You are here

ESF data match scheme to suppress price of gold

Section: Daily Dispatches

Copyright 2000 /
Not to be reproduced without the author's permission




Spot gold $279.80 down 10 cents
Spot silver $5.08 down 1 cent


Comatose. Not much to say except another outside day to
the upside went for nought in this dull, manipulated
affair. At the moment, mission accomplished by the
goon squad, as reflected in the action of the gold
shares and XAU (56.11, down 1.06), the collusion crowd
has managed to put gold off the investment radar scene.

The positives are that the trading volume is very low
and the world is bearish. That is healthy for short-
term price prospects. Several bullion dealers also tell
the Cafe that they have massive orders to buy physical
gold right below the market and right above $275.


Canada sold 70,000 ounces of gold in March, leaving it
with only 1.5 million in gold holdings.

While Canada sells, Russia buys, as its gold reserves
rose $400 million the week of March 31. Central Bank
Chairman Victor Gerashchenko told the State Duma that
the International Monetary Fund told him not to expect
more funds than Russia owes creditors, and that meant
quot;they mean we must live by our own means.quot; quot;That is why
the accumulation of gold and hard currency reserves is
an important principle of our monetary policy.quot;

Bloomberg News has ceased to deliver the weekly gold
market commentary put out by the World Gold Council,
which it carried for years. A Cafe member called up the
Bloomberg editor, who told him there was no interest
for it anymore. My experience is that Bloomberg has
been blase toward reporting any bullish gold news and
to this day refuses to acknowledge GATA's existence.

My friend Rich Hughes, whom I met at the Alaska Miners
Association Convention in Fairbanks, Alaska, sent me
local news I found of interest. Gold miners have it
tough enough with the U.S. Treasury Department's
Exchange Stabilization Fund assisting in holding down
the price of gold. Then the miners have to put up with
quot;greenquot; propaganda:

* * *


Fairbanks, Alaska

The Mineral Policy Center, Project Underground, and the
Western Organization of Resource Councils announce
today the publication of quot;Gold, At What Price? The Need
for a Public Debate on National Gold Reserves.quot; This
report -- jointly produced by the three organizations
-- examines the issues behind industrialized
government's maintaining huge gold reserves, and the
declining value of gold since 1971, when the
International Monetary Fund prohibited its member
countries from using the gold standard. It presents
compelling evidence that selling significant portions
of these reserves could result in a huge financial
payoff to taxpayers and help prevent environmental

By holding gold reserves -- thus keeping a vast
oversupply of the metal off the market -- governments
promote the extraction of new gold and the
environmental damage caused by large-scale gold mining.
The United States is the largest holder of gold
reserves (8,600 tons) and is the world's second largest
gold producer. Yet although gold production in the
United States skyrocketed in the 1990s, the price of
gold has plummeted since the early 1980s. Because of
this depreciation, the value of the gold reserves held
by the United States has declined from $215 billion to
$73 billion since 1980 -- a loss of more than $100
billion. At the same time, U.S. taxpayers continue to
subsidize the gold mining industry through the giveaway
of billions of dollars of gold ore and public lands.
And increasingly it is U.S. taxpayers who pay millions
of dollars in federal and state-financed cleanups of
mining disasters or abandoned mines.

Fairbanks is the site of the state's first large bulk-
tonnage modern gold mine -- the Fort Knox -- owned by
Kinross Gold Corp. Already under way as a mammoth open-
pit operation, Kinross is now proposing to convert its
mill to a regional mill, where it will process gold ore
from other satellite open-pit mines and dump the
resulting tailings in its tailings impoundment. On
March 28, 2000, Kinross released its project
description and reclamation plan for the first of these
satellite open pit mines -- located on its True North

The drive behind this expansion is Kinross' corporate
goal to boost gold production at the Fort Knox mill to
an annual rate of 500,000 ounces. Although company
officials promote this as a way to extend the life of
the Fort Knox mine, in actuality the satellite mines --
because they will operate concurrently with the Fort
Knox mining operation -- contribute nothing to
extending the mine life. They do, however, contribute
to the already massive amounts of gold annually
produced by the United States, amounts of a metal that
is rapidly losing its stature as a precious metal.

quot;In light of the decreasing value of gold and the
oversupply of gold that will flood the market as
government reserves are sold, we really have to
question why our community has to be put at risk so
that Kinross can produce even more gold,quot; says Mara
Bacsujlaky, director of Neighborhood Mine Watch. quot;We
need, as a community, to re-examine what the mining
industry is telling us about this metal, and to re-
evaluate the long-term impact this type of mining
brings to our communities.quot;

* * *

The natural gold supply/demand deficit is already 1,500
to 2,000 tonnes per year right now. If the greens had
their way, it would be 3,000 tonnes, as mine supply would
dwindle away due to mine closures. That would ensure a
gold price move to about $5,000 per ounce, not $600.
Internet-dot-com greed would pale to the most incredible
gold rush the world has ever seen. Better there be a
gradual move up so that the caribou herds and other
animals won't be in such big trouble as a result of
people stampeding to that beautiful part of the United
States. The environmentalists should be encouraging
gold mining to increase gold supply to meet the
deficit, not calling for a reduction. They know not
what they say and do. The expression quot;Be careful what
you wish for -- you might get itquot; comes to mind.

