first majestic silver

The Emperor has no Gold

July 3, 2000

The 23rd Annual FT World Gold Conference: The Emperor Has No Gold - Or, The Dog Did Not Bark ("Harry Schultz")

The setting for the 23rd Annual FT World Gold Conference was the finest, as the Intercontinental Hotel is surrounded by Place de la Concorde, Place Vendome and is located in the center of the cultural and historical areas of Paris.

Of special importance is the Champs-Elysees, which is very nearby, and that is the favorite street in the entire world of Le Chien du Café, "Little Bear."

Not far away are Napoleon' s Tomb at the Pantheon, the Eiffel Tower, which hovers over all, the Louvre, within in walking distance; so is the Ritz, where Princess Diana began her misfortune and, on the other side of the Intercontinental, is the Hotel Meurice, which headquartered the Gestapo during the Nazi days.

That had me chuckling a bit as the staff of the FT/GFMS conference that stopped Café member, Mark Gunn and I from passing out our handouts called our efforts "Nazi tactics." Later, ironically enough, a charming girl of the staff wondered what everyone had to say as she thought it personally very interesting and entertaining.

The irony of all of that is, what could be more Gestapo like-ish than what certain bullion dealers are doing, along with the pitifully inept and indefensible PROPAGANDA of Gold Field Mineral Services Limited? It is my opinion that Dr. Walker made an egregious mistake by arrogantly refusing to acknowledge GATA's challenge to PAY for a debate for the press and the gold industry on such important gold issues. All he had to do, if confident in his analysis, was to thank us for our efforts in behalf of the gold industry and say that they would take our challenge under consideration. But no, they are so freaked at being found out, he panicked in front of the attendees at the FT Conference and looked a bit pathetic with his anemic response to our good will quest for a transparency challenge.

That is what bullies do when put in their place. These guys and their bullion dealer cronies have misinformed the world to satisfy their own greed. It is a financial scandal of epic proportions that has debauched many poor people of the world. Those responsible are going to have to pay a price for all of this. More on that later in this Midas.

This FT Conference is mostly for the banking crowd, as more than 50% of the attendees were central bankers or bullion bankers. In addition to the Austrian, French and Ubekistan Central Banks, representatives from the following Central Banks attended:

Italy, Algeria, England, Denmark, Libya, Venezuela, Russia, The Netherlands, European Central Bank, Zimbabwe, Mozambique and Switzerland.

Also present were the Abu Dhabi Investment Authority, the Austrian Mint, ANZ Investment Bank, Almaty Merchant Bank of Kazakistan, Banco Pop Etruria e del Lazio and Banca Populaire di Bergamo CV of Italy, Banka Asaka of Uzbekistan, Bank Zenit of Russia, The Bank of Nova Scotia, Barclays Capital, Bayerische Landesbank of Germany, CA Indosuez of Switzerland, Chase Bank, Citibank, Commerzbank AG, Credit Suisse First Boston (10 representatives), Demirbank of Turkey, Deutsche Bank, Dresdner Bank, Erste Bank of Austria, Fleet National Bank of the US, Goldman Sachs, HSBC Bank, Investec Bank of South Africa, JP Morgan, Kazhommertsbank of Kazakistan, Korfezbank AS of Turkey, Lanta-Bank of Russia, Maquarie Bank of Australia, Mitsui & Co., NM Rothschild & Sons Ltd, Narodowy Bank of Poland, National Commercial Bank of Saudi Arabia, Ratobank International of the United Kingdom, Rand Merchant Bank of South Africa, Royal Bank of Canada, Royal Canadian Mint, Societe General of France, Standard Bank London Limited, Standard Corporate & Merchant Bank of South Africa, Warburg Dillon Read, and Westdeutsche Landesbank of Germany. Banks such as Dresdner and UBS Warburg (Warburg Dillon Read) had as many as 6 to 9 representatives per institution, from all over the world, attending this conference. I think you get the picture. These institutions spared no expense and no personnel. While most of the "delegates" are very bright and fine individuals, in general this is a "don't rock the boat" group. One generally rises to the top of the banking world by knowing how to say the right things at the right time to the right people. That is true in the corporate world in general - but, being bankers, that is true even more so.

