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Midas commentary for March 17, 2000
1p EST Sunday, March 19, 2000
Dear Friend of GATA and Gold:
Here's the text of GATA Chairman Bill Murphy's speech
last week to the Alaska Miners Association in Fairbanks.
It's a great summary of where GATA has been and where
we're going. Please post it as seems useful.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
REMARKS TO THE ALASKA MINERS ASSOCIATION
BY BILL MURPHY, CHAIRMAN,
GOLD ANTI-TRUST ACTION COMMITTEE INC.
March 10, 2000
Before coming to Fairbanks, I found myself singing that
old Johnny Horton song, quot;North to Alaska,quot; and
fantasizing about what this part of Alaska would really
be like. So far it seems wonderful to me -- very
majestic, this part of the world, and it is, WAY up
There are a couple of reasons that I have come all this
way to tell you the Gold Anti-Trust Action Committee
story. One is that several Alaskan miners were among
the first to support GATA. The second is that there is
an American financial scandal of epic proportions that
needs to be exposed and we would like your help in
getting the word out to the people who can do something
There is not one person here who has not been affected
by this scandal, no matter what aspect of the mining
industry brings you here. If our camp's supply/demand
analysis is correct, the natural equilibrium price of
gold today is about $600 per ounce. What would the
doubling of the price of gold do for your businesses,
families, and investment portfolios?
That is right -- $600 per ounce, not $290. The coming
gold business boom will rival the Internet boom, with
one significant difference. When the tide is turned and
the truth comes out that the gold price was held down
at an artificially low price, the gold price will soar.
But unlike many of the Internet companies, which
eventually will go bust, there will come a gold
industry boom that will last a very long time and
substantially benefit all of you here.
This, then, begs the question: Why is gold not $600
The Gold Anti-Trust Action Committee strongly believes
that the gold market has been manipulated the past
couple of years, at minimum, by certain bullion banks,
mostly headquartered in New York, and a certain facet
of U.S. officialdom.
We believe there has been a conspiracy to hold down the
price of gold at around the $290 price level, the
yearly closing price of the past three years. In the
past I shied away from the word quot;conspiracy,quot;
preferring the word quot;manipulation.quot; But the more our
camp gets into what has occurred, the more appropriate
it is to use the quot;conspiracyquot; word -- since it best
defines orchestrated collusion and the confined state
of the gold market.
The motive for the orchestration of a low gold price
was simple: money. The quot;in the knowquot; crowd borrowed
gold at 1 percent gold lease rates and invested the
funds in all kinds of investments, thereby making a
fortune. The culprits may include a United States
Treasury Department operation that used the Exchange
Stabilization Fund. They may have been writing calls on
the U.S gold reserves or using derivatives to sell
More on that later.
Much has been said about the Gold Anti-Trust Action
Committee, but unfortunately most if it has been sound
bite analysis. So today I thought I would try to set
the record straight by explaining how we got started,
what we are trying to accomplish, and what it can mean
to everyone here.
About a year and a half ago the gold market looked to
me like it was poised for one of the big moves of all
time. Demand was strong and it appeared that the supply
plagues of the past couple of years were subsiding. Any
pre-European Monetary Union selling by European Central
Banks would be over by the end of they year; the Asian
crisis and the scrap supply shock were behind us; and
it appeared that producer forward selling should be
greatly slowed because of the low gold price. That left
only leased gold as a major supply concern.
At the time I thought this might be a plus, since Long-
Term Capital Management was blowing up. Over that
summer we had heard that LTCM was short some 300 tonnes
of borrowed gold as part of a quot;carry trade.quot; The gold
price started to rally toward $300 and we licked our
chops as we prepared for LTCM to buy back its position.
Then the word spread that LTCM had been let out of this
position in an quot;off-market transactionquot; -- a rigged
trade that prevented the price of gold from shooting
The fall went on, and every time it looked as if the
price of gold would take off, the same crowd of bullion
banks would knock it down. The gold market manipulators
took no chances of losing control of this rigged market
and money-making bonanza. Their line of defense points
were first right above $300, ratcheted down to $296, and
then came to $290. We then heard this cartel was offering
unheard-of relaxed credit terms to producers if they
would just sell forward. At the same time, we twice
received feedback from very reliable sources that U.S.
officialdom asked Asian officials to refrain from
any aggressive gold purchases.
