8:45p EST Tuesday, February 15, 2000
Dear Friend of GATA and Gold:
Here's GATA Chairman Bill Murphy's "Midas"
commentary tonight at www.LeMetropoleCafe.com.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
MIDAS COMMENTARY FOR FEBRUARY 15, 2000
By Bill Murphy
Spot Gold $302, down $6.90
Spot Silver $5.2, down 2 cents
Late this afternoon I received word that Bloomberg has
taped a presentation given by Fed Governor Ed Gramlich
at the Business School of the University of Virginia.
After his presentation Gramlich entertained some
This is just a recap of what I was told and I hope to
get the exact wording between Gramlich and his
questioner as soon as possible. But it goes something
Gramlich was asked if the U.S. government was leasing
gold (wonder where that question came from?) and
reportedly said no. Of course that still leaves the
entire derivatives market for the government to be
Then the questioner asked about a 1998 interview in
which Gramlich said he was concerned about inflation
and that gold was an indicator he watched regarding
inflation. In an extraordinary comment, Gramlich said,
"At the moment there are funny things going on in the
gold market." From what I was told, he went on to say
that banks (not sure whether he meant central or
bullion) are going to be "adjusting their positions,"
so the gold price could be "erratic." The suggestion
(as I understand) was that if the gold shot up, it
might have nothing to do with inflation, or it might be
an indicator of future inflation as it would have been
I will get more on this, but that is what GATA has been
talking about for a year now and has said a zillion
times. The gold price can shoot up like crazy, not
because of inflation but because the banks that have
been manipulating the gold market and not allowing it
to rise decide to stop their manipulation, or, because
of outside market forces, the banks lose control of
their manipulation and collusive activity.
I also just received word that mega-bear gold analyst
Kevin Crisp of "Hannibal Cannibal" J.P. Morgan has been
let go as a result of a downsizing of Morgan's bullion
This may be of significance for several reasons. First,
word is that J.P Morgan might be turning bullish.
Second, Morgan knows that the producers are not going
to be giving the bullion dealers as much business in
the future, not with their intentions not to roll their
hedges forward and not after the Ashanti fiasco. Third,
Crisp has been their apologist, their mega-bear
foghorn. How can he change his mind quickly and be a
bull without looking like a dummy?
No problem for the Cannibal crowd. Easy solution: Give
the guy the hook. When in doubt, throw him out.
Nice group of folks, these big bank Hannibal Cannibals.
I had to go to the weight room today and pound the iron
to get the anger out of my system. By three sources
over the past two days I was told that the bullion
dealers were going to MANAGE DOWN the gold price. And
that is what they have done.
The first indication of this was from a well-known
bullion dealer commentator in London. The second was
from a bullion dealer in New York who told Cafe sources
that the dealers were orchestrating a move down to $290
and were circulating a bunch of half-baked reasons why
that would happen. The third was from a big trader with
close connections to the lovable Hannibal Lecter,
Goldman Sachs. That trader was told his Goldman Sachs
contact that Goldman was bringing the gold price down
to $295. This trader sold all his gold calls a couple
of days ago based on that news and is happy as a clam
Not that I was surprised by this move down. We know
what we are dealing with.
Not to be bummed, though. Actually, I think the
excitement about the gold market is going to erupt
soon. It just feels like it. There is too much smoke at
high levels about the "funny things going on in the
gold market." The questions and discourse about the
manipulation of the gold market are clearly headed for
As I said last night, word is out, courtesy of GATA,
that the gold market has been kept at an artificially
low price. That is a form of price control. When the
manipulation ends, the price of gold takes off, and who
knows where it will stop? March palladium closed today
at $658.35. That is where gold is headed. Historically,
the palladium price has led the gold price.
Also last night I suggested that the gold shares are
getting ready to move up after acting so poorly for so
long. The XAU went up 1.37 today to 66.94 even though
gold dropped $6.90. An extraordinary divergence, but it
does not surprise me at all -- not with what we all in
the Cafe know, plus the hullabaloo of $30 oil.
