidators if strike action, currently threatened by
South Africa's National Union of Mineworkers (NUM), came to pass. In
a matter of days, DRD's executive committee would tell the market a
sustained gold production loss would ruin the company, he said.

quot;I am not going to be personally liable, neither would my colleagues,
for trading irresponsibly,quot; he said, speaking on Moneyweb's Classic
Business. quot;After a few days of the strike we would have to call in a
liquidator. Then we would have to ask the liquidator to reinstate
20'000 jobs because there's nothing more I could do,quot; he said.

Most analysts agree DRD only makes money in the last week of any
particular month (the balance is dedicated to making up hedging
losses). It also has little recourse to debt. Haydn Franckeiss, head
of equities at Sanlam Investments, South Africa's second-biggest
institutional investor said: quot;Durban Deep is the most geared mine in
the world, but they've got no balance sheet, they haven't got too
many financial resources. So I think the strike certainly will kill

Durban Roodepoort Deep [JSE:DUR] will continue to fell the pinch of
its out-of-the-money hedge book until at least March next year, when
it has committed to have wound up its costly long positions at a cost
of about R140 million.

While the company pleased some analysts from an operational
perspective, where higher grades and a higher gold price allowed it
to turn in its first headline profit for more than a decade, its
convoluted forward positions continued to wreak havoc on its bottom


Meanwhile, back at the ranch, Anglogold's world class hypocrite,
Kelvin Williams, excoriates other gold producers for not supporting
their industry.

Gold producers under fire
Andrew Davidson
July 25 2001
Johannesburg - Kelvin Williams, the marketing director of AngloGold,
the world's biggest gold producer, yesterday slammed the vast
majority of global gold mining companies for not taking
responsibility for the promotion of their product and doing quot;nothing
whatsoeverquot; to grow or maintain the health of the gold market.

Instead they were riding on the backs of those who coughed up
millions of dollars each year to support and promote the industry.

Williams disclosed that only 30 percent of gold producers supported
the World Gold Council (WGC), a non-profit body set up 14 years ago
to quot;simulate and maximisequot; the demand and holding of gold by
consumers, investors, industry and the official sector (central

AngloGold, which has an output of about 7 million ounces of gold a
year, pays a membership fee of $13 million a year, or $2 for each
ounce produced. South Africa's second largest gold miner, Gold
Fields, with an annual output of about 4 million ounces, is also a
fully paid up member of the WGC, as are Harmony, Avgold and JCI.

Among local gold companies that do not contribute is Durban
Roodepoort Deep...


It is time to get down and dirty and even more detailed on what The
Gold Cartel is all about. From Reg Howe's Complaint in Boston Federal

quot;61. Goldman (Sachs) recently recommended three gold mining stocks:
AngloGold, Barrick Gold and Placer Dome, Inc. The first two, as noted
in paragraph 13 above, are heavy hedgers who appear to have material
non-public knowledge of the gold price manipulation scheme. According
to reliable reports received by the plaintiff, Chase intimidated
Placer Dome, also a heavy hedger, into denying that it had
contributed to GATA when it in fact had. All three of these
companies, although making announcements about reducing their hedge
books in the wake of the Washington Agreement, have since returned to
active hedging programs, including the writing of call options on
gold, a sure sign that they do not expect any repetition soon of the
fall 1999 gold rally.quot;

On May 10th 2000, a GATA delegation consisting of Chris Powell, Frank
Veneroso, Reg Howe, myself and an Illinois State Representative met
with the Speaker of the House, Denny Hastert. We laid out the GATA
story. The Speaker's eyes lit up. The meeting lasted 3 times longer
than WE expected.

At the end of our meeting, Speaker Hastert asked us to step into the
Lincoln Room. After about 10 minutes, Speaker Hastert came back and
said that he would try and set up a meeting with Texas Congressman
Dick Armey, a Republican powerhouse and Alabama Congressman Spencer
Bachus, who chaired the House Sub-Committee on Domestic and
International Monetary Policy.

Armey could not make it, but Bachus, on two hour's notice, showed up
with a staff of 8. One of those staff was a young protagonist named
Jamie McCormick. This young Washington star wanna-be told the GATA
delegation that the gold companies in the U.S. did not agree with
GATA and saw no evidence of gold market manipulation. GEEZ. How did
he get such insightful feedback so quickly?

