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this info could be usefull if you trade the gold market.
if you are not interested in the gold market don't read this, delete it
right now...
nobody asked you to read this
this is a really interesting story
>
>Date: Wed, 13 Oct 1999 07:09:27 -0400
>
>>
>GATA Secretary Chris Powell has already
>met with Connecticut Congressman Paul B. Larson who
>is going to start asking questions in Congress about the
>manipulation of the gold market.
>
>Marshall Auerback, GATA supporter in London, sent
>Chris the following for Congressman Larson:
>
>Chris:
>
>I have looked into this question as well, and I have
>learned that you have to be very detailed about the
>type of questions you ask, since any gap leaves
>these guys with lots of wriggle room. Even when
>Congressman Ron Paul asked a very detailed question
>about stock market intervention, there was still some
>ambiguity left in the answer, as was pointed out to
>me by a former legal counsel for the NY and Cleveland
>Fed.
>
>You must also ask whether the Fed, NY Fed, or Treasury
>has intervened in the gold market through the agency of
>other foreign central banks which have custody accounts
>managed by the NY Fed. Peter Fisher manages these
>accounts, but he does so in a Treasury capacity. This
>is a loophole which has never been nailed down by Congress.
>Also, I would ask about Peter Fisher's management of the
>Exchange Stabilisation Fund, which he also does wearing
>his Treasury cap. Also, I would address the whole
>question of the Fed writing calls against their gold
>position, since if this point is not specifically raised,
>they won't answer it. Believe me, these guys are snakes
>and will not give up the secrets of the castle that
>easily. Just thought I would pass on these helpful hints.
>
>Marshall Auerback
>
>I suggest that all GATA supporters incorporate Marshall's
>focus if you are contacting various members of the U.S.
>Congress about the manipulation of the gold market and
>possible N.Y. Fed intervention.
>
>
>Another big GATA supporter is going to be meeting with
>Congressman Ron Paul later this week. Yesterday, GATA
>received the following comment from his office:
>
>"keep up the good work and let me know the next time
>you're coming to DC"
>
>Finally, I have been updating the various banking
>and economic committees that I met with last April.
>
>The "Hannibal Cannibal" camp is spreading stories that
>"officialdom" is trying to cap the gold market at
>$325 to $330. If so, let us find out. Let us just
>ask for the truth about what they are up to and
>WHY.
>
>The following is the well balanced article that Janet
>Whitman wrote for the Dow Jones News Service. It was
>picked up in the European version of the Wall Street
>Journal, but not the U.S version. Every time I call
>the Wall Street Journal about why they have never
>mentioned www.LeMetropoleCafe.com or GATA, they give
>me some half baked excuse. We have nailed the gold
>market left, right, forwards and backwards, yet,
>they act as if we do not exist.
>
>
>COMMODITY MARKETS
>Gold Price Steadies, Investors
>Stop Beating Around the Hedges
>By JANET WHITMAN
>Dow Jones Newswires
>
>NEW YORK — The price of gold has
>steadied, giving pause to one of the biggest
>gold rushes in history.
>
>This one wasn’t a rush to California or
>the Yukon to pan for gold nuggets. It was a
>scramble by gold mines, banks, and specu-
>lators to cover their huge short positions in
>gold. They had been selling borrowed gold
>for years, intending to replace it eventual-
>ly with even cheaper gold.
>
>Gold prices have been falling for 20
>years. Shorting the gold market has been a
>safe and hugely profitable bet, especially
>while the market has declined relentlessly
>the past three years.
>
>Speculators and banks would borrow
>gold at interest rates of 1% or 2%, sell it
>and invest the proceeds in assets that paid
>them 4% or more. Gold mines would bor-
>row gold, sell it and use the proceeds to
>mine more gold and to finance complicated
>hedging programs that made money for
>them even while the price of gold kept
>falling.
>
>Banks Limit Sales
>
>It all went sour on Sunday, Sept. 26,
>when 15 European Union central banks an-
>nounced their intent to limit their gold
>sales and, for the next five years, freeze
>the amount of gold they will lend at cur-
>rent levels.
>
>That ignited a massive scramble by
>many mining companies, speculators, and
>bullion dealers to cover their short posi-
>tions. Covering shorts requires buying an
>amount of gold equivalent to previous
>sales, to cancel out those short positions.
>Those short positions were “enormous,”
>said Jeffrey Christian, managing
>director of New York-based precious met-
>als research firm CPM Group.
>
>“Nobody knows what the extent of the
>derivative situation is and now you’re see-
>ing the result of it,” said Bill Murphy, a
>gold bug who runs lemetropolecafe.com, a
>financial website. “Everyone’s trying to
>squeeze through the door at the same time
>and they’re not going to be able to get out.”
>
>Gold, which had been languishing at
>20-year lows of around $255 a troy ounce
>for much of the summer, skyrocketed to
>$327.50 on Oct. 6, the highest price in two
>years. On Monday, spot gold traded at
>$318.40 an ounce.
