You are here

Intervention may be necessary to support dollar, IMF boss says

Section: Daily Dispatches

8:10p ET Sunday, May 25, 2003

Dear Friend of GATA and Gold:

Here's GATA Chairman Bill Murphy's quot;Midasquot; commentary for Friday, May
23, at, where you can get a two-week free

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

* * *



Friday, May 23, 2003
Gold $368.30, up 70 cents
Silver $4.63, unchanged

The strategic importance of $370 gold becomes more apparent with each
passing trading day. The bulls took that resistance point out
Wednesday, but not for long. On Thursday, cabal forces stated that
was not tolerable by taking gold back down below $368. Last night,
they took gold down another $3 to the $365 area, but with the dollar
under severe pressure, gold rallied sharply to $370.70 during the
Comex session. The Gold Cartel said NO once again and let into gold
even though the dollar barely budged off its lows. Crashing it went,
to as low as $1.60 on the day. The selling dried up and back up she
flew, closing 70 cents higher on the day. All in all, a very volatile
and constructive session.

The Gold Cartel and other big shorts are:

* Defending their derivatives positions, which become extremely
troubling above $370.

* Defending their near-term written call positions that expire on May

The last time gold approached $370, it traded right below that level
for eight days. Then, it exploded to $388. It is only natural that
gold also do some work now, in this same area, before it punches
through. Decisions will be made basis the price action of gold and on
expectations of the future price. The same sellers as last time are
doing what they can to prevent that from happening.

Gold closed well off its lows yesterday and reversed late today after
the intense assault by the cabal. That bodes well for next week.
Their selling isn't developing any traction. The increased
volatility, closing well off the daily lows and finishing higher on
the day six out of the last seven sessions, suggests we could have
some big league fireworks in the very near future.

Comex open interest rose 1926 contracts to 202,292. The Battle for
$370 Gold intensifies.

Some comment on the coming derivatives crisis and why it has only
partially kicked in, as evidenced by the Morgan/Newmont flap. After
the Washington Agreement was announced in September of 1999, gold
rallied about $87 in less than two weeks. The option volatilities
went berserk and caused humongous margin calls. Gold was then quelled
by the anti-gold forces, the volatilities retreated and the bullion
banks calmed down.

Gold has moved up more slowly twice this year. All heck was beginning
to break loose when gold took out $370 in February, but the goon
squad took it all the way back down to $319. Financial market panic
was avoided. The gold derivatives problem is one that goes into play
behind the scenes. Margin calls and credit concerns have to be dealt
with by the various counterparties and their credit committees.
Decisions will be made based on the price action of gold and on
expectations of the future price. That's why staying above $370
for a period of time is critical. It would suggest much higher prices
ahead are likely. It will intensify the decision making process of
those counterparties to reduce their firm's short gold exposure.

Twice now, $330 has been a key for the gold price move. Each time it
was taken out, gold has moved sharply higher. Twice, $354 was
identified as key resistance. Once taken out, gold soared further two
times in row. Jim Sinclair has stated that many of the derivatives
positions go under water once gold breaches that level. He would
know. That seems to be the level that the alarm bells and whistles go
off. It seems to me that if gold can stay above $370 for a while, the
gold derivatives neutron bomb will go off. Stay tuned.


a href=

Back to the day's action. The dollar closed near its lows at
93.13, down .58 and the euro soared very late, closing near its highs
at 118.21, up a smashing 1.33.

quot;New York, May 23 (Bloomberg) -- The dollar plunged against the euro
to its lowest level since the euro's second day of trading in 1999,
spurred by lingering speculation the U.S. is content to see its
currency fall. At $1.1809 earlier today, the dollar is headed for a
seventh straight week of losses against the euro, the longest losing
stretch since May through June 2002. 'Ours jaws dropped to the floor
when we arrived this morning,' said Michael Woolfolk, senior currency
strategist at Bank of New York, which holds $6.8 trillion of assets
in custody. quot;Traders won't stop until they see the dollar at $1.20
per euro. This decline goes far beyond the economic fundamentals of
the U.S. in relation to Europe or Japan.quot;

The dollar:

a href=

There are some that say silver is being trashed because it is more an
industrial metal than a monetary one. I say it is acting so poorly
relative to gold because the price manipulators still have it under
their control. Oil closed at $29.15, copper at 76.75 cents, cotton at
53.19 cents. Those economy sensitive commodities are acting way
better than silver and they have no monetary component at all.
Soybeans are near multi-year highs. Cocoa is still through the roof
compared to past years. That silver's industrial component is the
reason for the poor price action, doesn't cut it with me. Expose
the price manipulators and watch silver fly!


a href=

Seems silver should be a steal around $4.55, OR when gold closes
above $3.70 again.

