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Schultz says GATA prodded central banks
11:15p EDT Monday, September 27, 1999
Dear Friend of GATA and Gold:
Here are excerpts from a long and meaty quot;Midasquot;
commentary by GATA Chairman Bill Murphy served
tonight at www.lemetropolecafe.com.
The whole commentary can be read without charge by
taking a free trial membership to the cafe. I'm grateful
to Bill for letting me share some of it with you here.
Please post this as seems useful.
CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.
* * *
By Bill quot;Midasquot; Murphy
September 27, 1999
Spot Gold $282.50 up $14.20
Spot Silver $5.34 up 10 cents
Where do we go from here? I was asked this all day
long. Day to day, that is very hard to tell. Last week
the world was bearish on gold. I told you I was looking
for a double and then a triple in the price from the
lows of last week. That is how I am approaching this
market. Like today, the big moves will come when out of
nowhere. Got to be in it to win it....
The gold market is explosive. This is a big-picture
play. It is time to invest that way. That is how I see
Veneroso Associates has nailed the significance of the
statement by the European central banks. Veneroso
Associates has a prestigious institutional clientele
but gave me permission to present its quot;Gold Watchquot;
analysis of the central banks' announcement to the
Cafe. It is right-on, in my opinion.
Gold Watch said:
quot;We believe that the large dealers have known for a
long time from their own books how large the gold
lending business in fact has become. The large funds
that are short also may have been informed. Judging
from the behavior of these funds and dealers in the
past several months, we can conclude only that these
groups have been counting on significant new lending by
the European central banks to maintain the recent large
and growing supplies of borrowed gold needed to keep
the current gold price depressed.
quot;If this is so, the cessation of future large-scale
European central bank gold lending is explosive.
quot;The panic action of large market participants before
even the European trading hours commenced would suggest
that such large market participants realize this....quot;
* * *
Reuters commentary from my favorite chairman of a gold
quot;'This means that the hedge funds that have been
looking for supply of gold from Europe have just lost
it,' said Robert Champion De Crespigny, chairman of
Normandy Mining Ltd, Australia's largest gold mining
quot;'It also means that the giant cloud that has been
hanging over gold from European sales and European
lending has just disappeared,' de Crespigny said.quot;
The good chairman may not want to talk to me, but he
talks as if he reads Midas....
There is little doubt that a big rift has developed
between some of the European banks, the Japanese, and
the U.S. Treasury, possibly including Alan Greenspan.
They made statements all summer suggesting they were
not happy with the U.S. way of doing things in the
financial arena and with what was going on in our
financial markets. With all the comments that have come
out of U.S. officials about selling IMF gold and from
what we have been reporting to you, it is certain the
United States did not want to see this announcement at
* * *
I have been saying for a couple of months now, quot;We have
the shorts right where we want them.quot; It would have
been only natural if you wondered if I had lost it. Now
I think you know why that commentary was delivered to
you several times.
* * *
How about a drum roll here! Let's have an encore and
bring in the Cafe's John Brimelow:
quot;NEW YORK, Sept. 27 (Bloomberg) -- Comment from John
Brimelow, director of international equities at Donald
amp; Co. in New York, on the outlook for gold prices after
15 European central banks agreed to limit their gold
selling and lending over the next five years.
quot;'I think we could see the price go up $100 in less
than a week. This is what happened in 1985. It turned
$45 in three or four days. The gold market shifted, and
it caught a lot of people my surprise. Just like today.
quot;It is very likely that many large lenders and
borrowers were predicating their activity on the
assumption that there would continue to be this huge
flow of European gold into the lending pool. If that is
to be contracted, the whole business of lending and
borrowing gold will have to be seriously reconsidered.
The whole game of borrowing and lending gold has become
much more dangerous.
quot;I haven't made up my mind why the European central
banks would make this announcement. The obvious answer
is that they've become convinced by petitioners that
the lending of gold at very cheap rates was, in effect,
undermining the value of one of their own assets. What
they've done is basically create a huge bubble in the
gold market by lending gold out at rates lower than 1
percent a year.
quot;Another answer may have to do with some sort of
struggle between the United States and the rest of the
world on the issue of hegemony and the dollar. The
argument runs that the Americans believe themselves to
be major economic beneficiaries of the fact that the
world uses the dollar as the reserve currency, and
therefore the other central banks have become extremely
jealous. Hence the opposition of the Americans to
proposals by the Japanese for an Asian currency zone.
This is a very deep issue that will take people a long
time to figure out. It's also possible the central
banks could just be interested in boosting the value of
* * *
All this cannot be good for the U.S stock market. For
months now I have suggested that the banking index
would tell it all. It tanked again today, down a
whopping 15.70 to finish at 737.15 -- a new low close
for this move down. That portends bad news for stock
prices. Now that the gold psychology has changed in one
week (gold will not be discarded as a monetary reserve,
etc), gold demand could skyrocket in the West as the
stock market takes its comeuppance.