first majestic silver

Gold Market and Precious Metals Commentary

March 29, 1999

Technicals -

The gold market has broken down as the recent new resistance point of $285 was not penetrated to the upside on a closing basis. The lousy price action at that level encouraged new selling as the open interest is on the rise again and now stands at over 173,000 contracts as of yesterday.

The Commitment of Traders Report, released after the close, shows that the funds were ying yanged perfectly by the colluders and are building short positions again after being run in just two weeks ago. The large specs, as of last Tuesday, are now short 54,000 contracts and the commercials are long again, to the tune of about 55,000 contracts. Unbelievable! Percentage wise, the specs are probably more short now than they were one month ago as the open interest is 20,000 contracts less. The funds were big, big sellers again today and squad leader, Goldman Sachs, was a huge buyer, taking in its previous shorts, and who knows, maybe even going long here.

The last 3 Commitment of Traders Reports are the most amazing and unusual that any of us have ever seen. The large specs went from 70,000 contracts net short to flat to most likely another 70,000 net short again as of today's close. Nothing like has ever happened before( that any of us can recall ) in such quick fashion and, in our opinion, could only have occurred as a result of "Goon Squad Collusion".

It now looks the price of gold will rally back to the $288-$290 area in the weeks ahead, which is a key gold borrowing point. The big question is, have the colluder made enough money in the past weeks and engineered the price to go low enough so that they now have orchestrated an exit strategy and again, who knows, maybe even decided to go long for the big play on the upside. Or, will these guys pull the same slam dunk maneuver all over again. Have no clue on that one. We do know that Goldman Sachs has an IPO coming up and the partners have a big pay day ahead in the months to come.

Aside from that, bear talk is everywhere and with good reason. The gold price is suffering from one of the biggest orchestrated onslaughts in the history of markets. Today, it was Canadian Prime Minister Jean Chretian doing his part, saying that "the IMF should sell 10 million ounces of its gold reserves", which is at the high end of the 5 to 10 million ounce range. Translation: gold has not broken sufficiently yet, so officialdom calls on Canada to follow Clinton, Chirac and crew. There are calls by many for market transparency. This is it ( though not exactly what had in mind ) - orchestration of bearish talk regarding gold of the most transparent kind.

Meanwhile back at the ranch, silver is holding $5 and the gold market pummeling in sterling fashion. Our sources continue to tell us that there is massive buying interest all around the $5 area and that is why silver is not breaking down like gold. Silver is not being manipulated like its sister metal is at the moment. Neither is oil which has rallied 60% off of its lows. Remember how bearish the pundits were when oil traded at $10? Oil's price weakness was a reason giving for the poor precious metals performance. How does that apply now? How about the CRB? It closed at 192.67, making a new recovery high. Hardly a bearish precious metals indicator. Where is the deflation talk and that reasoning for a bearish gold market?

Egregious is the best word I can think of when it comes to the gold market manipulation- egregious. Silver has different dynamics right now and its future shines. It appears it is gathering strength to make a run at $5.80 which will surprise Martin Armstrong and his bear cam followers. We will still be very surprised if silver does not trade at $9.78 before the end of this year.

Fundamentals -

Silence of the Lambs - Hannibal Lechter Lives!

( Insert Gold Mining Companies in place of Lambs )

Preface - Reuters - Toronto - March 23, 1999 - "A trace of panic entered the ranks of small gold producers in Canada where the growing possibility of mine closures and bankruptcies blight a horizon already darkened by low bullion prices….The slow demise of Kirkland Washington-based gold producers Royal Oak Mines Inc. which operates gold mines in Ontario, British Columbia and the Northwest Territories, highlights the troubles of junior players in the gold sector."

In the face of obvious manipulation of the gold market the silence of the gold mining companies is deafening. Midas will try and point out what is going on here and what GATA, who is Jody Foster in this analogy, is going to try and do about it.

Hannibal Lecther is your friendly bullion banker, who encourages the producers to sell forward and makes his fees for doing so. Hannibal is also the one who is making gold bullion available to the rest of his firm's investment operations for financing purposes and encourages other financial institutions to borrow gold at low 1%, or so, interest rates. This game has been going on for some time now and is fostered by bearish analyst reports from these same financial entities. Those reports serve to demoralize gold market participants even further, causing more forward sales and the cycle goes on.

Here is a recent example of that we mean. Yesterday, we were told by one of our sources that Bear Stearns was selling gold for the purpose of gold carry trades. Short term lease rates shot up about 20 basis points ( 25% ) so someone was out there borrowing gold in size and dumping it into the market place. Today, John Ryding, Bear Stearn's economist was on CNBC making repeated references to the gold market and how its low price shows there is no inflation and how it is such a good barometer that all is well.