Café members might like to know that was the only delegate named in a very long list. It is in this setting that GATA made its pitch to gently "rock that bullion dealer boat." Reg Howe of made the trip over to Paris from Massachusetts as a GATA delegate. He was superb in his delivery to the bankers in attendance about the gold derivative build up and the potential consequences of that massive increase on the books of certain banks.

The first session of the Conference was the most illuminating. While the Washington Agreement was universally applauded by everyone at the conference, the body language and comments by the big bankers told a bit of a different story about how they felt about gold and what was going on behind the scenes.

Terry Smeeton, former number two man at the Bank of England, opened the session by defending the Bank of England's decision to sell gold and praised it for transparency reasons - right off the bat and with fervor. Weird, I thought, to make such a big deal of such an old issue. Such heat they must still be getting. He then went on to say that central banks cannot be compared to commercial banks as far as their lending or risk Performas are concerned. I understood that to mean that the central banks could lend out gold or act in certain ways because they were too big to fail, but that commercial banks needed to be more careful. He ended by completely contradicting himself on the transparency issue by declaring that it was important that central banks not have to declare what they do not want to so as not to interfere with their furtive banking activities. He left me a bit bewildered because I know some of the behind the scenes scoop on this bureaucrat.

This is the same Terry Smeeton who told Frank Veneroso of Veneroso Associates that the gold loans were 3,000 tonnes as far back as 8 years ago. He was very open at the time and wrote a paper (now lost) on the subject. When Frank Veneroso called him in 1998 to query him further, he refused to say anything on the subject. Dead silence - as that admission would help to confirm the big gold loan numbers that Frank has come up with today.

Herve Ferhani, Head, Foreign Exchange Division of the Banque de France, then spoke. Naturally, his delivery was in bankerspeak, but it was VERY positive regarding the future price of gold as far as I am concerned. What struck me the most was that he stated that many lenders of gold may not be taking into account the risks involved in gold lending - and, that could eventually turn out to be a mistake. Ferhani noted that getting the gold back from borrowers might not be so easy as it appears at the present time. Then, he went on to say that the gold loans were now 5,000 tonnes but, from other sources, I believe he knows them to be MUCH larger, hence his gold loan risk comment. Ferhani also made note that the use of derivatives was facilitating the short sellers.

Ferhani went on to applaud the Washington Agreement as it gave stability and transparency to gold and ruined the one way bet of the short sellers. He noted that gold is a unique investment asset and that because of its upside asset potential, it was a great option to have on the books of the bank.

Finally, Ferhani sounded out the point that the widely reported comment that gold is likely to become a more important credit risk free asset for central banks as central banks call in their bonds as the U.S. is doing now. As long term bonds are called in by other countries, a "dearth" of credit risk assets for central bank portfolios will force central banks to buy gold to balance the credit risks of the rest of their portfolios. At least, that is what Ferhani posited.

All in all, a very bullish gold outlook presented by the French.

The presentation by Dr. Zoellner of Oesterreichische Nationalbank (Austria) and Charles Spall, Head of Central Bank Marketing (Commodities) for Deutsche Bank, was of a much different tone. Zoellner was ebullient about his mobilizing gold for Austria - euphemisms for selling, lending and writing calls on their gold. He stressed the word "active" when referring to Austria and the gold market. In 1988 Austria owned 658 tonnes of gold, is down to 378 tonnes now and will bottom out with 320 tonnes in 2004. That will all be in accordance with the Washington Agreement which he praised as good for transparency and good that it put the "one way short bet" speculators on notice that this previous assured winner was no more.

Zoellner also opined that gold was not moving higher because inflation was under control around the world. I found it of interest that he spent so much time praising the ebullient sales of the Austrian Philharmonic Gold Coin and the fact that it is the most popular in Europe. In fact, it has become the "European Bullion Coin."

I wonder how pleased Dr. Zoellner will be when the price of gold shoots up to $600 as the buyers of the Philharmonic Coin rejoice and he is pilloried for dumping a good amount of Austria's gold at sub $400 prices?

