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AngloGold raises bid for Normandy, cites cooperation with Barrick

Section: Daily Dispatches

By Bill Murphy
December 19, 2001

The following documentation and statements were presented
in Reg Howe's lawsuit in U.S. District Court in Boston against
the Bank for International Settlements, Fed Chairman Alan
Greenspan, New York Fed President William J. McDonough,
J.P. Morgan amp; Co. Inc., Chase Manhattan Corp., Citigroup Inc.,
Goldman Sachs Group Inc., Deutsche Bank AG, and former
U.S. Treasury Secretary Lawrence H. Summers.

* * *

In July 1998, Fed Chairman Alan Greenspan, testifying
before the House Banking Committee, stated: quot;Nor can
private counterparties restrict supplies of gold, another
commodity whose derivatives are often traded
over-the-counter, where central banks stand ready to
lease gold in increasing quantities should the price rise.quot;
This statement amounted to a declaration that the gold
price had been and would continue to be controlled.

According to reliable reports received by the plaintiff,
this effort was later described by Edward A. J. George,
governor of the Bank of England and a director of the
BIS, to Nicholas J. Morrell, chief executive of Lonmin

quot;We looked into the abyss if the gold price rose further.
A further rise would have taken down one or several
trading houses, which might have taken down all the
rest in their wake. Therefore at any price, at any cost,
the central banks had to quell the gold price, manage it.
It was very difficult to get the gold price under control
but we have now succeeded. The U.S. Fed was very
active in getting the gold price down. So was the U.K.quot;

The quot;abyssquot; comment made by George is no rumor
monger talk. It was made in front of three people I know
personally pursuant to the dramatic rise in the price of
gold following the surprise Washington Agreement
announced on September 26, 1999.

* * *

The evidence that the GATA army has collected over the past
year since Howe filed his complaint fully supports George's
comment that the central banks would do anything to quot;managequot;
the price of gold. Tragically, quot;anythingquot; came to mean lying,
deceiving, and breaking various laws.

The essence of the Washington Agreement was that 15 European
banks agreed to limit the sales of central bank gold to 400 tonnes
per year for five years and not to increase their lending of gold
over that time. The British and the Americans were not clued in
prior to the announcement.

The reaction of the gold price to the Washington Agreement
was the most dramatic rise in the price of gold ever. That is not
what any of the central bankers had in mind. They were just
perturbed at the tactics of the Gold Cartel to suppress the gold
price and wanted to do something about it. They had no intention
of creating financial chaos.

How could they have been so surprised at what occurred?
Easy. They were working off the inept gold industry gold
loan numbers of less than 5,000 tonnes. The real number
was more than double that at the time, which means the
central banks had FAR less gold in their vaults than they

The announcement set off a panic because the yearly
supply/demand deficit was running over 1,600 tonnes
(again, more than they realized) and there would be no
way to hold the gold price down under the new agreement.
The scheming Gold Cartel was in deep trouble. Something
had to be done FAST. A solution had to be found that
would allow the central banks and the Gold Cartel to calm
the market by feeding central bank gold into that market to
satisfy the strong gold demand.

The problem for the Gold Cartel and the central banks was
they needed to come up with a way to get the job done and
not let the investment world realize the seriousness of the
situation. Some sort of plan of deception had to be devised,
and one was -- in Santiago, Chile, in October 1999 by the
International Monetary Fund. The plan centered around IMF
central bank members quot;swapping outquot; their gold, yet still
accounting for that gold as a central bank gold asset.

To put it bluntly, they would perpetuate a lie about what the
true status of central bank gold. We know that to be the case
as a result of the super-sleuthing of GATA's Andrew Hepburn
of Canada.

Andrew asked the IMF the following:

Why does the IMF insist that members record swapped gold
as an asset when a legal change in ownership has occurred?

The IMF answered:

quot;This is not correct. The IMF in fact recommends that swapped
gold be excluded from reserve assets. (See Data Template on
International Reserves and Foreign Currency Liquidity,
Operational Guidelines, para. 72,)quot;

Yet, the following can be found on the Internet site of the central
bank of the Philippines:

quot;Beginning January 2000, in compliance with the requirements of
the IMF's reserves and foreign currency liquidity template under
the Special Data Dissemination Standard (SDDS), gold swaps
undertaken by the BSP with non-central banks shall be treated
as collateralized loan. Thus, gold under the swap arrangement
remains to be part of reserves and a liability is deemed incurred
corresponding to the proceeds of the swap.quot;

The central banks of Portugal, Finland, and the European
Central Bank itself then all confirmed to Hepburn in writing their
understanding of the appropriateness of the Philippines'
treatment of gold swaps.