This gold lending and borrowing scheme has been a bonanza for the Wall Street insiders and for those in on the wink . In essence, they have been able to borrow money almost for free to invest in Treasuries, stock markets, and sophisticated derivative plays ( a la Long Term Capital Management ).

Of course, the game is only a winner (and the loan being almost a free one ) if the price of gold does not go up to any great degree. As we have said many times before, if that occurs, an almost free loan could become one of the most expensive in history. As we believe that there is a natural supply/demand deficit of some 1600 tonnes ( approximately 4129 tonnes of demand over 2529 tonnes of mine supply ) the lending game is becoming a little hairier to play. The 1600 tonne deficit must be met by producer forward sales, scrap supply, central bank sales, or gold lending schemes.

Hannibal Lechter can only thrive " with a little help from his friends" for the devouring of most of the gold market participants to continue. That is why we believe they have colluded together to keep the price down. It is one big "cabal" playing the same game and consorting to punish the market to satisfy their greedy appetite.

Thus, they recruit "friends" like the producers and urge them so sell forward. It has been a viscous, endless cycle the past few years. To be blunt, here is where the problem lies, "Hannibal" is an "animal". The bullion bankers give the gold companies their lines of credit to operate. Many of the gold companies know what is going on here, but are afraid to do anything about it for fear that their credit lines might be severed or reduced. What is worse, is that we think certain gold companies know exactly what is going on and are, in some ways, are in bed with Hannibal. They have taken this knowledge and have hedged to the max, thus profiting in many ways from this dreadful situation. In the meantime, the sustained low gold price is destroying exploration companies and other higher cost gold producers. Thus, certain of these gold producers have become "Hannibals the Cannibals" ( perhaps unintentionally ), and are picking off their own by corporate acquisitions of cheap gold resources. As each month passes without a substantial rise in the gold price, the situation for many gold companies will grow more dire and the "Cannibals" lusty appetite to devour other weakened gold firms will grow, even if unwittingly.

What a nightmare! A few gold companies have told us they might be afraid if they support GATA, that the U.S. government will sic the environmental authorities after them and their gold mining properties. What was done and threatened to those that dared speak against President Clinton has had its effect in the land. What have we come to? Is this now the United States of China? - where individuals and companies are afraid to speak out and react to wrong doings for fear of own government squashing their lives and livelihood. A revolting development.

Well, GATA ( and with our Jody Foster type efforts ) is going to do something about this mess. Regarding the gold companies: we are very sympathetic to their problems at the moment. We are alerting them to our activities,, our concerns, and our intentions to give some support to their industry and to shareholders that believe in the role of gold and the gold companies.. For the most part thus far, they have been very receptive to our calls and have assured us, they will follow us closely. That is all we ask for at this point in time. In the near future, we are going to ask for their support. If they cannot give it to us publicly, they can give it to us anonymously. They will be for us, or not for us. Black or white. That simple. The collusion in the gold market has gone on too long and is too serious now for gold miners around the world, gold company shareholders and certain gold companies to do any pussyfooting around. Time is of the essence.

In the meantime, GATA is methodically marching forward. Yesterday, Chris Powell, John Meyer and I flew to Philadelphia to meet with Merrill Davidoff and Jerome Marcus of Berger & Montague, GATA's future attorneys. GATA is so very, very lucky. Merrill Davidoff is extremely knowledgeable about the gold market and follows it very closely. He has also won many BIG, well known cases. Jerome Marcus is a tiger, too. Philadelphia Magazine just wrote a story about him and his behind the scenes role in the Paula Jones case. As John Meyer said on the way back, "this guy is so good, he strategized a way to win a judgement in a case that had been throw out of court". As you are all aware, there are many details that we cannot get into in a public forum. Our attorneys would prefer we say nothing at all, but they also know that we need to mobilize support and enthusiasm for GATA. That cannot be accomplished in a vacuum, so I will lay out as much as I can for you.

We should officially retain Berger & Montague very soon. That will coincide with our intention to retain Edelman Public Relations Worldwide. We will then announce that we are launching an investigation into the activities of various bullion banks and financial institutions that we believe have colluded to hold down the gold price. We intend to dig up additional evidence of collusive activities that will bolster the evidence that has come to us already.

Remember, the attack plan we laid out in Shaka…..Zulu. It calls for the formation of a diamond formation that will turn into an enveloping horn. At the front of the diamond, will be our efforts in the legal area. While engaging the manipulators head on with our legal, investigative efforts, our left and right flanks will fan out and engage the colluders from the sides.