After all this, the Counterparty Risk Management Group,
led by Goldman Sachs and J.P. Morgan was formed to manage
risks in the financial sector along with the likes of
scandal-ridden Credit Suisse. How long do you think it
would stand if Chrysler, GM, and Ford got together to do
the same thing in the automobile industry?
There was much more and I wrote an essay called
quot;Scandale Gold.quot; Chris Powell, managing editor of a
daily newspaper in Connecticut and one of my web site
members, said it looked to him like there be might be
violations of the Sherman and Clayton Anti-Trust Acts
here, and that we should do something about it. That is
how GATA came into being.
We put out a press release and then I was on CNBC.
Coincidentally, Merrill Davidoff, a senior partner of
Berger amp; Montague of Philadelphia, one of the most
prestigious law firms in the United States, had just
signed up at my financial website. I found out who he
was and we met with him in Philadelphia. Berger and
Montague was plaintiff's counsel in such powerhouse
cases as the Michael Milken/Drexel Burnham case, the
Exxon/Valdez case -- which many of you can appreciate
here in Alaska -- and MANY others. What a dream law
firm for us!
While Berger amp; Montague would work on some sort of
contingency basis, we were to conduct an investigation
at first -- not a lawsuit -- so a reasonable retainer
for a firm of their stature would have to be secured.
The clarion call went out for support from people all
over the world just like yourselves. Many gold
company shareholders and a few mining companies
quietly gave us the funds to retain this dream law firm.
We then needed a plan to seize the day.
Perhaps I had had too much idle time in past years and
watched too many movies, but after seeing the TV serial
about the great South African Zulu chieftan, Shaka, I
decided to fashion our battle plan after his. To
vanquish his foes, Shaka put his troops into a diamond-
shaped formation that became an enveloping horn. We
would do the same.
At the front of the diamond was our retention of Berger
amp; Montague. That firm is so highly regarded that our
adversaries would know we were for real. So would our
supporters. Those who might have information about
manipulation of the gold market might more easily come
forth and speak confidentially with our attorneys. As
our attorneys told us: quot;This is a just case about
price-fixing. It goes on all the time.quot;
Thus we would confront the colluders head-on with GATA
legal power when appropriate.
While proceeding with our investigation, we called on
our left flank to flare out to encircle those who have
no regard for the free market. The left flank assault
has been a publicity campaign that has targeted the
U.S. Congress and the press. We alerted them as to the
size of the total gold loans and to the danger they
presented to the financial system. We told them that we
believed that the economist Frank Veneroso was correct
about the gold loans -- that they are greater than
10,000 tonnes, which is more than double the figure
commonly accepted. Since mine production of gold in
1999 was only 2,559 tonnes, we told all who would
listen, the gold loans had become too big to pay back
in a short time. They had now become a problem of
quot;systemic risk,quot; and if not reduced soon could cause
another savings and loan type of financial crisis.
I went to Washington last April and met with U.S. Rep.
Jim Saxton, chairman of the Joint Economic Committee,
his staff director, and their senior macro-economic
adviser. I also met with the senior counsel of the
House Banking and Financial Services Committee and the
staff director of the Capital Markets Subcommittee.
Whether it was a result of GATA's effort or not, Saxton
issued a strong statement against the IMF gold sales
the day after my visit. I also became well aware of the
growing congressional opposition to the proposed IMF
gold sale and told my web site members that Congress
would never approve it.
Since that initial trip to Washington, GATA has
delivered extensive documentation of our findings to
the Senate Banking Committee, chaired by Sen. Phil
Gramm. The committee has been eager to hear all GATA
has to say, and I hope to meet with Senator Gramm in
the weeks ahead. A GATA delegation is also scheduled to
meet with other congressional leaders soon.