According to a Reuters report, Ashanti announced that
it is "close to concluding a deal acceptable to
dissident shareholders, its bankers, and the Ghana
government, which holds a 20 percent and golden share
in the group."
The bullion dealer crowd was spinning and spreading the
word all day that a deal would be bearish because the
bullion dealers would not have to buy back the hedged
shorts. Maybe yes, maybe no.
It looks like the government of Ghana is getting its
way with Ashanti's Board of Directors, and the
government has already stated that it wants the forward
sale positions reduced.
In addition, Ashanti CFO Mark Keatley became the
scapegoat and was fired because he was responsible for
the hedge losses. Other CFOs of gold producers that
hedge are going to get this message: Screw up by
overhedging and you will get canned! That can only
reduce forward sale gold supply hitting the market at
these pathetic gold prices. (I consider anything below
$370) to be pathetic. Just now Normandy Mining,
Australia's big gold miner, reaffirmed it is delivering
into its forward hedges and not selling forward.
Nobody knows how the bullion dealers involved in the
Ashanti fiasco will fare in this one. Word is that they
all came to the conclusion that the government of Ghana
was not going to lose out to the hedge-advising
bankers, which has been my conclusion for you. Sources
close to the Cafe say the bullion dealers will eat big
losses and bury them in their books so as not to be
embarrassed. Could Goldman Sachs have to absorb losses
in the hundreds of millions for its inappropriate role
in the Ashanti affair? Word from Cafe sources says yes,
and the losses will be sizeable.
Further anecdotal evidence that the big hedging
producers are going out of favor with investors is what
happened to Barrick and Newmont Mining today. The gold
price was down $6.90, which should have hurt the
relatively unhedged Newmont much more than the heavily
hedged Barrick. But lo and behold, Newmont went up
13/16 today while Barrick could manage only a 3/8 gain.
A sign of the times. Wake up, Barrick! Get with the
program. Stop wasting your time giving hedging seminars
around the world and just cover your forwards. How long
are you going to let your arrogance get in the way of
your share price? How long are you going to penalize
your shareholders so that your egos won't be wounded?
Speaking of Barrick...
Could Trizec Hahn, the firm of Barrick Chairman Peter
Munk, have some big financial problems? I received this
email from a Cafe member today:
"Go to Bloomberg, do search, and you will find a report
on Trizec Hahn;s 4th quarter. Buried in the story about
cash flow it states that Trizec has hired firms to sell
properties to make Trizec more liquid. Also, it notes,
Trizec stock has dropped about 25 percent. Sounds like
"Then go to the Toronto Globe and Mail, search for
Peter Munk, and there is a story from Feb. 12, related
to the Bloomberg story, and in this story they talk
about Trizec selling and reorganizing its holdings due
to poor performance. Suspect more stuff under the
The following Bloomberg report details the current
derivatives philosophy of the Federal Reserve and
The testimony here seems to indicate that there should
be NO ceiling to the notional value of derivatives --
currently near US$36 trillion. In addition, they
believe there should be no additional regulation of the
derivative markets supervised by the Commodities
Futures Trading Commission.
This is too much to get into now. But the former CFTC
chairman, Brooksley Born, was fired last year, some say
at the urging of Robert Rubin, because she wanted more
Why do the Fed and Treasury feel so strongly about this
issue? Until Treasury Secretary Lawrence Summers
answers the questions put to him in GATA's open letter
in Roll Call on December 9, 1999 and re-asked of him by
Senators Dodd and Lieberman, et al, it can be my
conclusion only that the Treasury Department wants to
Yes, the manipulation crowd is trouncing the gold
market by managing it down, as they told most of the
inside crowd they would do. But this will be short-
lived. Indian gold demand is beginning to soar again
and the jig is up.
Just ask Fed Governor Gramlich.
The shares of so many of the good gold companies are
going to soar. It is going to be a rocket ride. Billy
the Kid here will be buying his favorite gold shares
while the gold price is setting back. I want my "Ticket
on the Fast Train."