Charles Stall spent most of his talk explaining the reasons for selling gold and being active in the gold market. This was of special interest to me because I learned on this trip that the former chief gold trader for Deutsche Bank, Fritz Platz, was fired because he did not want to go along with the aggressive mobilization plan of the young turks at Deutsche Bank. I guess that is why Charles von Arenschildt was brought in from Morgan Stanley and why the notional value of the gold derivatives on the books of Deutsche Bank have gone up so much.

Stall spoke highly of the Washington Agreement, but spent most of presentation highlighting the fact that the costs in owning and storing gold are not insignificant and that gold should be mobilized in various fashions to pay for those costs. He noted that banks liked to earn a return and that gold derivatives are a good vehicle to manage gold assets - that basically means lending gold or writing calls on gold sitting in the banks vaults.

That can explain why the notional value of those gold derivatives on the books of Deutsche Bank have ballooned to $50 billion from $15 billion in only one year. Stall went on to say that out of 75 central banks involved in the gold market, only 10 to 15 wrote calls and even less, 5 to 6, did lease rate swaps.

It appeared to me that he fancied himself as the cat's meow as far as his gold money making prowess was concerned. My guess is that when the price of gold explodes and his peers at Deutsche Bank find out he has made pennies and cost them many Euros, he will be history. Stall has most likely seen his last FT Gold Conference - at least with Deutsche Bank.

The rest of the speakers at the Conference were generally good, but were very predictable in what they had to say. Except for Egizio Bianchini, Managing Director, Precious Metals of BMO Nesbitt Burns, who presented a bull case in a duel with bear case presenter, Kevin Crisp of Credit Suisse First Boston, there was NO talk of the raging bull market that lies ahead of us and NO ONE but Egizio presented the myriad of facts why the price of gold should gold should go higher.

$320 gold was very bullish for most of the attendees at this Anti-Gold Conference.

Interestingly, Egizio had enough gumption to point out on a slide that the gold loans COULD be as high as 10,000 tonnes, or twice the newly acknowledged, "official" amount. Just bringing that figure up was tantamount to heresy to many of the delegates.

As is the case in many industry conferences, the real action took place at the coffee breaks, in the bar, during lunch and at dinners. That is when all of us were able to interact with other delegates and learn from each other.

The first night I went to dinner with the venerable "Sir Harry Schultz," his charming wife Joy, John Hathaway and our host Sean Boyd, CEO of Agnico-Eagle. We were regaled with stories about the generosity and likability of former Agnico-Eagle honcho, Paul Penna. Agnico-Eagle is a fine gold producer that does not hedge. It should do very, very well in the bull moves of the coming years.

John Hathaway did not tell me this, but I know it was suggested that he speak in place of Gold Fields Chairman, Chris Thompson, who had to attend a Board meeting. That was a natural as John is articulate and shares many of Chris Thompson's views whose topic was, "The Case Against Producer Hedging." Hathaway has just about written the book on that one, yet GFMS voted Hathaway down. Just like they publicly refused GATA's challenge to debate the bullish case for gold. A sad lot these GFMS people. When the gold price explodes, the should be taken to task for the misinformation they are putting out that is hurting so many people around the world.

The next night I dined with Reg Howe, Ferdinand Lips, and a young dynamo who shall remain anonymous. This "dynamo" invited us to dinner at Laurent, one of Paris' fancier restaurants. Our host did not attend the conference, but wanted to meet with Reg and myself as he is in almost complete sync with our views that the gold market has been and is being manipulated, and that a gold price explosion is not too far off.

Ferdinand Lips is a most delightful and charming character. At present, he is on the Board of Directors of Durban Deep and Randgold Resources. During his esteemed career, he was founder of Bank Lips in Zurich and was a Director of other banks. In 1992 Bank Lips Ltd awarded its International Currency Prize to none other than Reg Howe as a result of his paper, "The Golden Sextant."