Just two weeks after my last trip to Washington, the
gold price was beginning to surge. Gold share prices
were soaring around the world. Gold was about to take
out the orchestrated resistance at $290. But on the
afternoon of May 6 I received word that Deutsche Bank
was telling its clients the price of gold would NOT go
past $290 -- and gold was trading at $289 at the time. I
put that up in BOLD on my website,
The very next day, May 7, Britain announced its new
gold sale policy. The Bank of England was the first
central bank in more than 20 years to announce a gold
sale in advance. The bank knew this announcement would
devastate the market and send gold prices crashing --
and, of course, it did. The gold price went straight
down more than $30 per ounce. This assured the people
of Britain the worst price possible and cost the
country many millions. In Abbot and Costello quot;who's on
first?quot; comedic style, no one in the British government
would own up to making this mysterious decision, which
devastated poor African countries and gold companies
alike. But it pleases me to tell you that just this
week it was announced that the National Accounting
Office in England has launched an official
investigation into this woeful event.
Then on Sept. 25 15 European central banks announced
they were going to curtail their selling and lending of
gold for the next five years.
The gold price exploded. Many bullion dealers were
caught short (in big trouble), and had to call for help
again. So on Oct. 11 we got this statement from
perennial gold bear, London gold analyst Ted Arnold:
quot;Central banks are selling gold in order to prevent a
further sharp rise in prices from causing a major
quot;Central banks, according to our sources, have acted
swiftly to prevent a repeat of an LTCM-type of crisis
by making sure that gold prices remain in a tight
range. Enough selling is done by agents of the monetary
authorities involved to cap gold.
quot;Central bank regulation of the bullion market always
seems very farfetched to most observers, but it is a
cheap option compared with the potential cost of
bailing out banks and generally injecting liquidity
into an economy if there were a full-blown crisis.quot;
Mr. Arnold, that is exactly what I told Congress was
going to happen as a result of your crowd's
manipulation of the gold market and even YOU admitted
the bullion dealers needed the central banks to bail
them out of their collusive mess. What an outrage! And
that was with gold at $325. How about $425 or $525?
Soon after came these events:
* An unprecedented announcement by Kuwait that it had
deposited 79 tonnes of gold reserves with the Bank of
England for investment on world markets. (That meant
gold supply lent into the physical market.)
* An announcement by the Federal Reserve Bank of South
Africa that it had lent 7 percent of its gold reserves.
(That also meant gold supply hitting the market.)
* Rampant rumors that Peter Fisher of the New York
Federal Reserve Bank was active in calming down the gold
market via a trading account at Goldman Sachs, the New
York investment house..
Getting right to the point, all GATA's investigative
roads lead to Goldman Sachs.
The orchestration of the announcements by various
countries and the actions of the bullion dealers are
blatant. It could not be more clear that the gold
market has been and is being manipulated. The price
of oil triples, other commodity indexes make new highs,
and the stock market sets back on inflation concerns,
but the gold price goes nowhere.
I am here in behalf of GATA to let you know we are
making progress in bringing this to the attention to
those who can do something about this outrage.
Our right flank has been unleashed and progress is
being made there too. The plan was to go to the gold
companies via the press and letters to their CEOs and
ask them to speak up for their industry, to take some
action, to cover forward sales, to get behind us, etc.
However, we realize the producers have a big dilemma.
He's called quot;Hannibal Lechter.quot; Some of you may
remember Anthony Hopkins, the psychopath character in
the movie quot;Silence of the Lambs.quot;
GATA realized that the bullion bankers were eating the
lunch of the producers. The bankers were flooding the
market with gold supply via 1 percent gold loans, known
as the quot;gold carry trade,quot; saturating the media with
bearish propaganda, which tends to feed on itself, and
scaring the producers half to death, pleading with them
to sell forward, even at very low gold prices.
The producers were quot;silenced like lambs.quot;
Why? Because Hannibal is the credit lifeline of the
producers, their banker. The gold producer privately
loathes what is going on, but fearing to alienate
Hannibal does little or nothing about it. That silence
has contributed to the slaughter that has affected so
many of us here today.
