You are here

Bankers lost all restraint when it came to gold

Section: Daily Dispatches

Copyright 2000,
Not to be reproduced without permission


By Bill Murphy

Spot gold $270.40, down $3.10
Spot silver $4.90, down 7 cents

The CRB: 224.55 and was over 227 at one point this
morning, crude oil at $30.51 per barrel, platinum at
$547, and gold: $270.40.

For the first time ever, natural gas is priced over $4
while crude oil is over $30.

So what is going on with gold? Posted at the new
Conference Room here at the Cafe from Tm Robinson:

quot;I also subscribe to an economic forecast letter and
they have reliable sources reporting to them that it is
the New York Fed itself paying for the derivatives
being used to keep the world price of gold down long
enough to bail out their favorite hedge funds and giant

It would appear that word is finally getting around
about what is really going on in the gold market these
days. Good to know that is not only GATA highlighting
the obvious.

* * *

Gold Fields Limited Issues Cautionary Announcement

JOHANNESBURG, South Africa, May 25 /CNW/ --
Shareholders of Gold Fields Limited are advised that,
as a consequence of Gold Fields being involved in
discussions with a number of parties, the price of Gold
Fields securities may be materially affected.

Accordingly, shareholders are advised to exercise
caution when dealing in the company's securities until
a full announcement is made.

* * *

Dow Jones -- Normandy Mining Ltd. said Thursday it will
deliver a total of 450,000 ounces of gold borrowed from
bullion banks from up to five years ago, Colin Jackson,
group executive corporate told DJN.

quot;In the fourth quarter ending June 30, 450,000 ounces
of gold from the Normandy Group and the Great Central
Mines, whose books we manage, will be delivered back to
bullion banks. It won't be sold into the spot market,quot;
Jackson said.

quot;We don't anticipate new positions and no new
replacement positions,quot; Jackson said.

Normandy's hedged positions declined by 356,000 ounces
in the March quarter.

* * *

Then there is good old Barrick Gold: the arrogant high
and the mighty and part of the enemy camp. This email
was sent yesterday to a Cafe member by Barrick's
investor relations person:

quot;Subj: RE: Hedging and Counterparties
quot;Date: 5/24/00 11:08:58 AM Central Daylight Time

quot;Barrick management is not and has not sought opinion
on its hedging policy. Both senior management and the
board are completely in favor of the program as it
stands. Furthermore, it is our view that our role as
custodians of our shareholders assets is to earn a
competitive return. The combination of our low-cost
asset base and our premium gold sales program has
resulted in significantly higher returns than that of
our peers. It is a formula that has worked very
successfully in the past and will continue to guide us
in the future.

quot;Finally if you wish to own a highly levered gold
producer whose only strategy is to wish for higher gold
prices, then consider other stocks.quot;

Am I being too harsh when I throw Barrick in with the
collusion crowd? I think not. They know exactly what is
going on. They are tight with the kings of the
Hannibal Cannibals, Frank Arisman of J.P. Morgan and
Charles von Arenschilt of Deutsche Bank.

Arisman took Morgan's gold derivative book from $18
billion to $38 billion in the last six months of 1999.
Arisman speaks on hedging at Barrick's presentations to
investors and analysts.

Charlie von A. built Deutsche Bank's derivative book up
to $50 billion in only four years.

It will not surprise you that Deutsche Bank and Morgan
were the big sellers of gold today.

This just in from a very informed long-time Cafe

quot;I understand reliably that Deutsche Bank has a good
piece of Barrick business in that derivative book.quot;

One happy family: Morgan, DB, and Barrick.

No, Deutsche Bank wouldn't do anything like manipulate
the gold market. From yesterday's Financial Times:

quot;The Financial Supervisory Agency, Japan's banking
watchdog, yesterday banned Deutsche Securities from
applying for a licence for over-the-counter derivatives
trading in securities for six months as a penalty for
improper trades.

quot;This comes after the FSA cited Deutsche for three
breaches in Japanese securities law including incidents
in which the German brokers helped Japanese domestic
institutions to mask losses and fiddle the balance
sheets of the same institutions.quot;

On that note:

quot;Tokyo, May 24 (Bloomberg) -- Merrill Lynch amp; Co., the
largest U.S brokerage, said it will pay $275 million to
Sumitomo Corp. to settle a copper trading dispute.

quot;In 1996 Sumitomo, Japan's fourth-largest trading
company, disclosed it had lost $2.6 billion as a result
of unauthorized trading conducted by its then head
copper trader, Yasuo Hamanaka, who is serving an eight-
year prison term....

quot;Earlier this month, Rudolf amp; Co., one of the founding
members of the London Metal Exchange, was fined a
million pounds in connection with Hamanaka's
manipulation of copper prices. In January the LME fined
a unit of Deutsche Bank AG 1.5 million pounds for
breaching the exchange's rules of conduct in relation
to the scandal.quot;

Might Deutsche Bank be part of a gold market
manipulation? Nah.