Our "dynamo" host believes that certain currencies are being manipulated in order to facilitate producer hedging and that certain officialdoms are encouraging the manipulation of the gold market in order that "the dollar" not have any competition from other reserve currencies. That may not sound all that dramatic to you, but this will be. He already owns "tonnes" of gold (that is tonnes, not ounces) and is thinking of taking delivery on $100 to $120 million dollars worth of gold sometime in the near future. This is NOT an idle boast or a trivial story that I am sending your way.

This gentleman knows that there is a coming physical gold shortage that will precipitate a crisis of sorts - for the trapped gold shorts. It will not take too many buyers like this to turn the gold market topsy turvy. If any Café member knows of anyone out there who has the capability of buying tens of millions or hundreds of millions of dollars worth of gold bullion, or you think that this individual might like to know why this is such a sound investment at this point in time, I would be most grateful if you could make it possible for me to talk with that person. All conversations will be confidential and it may be possible for me to arrange a meeting with our host at Laurent in Paris.

By the way, this "dynamo" is an avid Café member and fan of Reg Howe. He learned about us through The International Harry Schultz Letter. This man told us that Harry's newsletter is tops and that he holds Harry in the highest regard. I will second that. Harry is a class act.

So is Daniel Oichanski, another Café member, and former Chief Investment Officer of the National Banque de Paris. Daniel presented me with a couple of books on the cafes of Paris in their heyday for which LeMetropole is themed. We went to the Automobile Club and Daniel reminisced about much - especially his times with Henry Kaufman, famed US Economist. Daniel was also most fun to be with.

When the price of gold soars and stays there, we will have a get together some day and you will be able to meet these wonderful people as we all celebrate our victory over the tyrannical forces that have fraudulently held down the price of gold for so long, just to satisfy their own unending greed.

At that get together, you might also meet Dr. Bruno Bandulet, Editor of the well known and highly circulated Gold & Money Intelligence. His publication is widely followed in Germany and Switzerland. Bruno and crew were filming a documentary at the FT Gold Conference and I was fortunate to be included in the interviews. I followed gold historian Timothy Green and "warmed things up" for Wayne Murdy, Newmont Mining Corporation President. That is what Wayne chuckled about with me anyway.

It is amazing to me how much the foreign press knows about GATA and/or wants to learn more of what we have to say. The mainstream US press wants nothing to do with us and, for the most part, refuses to acknowledge our existence. Roland Vandamme, Editor of Analysis in Belgium, was VERY informed of our claims and writings (such as the "Gold Derivative Banking Crisis" document). Naturally, he was a delight to talk to as was Patricia M. Colmant of the Paris newspaper, Les Echos, who wrote up the GATA challenge to GFMS.

And a big hello to FT Conference attendee, Iceland's Thorsteinn Thorgeirsson, Senior Economist of the Money and Finance Division of the OECD in France. Thorsteinn is a Café member and gold owner.

What to make of the conference?

First and foremost: "the dog did not bark" as Harry Schultz put it - borrowing Sherlock Holmes' renowned line. While most of the attendees at the Conference were not bullish, NO ONE presented a solid case why the gold price should go lower. When it was all said and done, that was most obvious and peculiar. If anything, it solidified GATA's claims that the gold price was being held down at the $290 price level and NOT BEING ALLOWED to rise.

Second, the Schultzs, Bandulets, Lips' and Oichanskis of the Conference all compared today's gold market to that of the late 60's when gold was being officially held down. The only difference between then and today, is one of recognized policy versus unofficial market manipulation. We all agreed that the end result would also be the same - a doubling and tripling in the price of gold.

The price of gold can explode any day now. It is trading differently - that is to say it is trading lighter with greater volatility. Much of the time these past few years it traded as heavy as a stone with no movement, no volatility. That appears to be changing as gold acts bubbly. As gold breaks $290 to the upside, the manipulation crowd beats it back as it has done for so long. However, now it appears we have new buyers to take them on AND many more producers do not want to sell forward any more as they have done in years past (for example, Normandy Mining of Australia is delivering its gold into forward hedges rather than rolling the hedge forward).

The Comex open interest is below 150,000 contracts. There is easily room for 75,000 new longs to step up and take on the bullion dealer cabal.

