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2a EDT Wednesday, July 7, 1999
Dear Friend of GATA and Gold:
As bleak at things seemed for gold Tuesday as the price
of gold fell sharply after the Bank of England's
auction, it actually may have been a good day for us.
For the gold mining industry rallied in self-defense
for the first time. A coalition of major mining
companies demanded an explanation from British Prime
Minister Tony Blair about his government's disposition
of the British gold reserves and the possibility that
the government means mainly to rescue the gold shorts.
That these questions now are being raised at the
highest levels of the British government and
international finance is largely GATA's doing.
The methods of gold's enemies cannot survive scrutiny,
and it is GATA that is bringing scrutiny to bear
against them, GATA that leads the gold cause in the
world today. You get something for your support for
GATA. We're only 5 months old but we think we now have
a chance of changing the world. Mobilizing the industry
is a huge step forward.
GATA Chairman Bill Murphy's quot;Midasquot; commentary of
Tuesday at www.lemetropolecafe.com elaborates on this
below. It is, I think, the first analysis of the Bank
of England auction and related developments. Please
post it as seems useful.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee
* * *
quot;MIDASquot; COMMENTARY FOR JULY 6, 1999
By Bill Murphy
Spot Gold $257.10, down $6.90
Spot Silver $5.19, down 15 cents
The bear is roaring in New York, but he is about to be
sent back to the hinterlands of Maine and Canada. The
gold market crashed today and closed in new 20-year low
ground. Sellers were everywhere and buyers were few and
far between. The ploy by the collusion crowd to create
very negative sentiment worked. Not much else can be
said here that is worth a tinker's darn. The technicals
mean very little in a market that is manipulated.
Silver got caught up in the gold market bear mauling
and was sent South searching for support. It found some
around Georgia and the silver bull might be headed back
to New York faster than one might think. That support
in Georgia was someone who took 600,000 ounces of
silver out of the Comex warehouses after the close.
They now stand at a very low 74 million ounces. The
$5.18 support held on a closing basis. Our longstanding
bullish silver outlook remains intact.
On Friday in an email to cafe members I made the
following comment after noting that Anglogold had
commented about the British gold auction's being
oversubscribed by some 300-400 percent (what we had
told you earlier in the week) and that it was
disconcerting to see the bullion dealer banks offering
huge size once again to short-covering specs:
quot;Something does not sit right again here. Why are the
bullion banks offering size going into an auction that
is oversubscribed three or four times? What oversold
market, like gold, produces such feeble rallies with
such strong demand? If Goldman Sachs IS such a big
buyer, whom are they buying for? I have a sickening
feeling that the manipulation of the gold market is
Unfortunately it is clearly escalating as the
manipulating crowd is pulling out all stops to crush
the gold market and its followers. The results of the
BOE auction were as follows:
25 metric tonnes (803,600 ounces) were sold at $261.20
per troy ounce. A total of 4,174,000 ounces was bid
for, which meant the auction was covered 5.2 times in
terms of the number of bids made.
This is how I analyze what just occurred in the gold
market, and it is right in line with the email that I
The Bank of England sale is one of the very last supply
shock events that officialdom and the quot;Hannibal
Lechterquot; bullion dealers can use to manipulate the gold
price lower. Ironically, their situation is actually
getting more desperate. The supply/demand deficit at
about 150 tonnes or more per month (a Veneroso
Associates calculation) is greater than the bullion
dealers ever dreamed it would be, and it now appears
that the IMF gold sale will not get through the U.S.
Congress. That is why they had to call on the British
to bomb the market -- not so much with physical gold,
but bomb the market psychologically with that
announcement. I suspect our officialdom (via the N.Y.
Fed) and the bullion dealers have been doing the rest
of the gold-selling damage in coordinated fashion.
Look at the sequence of events that just transpired.
Through our sources we heard at the beginning of last
week that the British auction was 400 percent
oversubscribed. Goldman Sachs was seen buying 265 and
270 August calls. That is well reported to the
marketplace and they know it will be. And sure enough
at the end of the week Kelvin Williams of Anglogold
confirmed our initial reports to Reuters that the
market was 400 percent oversubscribed and that one of
his counterparty banks was expected to take down the
entire 25 tonne amount. This created bullish
expectations around the world that the carnage in the
gold market might finally abate.
But when I found out that the bullion banks, led by
Chase, were offering all the gold in size to any buyer
who showed up, it become apparent they knew something
that I and most gold market participants, did not --
until I saw what was happening once more. The fix was
in again. That simple.
Look at the record. The gold market went straight down
after the Bank of England announcement on May 7. The
selling was led every day by Goldman Sachs. The specs
started to pile in again. That went on until we reached
$257-$260. The market went sideways and then drifted up
a few dollars. The rally attempts were feeble. During
this whole time the price of gold never closed more
than $2 higher on the day. Never was any gold market
excitement allowed to build.
