first majestic silver

Gold Market and Precious Metals Commentary

September 7, 1999

What a day! Goldman Sachs sat on the gold market (what else is new?), as gold rallied only $1.10 while the dollar swooned again, bond yields rose, and the stock market dived. Silver put in a better performance and rallied 7 cents.

Behind the scenes there was all kinds of news.

The lease rates rose again today, with the one-month rate soaring to more than 4 percent. The six-month rate is about 3.6 percent; all of a sudden the lease rate market is inverted. A bullion dealer acquaintance told me that the physical gold market is on fire and there is just not much gold around. One-week rates are even higher than one-month rates. There was actually alarm in his voice. All this comes after the August gold contract was almost squeezed. That will give you some idea of what the gold market manipulators are up against.

This is only the beginning of their angst and it is what I have been harping about for months now. The shorts have been relying on less formidable supply/demand deficits than is the case. Midas relies on Frank Veneroso's supply/demand forecast. He tells me that the deficit is now about 160-180 tonnes per month. (I have known Frank for 20 years and he is always early and almost always right.) That is a big number and may be 100 tonnes more per month than the bears comprehend. Thus they are being blindsided here if they are listening to less-informed precious metals services.

And that is why I have said over and over that we have the shorts and the "Hannibals" right where we want them.

Desperate they are and back to their old tricks. All of a sudden they are floating talk that the International Monetary Fund is finalizing plans that outline a proposal for central banks to buy some of the fund's gold reserves, freeing about $2 billion to ease the debts of the world's poorest countries.

Well, three cheers for Le Metropole Cafe's John Brimelow. Here is what he had to say about this latest IMF scheme:

"New York, Sept. 2 (Bloomberg) -- John Brimelow, director of international equities research at Donald & Co. in New York, comments on the International Monetary Fund's plan to possibly sell gold to direct buyers rather than in the open market. The IMF is considering gold sales from its reserves to finance debt relief for the world's poorest countries.

"`If the IMF takes an `off-market' approach, that means instead of going to the marketplace and offering the gold to all and sundry, they will negotiate with a specific buyer,' Brimelow said. `Any large party could negotiate directly -- a central bank, a hedge fund, or another parastatal institution. Its rather like a block trade in the securities business.'

"This approach `can avoid pressuring the market, although that's assuming the person who buys the stuff hangs on to it,' Brimelow said. `If they don't sell it or they don't lend it, then it's a transaction that won't damage the market.'

"The problem is that `central banks don't report what they are lending. There's no way of tracking it,' Brimelow said. If the IMF sells gold to central banks that lend it to the market, `through the back door, the IMF would be achieving the same effect as selling the gold' directly to the market, he said.

"`It seems to be a thinly camouflaged version of the original plan and I don't think it's going to fly,' Brimelow said. The key obstacle would be getting consent from the U.S. Congress, which has so far blocked direct market sales. `I think the IMF bureaucracy is displaying extraordinary arrogance and even stupidity in its dealings with Congress. At a very deep level, it doesn't understand how the American political system works.'"

John has it nailed. The IMF and their Hannibal Cannibal cronies don't give a tinker's darn about the poor. For 36 out of the 41 poor gold producing countries have already asked them not to sell this gold. Yet they persist in the charade. Why? Because their buddies, the bullion dealer, big-money crowd gold shorts, are desperate to have gold supply hit the market, and all they care about is keeping the gold price down. These devious crumb-bums need the IMF gold supply to cover their gold shorts.

Our team will do what we can to shut them out of their nefarious plans.

All my contacts in the Joint Economic Committee and Senate Banking Committee, etc., have left for the Labor Day weekend. I will contact them next week and send them Brimelow's comments along with a few of my own.

Bank Scandals. One after another. Why there aren't more people looking into the biggest banking scandal of all time -- the manipulation of the gold market and orchestration of low prices? It blows my mind.

Credit Suisse has been shown the exit from Japan, the Bank of New York is under siege for moving the money of the Russian elite and Russian mobsters out of that country, and today came word of two more big banking scandals.