Meanwhile the Hannibal Cannibals made fat fees and
fortunes by investing their virtually interest-free
gold loans in other vehicles. How would you like it if
your papa came to you today and said, quot;Son, go borrow
what you want at practically no risk, practically no
interest cost, and invest it.quot; How well do you think
you could do? If you had some bad debts that had to be
repaid, would that sort of proposal help you get back
on your feet?
quot;But Dad,quot; you might say, quot;such a deal! How can this
quot;Oh, don't worry, Son. We'll make sure the gold price
does not go up for some time. You won't have to worry
about paying back the gold loan with a higher gold
price. Only some poor gold-producing countries, gold
producers, gold miners, and gold shareholders will
suffer and they don't matter.quot;
Alan Greenspan's TWICE made the following comment first
on July 24, 1998, before the House Banking Committee,
and then on July 30, 1998, before the Senate
Agricultural Committee: quot;Central banks stand ready to
lease gold in increasing quantities should the price
rise.quot; This set the recent stage for this big-money
game and for the manipulation of the gold price.
The irony is that this scheme could blow up in their
faces at any time, as it almost did late last
September. The shorts panicked as the spot gold price
rocketed $84 an ounce before it was capped at $336.
Frank Veneroso thinks the supply/demand deficit runs as
high as 1,500-2,000 tonnes this year and that this is
making it harder and harder hold the gold price down.
Gold supply has to come from somewhere to meet that
deficit and keep the gold price from rising.
GATA is not alone in its manipulation charges.
quot;Adelaide, Oct. 27 (Reuters) -- Australia's biggest gold
producer, Normandy Mining Ltd., on Wednesday said
manipulation of the gold market by banks was causing
bullion prices to fall.... `I think you'll find this is
banks manipulating the price, because of the financial
trouble two gold companies are in,' Normandy executive
Robert Champion de Crespigny told reporters.quot;
We know that the Normany executive was referring to
gold producers Ashanti and Cambior, which overhedged
their mineable reserves as a result of ill-conceived
advice from the likes of Goldman Sachs and other
Gold producers may not agree with all of what GATA has
to say, but some of the most well-known and most
respected are quietly giving us financial support
because we have been effective
GATA's right flank has made great progress.
In that regard all of us can do SOMETHING to help.
On Oct. 17 at exactly 7:50 a.m. GATA launched a
surprise Sunday morning quot;Tora! Tora! Tora!quot; right flank
quot;fax attackquot; on most of the world's leading gold
companies, whose executives were attending the Denver
Gold Group conference in Colorado. GATA urged gold
company shareholders to fax the hedged gold companies
attending the conference and urge them to start taking
in their forward sales. I went to Denver and found gold
company executives muttering to themselves about the
faxes they had received.
In response to our request, the renowned novelist
Arthur Hailey, who wrote such popular books as quot;Airport,quot;
quot;Hotel,quot; and dozens more, faxed Barrick Gold a letter
announcing that he had sold his Barrick stock because of
the company's excessive hedging. Hailey also wrote a
letter to Gold Fields Ltd. Chairman Chris Thompson,
commending his company's buying gold at the Bank of
England gold auction and for announcing the the company
had covered its hedges.
The foreign press wrote it up.
Over the past six months Barrick Gold's stock has
seriously underperformed in an environment in which
this heavily hedged company should have outperformed.
Barrick CEO Randall Oliphant has blamed the quot;conspiracy
crowdquot; for his company's poor share performance -- and
he did so at the podium in front of a New York City
Yes, it very much pleases me to tell you that GATA is
making significant progress, and our quot;enveloping hornquot;
is actually closing in on the manipulation crowd. Some
* Many gold producers, such as Placer Dome and
Anglogold, have announced that they are delivering into
their hedge positions rather than rolling them over.
That will reduce gold supply hitting the gold market
* The international press is paying attention to what
we have to say:
On Feb. 12 the acclaimed Financial Times journalist,
Barry Riley, wrote: quot;The gold manipulation might well
have started out as a minor smoothing operation that got
out of control.quot;
From the February issue of the Economist: quot;Until
recently it has been easy to dismissquot; gold bugs quot;as
flat-earthers, clinging to outdated ideas. Now,
however, it is harder to explain why the gold price
remains so low.quot;
The Wall Street Journal last week actually mentioned
that the Gold Anti-Trust Action Committee is urging
Congress to investigate the gold market.