The bullion dealers (and possibly the New York Fed)
cannot afford to let any serious excitement build, for
this is their last shot to hold the price down. So very
cleverly they allowed certain information to circulate
to build up some hopes and cause some of the shorts to
cover. That was accomplished to some degree, so now
those hopes had to be quickly dashed and thus they
bashed the market today. They have also subtly told the
market: We have another auction coming in September --
do you want to buy ahead of that one too?
Well, the world is slowly waking up to what is going on
here and our day is not as far away as you might think
on this dismal day.
quot;Reuters, July 6, London: Major gold miners seek Blair
statement on UK sales.
quot;Executives from some of the world's leading gold
miners demanded on Tuesday that British Prime Minister
Tony Blair answer rumours that UK gold sales were timed
to help out speculative short sellers in the market.
quot;The letter arrived as Britain sold 25 tonnes of gold,
the start of a programme intended to cut reserves from
715 tonnes to 300 tonnes during the next few years.
quot;Chairman and chief executives at Canada's Placer Dome,
U.S. miners Newmont Gold and Homestake Mining, South
Africans Anglogold and Gold Fields, and Ghana's Ashanti
Goldfields sought Blair's response to rumours that
reserve sales were to bale out firms running short
positions in gold.
quot;The letter, a copy of which was faxed to Reuters,
quoted parliamentary remarks made by British opposition
MPs on June 16 suggesting Britain's announcement of
reserve sales had been to 'save the bacon of those
firms running short positions.'
quot;'We believe it would be helpful for you to make a
public denial of these rumours or investigate them
publicly,' said the letter, signed on behalf of all the
companies by Placer Dome President and CEO John
Now where have you heard that sort of commentary
before? If that letter by many of the leading gold
companies in the world does not have GATA's stamp all
over it, nothing ever would.
I also suggest that the cartel of shorts has overplayed
its hand -- such as the cries of the IMF and the
Clinton administration for congressional approval of
the sale of IMF gold to help the poor. Today South
African President Thabo Mbeki hit out at the Bank of
England's decision to sell gold reserves, saying its
negative impact on prices threatened the country's
embattled mines, which employ around 300,000 people.
Maybe Treasury Secretary Summers will suggest to the
Black Caucus in Congress to ignore Mbeki and this
Reuters story today:
quot;The Johannesburg Stock Exchange said on Tuesday it had
suspended East Rand Proprietary Mines Ltd shares at the
request of the directors. The struggling gold miner is
to apply for liquidation in the face of falling
earnings due to a depressed gold price.
quot;ERPM managing director Ivan Vidulic said the mine was
forced to apply for liquidation after the government,
its largest shareholder, refused to give it 18 million
rand in bridging finance.
quot;Closure of the mine, which funded the British war
effort in the Second World War, would cost 5,000 jobs,
a prospect that has angered the country's powerful
National Union of Mineworkers.quot;
And finally from South Africa: quot;Finance Minister Trevor
Manuel said this sale and others endangered jobs and
investment in South Africa and other African gold
producers like Tanzania, Ghana, Mali, Burkino Faso, and
Zimbabwe. Manuel blasted the IMF gold sale proposal.
'It doesn't make sense to tell countries we will weaken
your economies and then give you a little debt relief,'
Presidential hopeful Al Gore, take note.
Kelvin Williams of Anglogold echoed the negative
sentiment about the Bank of England sale, saying it was
naive and would contribute to the collapse of several
marginal South African mines. quot;The Bank of England has
chosen what we believe is a remarkably inappropriate
method. The trouble with announcing a public auction in
advance in a non-transparent market is that it gives
speculators an opportunity to sell in advance of the
sale.quot; Williams went on to say that short sellers had
moved into the market and are now heavily short. Then
he suggested that the BOE gold sales be reconsidered.
The World Gold Council did not pull any punches either.
According to a Dow Jones release today, the council
said the first Bank of England gold sale was a disaster
for the gold market and for all gold-producing
quot;At this price the people of Britain are being short-
changed by the chancellor (of the exchequer, Gordon
Brown) by a staggering GBP 450 million ($600 million),quot;
the World Gold Council said. And in one of the great
gold market quotes of all time, quot;This is the economics
of the madhousequot;
The World Gold Council went on to say that any interest
earned over the next two years would be dwarfed by the
scale of the losses already incurred on the value of
gold in the reserves.