Both London and New York bullion markets will be closed on Monday May

* * *

The John Brimelow Report

Friday, May 23, 2003

Indian ex-duty premiums: AM $7.52, PM $5.87 with world gold at $366
and $369.50. Ample for legal imports. In a volatile week, the utility
of following the domestic gold price in the world's largest
consumer has been clearly demonstrated: especially early today US
time when a serious effort to rout the gold price was blocked.

A comparison the first week of February, which $US gold spent mainly
in the $370s, with a one-day spike to $390, is revealing. The average
Indian ex-duty premium that week was ($4.60) e.g. Indian gold
was above the world price by only a couple of dollars, duty at that
time being around $6.52 per oz. India was far from being an importer.
Gold is now in a far stronger position: JP Morgan's quot;Daily
Strategistquot; probably has the right idea in announcing today:

quot;Buy Gold at 369/70 risking 365 targeting 380.quot;

Interestingly, the best physical premiums in North Asia reported by
Reuters today are from Korea, where there seems to be a minor local
gold boom: the Korea Times reports this morning a gold dealer
saying: quot;A number of individuals are trying to purchase gold as
investment tools because interest rates have reached all-time lows
and the government has introduced a series of measures to stop real
estate speculation.quot;

Perhaps having a lunatic nuclear armed neighbor has some influence!

a href=

TOCOM was discouraged by yesterday. Nihon Unicom says:

quot;TOCOM precious metal market had depression across the board, as the
NYMEX and COMEX precious metal markets collapsed down on fund profit
taking before 3-days weekendThe spillover from foreign metal
markets activated profit-taking sales by speculators on the Tokyo

Volume fell 36% to a still heavy 57,679 Comex equivalent level and
the active contract dived 28 yen on late selling, which also caused
$US gold to slip $1.70 below the NY close to $365.10. However, open
interest rose again, by a fairly significant amount equal to 2,926
Comex lots: maybe the speculator sales were shorts. (NY yesterday
traded 70,597 contracts, with open interest rising 1.926 lots to
207,297, a level which, as a couple of observers note, is still
40,000 or so short of the February peak. Speculators appear to have
more ammunition.)

The surge in TOCOM volume this week (to the equivalent of 298,099
Comex lots, with open interest rising 5,795 Comex equivalent) has
been combined with a rush of rumors of stressed derivative books,
triggered by Newmont's Yandal stand and exacerbated by the rising
gold price. This opens the possibility that the strange explosion of
TOCOM volume in the first week of February, which featured two record
volume days in a row, weekly volume equal to 469,024 Comex lots, an
open increase jump equal to 17,380 Comex, and gold's brief leap
from the $370s to the $390 peak, may in fact have been driven by
Western Hemisphere gold derivatives purveyors seeking emergency

There was further bad news for these parties in the form of news that
the European Commission wants to impose capital requirements on the
users of commodity derivatives.

Increasingly it looks as if the excessive gold hedging of the 1990s
is permanently departing.

-- JB

* * *


The stock market continues to levitate with the DOW closing at 8601,
up 7 and the DOG finishing out at 1510 up 2 and change. The bonds
closed higher once more at 121 9/32, up 4.

Same comment from me. It's spookily eerie out there. The markets
are paying no attention to the cascading dollar. How much longer are
foreigners going to hang in there? This is some bear market for them.
When our US market corrects, it could induce an avalanche of selling.

* * *

Hi, Bill:

The repo pool indicator posts at $41 Billion, thus we will probably
see the DOW hold its own around 8,600.

How much of the pool is used to support the dollar if any is
conjecture at this point but it looks like the Major Currency Dollar
Index MCDI will print a new low this PM.

Continued defense of $370 gold in the face of a falling dollar is
futile. I can only guess that the gold cartel is desperately trying
to make it to the next options expiration--May 27th.

-- Mike

* * *


Perhaps you can relate to my feelings, but I just find it difficult
to relax at this particular time. All of the evidence is mounting
explosively that we have come to a historic turn in the markets. When
I wrote Sunday, I didn't think that the sentiment could get worse but
it has with the VIX and VXN continuing to grow displaying an eerie
unconcern about this market. The AAIA and Investor's Intelligence
turned noticeably more bearish with levels now exceeding the very
bubble top. Now we can see leadership in this market. MSFT has traded
almost 200 million shares in the past two days while appearing to
break down. Wal-Mart and IBM also look as thought they are joining
MSFT. This is quality leadership, and if it were occurring on the
upside, it would be very positive, but it's ugly at this point.

The monetary authorities are obviously in a panic mode, pumping as
fast as they can, but if the technical signs are valid, it will be
without any effect. Something is ready to give here, and it is going
to be a geyser of some sort. I noticed that the silver sentiment at
TFC that there are now more bears than bulls, so I am expecting a
blow out move in the metal soon, but I can't imagine that gold won't
be along side it. Assuming that the pre-holiday Friday is relatively
meaningless, we should expect some fireworks next week.

Sorry for the babbling, but something profound is very, very near.