* On March 29 I will be a guest speaker at the
Committee for Monetary Research and Education's spring
dinner Meeting in New York. Also speaking at that
dinner are Owen F. Humpage of the Federal Reserve Bank
of Cleveland and former U.S. Rep. Henry J. Reuss, former
chairman of the House Banking Committee. I have been
invited to attend the prestigious Financial Times Gold
Conference in Paris. Now that may not seem like such a
big deal, but this is progress. Just a few months ago I
was banned from attending the Denver Gold Group
* But of most importance is that GATA has the attention
of Congress. On Dec. 9 we placed in the Washington
publication Roll Call a two-page advertisement with an
open letter to Fed Chairman Greenspan and Treasury
Secretary Lawrence Summers. We requested that both
gentlemen answer 11 specific questions about gold
market activity by the Fed and the Treasury.
So far only Greenspan has responded to those questions,
after they were put to him by Sen. Joseph I. Lieberman,
D-Connecticut, who made the request in GATA's behalf.
Senator Lieberman told us that the Treasury had
promised to respond as well by Feb. 22 but we have not
yet received any response from the Treasury.
According to the Treasury itself, many other
congressmen have been requesting answers to GATA's
When the GATA delegation visits Washington we will
formally request a full congressional inquiry into the
gold market manipulation, which we believe has greatly
benefited a number of New York financial institutions
at the expense of so many unsuspecting people.
We will tell Congress we are upset because we have
invested in a game that was rigged against us. In
hindsight, we never had a chance. In the meantime, the
quot;in the knowquot; crowd was borrowing gold at 1 percent
lease rates and investing those funds in all kinds of
investments, thereby making a fortune.
I am a former professional athlete (starting wide
receiver with the Boston Patriots in 1968) and thus I
am used to being banged around by some pretty big
characters. I did not mind that because I knew what I
was getting into and knew I was playing on a level
playing field. The refs were not fixing the game.
The gold market has been rigged in a clandestine manner
for some time now. If this was the athletic arena, the
cry quot;foulquot; would be greater than that of the Chicago
Black Sox scandal of baseball World Series lore.
Yes, we are mad as hell and we are not going to take it
I do not think it will sit well if Americans find out
that the New York investment banking crowd became
richer -- in violation of U.S law -- at the expense of
unsuspecting others. It will be even worse a scandal if
they had the blessing of the U.S. Treasury or New York
Federal Reserve Bank have put U.S. gold reserves
in jeopardy. Does not the U.S government preach the
importance of free markets and government neutrality
in markets to the rest of the world?
My fellow Americans up here in Alaska, what has
transpired in the gold financial arena has greater
significance than the gold market itself, and that is
what we will tell Congress. When I approached Absolut
Vodka artist Alain Despert about doing a GATA
painting, I gave him the background of what was going
on. In his natural brilliance it was he who came up
with the idea of depicting GATA shining light on a dark
situation, the idea of the people taking on the big-
money New York banks and a facet of the U.S.
government, and of a Don Quixote-like effort to right
an unrightable wrong and to beat an unbeatable foe.
That is our quest, Alaskans. For G-A-T-A is how America
G-A-T-A: It stands for Going Against The Authorities,
when they are wrong.
America became America because the colonists fought for
what was right. They took on the establishment, risking
their lives to fight tyranny and taxation without
Is that not so?
Well, what this collusion crowd has done to all of us
in the gold industry is not all that much different, and,
funny enough, the British are involved once again.
But just as in 1776, the British and their allies will
lose one more time. The voice of the aggrieved people,
those of us who believe in free markets, will be heard.
The Internet is making all this possible. GATA has
support all over the world now as our message is
resounding via this omnipresent medium.
The gold price spikes up in September and January can
be likened to minor eruptions of a dormant volcano that
is becoming active. These recent gold price spikes were
just warnings of what is to come. It is clear that
the shorts are now very desperate to contain a full-blown
The Gold Anti-Trust Action Committee is making great
strides in exposing the despicable scandal of the
manipulation of the gold market. The enveloping horn is
relentlessly surging forward and is already closing in
on quot;Hannibal Lecter,quot; the quot;Hannibal Cannibals,quot; and the
guilty U.S. officials. It is only a matter of time now
before the big gold shorts are going to have to cover a
big percentage of those shorts and retreat out of the
back end of that horn. The price of gold will rise
dramatically and then all of us here will be the ones
with the happy grins. And maybe then we will all have a
different perspective towards those who tilt at