* * *

World Gold Council says Q1 gold demand 795.2 tonnes,
flat vs '99

New York, May 22 -- The World Gold Council said Monday
that gold demand remained strong during the first
quarter of this year at 795.2 tonnes, which was similar
to the levels seen in the 1999 first quarter.

First quarter jewelry demand was 701 tonnes, up 7
percent from the year-ago period. However, gold
investment demand was 94.2 tonnes, down 29 percent from
the 1999 first quarter.

* * *

From Bridge news:

Rain slashes Australian gold production
9 percent in first quarter

Melbourne, May 21 -- About 10 to 15 times more rain
than normal drenched many Australian mines in the first
quarter of the year, making haulage roads impassable
and cutting the nation's gold production by 9 percent
from the previous quarter, the mining consulting group
Surbiton Associates said Sunday. Gold production was
69.7 tonnes, down from 76.5 tonnes in the last quarter
of 1999.quot;

* * *

Jakarta, May 24 (Reuters) -- Jakarta said on Wednesday
PR Freeport Indonesia had agreed to cut daily output at
its vast Graspberg copper and gold mine by around
30,000 tonnes (13 percent).

* * *

Demand is strong. Supply is down. Yet the gold price
sinks like a submarine. Makes sense? What a joke!

This is my take on what is going on:

My guess is that behind the scenes there is serious
concern regarding some financial market stress or event
that is about to have a bad effect on a fragile stock
market. It could be that the dollar is about to take a
sudden beating. It could be that the price of oil is
about to soar toward $40 per barrel. It could be that a
financial institution is in big trouble for some
reason. Something like that.

Whatever it is, the powers to be must be afraid of a
stock market meltdown.

Today's big market drubbing is additional confirmation
on my thinking about why gold is being trashed.

These same powers (bullion banks and the New York Fed
and the Exchange Stabilization Fund) know that a gold
derivative banking crisis could develop if the price of
gold started to move higher during a period of general
financial instability.

It is the buildup of these gold derivatives that is
keeping down the gold price. That is clear from the
data GATA has discovered. If investors were to turn to
gold in a time of financial chaos, a gold-buying panic
could quickly get out of hand.

That is coming anyway. I think they know it and are
just desperate to do what they can to hold the price
down and hope for a miracle.

They are not going to get one. One day we are going to
wake up in the United States and gold will be $50
higher. It will go up from there.

I just caught a flash on CNBC that Alan Greenspan is
telling bankers to be careful about their loans and not
be involved in too risky situations.

He should read the quot;Gold Derivative Banking Crisisquot;
report we gave to the Senate Banking Committee and the
House Banking Committee. What he is warning the bankers
about is what we are warning Congress about. Get with
the program, Alan. The biggest banking disaster of all
-- a gold derivative blowup -- is staring you in the
face. What are you going to do about it?

Then again, maybe Greenspan knows what is facing the
bullion banks concerning the excessive gold loans and
the excessive gold derivatives on their books, and is
trying to distance himself from the coming problem.

Price action makes market commentary and that price
action can affect the decisions of potential investors
in physical gold. Today's gold bashing was a clear
painting of the tape by the bullion dealer cabal. It
was so obvious. Interestingly enough, the volume was
heavy today. Somebody bought a lot of gold and it used
up a good bit of the gold cabal's ammo. Who knows,
though? maybe Deutsche Bank is shooting for $100
billion in gold derivatives on its books.

There must be much greater stress behind the scenes
than most suspect for the manipulation crowd to go to
such lengths to bury the gold market like this.

They are winning this battle, but they will lose the
war in ignominious fashion.

On a refreshing note. Cousin Danny (44), who did so
well in the recent London Marathon, sent me this today:

quot; In an effort to honor GATA, I have decided to run the
Paris Marathon on April 8, 2001.quot;