-- Your friend, Chuck

* * *

First JP Morgan, then Goldman Sachs, now Citigroup:

Citigroup Fires Seven Top Sector Analysts
Friday, May 23, 11:41 am ET

NEW YORK (Reuters) - Citigroup (NYSE:C - News) , the world's largest
financial services company, has fired seven top analysts and has
temporarily dropped coverage in nine sectors as it realigns its
research department, sources familiar with the situation said on
Friday. Analysts let go at Smith Barney, the investment banking unit
of Citigroup formerly known as Salomon Smith Barney, include Michelle
Applebaum, head of metals and mining research, and Ray Niles, its top
utilities analyst, the sources said.

* * *

Gold has been in a major bull market move for a couple of years and
The Gold Cartel continues to fire their analysts. Actually, it makes
sense. The market was not about much more than their price
manipulation for a long time. Now gold is about to blast sky high and
they are trapped short. The last thing they want is to have analysts
come out with bullish commentary. Writing neutral to bearish
commentary would just make them look stupid, or deceitful. They are
in enough trouble doing that already over their disingenuous IPO

The feedback over the World Gold Council's Equity Trust Fund is
not all positive. One of the negative ones:

* * *

Hello, Bill:

I am not enthusiastic about the exchange traded fund that will
make quot;buying gold as easy as buying shares.quot;

Act I -- a lot of favorable publicity, a lot of gold bugs taken in,
everything looks positive and the Fund is launched with a lot of
fanfare, so UNUSUAL for anything to do with gold.

Act II -- millions of investors call their brokers, they quot;get into
goldquot; via the shares. The price of gold rises.

Act III -- millions more invest, to get in on the bonanza. The price
some more.

Act IV -- the investors have loaded up heavily, the share is a great

Act V -- suddenly, the price of gold tops out and the shares begin to
fall. What the quot;investorsquot; did not know, is that the brokers shorted
the shares that belonged to their customers. And besides, like other
shares, they were largely bought quot;on marginquot;. Margin calls go out.
The investors are taken to the cleaners and the brokers clean up on
the shorted shares.

Act VI -- the gold shares have taught the quot;investorsquot; once again,
that GOLD SUCKS! A lesson that will be rubbed in for years and years,
not like DOW and NASDAQ losses, that are so easily and quickly

The brokerages keep the shares and thus the cabal has a new stock of
gold with which to hammer the price for a long time to come, perhaps
at a higher price, but they will be able to hold that new line for a
long, long time, far below $1,000 ounce; more like $450.

I don't know beans about stocks, but intuitively this is what I see

This stock exchange acceptance of quot;gold sharesquot; is not a change of
heart; it is a trap.

Tell me I'm wrong!

-- Hugo

* * *

Samex Mining CEO Jeff Dahl has an interesting thought:

* * *


I'm just back from a short road trip trying to catch up on news,
trends and markets, the MIDAS MIRACLE is the best.


In answer to this mild market conundrum I would suggest that we are
observing a massive FED quot;bailingquot; job to preserve the balance sheets
of a few once mighty Wall Street banks.

Remember GATA has tirelessly demonstrated one of the pieces of
Cabal heavy equipment used to quot;managequot; the gold price was/is
the quot;gold carry tradequot;, were CB gold was leased at #43;/-1% then SOLD
into the market with a portion (how large?) of the proceeds used to
BUY US Treasuries yielding #43;/-5% for a tidy quot;straddlequot; PROFIT of #43;/-

IN ADDITION, for many years, these players enjoyed a quot;nudge-nudge,
wink-wink, say-no-more say-no-morequot;, CAPITAL GAIN on both sides of
the straddle as the shorted gold declined and the long Treasuries
gently gained throughout the falling interest rate environment!

CURRENTLY, thanks largely to yourself and the ever capable GATA Army,
the cabal is steadily loosing capital/margin on the short-side of the
trade as gold rises. SO the FED, as lender of last resort, MUST bid
up (monetize) the long-side of the carry trade, Treasuries, providing
a corresponding gain in order to avoid quot;systemic-collapsequot; by
maintaining cabal balance sheet equilibrium.

If there's any substance to this speculation, and I'm sure
that other more savvy market analysts could dissect and demonstrate
its weaknesses and/or strengths, then the hidden quot;systemic-riskquot;
pressures must be steadily mounting and may vent soon in a market
near you!

-- GATA Cheers, Jeff Dahl

* * *

The gold shares continue to tread water. The HUI rose 1.47 to 141.51,
while the XAU fell asleep, rising .16 to 73.79. The gold share gift
is still on the table.

The quot;10+quot; gold fundamentals continue to get better by the day. Now
there is talk not only of the US lowering interest rates further, but
the ECB might do the same. Note the effect the continued lowering of
interest rates is having on the Koreans as illuminated within John
Brimelow's prescient commentary. It is hard for me not to imagine
the gold price exploding in volcanic fashion in the near future.