Hepburn's latest investigative work reveals that the Bank of
Italy changed its accounting procedures in October 1999 to
accommodate the IMF's devious scheming. Hepburn has
just reported the following:

* * *

I had been under the impression that Italy was very
pro-gold and that none of its reserve had been lent
or swapped out. I can now state with fair confidence
that Italy is indeed quot;managingquot; its gold reserve.

A few days ago I e-mailed the Bank of Italy and
inquired as to whether it had swapped, lent, or
otherwise transferred any of its gold to investment
banks or other central banks. Today I received a
response that did not answer my question but instead
pointed me to a publication on the bank's Internet
site entitled, quot;Monetary and Credit Aggregates of
the Euro Area: the Italian Components.quot;

Unfortunately, the way the site works is that there are
no separate URLs, so I can give only the directions for
getting to the report that I'm about to focus on. To quote
the e-mail I received: quot;... You can find the data you
requested at under the item
Publications\Statistics\Supplements to the Statistical
Bulletin\ Money and credit aggregates of the euro area:
the Italian components in table 1 in the column quot;Gold and
gold receivablesquot;.

The name of the column, quot;Gold and gold receivables,quot;
indicates that at least part of the reserve represents only
a paper claim on gold -- that is, not all the gold is in the
vaults of the Bank of Italy.

The next interesting piece of information is found in the
notes/definitions section of the report. Page 45, S034162M,
which apparently is the code for an account, reads in the
following manner:

GOLD RECEIVABLES. Comprises the gold owned by the
Bank of Italy and receivables in respect of deposits
denominated in gold and swaps.quot;

The above essentially confirms that the Bank of Italy is
active in the swaps/deposit market.

The next excerpt of note is found on Page 48 of the report.
The bank states:

quot;In October 1999, as part of the harmonization of the Eurosystem
statistics, the accounting treatment of the Bank of Italy's
official swaps (in gold and dollars) with the EMI between
September 1997 and June 1998 and with the ECB from July to
December 1998 was modified. The main change was the switch from
stating gold assets net of official swaps to stating them gross
of such transactions.quot;

A few things are of interest here. First, they admit to doing gold
swaps. Second and much more importantly, in October 1999 the
ECB adopted the collateralized loan approach to accounting for
gold swaps. This is the same treatment that the IMF denied it
ever recommended, but we know to have been undertaken
anyway. Under this treatment, swapped gold remains as a
reserve asset even though the ownership has changed and
the gold has left the vault. Furthermore, this accounting change
went into effect around the time of the Washington Agreement.
If I remember correctly, the Washington Agreement curtailed
only sales and lending; it said nothing about swaps. Because
of the new treatment, it is very possible that gold swaps have
increased significantly since late 1999.

The term quot;official swapsquot; is in reference to swaps with the EMI
and ECB. I'm unsure as to the level of swaps with the EMI but I
believe around 15 percent of the ECB's reserves are in gold,
which means that Italy transferred at least 450 tonnes in that
swap arrangement.

On Page 51 in the quot;Methodological Index,quot; the following is said
when explaining an account code:

GOLD AND FOREIGN CURRENCY. Net gold and foreign
currency claims on non-euro-area residents.quot;

Unfortunately, they do not specify how much of the claims are
on gold and how much on foreign currency. What is interesting,
however, is that the Bank of Italy apparently has a gold claim
on a non-euro-area country. It would be very interesting to see
if Italy has a gold swap with the BIS, the IMF, or even the United

-- Andrew

* * *

What Andrew has uncovered ought to be one of the most important
findings ever for the gold industry. The BIS and Gold Fields
Mineral Service (the generally accepted gold industry statistician)
state that central bank gold loans are around 5,000 tonnes. Neither
mentions anything about what the total amount of gold quot;swapped
outquot; of the central banks might be.

GATA suggests that amount is significant -- so significant that we
believe the total amount of central bank gold that has been
lent/swapped is closer to 15,000 tonnes than 5,000 tonnes.

The difference between the two numbers has staggering ramifications
for all gold market participants and investors. GATA believes that if
the truth were known, the price of gold would have to more than
to ration the true supply of gold left to satisfy demand.

This is just what the Gold Cartel does not want the investment world
or public to know. That is why they have stifled GATA's discoveries
and refuse to allow our startling findings to be presented in the
mainstream U.S. press.

GATA has caught the Gold Cartel and the IMF doing something very
wrong. To let them get away with this sham would be even more wrong.

The Gold Anti-Trust Action Committee and our army of supporters
ask the gold industry to examine the facts and help us expose the

Who could be against that?