Greenspan / Bullion Dealer Gold Panic

May 22, 2001

On Friday, I informed you that it was the BULLION DEALERS and TRADE that ran up the gold price after it broke above $275. I explained that it was clear to me that once the dealers saw The Gold Cartel losing, they panicked - for they know what is coming down the road.

The following came in yesterday from one of your Café members and confirmed what I already brought to your attention. By the way, pathetic Bloomberg and Reuters (whom I met with personally two years ago, yet still refuse to even mention the word GATA) reported that it was spec buying that drove gold to 9 month highs in the biggest one day move higher since the Washington Agreement. Wrong!

Hi Bill,

My name is J. C. and I have been a member of the cafe for what is now

going on my third year and I am also a Comex member and have been so for 20

years. I would like to share my observation of Friday's move with you. Since

Thursday Chase was trying to defend the 275 number. Every time we approached

it they sold 200 August contracts every dime up. The June/August switch was

offered at a buck so Chase started selling August at 27520-27580 and Goldman

was a seller in June from 27450 to the high of 27490. Whenever another trader

bid 90 Goldmans broker screamed SOLD--COME ON which I am sure you know means

that Goldman had the world to sell. I turned to another trader and said Chase

and Goldman will not let this market trade above 275 and it did not settling

at 274.30.

Now on to Friday......The market opened a dollar lower and quickly

traded down to 27260, on small volume, the Euro was on it's lows and the

dollar was on it's high's (as you know that is not a good sign for gold) and

it looked like it was going to be a down day. Then Moore capital started to

do some buying in June and Refco was a buyer in August and the market was

drifting higher, and because of the Euro and the $ most locals in the ring

were short. Goldman and Chase again tried to defend the 275 number but on

this day it would not work. Massive buy stops were hit above 276 and we were

off to the races. One of your articles this morning stated that it was fund

buying and CNBC is telling the world that gold and oil were up on Friday due

to unrest in the middle east. I want you rest assured that the buying from

276 to 288.50 was majority trade buying. I have been on the exchange a long

time and I have heard and seen it all but this my friend was TRADE BUYING.

Thanks for listening to me and thanks for all you and your staff are trying

to do for the gold world.

Sincerely,

J. C.

Important feedback from another Café member: "A financial man on Wall Street spontaneously observed that gold was moving. A mutual fund manager innocently asked why, to be told by the firm's commodity people had said that it stemmed from anxiety concerning the law suit in Boston alleging BIS involvement in manipulation."

This is what we know:

*The specs that got long on Thursday are big winners, so big that they can freely add on dips - or whenever they choose to do so. This is now a dream trade.

*The dealers rarely buy on strength or technical chart breakouts. This indicates a bit of panic on their part. Most bullion dealers were not part of The Gold Cartel, but most had to know what was transpiring and some had to be playing along for the ride. They have to now be stunned at what is happening. The big move has occurred ever since GATA went public in South Africa and received so much South African media attention as a result of the GATA African Gold Summit in Durban. It is no coincidence that gold has rallied over $30 per ounce recently. The haughty and arrogant bullion dealers cannot believe that this is happening to them - gunned down by the GATA guerilla forces.

*If the dealers are scrambling to cover shorts and the specs are long and want to get longer, who is going to sell? The producers? Certainly not the Aussies. The Aussie gold price is now around A$552. Many of their hedge books are underwater and sinking fast. They (Sons of Gwalia types) are liable to panic once they realize GATA is winning and gold is headed for $600 per ounce.

Certainly, not mega hedger Barrick. They just added substantially to their hedges near the bottom. A recent story in www.thestreetcom.com: "Barrick Gold is one of the most heavily hedged gold producers. In fact, the company actually added to its hedge book in the most recent quarter, selling gold forward at an average price of $270 per ounce. Analysts estimate that Barrick has between 27 and 39 percent of its total reserves sold forward, a huge number for a gold company."

Another significant hedger, Anglogold, announced recently that it had reduced its forward sales by 800,000 ounces. Anglogold will more than likely continue to reduce hedges in the future, not increase them.

If dealers want to buy and some producers need to cover, then who could the sellers be? Certainly, not the specs. They want to buy and the ones that are already long prior to Friday have big cushions to do so. It is not just the "black box" types that want in. One of the legendary traders/investors of all time was rumored to be a big buyer on Friday.

That leaves only The Gold Cartel, or the central banks, to quash another rally. The problem there is that GATA is breathing down their necks everywhere they turn. Especially, Alan Greenspan who, as it turns out, may have been one of the ringleaders of the gold fraud ever since he abruptly took his seat on the Board of Governors of the BIS in Switzerland.

