Gold, Silver, Platinum & Diamonds

August 6, 1999

Persistent rumors have been coming out of London for three weeks that G-7 bankers have been bailing out hedge funds to the tune of $25 billion and at the same time making a coordinated effort to drive down the price of gold, so that as much gold as possible can be bought at lower prices. Players are the Bank of England, the ECB, the Fed, Bank of Japan and the remainder of the G-7. Supposedly Tiger Fund had market exposure of $650 billion and made grievous mistakes that would have forced it into bankruptcy taking the world financial system down with them. That is why other elitists rode to their rescue. Tiger was another victim of the yen carry trade. As we explained in previous issues, that there were forces in play that were driving interest rates higher, that had nothing to do with the supply and demand of credit. Rates on the 30-year Treasury bond moved from 5 3/8 to 6.2%. We now feel a good part of this move was caused by Tiger and others selling Treasuries and buying yen to terminate their carry positions, which had pushed them to the brink of insolvency. The yen had moved upward from 1.25 to 1.15. The higher the yen goes the larger the losses. Rumors or not, there is now enough evidence that since June 12th the G-7 has covertly agreed to a bailout to prevent a repeat of the October 1998 LTCM triggered meltdown. As usual the controlled media kept a lid on the entire event, which is still in progress. At the heart of the crisis is Japan and Switzerland's ultra-cheap credit markets. They both have almost zero interest rates. You borrow yen and francs, buy dollars, buy Treasuries on 90% margin and make a profit as long as the yen and franc don't go up in value. The franc just went up from 1.57 to 1.49 after having broken down at 1.55. The Japanese have already intervened and purchased $25 billion in dollars to stem the upward rise of the yen and it's gone up anyway. This exercise by the Japanese government is to allow the hedge funds to cover their short yen positions. As it is U.S. Treasuries were sold, hence the almost 1 point jump in yields. The idea was to sell Treasuries and have the Japanese intervene so these hedge funds wouldn't have to sell stocks. The other part of the equation is manipulation of the gold market by the IMF, Swiss and British. The British being the main culprit. The hedge funds had borrowed billions of dollars in gold at 1-1 1/2% interest, sold the gold into the market and used the funds to leverage stocks and bonds on margin and in derivatives. If gold had gone up the entire financial system would have collapsed. Thus, in order to be sure gold went down the British announced the sale of 50% of its gold reserve, which we believe was a sham transaction. We expect gold could hold between $250 to $260 an ounce, but the financial elite could force prices lower to some level predetermined among themselves, then amass huge private gold holdings in preparation for the day when paper becomes worthless and this new world order introduces its new One World Currency. Why else would the Bank of England choose the most disruptive method of selling gold? In retrospect we can now see that the fervor over an increase in interest rates was simply a dog and pony show to divert attention away from the real crisis, that as of yet hasn't been resolved. It is still on life support until the elitists decide which process might be to their long-term advantage.

It's official, Placer Dome is halting development of the $575 million Las Cristinas mine in Venezuela. Management said, because of changed gold market conditions and lower prices, which have created greater uncertainty about the future, we are halting development. Those are certainly factors, but just as, if not just important, is the protracted legal dispute with Crystallex and accusations in Venezuela that a judge on the panel, that adjudicated the claims, had been paid off, puts a dark cloud over Placer's ownership claims. The question is, will the ownership situation become an issue within the U.S. Court Systems? Additionally, Venezuela Guyana Corp., the 30% JV Minca Partner, says it wasn't even consulted prior to the decision. Stating these very one-sided reasons displayed complete disrespect towards CVG investments in the project. CVG was infuriated being shunted aside and got more disturbed when Placer stated it would "continue in other countries" to create a portfolio that would increase its proven and expected gold reserves. Now CVG says, "they will continue to analyze alternatives to secure continuity in Las Cristinas", as well as study the consequences derived from Placer Dome's unilateral decision. Placer's arrogance may well have gone too far this time. You don't do a trip on your partner in crime on his turf. In addition environmentalists have long been opposed to Placer's presence in Venezuela because of an incredibly bad reputation on environmental issues. At least in Venezuela it is common knowledge that PDG is involved in the endemic local corruption.

Cyprus Amax Minerals & Asarco announced a merger and both their stocks fell 3%. Both are big producers of copper as well as precious metals. It looks like the public sees the marriage more like a suicide pact.

Gold Fields lost a court bid to have a strike by workers at its Oryx mine on the Free State declared illegal. 4,000 workers have stopped work due to retrenchment packages. The redundancies, caused by lower gold prices, is raising social and economic havoc. The company offered two weeks pay for each year of service. The union is demanding four months pay for a year of service and six months notice of any redundancies. There recently has been massive marches in Pretoria citing British and Swiss gold sales.

House Banking Committee Chairman Jim Leach (R-IO), stunned the world elitists when he announced it was unlikely that committee members would approve the IMF gold sales, because it would sink gold prices when they're already near 20 year lows. He said, "care must be taken not to jeopardize the mining industry that provides many of the most stable jobs in the developing world." The elitists are deeply surprised by the depth of the opposition to the gold sale, particularly from American citizens, which would pay for the IMF's share of a plan to reduce the debt which poor countries owe to wealthy nations. The IMF wants to approve the sale in September, but the U.S. holds veto power, and can't offer support without Congressional approval. Major opposition was drawn from gold-state lawmakers, the Congressional Black Caucus, IMF critics in Congress, and poor-nation gold exporters such as Ghana and So. Africa.

Aber Resources, which holds a 40% interest in the Diavik Diamond Project in Canada has sold 14.9% of its interest to Tiffany for $72 million. Tiffany needed a reliable supply of high-quality diamonds so it opted for this vertical integration strategy, which will also widen profit margins.

Demand for platinum comes from its use in automotive catalytic converters, jewelry, chemicals and glass manufacturing, petrochemicals, electrical and computer components and investment bars and coins. In 1998, total demand for the metal rose 4% to 5.35 million ounces. Mine and supply from stocks gained 8.9% to 5.4 million ounces during the same period. Each year, many more high-technology applications are discovered, from computer hard disks to new fuel-cell vehicles where platinum is used in the proton exchange membranes technology for electric cars. Last year So. Africa produced 3.68 million ounces. Russia is the second largest producer.

The volume of all the gold ever mined can occupy a cube 63 feet on each side.