The first was First National Bank of Keystone in West Virginia. They had been touted as one of the most profitable banks in the country with a reported capital ratio of 16.5 percent. That ratio had them one super sound bank. But lo and behold, the Office of the Comptroller of the Currency just shut them down. It turns out that half of their $1.1 billion in assets was phony.

One day a banking king, the next day a banking disaster. What was the difference from one day to the next? Simple: The truth came out.

That is what is going to happen in the gold market. When the scam is exposed (along with the true size of the gold loans, 10,000 tonnes or more) and the shorts try to cover, the price of gold will go from $250 to $500 practically overnight, and for the same reason. The truth will come out. That is why it is time to focus and to invest in the gold and silver markets.

The second big story of the day was about GATA critic Martin Armstrong and his Princeton Economics International. Martin has decried GATA. He is a mega-bear on gold in the short term, looking for sub-$200, and on silver, putting his money where his mouth is, as far as we can tell. Sources tell us that one of his hedge funds is short 20 million ounces of gold. He is the most vociferous silver bear in the world and constantly expounds that the price of silver is headed for $2.80. He says silver ranks among the world's worst investments.

The funny thing here is that when the price of silver shot up last year to $7.80 after the Warren Buffet silver-buying news, Armstrong complained that the silver market was being manipulated. Then he called for an investigation by the Commodities Futures Trading Commission. There was no basis for what he had to say and the CFTC told him so. Not that the CFTC would have a clue what is going on in the metals markets anyway. How quick were they to pull the trigger on the big Sumitomo copper scandal?

Months ago I said Cafe sources told me that Armstrong's operations were under scrutiny. This is what the press had to say today:

"New York, Sept. 2, Reuters -- New Jersey Firm lies at heart of Republic probe.

"At the heart of a regulatory probe that ie expected to stall a merger between Republic New York Corp. and Britain's largest banking group, HSBC Holdings PLC, are the U.S. bank's dealings with affiliates of a New Jersey economics forecasting firm.

"Republic's brokerage unit came under regulatory scrutiny for allegedly mispricing investments for one of its clients, Princeton Global Managements and Princeton affiliate Cresvale International, sources close to the situation told Reuters on Thursday. The company that owns these two entities is Princeton Economics International, a forecasting and derivatives trading firm based in Princeton, N.J.

"The bank, which is cooperating with Japanese as well U.S. regulators, said it fired the management of its futures trading operations and suspended the head of its Philadelphia-based securities unit, James Sweeney.

"Princeton Global is an investment company owned by Princeton Economics and helps Japanese institutions hedge their foreign currency transactions. Princeton Economics, which employs 300, also owns futures broker Cresvale Investments, whose Tokyo office was investigated by Japanese authorities in May."

Cafe members might like to know that Republic has been the silver and gold floor broker for Armstrong. Plus you might also like to know that that Armstrong's prediction is that the yen will go to 278 to the dollar.

Get the picture? Princeton is mega-short the yen, gold, and silver. We know what is happening to the yen shorts. Armstrong has berated us for our views of what is going on in the gold market. What goes around comes around. Boomerang time here, and only a matter of time before this guy blows up and is carried out.

Bloomberg reports that "Martin Armstrong is considered to be the biggest individual silver futures trader on the Comex division of the New York Mercantile Exchange." I will send the stretcher to the Comex for him.

Seriously.... The question that needs be answered here is: Why was Republic marking up the value of the hedge fund? What is there to hide? Is Armstrong's group in serious trouble? Certainly he has big problems. How easy will it be for him to cover his massive gold and silver shorts if he has to? Does he call Alan Greenspan as everyone else does?

More soon. Get long. Be strong.

Bill Murphy ( Midas )

Midas du Metropole

After graduating from Cornell University, Bill was a starting wide receiver with the Patriots of the old American Football League and has been around the financial and commodities markets ever since. He owned a futures firm in N. Y. that specialized in precious metals and was a contributor to Veneroso Associates, a global strategic investment firm and producer of the 1998 Gold Book Annual.


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