Not all the recent publicity has been negative. Frank
Veneroso will be the lead speaker at the highly
attended Australian Gold Conference in Kalgoorlie. The
following headline was featured last Friday in the
Mining and Business section of the Kalgoorlie Golden

quot;Gold conspiracy theory on Internet, by John Bowler.quot;

I will send this article tomorrow in an attempt to stir
up attendees at the conference to go to the gold
producers and stir up support for GATA and to listen to

Potpourri and the Gold Shares

The Plunge Protection Team wins again for the short
term. CNN surveyed the public Wednesday about their
strategies regarding the stock market, and 75 percent
said quot;buy the dipquot; was the way to go.

Something is not right in U.S. financial land. Bond
yields collapsed again today breaking 5.70 percent at
one point. The credit spreads are the widest since the
financial crisis of late summer 1998. The bank index,
after a big rally, now has broken its 200-day moving
average to the downside again, while bonds are on a
speedy rally. The pundits say Fed Chairman Alan
Greenspan is going to raise interest rates. All this
does not fit unless there is serious financial stress
beneath the surface. Maybe that is what the stock
market break was telling us this past Tuesday.

Consolidation in the gold industry: We are seeing more
and more of it and I am hearing that more is coming.

* * *


Ashanti Goldfields Co. Ltd. and AngloGold Ltd. are
pleased to announce that they have signed a non-binding
Heads of Agreement for the sale by Ashanti to AngloGold
of an effective 50 percent joint venture interest in
the Geita project in Tanzania.

AngloGold will pay Ashanti US$205 million in cash for a
50 percent share of the project and will procure or
provide project financing to the Geita project totaling
US$130 million. Ashanti and AngloGold will each be
responsible for repayment of 50 percent of this project
financing from their respective shares of project

* * *

The Ghana government and Ashanti shareholders can thank
Goldman Sachs, in part, for the loss of half of this
valuable asset. Goldman Sachs was lead adviser to
Ashanti regarding their hedging policies. That advice
took Ashanti to the brink of bankruptcy, and Goldman
Sachs was criticized from many quarters for its role in
the matter.

Recently Goldman Sachs downgraded the gold producers,
but lo and behold, they just upgraded Ashanti. I wonder
why. Could it just be because their butt is on the hook
on this one?

As part of the consolidation process, Normandy Mining
took over Great Central Mines of Australia (see below)
and was immediately downgraded:

* * *

MELBOURNE (Standard amp; Poor's CreditWire) April 6 --
Standard amp; Poor's today affirmed its triple-B-minus
corporate credit rating on Normandy Mining Ltd. The
outlook remains negative. At the same time the double-B
corporate credit rating on Great Central Mines Ltd. is
placed on CreditWatch with positive implications.

The CreditWatch placement of GCM follows the
announcement by Normandy that it has acquired the
remaining 42 percent of shares in GCM for a net cash
outlay of A$21 million.

* * *

Then this from AngloGold chief Bobby Godsell in a
Bridge News wire story from Sydney:

quot;South African gold producer Anglogold Ltd. is
'carefully taking note' of restructuring efforts
announced by Australia's Normandy Mining Ltd.,
Anglogold chief executive officer Bobby Godsell said
Thursday. Asked whether Anglogold was eying Normandy
for a takeover, Godsell said any major company would be
seriously considered.

quot;He went on to say:

quot;'Can we create a Microsoft in and for the gold
industry? Let me remind you that Microsoft, at least
before Tuesday, was trading somewhere around US$450 or
$500 billion market capitalization. So when we talk
about size, without US$10 billion, it's quite hard to
go get on a medium-size fund manager's screen. You just
don't feature,' he said.quot;

For your future reference from a Cafe member:

quot;I thought you would find this interesting. On all of
the major drops in the market since 1997, I usually
talk to the Charles Schwab brokers about the activity
on the market. They tell me that every time there is a
major drop, the following happens:

quot;First, any buy order is immediately sent through.
Second, sell orders are delayed. During the day the
sell orders are delayed between 30 minutes to an hour.
Also, during the last hour of trading, no sell orders
are processed.

quot;They told me they go nuts trying to explain to people
why their sales don't go through. And the next day the
have all these sales backed up and the rules remain in
place. That is a 30-minute delay in sale orders being
processed, up to 1 hour. This happens a lot.