After our next meeting with Dr. John Silvia, the chief economist of
the Senate Banking Committee, we met with an aide of Congressman Ron
Paul. This staffer asked if Jamie McCormick was at the meeting.
Surprised, we said yes. This staffer then told us that Mr. McCormick
was very close to a guy named Ted Truman.

He went on to say that Truman used to work with the Fed in a high
level position, got into some sort of disagreement with Greenspan,
and went on to work with Treasury. The scary part was that the
staffer told us that Truman was known throughout the in-crowd in
Washington as a CIA snoop.

Great! Just what GATA needed - the CIA on our butts.

Honestly though, my first thoughts were that had to be hokum,
Washington poppycock!

However, when GATA's Chris Powell returned home, he received a letter
from the omnipresent Ted Truman, the supposed CIA snoop, denying any
Treasury involvement in manipulating the gold market. It was dated
May 10. As far as we know, Truman has written no on else in the
United States about gold except to Chris Powell - which just happened
to coincide with the very day of our meeting with the Speaker and
Bachus staff member, Jamie McCormick.

In the weeks to come you are most likely going to realize the
significance of Mr. Truman's participation in one of the most
horrific financial scandals in US history.

From one of my favorite tunes as a quot;yutequot;:

quot;Oh Lord Come On Down, Got To Spread Some Love Around
I Swear Just Ain't Fair. Trouble Trouble Everywhere.quot;

The quot;Troublequot; is that the GATA team is in the process of uncovering
one of the most monstrous quot;unthinkablesquot; in the financial history of
the United States. BELIEVE IT or NOT!

Anyway, the following week after the GATA delegation meeting in
Washington, the most credible of our sources said that Chase Bank
spoke to him debauching GATA's assertion to Congressman Bachus that
Placer Dome was one of the contributers to GATA's efforts to expose
the manipulation of the gold market.

How did Chase find that out?

In an apparent panic, Placer Dome denied vehemently in writing to
Chase that they had anything to do with GATA. Our source said if he
could prove Placer had given GATA $10,000, would Chase send him a
copy of the letter from Placer Dome to Chase.

When our source provided the documentation to Gold Cartel honcho
Chase, they were shocked. The quid pro quo was that they would send
our source the denial by Placer Dome that they ever supported GATA.

That evidence is a part of the Reg Howe Complaint as it reveals
the quot;Hannibal Lecter-likequot; pressure that cartel bullion dealers
assert on gold producers.

Which brings us full circle to the World Gold Council. Might as well
rename it at the World Hapless Council. This is what the efforts of
the World Gold Council have wrought:

July 23, 2001
Mr. David Poitras
Haddonfield, NJ 8033

Dear Mr. Poitras:

I think you should read the enclosed copies of correspondence between
Blanchard's CEO and the World Gold Council. The Blanchard Economic
Research Unit, with the assistance of one of the most highly regarded
groups of gold analysts in the world, are completing a comprehensive
study that arrives at some terribly negative conclusions about gold
bullion. For several months now, we have asked the World Gold Council
and its senior economists to provide us with their rebuttal to those
conclusions. Although we have had two meetings and numerous
conversations, we have received nothing from the Council that
addresses our principal concerns.

As you can see from the latest correspondence, the Council is still
struggling to come up with a response to the most fundamental
question that could be asked of it: Are there any good reasons why an
investor should buy gold bullion? The Council's Mission Statement
says that its job is to promote and expand the market for gold and
gold products and quot;to promote both private and institutional
ownership of gold...through a research-driven approach.quot; If the gold
industry's trade organization, whose sole reason for existence is to
increase the demand for gold bullion, can't find anything in all of
its research that will give Blanchard, the biggest retail dealer in
physical gold in the United States, a single reason why it should
want to own gold bullion, then gold bullion's downside potential may
be staggering.

Why would Blanchard turn down a large sum of money from the World
Gold Council that was to be used by Blanchard to conduct a marketing
campaign for gold bullion? It's no secret in the industry that the
money offered to Blanchard represented the majority of the Council's
entire global marketing budget to create retail investment demand.

The answer is that we can't sell gold bullion to our clients if we
don't want to own it ourselves. The gold industry's ultimate
insiders, the central banks and the gold mining companies, have
managed to destroy the world's confidence in an asset that has long
been the premiere store of value, the ultimate source of liquidity
and security, and the most effective form of financial insurance.
Those insiders have managed to transform gold bullion, at least for
now, into a speculation.