Why should that happen at THIS POINT IN TIME? Simple! The bullion dealer game is being found out. Thinking people have come to understand that the gold loans are much greater than GFMS, the bullion dealer apologist, is revealing. All of a sudden the official number has leaped to 5,000 tonnes with no explanation given. Highly regarded Chase Bank bullion dealer, Dinsa Mehta, told the attendees at the Australian Gold Conference that he believed them to be 7,000 tonnes. The GATA camp believes they are greater than 10,000 tonnes. The momentum is clearly going our way.

There is a great danger that much of the gold that has been lent out may not be retrieved.Herve Ferhani, Head of the Foreign Exchange Division of the Banque de France, made that very clear at the FT World Gold Conference. The new smell of danger has begun to permeate the gold world. Is it a coincidence that lease rates are suddenly creeping UP.

Just as dangerous is the recent discovery of the incredible notional value of gold derivatives on the books of the banks. The increase over the past year is staggering. GATA 's investigator discovered that these numbers were public knowledge. The Café and GATA have since trumpeted the big gold derivative numbers all over the world and even advised the top political leaders in the United States that a gold derivative banking crisis will be upon us unless the gold price is allowed to rise to slow down gold demand.

That was the message that GATA took to the FT Conference. That message did not go unheeded. Nobody there could explain to us why the notional value of these same derivatives have gone way up at certain banks, but have not increased on the books of certain other bullion banks, like UBS Warburg, for example. At $79 billion, UBS Warburg is still the biggest, but the gold derivatives on their books have not increased over the past year.

Contrast that to Deutsche Bank, JP Morgan, and Chase Bank. JP Morgan's gold derivatives have jumped from $18.1 billion to $36.5 billion in one year. While it took Chase Bank 14 years to get to $22 billion, in the first quarter of 2000 that number jumped to over $31 billion. According to the BIS, the gold derivative positions of reporting banks surged in the quarter from $87.6 billion to $95.5 billion, a 36% annualized rate of growth. That number is as great as all the gold in the coffers of all the central banks in the world! ALL OF IT!

These are not FLUFF numbers. They count against the bank's capital adequacy requirements. More importantly, Charles Stall of Deutsche Bank told the FT attendees that derivatives are used to manage gold assets - that banks want to get a return on their assets. That means lending gold and writing calls. Thank you Herr Stahl.

From sources developed over the past year, I know for a fact that many of the producers have been sold exotic hedge programs that involve writing of calls of every conceivable combination. Some of these exotic hedge strategies extend as for as ten years in the future. I can assure you many of the gold producers have no idea of what kind of exposure they have should the gold price explode. I mean EXPLODE!

Mr. Kewku Awotwi, Managing Director, Strategic Planning & New Business Development of Ashanti Goldfields Co Ltd in Ghana, told one of the delegates at the Conference that they are still sorting out their own mess. STILL. One of the presenters showed that Ashanti's financial problem diminishes at the rate of $2.8 million per week as long as the gold price does not rise. More motive for the "on the hook" bullion dealers to hold down the gold price.

The reason that the bullion dealer crowd does not want the real gold loan story and the gold derivative numbers discussed in public is that those revelations are disastrous for their huge short positions. I know it and they know it. Problem for them is that the word is spreading. The "Gold Derivative Banking Crisis" document at the web site is being read and distributed. I was stunned to learn how many of the bankers at the conference are now reading the material presented at

What our camp has been saying is starting to have an effect! Word is spreading that it is paper gold that is holding down the price of gold. It is a losing battle for the bragadoccio bullion dealer shorts. It is only a matter of a very short period of time now before one of the big banks breaks ranks and advises clients to cover their short positions. That will have a domino effect. No one will want to be the last man out the door.

There is something else. The manipulators in the gold market have hurt many people and countries around the world to satisfy their own greed. In my opinion, there has been a fraud committed and that will be borne out in time. There are guilty individuals who work at the big bullion banks who are guilty of committing this fraud and they could be looking at criminal charges in the years ahead.

Does that seem far fetched?

Nothing could be less far fetched!

* * *

In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce
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