quot;Now if Charles Schwab does this, how many others do

From Richard Russell and his Richard's Recent Remarks
commentary of March 6:

quot;A number of subscribers have asked me about an article
written by John Crudele, the New York Post columnist.
(The article was published April 5). Crudele wrote that
near the crash bottom of April 4, both Goldman Sachs
and Merrill came in with big buy order for futures --
and those orders may have turned the market. Crudele
can't prove it, but he thinks that Goldman and Merrill
may have acted for a secret government group who are
intent on preventing market plunges. I've heard these
rumors for years that a government stabilization fund
exists for the purpose of keeping the market on an even
keel and hopefully moving it higher. Frankly, I've
always been skeptical of these stories, but now I'm
beginning to believe that they're real. The truth is
that I wouldn't put anything past the government.quot;

OK, so far so good. But then Russell says:

quot;Some people call it manipulation in the golds, but I
don't think they can manipulate all the metals. No, the
market just doesn't want gold at this time. That's the
simple explanation and, I think, the right one.quot;

Go figure. What is it that Harry Schultz of the
International Harry Schultz Letter can see so clearly
that Richard Russell cannot? It is much easier to
manipulate the gold market, in which most transactions
are conducted without transparency in the over-the-
counter market.

What is it about gold that prevents normally rational
thinking people from looking at the facts about what is
really going on?

Crudele sent GATA Secretary/Treasurer Chris Powell a
note that included these excerpts regarding this week's
miraculous stock market recovery:

quot;Get a copy of a Wall Street Journal op ed piece on
October 27, 1989, written by Robert Heller, who had
just left his job as governor of the Fed. Heller says
in this piece -- first given as a speech before the
Commonwealth Club in San Francisco -- that the Fed
should rig the stock market during dire times.

quot;Look at that first and the blueprint for this type of
operation is set.

quot;Then take a look at the Washington Post piece on
February 23, 1997, about the Plunge Protection Team.
Somebody wanted the existence of this group known. And
once you have an operation like this in place,
obviously they are going to go something when there are

quot;Lastly, find an article in the Wall Street Journal
about Peter Fisher and his job at the New York Fed.
He's the head trader and the piece naively says that
Fisher and some trader friends study the market before
each day's opening. Why? To fix trouble? Just because
he's curious?

quot;Regarding the Exchange Stabilization Fund: I too
thought this was the emergency money they used whenever
there was trouble. But traders explained things
differently to me.

quot;All the Treasury has to do is assure Merrill or
Goldman that they wouldn't lose money if they employed
their own funds in a rescue operation. This way the
government can be hands-off and use proxies to rescue
the market. that's what minds better than mine think
are going on.quot;

Two of three articles Crudele mentioned can be read in
my letter to U.S. Sen. Phil Gramm, which can be located
at the Matisse Table Library from last July 20 and at They are entitled quot;Have Fed Support Stock
Market Tooquot; by Robert Hellerquot; and quot;Long-Term Capital
Bailout Spotlights a Fed Radicalquot; by Jacob Schesinger.

While you are at it, you might note the article,
quot;Reform of Exchange Stabilization Fund Readies.quot; I
spoke with the staff director of the House Joint
Economic Committee today and have an idea for us that
might work. More on that soon.

* * *

The latest jaw report.... My dentist sent me to an oral
surgeon to determine if my jaw was fractured. He
thought it probably was, as my left cheek is so swollen
that I look like Alvin the Chipmunk and still cannot
really chew solid food. The good news is that it is not
fractured as thought. The bad news is the muscles and
joints are very badly bruised and will take six weeks
to heal.

I have a new compassion for boxers and the term quot;glass
jaw.quot; Thus, it was with great interest that I watched
an ESPN cable TV show on the great boxers yesterday. It
brought back memories. I remember eating several meals
with the great lightweight Willie Pep in Hartford,
Conn., when I worked up that way after college. Some of
you may remember another good one, welterweight Walter
Cartier, who went on to act as one of the Army platoon
members in Phil Silvers' quot;Sergeant Bilkoquot; TV show.
Walter worked for me for a few years. Great guy.

I only briefly met the captivating Mohammed Ali in
Miami Beach a few years back, but the my most memorable
boxing story (appropriately enough) had to do
indirectly with the Raging Bull, Jake La Motta.

Some of you may have seen the classic movie quot;Raging
Bullquot; starring Robert De Niro, which was about Jake La
Motta. He ended up marrying Vicki La Motta, a sassy
babe played by Kathy Moriarty in the film. It was in
the early 1980s and I was a broker for Drexel Burnham
in New York and was taking Pat Todia, my girlfriend, to
Maui on a company trip. Pat had been orphaned as a
young girl and had been raised by Vicki La Motta in
Miami. We were seated in the plane and we spotted the
guy in front of us gawking at the foldout of the
Playboy centerfold, 51-year-old Vicki. At the time it
was shocking for a woman of that age to do such a
thing. She looked great and I'll never forget that
fishnet she was wearing. Years later I met Vicki at a
boxing match at Madison Square Garden. What a mouth on

Memories on a very slow day for gold.