Let us examine the pickle Greenspan is in. It will illuminate Bob Chapman's "on the money" gold bulletin that he sent our way early this past week which included:

"Our intelligence sources have informed us that Alan Greenspan has given the bullion banks until the end of May to clear up their hedging and outstanding gold derivative positions."

Let us regress to Alan Greenspan's letter to Senator Lieberman of January 19, 2000.

The Honorable Joseph L. Lieberman

United States Senate

Washington, D.C. 20510

Dear Senator:

Thank you for your recent letter from your constituent, Chris Powell, concerning the open letter published in the Thursday, December 9, 1999, edition of Roll Call.

The letter asserts that the Federal Reserve has been seeking to manipulate the price of gold by intervening in or otherwise interfering with the free market in gold. This is not true.

The Federal Reserve owns no gold and therefore could not sell or lease gold to influence its price. Likewise, the Federal Reserve does not engage in financial transactions related to gold, such as trading in gold options or other derivatives.

Most importantly, the Federal Reserve is in complete agreement with the proposition that any such transactions on our part, aimed at manipulating the price of gold or otherwise interfering in the free trade of gold, would be wholly inappropriate…………...

-END-

Note his words: "the Federal Reserve does not engage in financial transactions related to gold."

Several Café members brought the following to GATA's attention. It is from a European Central Bank publication and gives examples of certain kinds of ECB financial transactions. Amazingly, they involve what GATA calls The Gold Cartel and some of those institutions that Reg Howe has cited in his Complaint.

It could not be more clear that some scholarly bureaucrat was explaining certain kinds of European Central Bank transactions. No one could possibly make up these names and have them match almost exactly what GATA and Reg Howe have been alleging. Not after Reg uncovered the now infamous quote from the January 1995 Federal Reserve Minutes:

"MR. MATTINGLY. It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The [ESF] statute is very broadly worded in terms of words like "credit" – it has covered things like the gold swaps – and it confers broad authority."

A swap infers a counter-party and GATA found one for the Federal Reserve. Mr. Greenspan presided over that January 1995 meeting and that brings us to the specifics in the ECB discovery:

European Central Bank

Statistical treatment of the Eurosystem's international reserves

October 2000

Postal address:

Postfach 16 03 19

D-660066 Frankfurt am Main

Germany

Telephone +49 69 1344 0

Fax +49 69 1344 0

Internet: http://www.ecb.int

Page 37 IV Appendix: Some numerical examples

This section includes examples of some transactions involving external reserves. The following types of transactions are considered:

*Gold transactions

*Credit Lines

*Repurchase Agreements

*Interest rate swaps

*FRAs

*Forward Foreign exchange contracts

IV.1 Gold transactions

An NCB "A" of the euro area performs the following transactions in gold:

  1. 5 Dec. 1999: purchases 20,000 ounces of gold from the Bank of England, at USD 300/ gold oz. This transaction is settled by means of a credit entry in a six-month deposit in USD in the Bank of England in "A" (at 3%).
  2. 15 Dec. 1999: one-month gold deposit of 10,000 ounces in J.P. Morgan New York. JPM places USD 3,100,000 in US government securities as collateral. Under the terms of the loan, JPM agrees to return the gold on demand; otherwise, the collateral would be exercised. At maturity (on january 15 1999), in addition to the gold, "A" receives from JPM USD 3,000; this amount is placed in a deposit denominated in USD in JPM. At the same time, the collateral returns to JPM.
  3. 20 Dec. 1999: "A" undertakes a gold swap with the United States Federal Reserve in which "A" provides the Federal Reserve with 1,000 ounces of gold in exchange for USD 300,000, in currency. The transaction will be reversed on 20 January 1999, at the spot proe of the gold prevailing in the market at the moment.

-END-

The European Central Bank (Bundesbank), the Fed, J.P. Morgan, the Bank of England!!!! It all fits perfectly. GATA has them nailed and the investment world is coming to grips with the fact that GATA is correct and so are most of our allegations - maybe all of them! That is most likely why the gold price took off once Dow Jones reported our charges 11 days ago, reporting that GATA was in South Africa to expose them to African governments. The GATA watching smart money knew the jig was up. Once gold took out $275 and observers saw Chase and Goldman Sachs overpowered on Friday, panic set in among other shocked gold shorts.