The statistical data and other information from the Blanchard
Economic Research Unit has convinced us that the interests of the
gold industry's insiders are no longer aligned with the interests of
gold investors. As long as nothing happens to prevent those insiders
from sabotaging the value of their own product, we have decided that
we no longer want to maintain gold inventories, nor will we market or
sell gold bullion to our clients.

Blanchard's research didn't reveal any complex conspiracy theories.
It simply followed the chain of events that began with the actions of
corporations, institutions and sovereign nations that were acting in
what they perceived to be their own best interests and those of their
stakeholders. Although deliberate price fixing and market
manipulation is involved, and although some of the parties acted in
concert to fix, stabilize or manipulate prices, there is probably no
actionable conspiracy since the parties directly involved appear to
have all been sovereign nations, or the agencies of sovereign nations.

The effect of that market manipulation is to make it impossible for
gold to play its traditional role as financial insurance. As U.S.
investors lost confidence (and money) in the stock market, other
tangible assets, like platinum and rare coins, went up like rockets.
Gold went down.

We are still in the process of preparing the final report for
Blanchard clients, which won't be finished and printed for several
weeks. However, the conclusions are so overwhelmingly negative - gold
bullion has very little upside potential and its downside potential
is much greater than you think - that we felt we should give
immediate notice to as many of our bullion clients as possible.

We have a great deal of respect for the competence and integrity of
the Council's economic analysts. After several months of
conversations and correspondence, they have been unable to rebut our
negative conclusions and have provided no answers to a question whose
answer is fundamental to the very existence of the World Gold
Council: quot;We (will) no longer market gold to our clients, or accept
co-op marketing funds from the World Gold Council, if we do not want
to own gold ourselves. Can you give me a good reason why we should?quot;
If you were one of the biggest shareholders in Microsoft, and Bill
Gates couldn't give you an answer to the same question about
Microsoft's stock, how long do you think it would take for you to get
your broker(s) on the phone?

I hope to get a summary of the report, which I understand is
entitled quot;Gold in a Bear Trapquot;, fairly soon.

When I receive the summary, I will give you a call to see if you
would like to have a copy.

Very best regards,

Charles Me Carble
Account Executive

July 3, 2001
Via Email:

World Gold Council
444 Madison Avenue
New York, NY 10022

After our discussions last week, I had an interesting conversation
with ___________ in which he addressed some of the issues that we
discussed. However, I still find myself at a loss as to how to
explain the statement in the World Gold Council Annual Report 2000
that the Council has reconsidered its strategy and is now placing its
focus on creating demand through the promotion of gold in jewelry.

All of the evidence shows that there is a negative correlation
between the demand for gold jewelry and the price of gold. In all of
the conversations that I have had with representatives of the
Council, their position has been that jewelry demand provides a
physical market for new production and helps to place a basement
under the gold price, but that jewelry demand will never create a
significant increase in the price. Only increased investment demand
can do that. Do you agree with that view?

My first impression on reading the Council's report was that the
major producers had written off investment demand (at least for the
immediate future) and that they had, therefore, resigned themselves
to a flat or declining gold price. That may work well for companies
like Barrick and AngloGold whose cash flow is actually hurt by a
rising gold price. Perhaps they would rather wait until they have
been able to gobble up the reserves of the weaker companies who
haven't fattened their balance sheets by selling short.

Is there a plausible argument, one that you believe in yourself, that
increasing jewelry demand can materially increase the price of gold?
The combination of the Council's strategic focus on jewelry and the
fact that the industry, once again, failed to provide financing to
fund adequate product promotion leads me to believe that the only
potential savior for the gold market, the individual gold investor,
is about to become as extinct as the dodo.

The individual investor has complete discretion over whether he buys,
sells or does nothing with gold. The amount of money investors can
collectively put into the gold market (or pull out of it) makes up
the biggest segment of the market. Individual investors own over
twice as much gold as the central banks do. Last year, for the first
time in over 20 years, investors sold more gold than they bought.
Implied Net Investment, as calculated by Gold Fields Mineral
Services, Ltd., came to a negative 291 tonnes.

