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9:30p EST Monday, February 14, 2000
Dear Friend of GATA and Gold:
Here's tonight's quot;Midasquot; commentary by GATA
Chairman Bill Murphy.
Please post this as seems useful.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
MIDAS COMMENTARY FOR FEBRUARY 14, 2000
By Bill Murphy
This past week Barrick Gold CEO Randall Oliphant and
other Barrick executives did their dog-and-pony show in
New York trying to pump up analysts and investors about
how brilliant they are. Barricks chairman, Peter Munk,
even took the time to do an interview with Janet
Whitman for Dow Jones News Service.
Barrick Gold is making the rounds for a reason. The
companys share price is stinking up the place.
From The New York Times, Feb. 13:
quot;This investor preference is seen in a comparison of
the recent performance of Newmont Mining, which is not
a hedger, and Barrick. Since the gold rally began in
August, Newmont stock is up 24.4 percent. Barrick,
which had a guaranteed price of $370 an ounce this
year, is down 1.7 percent.quot;
Cafe members know that Midas and GATA have urged
investors for eight months now to dump Barrick stock as
a protest to their EXCESSIVE hedging strategies, which
were hurting so many in the gold industry. We hoped
that Barricks stock would underperform so other big
hedgers would notice and do something about their own
hedging to prevent their stock prices from suffering
the same fate. We even hoped that Barrick would finally
get its act together and buy back its forwards.
Whether we had anything to do with what has gone on in
the gold industry about reducing forward selling is
anyone's guess. Of course we would like to think we did
make some kind of difference. What I do know is that
that the publicity generated by Cafe member and GATA
supporter Arthur Hailey (the prolific novelist who
wrote such blockbusters as quot;Hotelquot; and quot;Airportquot;) DID
cause many investors to unload Barrick shares. In fact,
we know one who sold 3 million shares. All this
occurred because Arthur responded to GATA's plea to
protest Barrick's hedging policy by faxing Barrick's
executives at the Denver Gold Conference in October. He
did just what we had hoped for by telling the company
in a letter that he had sold all his Barrick stock,
which he had held for many years. We publicized his
letter. The press was all over it.
In the spring of 1999 Barrick CEO Oliphant told a
popular New York journalist that the GATA folk were a
quot;bunch of nuts.quot; This past Thursday at a presentation
to loyal Barrick shareholders, press people, and market
analysts, Oliphant told everyone from the podium that
quot;the only problem with Barrick's stock was the
I guess he could not say quot;those nutsquot; in public.
Now I have a question for Oliphant. What exactly did
you mean by that statement? Are you suggesting that
investors have analyzed the gold market and have
concluded that GATA is right about the manipulation of
the gold market and thereby are declining to buy the
shares of your company?
Could a bunch of quot;nutsquot; really do that?
Well, maybe they can! Financial Times columnist Barry
Riley may be most widely read and respected financial
journalist in the Britain. That is what London's
Marshall Auerback tells me.
The most respected financial journalist, who writes for
the most respected financial newspaper in the world --
that is what we have here, Mr. Oliphant.
While many of you read the Financial Times article, I
want to highlight some of what Riley wrote as it
relates to Barrick Gold and the manipulation of the
From the Financial Times, London, February 12:
quot;The Long View -- The Battle Over Bullion.
quot;All the attempts over the years to downgrade gold to
the status of a routine commodity such as, say, zinc or
aluminium have failed. This week the gold price has
again looked quite frisky at above $300 an ounce. The
sector was also enlivened by Barrick's refusal to
abandon its hedging programme and by the sad plight of
Ashanti Goldfields, which is teetering on the edge of
collapse after losing a court action in Ghana....
quot;The weakness of the gold price, which tumbled from
$400 in 1996 to $250 last summer, has encouraged
elaborate conspiracy theories. Now, though, the gold
bugs are getting excited. The bullion price, they
claim, could be on the edge of a breakout; many years
of oppression by the central banks and their
collaborators might be about to end. Gold, say the
conspiracy theorists, could be about to reclaim its
leading position among precious metals. There is, after
all, plenty of action in platinum and palladium, which
have both risen in price by about two-thirds since last
quot;The gold bugs of GATA (it stands for Gold Anti-Trust
Action) have an entertaining web site where the
conspiracy theory is debated endlessly. GATA blames the
U.S. government; it has more or less accepted the
Federal Reserve's pleas of innocence but thinks the
Treasury Department has been operating heavily through
the Exchange Stabilisation Fund, aided by big bullion
traders such as Goldman Sachs....
quot;When mining companies behave more like hedge funds
than metal producers, they actually can be bankrupted
by a rising price. But, allegedly, the U.S. Treasury
then intervened on a bigger scale to limit the damage.