This is stunning, right-on commentary by those in the
gold industry who are being devastated by the obvious
orchestration of lower gold prices. But lo and behold,
look who comes all bright and cheery today about how
all is wonderful in the gold market: the quot;Hannibal
Lechterquot; bullion dealer crowd in all their deceitful,
From Kevin Crisp, head of precious metal strategy at
J.P. Morgan, bullion dealer and Counterparty Risk
Management Group leader, on the auction price: quot;It's
toward the upper end of most people's expectations. The
allotment price is pretty much where the market has
been trading, or maybe slightly under, so no nasty
surprises.... The auction has gone pretty smoothly, it
shows the bank can sell gold in a reasonable fashion in
fairly large tranches and get pretty close to the
marketplace. Five times the cover ratio is an
encouraging first auction.quot;
From Charles Von Arentschildt, chief bullion trader at
Deutsche Bank in New York: quot;The price right before the
auction was $262 an ounce. Eighty cents for 800,000
ounces of gold is a small price to pay. I think it
shows the tremendous depth and liquidity in the market.
I think the auction went very well.quot;'
So the only two positive comments all day came from the
leaders of the cartel that is driving down the price of
gold and making a fortune off their gold loans. How
obvious can it get about what has been going on here?
It is ludicrous how transparent this collusion crowd
really is, and just maybe they have gone too far. After
all, many of their biggest gold-producing clients are
now calling for an investigation into what and who may
have been behind the Bank of England's sales. Deutsche
Bank, J.P. Morgan -- perhaps it is time you call up
Goldman Sachs and schedule a get together. The world is
wising up to what you and certain officialdoms are up
Potpourri and the Gold Shares
The XAU was hit hard today, closing at 62.95, down
4.12, but it is well above its major support at 60 and
still represents a significant diversion from the
I was informed today about a Bank of Nova Scotia
conference call today about the Bank of England sale,
so I called up just to listen in and introduced myself.
The operator asked, quot;Is that GATA?quot; I responded, quot;Yes.quot;
quot;One moment please.quot; Then she came back and informed me
that the operators were told that under no
circumstances would I or any representative of GATA be
allowed to have access to the call.
Needless to say, this bank is a bullion dealer.
Here is a good one: Kim Rose, the owner of Eclipse
Jewelers, is taking Britain to court over the BOE gold
sales, saying it would cost jobs and devalue gold. Ross
has vowed to file an injunction against the government
within the next few days. quot;These sales could have
catastrophic effects on the jewelry market,quot; Ross said.
quot;To the average man on the street, gold is a tangible
According to a Reuters report, Rose said Britain's
Independence Party would fund legal costs for the
injunction. quot;I have the full support of the
Independence Party. They will finance it and are behind
me,quot; Rose said.
The lease rates inverted today. Someone wants to borrow
gold very badly to dump into the market. Hmmmm. The
one-month rate flew to 2.28 percent, up 60 basis
points, while the six-month traded at 1.99 percent,
which was almost flat. This would indicate to some
degree that it was not producers that were doing the
Hearings were recently held in Congress to review the
nomination for sssistant secretary of the treasury for
financial markets. His name: Lewis Andre Sachs. How
The wrapup here is the good stuff and, in all
sincerity, very bullish news for the intermediate term.
The letter the gold companies sent today is a big deal
for GATA and will be a big deal for the gold market. It
is not an idle letter. I will explain now. Had I done
so before, we would have been thrown too much in the
nutcase camp and our revealing certain privileged
information might have mucked up the works.
First, GATA has operatives that have accessed the
British government at the highest levels. You are
already aware of our connections that primed Sir Peter
Tapsell, a member of the oppposition Tory Party in
Parliament. His presentation in defense of gold before
the House of Commons has been read all over the world.
It was easy for Tony Blair and the Labour Party to call
it a partisan maneuver. Regardless, it was very
But the big news that we can now tell you now is
information from another GATA operative: The discovery
of the gold short position on the books of Goldman
Sachs was made by a member of Tony Blair's own Labour
Party. In addition, I was told months ago by a third
GATA operative that one of the major gold producers
quot;knows much of what GATA knowsquot; and intends to do
something about it. Thus it is no surprise to GATA that
the gold producers have sent Blair this letter.
The producers that wrote the letter today have some
juicy goods in their back pocket and inside knowledge
that Blair cannot just slough this off. A member of his
own political party has the goods on the colluding
bullion dealer shorts and, for reasons we cannot
disclose at this time, believes that something must be
done about it.
There may be some posturing here or there, but the
producers have the goods on the shorts and they are
quot;mad as hellquot; and quot;not going to take it anymore.quot; The
gauntlet has been thrown down in front of the bullion
dealers and unless Blair does something about the gold
problem, he could face a political scandal.
So take heart on this brutal day. The beginning of the
end for the bullion dealers and certain politicians is
not that far off. The letter to Blair by the gold
producers is a significant event. An incredible move up
in the gold market is coming and our patience in
putting up with this rigged market will pay off in a
very big way.
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