>
>Leasing Market Is the Key
>“Just a month ago, people were talking
>about gold going to $200, and now they’re
>talking $400,” said one New York-based
>bullion dealer.
>
>Gold’s prospects depend on one’s view
>of the size of the leasing market for gold
>and to what degree the shorts have been,
>or will be, shaken out.
>
>“I still think we have at least one leg
>up to go,” said Dave Meger, senior metals
>analyst with brokerage firm Alaron Trad-
>ing in Chicago. “There’s no way of knowing
> how much of a short position is left in
>the market. I continue to believe that
>there’s still a significant amount left.”
>
>If shorts are as large as some believe
>a rally to $500 and beyond is conceivable to
>some gold bulls.
>
>More mainstream analysts, however,
>are projecting a gold price of around $340
>or $350 by year’s end. That still represents
>a sharp turnaround from expectations only
>a month ago of a dive to $200 an ounce.
>
>Most of the derivative claims against
>gold are the product of the expanding mar-
>ket for leased gold. For 15 years, central
>banks have been lending a portion of their
>gold reserves to commercial banks at low
>interest rates to get a return on the non-
>performing asset.
>
>The slide in gold prices made the leas-
>ing market such a safe bet that bearish-
>ness became pervasive. Even at 20-year
>lows, some gold-mining companies put on
>fresh hedges and speculators continued
>their heavy selling.
>But gold lending by central banks and
>private-sector sources has resulted in
>paper claims against the market far in ex-
>cess of annual mined production. With the
>30% spike in the price of gold over the past
>two weeks many of those claims are now at
>risk.
>
>While limited disclosure makes it diffi-
>cult to judge the extent of the short posi-
>tion in gold, market bulls contend that as
>much as 12,000 metric tons - 385 million
>ounces - is currently on loan, compared to
>annual mined production of 2,500 tons. A
>more-conservative estimate from U.K.-
>based research firm Gold Fields Mineral
>Services pegs total gold loans at about
>5,000 tons, 90% of which are from central
>banks.
>
>All of the participants in the market -
>the producers, hedge funds, dealers,
>and central banks have acted to create,
>over 15 years, a structure that is hugely
>unstable and intractable," said gold bull
>Frank Veneroso of Veneroso & Associates.
>“First-year micro economics would have
>taught them this.”
>
>Shares Slide
>
>Already, the rally has slammed some
>gold-mining companies. Camblor Inc. saw
>its stock fall 41% last Wednesday after
>news reached investors that the jump in
>prices could result in big losses for gold-
>producing company because of its hedging
>program.
>
>Ghana-based gold producer Ashanti
>Goldflelds Co., also caught by the rally in
>gold, has seen the value of its stock decline
>by 50%.
>
>“Almost all of the gold companies have
>some hedging program,” said John Hill,
>equity research analyst with Salomon
>Smith Barney in San Francisco. “Some are
>above water and some are under water at
>this time. It’s very ironic to contemplate
>that gold-mining companies are suffering
>from a best-case scenario for gold in-
>vestors: a gold rally.”
>
>Not only gold-mining companies are at
>risk. Rumors abound of losses at hedge
>funds and bullion banks, commercial
>banks that buy, sell and lend gold.
>
>“I wouldn’t be surprised to see some
>bullion banks get out of the gold business
>in the next three months because of the
>losses incurred in this,” said CPM Group’s
>Mr. Christian. “It’s not a particularly prof-
>itable business anyway, but shorting the
>market has kept them in it.”
>
>Analysts say the outlook for gold largely
>depends on the amount of gold available
>for leasing.
>
>‘That’s Ludicrous’
>“There is little doubt that the leasing
>market has contributed to the lower gold
>price, but the question is: where would the
>gold price be without it?” Gold Fields Min-
>eral Services Managing Director Philip
>Klapwijk asked rhetorically.’ ‘Some imagine
> we would see a gold price of $600. I
>think that’s ludicrous.” He said $300 is
>‘‘fair value."
>
>While the EU banks are limiting their
>lending, there’s still the possibility of sales
>or lending from other central banks and
>private-sector sources, as well as the likeli-
>hood of selling by gold producers as the
>price of gold rises.
>
>Indeed, if the price of gold surges too
>high, the EU banks may well reverse their
>new policy, some analysts think.
>
>“The (European Central Bank) state-
>ment is perfect central bank policy in that
>it’s extremely vague,” said CPM Group’s
>Mr. Christian. “They ... cut themselves
>plenty of leeway to do whatever they need
>to do.”
>
>But for the time being, the change in
>European leasing policy has transformed
>the gold market.
>
>“The thing is to see if gold can still hold
>up after (the short covering),” said James
>Steel, analyst with New York-based com-
>mission house Refco. “I suspect it will.”
>
>
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