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Gold About to Explode !

June 9, 2000

Deutsche Bank, along with some help from Goldman Sachs, bashed gold early today, taking it down almost $6, but the funds came in as buyers, taking it back up late in the day. August gold finished at $290, down only $1.80.

Good ol' $290 again. That is the price the manipulators have been defending for a couple of years now. They are at it again.

Word to me was that some hedge funds were buying. This is very important news. I received a call today from Europe that GATA's "Gold Derivative Banking Crisis" document is being distributed around the world at a furious pace and is going to the highest levels of the banking world. This is not supposition. One of the most prominent bankers in Europe has already received four copies, and the report was made public only five days ago.

A futures broker was called by a well-known futures trader and asked him, "Have you seen the report that is so bullish for the gold price?"

If the GATA document (which can be obtained for free at www.GATA.org) is circulating to this degree and to the right people, it is only a matter of time before the big-money crowd starts buying gold in earnest.

The report is a lot to digest. But once the investment community realizes that the bullion banks are in a bind -- big-time -- investors will buy gold. Historically, when banks, central or otherwise, have screwed up to this degree, the George Soroses of the world have taken them on.

They will most likely do so again. After all, the downside in gold is $20 to $30. The upside on this trade is $300 to $600. For that matter, just pick a number.

The gold derivative numbers of the Office of the Controller of the Currency for the first quarter were released yesterday. They show another big derivative buildup, as the new total of notional off-balance-sheet gold derivative contracts has risen to $95.5 billion from $87.6 billion. The big increase came at Chase Bank. I am sure Reg Howe, Mr. Derivative Expert, is doing a report on this, so I will leave the details for him to present to you.

What does this all mean?

It is simple. There is too much gold being consumed at too cheap a price. There is a dearth of physical gold. Only PAPER gold is holding down the price. The bullion banks, their clients, and heavily hedged gold producers have an exposure that is frightening. Once that exposure is understood by serious money people, they will buy gold. CHECKMATE for the shorts.

On a less dramatic note, crude oil roared back today after being down $1 to close up 20 cents on the day at $29.95 per barrel. The price of oil is headed up, as is the price of gold.

The dollar was weak all day as it sank to 106.16. Firm oil price, a soft dollar, and little physical gold around to meet demand. What a combination!

Thanks so much to so many of you out there who have been behind GATA, spreading the word on the building crisis in the gold market and sending the GATA report all over the world.

The Gold Anti-Trust Action Committee is trying to find out what the gold leaving the New York Fed is all about and why it is being categorized in the trade data.

A GATA Committee member is doing yeoman work contacting the Customs people, the Commerce Department, the Census Bureau, and the New York Fed. I thought you might like to see some of the kind of repartee going on behind the scenes:

* * *

Bill, Reg, Chris: I just talked to a John Kohler at the Foreign Fiduciary and Financial Service Staff of the New York Fed. This is the gist of our conversation:

"Do you not handle the paperwork for the gold transactions in and out of the vault?"

"I can't answer everything for reasons of security."

"Can't you tell me your own responsibilities or the responsibilities of your office? Do you not handle the paperwork when a foreign government instructs the Fed to physically transfer its gold to a dealer?"

"Yes."

"What Customs paperwork do you fill out?"

"None."

"Are you aware that, once demonetized, this is an import and should be declared as such?"

Long silence.

"Or if it is not demonetized, it should be debited against current account?"

"I can't tell you about our accounts for reasons of security."

"I'm not asking about accounts. I'm asking about accounting! That's not security! Aren't you aware that there is a separate category in Customs for monetary gold?"

Pause. "Yes."

"And are you declaring such to Customs?"

"No."

"Why?"

At which point Mr. Kohler excused himself, said other personnel were involved, and referred me to Susan McLaughlin, the staff director.

A report on my phone conversation Susan McLaughlin:

She knows of no Customs forms that need be filed when the Fed transfers gold. She thinks it is the responsibility of someone else, either someone at the Fed or else the recipient's responsibility. She has been on the job less than two years and has no idea who at the Fed would be responsible and did not want to help me further.

I had to pull my trump card that I am having dinner with my ex-professor, the Fed governor, next week.

Ms. McLaughlin has now received a written inquiry similar to the one I sent Ms. Boney yesterday and I think she will pursue the matter now in a timely fashion.

W.

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