Since I believe we agree that investment demand remains the most
important determinant of gold prices, if the industry doesn't even do
enough marketing to ensure retention of gold by existing owners, then
the market could be in for a free-fall. There's a lot of gold out
there if nobody wants it.

Based on all of the data that we have been reviewing, I am coming to
the conclusion that gold is no longer an investment but rather a
speculation on the timing and the occurrence of uncertain events that
are solely in the control of other parties. That being the case, our
clients should avoid gold like the plague until such time as the free
market laws of supply and demand are allowed to dictate the priceSS

1-800-880-4653 * 504-837-3010 * FAX 504-581-3677
Congratulations once again World Gold Council. No wonder Anglogold's
Kelvin Williams wants more gold companies to contribute to your
efforts. There won't be too many others around at the rate things are

Then again, perhaps the only organization that might be more inept
than the World Gold Council is Blanchard and Company INC. They have
fallen hook line and sinker for all the drivel that the World Gold
Council and GFMS have put out. Woe to their clients.

Contrast Blanchard and Company INC with Swiss America Trading Corp
and Dr. Fred Goldstein in Scottsdale, Arizona that have contributed
close to $2,000 to GATA by selling gold coins in a promotional effort.

In the most recent Gold, the World Gold Council's glossy covered
magazine, they feature an article titled, quot;Pooling our Resourcesquot;
featuring Delta Gold's managing director Terry Burgess.

It begins:

quot;In a RECENT discussion with a taxi driver, I learned that he would
not buy shares in a gold company. I challenged him on this, to
discover, at length, what problems he saw with gold stocks: there is
too much gold around, reserve estimates are unreliable, mining is
environmentally unfriendly, gold companies speculate on the gold
price and there is a conspiracy to keep the gold rice low. quot;He was
referring to central banks, Bre-X cyanide, hedging and GATA.quot;

Later, in this quot;Last Wordquot; interview special, Terry Burgess says:

quot;Although there are differing views on the points raised by GATA,
some gold company shareholders firmly believe that there is a
conspiracy to keep the gold price down. Personally, as long as gold
price movements are difficult to explain, I do not believe that a
concerted effort is being made to prevent free trading in the
commodity. The issue that concerns me most, however, is that the talk
of conspiracies lead investors to avoid the purchase of both gold and
gold stocks.quot;

No Mr. Burgess, it is not the talk that is the problem, it is the
conspiracy itself. When are you and other leaders in the gold
industry going to wake up and help GATA expose this nightmare. Why
are you even afraid to engage us in serious discussions on what we
have uncovered?

I'll end with this recent note from Germany.

Hi Mr. Murphy,

Good news for gold. The issuance of the 12 tons that were melted into
1 DM Gold-Coins from the Bundesbank was already given out the same
morning the gold coin was issued today by the Landeszentralbanken
(which are the sub-Bundesbank in each German-state). In front of
these Landeszentralbanken there were coin-dealers that bought these
at much higher prices than the coin was sold to the public. The black
market price for these gold coins is already twice as high.

The following is from the book quot;The United Nations Exposedquot; by
William F. Jasper, page 49, quoting Prof. Carrol Quigley, (Bill
Clinton's acknowledged quot;mentorquot;). The chapter deals with the system
instituted by Cecil Rhodes,(founder of the African Nation of Rhodesia
which he regarded merely as his private possession):

quot;The plan developed by Rhodes and his small circle of co-conspirators
was one in which 'a world system of financial control in private
hands' would be used to bring about world government.quot;

quot;This system,' notes Quigley, 'was to be controlled in a feudalist
fashion by the central banks of the world acting in concert, by
secret agreements arrived at in frequent private meetings and

quot;Professor Quigley explained further: 'The apex of the system was the
Bank of International Settlements in Basle, Switzerland, a private
bank owned and controlled by the world's central banks which were
themselves private corporations. Each bank ... sought to dominate its
government by its ability to control Treasury loans, to manipulate
foreign exchanges, to influence the level of economic activity in the
country, and to influence cooperative politicians by subsequent
economic rewards in the business world.quot;

Pretty neat, eh? Fits the resume of Clinton, Rubin and Summers (and
possibly Bush/O'Neill??) quot;like the fist fits the eyequot; as we say in

Alex Wallenwein

And, pretty scary too. Maybe that's what the World Gold Council and
some of its leading members are afraid of, or worse, responding to.

Regardless, this is what the World Gold Council has wrought!