The bullion price hovered around $280 an ounce for
several months but recently has pushed higher again....
quot;The reasons, as always, are obscure. But some of the
mines are changing or abandoning their hedging
strategies and one or two might even collapse, while
bullion banks are running some very dangerous
positions. The market could be vulnerable to a
quot;The gold manipulation might well have started as a
minor smoothing operation that got out of control. For
central banks to lend out their gold reserves has
seemed a promising way to earn modest revenues from an
otherwise unrewarding asset. But the speculative
institutions that borrowed it realised that, if they
could drive down the bullion price, they could make
useful profits from short sales....
quot;The miners, meanwhile, decided they could protect
their profits by selling forward for future delivery at
roughly today's price -- although now they are starting
to realise that a long-term downtrend in the price
cannot possibly be in their interests, quite apart from
the dangers of an incompetently run hedge book
vulnerable to enormous margin calls if the gold price
takes an unscheduled upturn....
quot;That the U.S. Treasury apparently has helped to mess
up the gold market is perhaps not very surprising when
it has plunged even its own domestic bond market into
near-chaos. Last week Larry Summers, the treasury
secretary, effectively lowered long-term bond yields at
the same time that the Fed was raising short-term
rates. He did this by announcing he would focus buy-
back activities on the 30-year bond.quot;
Would you not say that Riley has listened to what GATA
has to say and that he tends to agree with us? His
commentary had almost a casual, factual tone.
This is a stunning development. So how can Randall
Oliphant and Barrick's PR crew go around denigrating
GATA without also denigrating this most highly regarded
of financial journalists?
Other financial journalists can now pretty much what
GATA has to say and always refer to Barry Riley as the
precedent setter. It will give them more confidence to
write about the manipulation of the gold market. I
cannot tell you how important a development this is.
Certain members of Congress and certain committees
(like Banking) are receiving copies of Rileys column
in the Financial Times. It is an eye-opener for them, I
can assure you.
In that regard, Reginald H. Howe deserves much credit,
as it is clear to me that Riley has read what Reg has
to say on the subject. Three cheers for Reg!
The quot;enveloping hornquot; juggernaut rolls on.
Oh yes, after all Barrick's rah-rah of last week, the
company's share price closed today at 17 1/2, down
Midas has been bullish on oil for a long time now,
predicting this big oil move, and now we have $30+ oil.
It is conceivable oil is headed for $40 a barrel.
So you can get the flavor of what is going on out
there. Here's oil market feedback from Cafe member Jon
quot;When the dust settles, today's close will be the
highest close for crude since January 16, 1991....
Today's buying came on the heels of reports from global
analysts who warned that worldwide crude inventories
can't drop further without risk of outages in some
quot;Texas Markets See Severe Product Outages.
quot;Several Texas markets are experiencing significant
product outages. Koch notified its marketers that as of
February 11 it would have no No. 2 oil or gasoline
available in Corpus Christi, Waco, San Antonio, Austin,
and Fort Worth at Koch terminals. The most critical of
the markets is Austin, where Koch is the only terminal
operator, meaning that all suppliers in Austin have no
product. Koch told jobbers that they would have no
product until further notice.quot;
Another headline: quot;Spot gasoline soars in Chicago.quot;
Who knows how high oil can go?
Then there is palladium. Barry Riley must know about
the Cafe's John Brimelow, who predicted this mega-move.
March palladium closed at $605.50. That is where the
price of gold is going to close when we get these
manipulators out of the way.
Methinks it is time for the gold shares to do their
thing and start a long-overdue move much, much higher.
Portfolio managers have been forced to sell gold shares
because they have not been momentum plays, etc. With
$30+ oil hitting the headlines, bells and whistles have
to be going off behind the scenes in investment board
rooms, signifying that the inflation game is changing.
So is the investment scene. My guess is that the big
money crowd is about to wake up and charge into the
gold shares any day now.
There is one more thing. As a result of Barry Riley's
column, GATA, Reg Howe, Frank Veneroso, and all of you
GATA supporters who have helped make a difference, the
investment world is going to realize that the gold
price has been held down, and as Harry Shultz says,
quot;not allowed to rise.quot; Thus too much gold has been
devoured at too cheap a price for too long. As that
becomes known and accepted by that big money crowd,
they will pile into gold and the gold shares, for they
will know that the price of gold is going to explode --
as if price controls were suddenly lifted.