On the left flank, will be our PR effort to counter the negative publicity officialdom spin meisters are pitching at the media. We will let the investment world know that we believe they gold borrowing speculative crowd is short over 3,000 tonnes of gold and that is more than one year's mine supply. We will pound away at the fact that this is a very dangerous situation and could cause some economic chaos for the financial markets if the size of this speculative short position is not sharply reduced. Our purpose will be to focus on this issue to draw attention to the precarious situation of the gold lenders and gold borrowers. We hope that by raising investment community awareness of the vulnerability of the shorts, that other big players in the investment world will begin to want to take them on. Remember, future longs will have the natural supply/demand deficit and Asian official sector buying as allies. We have been told that certain bullion banks have already become a bit nervous about GATA's activities. It is our goal to make them really sweat.

We also want to alert the public as to the harm this activity is causing certain poor, but mineral rich, African countries. Thus, we will oppose IMF gold sales, for the reasons we have already explained to you in previous Midas commentary. We intend to state our case to some members of the Joint Economic Committee of the US Congress sometime in April and will attempt to bring other sympathetic politicians up to speed as to the shenanigans going on in the gold market.

The right flank activity will be our efforts to solicit the support of the gold mining companies and, in time, to alert gold company shareholders as the stance by individual companies on the issues raised by GATA. The GATA Committee members all own shares in gold companies. We cannot see any point investing in a gold company that is contributing to holding down the price of gold needlessly ( might as well invest in a tiddlywink company someplace else where there is hope and there is at least a chance for the share price to go higher ). That is not to say we do not appreciate what hedging has done and can do for certain gold producers ( that subject for a different time ). However, if they feel compelled to hedge, even at these horrendous price levels, they can still support the efforts of GATA. Already, we have received feedback that some of them agree with us about collusive price activity but continue to hedge because they know what is going on. We hope all the gold companies will give us their support in one way or another.

The back of the horn is open and is where the shorts can retreat and scurry for safety by buying back their positions. To take on some of the most powerful financial interests in the history of world is formidable task, but one that we can win because we believe we have the truth on our side. But this battle can only be won with the support of many and a building of momentum so the "real" story of the gold market is heard around the world.

Potpourri and the Gold Shares

The XAU continues to meander, but 60 support has held like a rock and it rallied strongly at the close today to finish at 60.76 down only 1.18. Thus, the XAU joins silver in a stark divergence from the bullion breakdown.

Ironically, as Midas was preparing today's commentary, Café member, Jerry, sent me this wonderful letter and expression of his feelings. What timing! It is to the gold industry. Jerry, I hope some of our members send your letter to some of those would be "giants".

For Whom The Bell Tolls

(A Leadership Question)

I think back to a day when gold was a welcome addition to any portfolio. I think back to a day when ownership represented security and peace of mind. I think back to a day when conscience and integrity ruled, and giants held these values high for all to see.

Time and technology have changed this industry like many industries, which is good; yet the impacting change that occurred in the leadership of your companies, is sadly to say... poor. It is the inherent values of company leaders that have shaped this industry and turned it into what it is...and what it has become...bankrupt, manipulated and leaderless.

Who within the industry speaks for it? Who within this industry is willing to stand up and fight for it? Are there no giants within the ranks? Analysts speak for your industry and you BELIEVE, Bullion Banks speak for your industry and you ACT. Your industry is a technical and fundamental defies all logic. Your silence is as perplexing as the problem itself. The gold industry in reality is nothing more than an extension of the banking industry...BELIEVE IT!

You are not victims in all of this, but willing or unwilling perpetrators. This could not happen over the collective voices of company leaders raising the alarms. Gold leasing through Bullion Banks services the financial community, not your industry for which it was designed. You know this and accept the rules at the very expense of your industry. I have yet to see in print one company leader rise to the moment, challenge the rhetoric and explain the real facts. Gold is short thousands of tons, you know this better than anyone. You are witnesses to a rape and have done nothing to stop or expose it.

The next industry conference you attend where analysts are projecting $295 gold prices through the year 2000 ask them: How can this be if supply is running behind ever increasing demand and the estimated physical short is 3-5 years global production? The next time your friendly Bullion Bank calls to urge "locking in" that lofty $290 price, ask them the same question. The next time you speak to the press on company or industry matters, let them know the facts as well. Let one amongst you stand and quickly the rest will follow.


Unless change comes from the top and within, this industry is doomed to suffer many years into the future and there will be none to blame but yourselves. Use your time and efforts well, take stock of the moment. As I write, many of you will not be around as early as next year, such is the state of your industry and the high price of your advisors. "The news always follows the tape" and someday soon a book will be written explaining how this happened for all of the wrong reasons. If you "believe in truth, stand and be strong, let grace fight the battle and sin dies here. " Stop this! Stop it now!

The "Bell Tolls For Thee".


Jody Foster


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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