Which brings us back to Senator Lieberman and Alan Greenspan again. In an extraordinary move, and as a result of the GATA/Howe/Turk revelations, Senator Lieberman has gone back to Greenspan for clarifications. I have a copy of the letter that Senator Lieberman sent to Federal Reserve Chairman Greenspan. Regard what Chris Powell, who has known Senator Lieberman for 30 years, told us:

3:43p ET Wednesday, May 9, 2001

Dear Friend of GATA and Gold:

Below are the questions I have put to Fed Chairman Alan Greenspan and Treasury Secretary Paul O'Neill through Sen. Joseph I. Lieberman. It would help if others in the United States asked their congressmen to do the same.

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

* * *

1) What are the "gold swaps" cited in the minutes of the January 31, 1995, meeting of the Federal Open Market Committee?

2) What "gold swaps" have been made by the ESF, the Treasury Department, or the Federal Reserve in the last 10 years? Whose gold was involved? What other parties were involved? What is the status of these "gold swaps"?

3) What was the purpose of these "gold swaps"? Do these "gold swaps" facilitate the lending, leasing, or sale of gold by other parties? How did these "gold swaps" come about? What does the United States gain from them? What becomes of gold that is "swapped"?

4) Were these "gold swaps" ever made public or reported to Congress? If so, how? If not, why not?

5) Have these "gold swaps" encumbered or otherwise put in jeopardy the gold reserves of the United States? If so, in what amount and to what extent?

6) Why has the gold at the U.S. Mint at West Point, N.Y., been reclassified from "gold bullion reserve" to "custodial gold"? Is this gold still owned by the U.S. government?

If not, what is the authority for its having left the possession of the U.S. government? Whose gold is it now? What has the United States received for it?

7) If, as Chairman Greenspan suggested in his letter of January 19, 2000, to Sen. Joseph I. Lieberman, the Federal Reserve System does not interfere in the free trade of gold, why were "gold swaps" discussed at the FOMC's meeting on January 31, 1995?

8) Exactly what is the policy of the Federal Reserve System, the Treasury Department, and the Exchange Stabilization Fund toward gold and the gold reserves of the United States?

-END-

How can Greenspan possibly respond to this without setting off a few financial time bombs? Did he lie to Lieberman the first time? It sure appears that he did. It is important to remember that he may have to testify under oath in the Reg Howe Complaint. Was is this poor, deceitful man to do?

Abandon ship, that is what. And that can explain the Bob Chapman intelligence report that Alan Greenspan is instructing bullion banks to run for the hills. They have been found out and the reverberations from the revelations are only starting to kick in. As planned over two years ago, Shaka's "Enveloping Horn" has The Gold Cartel surrounded. I refer to my closing statement at the GATA African Gold Summit:

"The "enveloping horn" is now in full battle formation. By acting decisively together we can close the back end of the "enveloping horn" on the gold cartel. These financially and politically powerful institutions are likely to be slightly bewildered. The truth will see the light of day and we will win. So will all of sub- Saharan Africa."

Siyabonga kakhulu! (Thank you)

Hambani kahle! (Go well)

Ukuthula kube nani! (Peace be with you)

It is not just Senator Lieberman who is breathing down Alan Greenspan's neck. I know of at least one official party that is following through on GATA's Action Plan presented at the GATA African Gold Summit, which included the following questions:

"Alan Greenspan of the U.S. Fed and Paul O'Neill, new U.S. Treasury Secretary, should be asked whether the U.S intervened in the gold market in any way following the sharp price rise after the Washington Accord."

"8. To the U.S. Federal Reserve Bank Chairman: On July 24, 1998, before a House Banking Committee and on July 30 before the Senate Agriculture Committee, you stated,

"Central banks stand ready to lease gold in increasing quantities should the price rise." Since then, that is exactly what happened every time there was a gold price rally -- to the detriment of the African gold-producing countries. How did you know that and what specific central banks were you referring to?"

What is Alan Greenspan going to say to various African Governments who query him? What is he saying NOW to them? How will Colin Powell respond to these questions when he visits Africa?

It looks to me like the Federal Reserve chairman is on a hot seat, one that is growing hotter by the week!

The more one reviews what GATA has said and the evidence that we have collected over the years about the gold market manipulation, the more the brightest people in the gold industry realize that we are right. Few are brighter than Peter Hambro, who sent this letter to the Financial Times in response to their recent GATA slighting article.

8 May 2001

Ms. Gillian O’Connor,

The Financial Times,

Dear Gillian,

Thank you for the piece on Professor Neuberger’s excellent work on gold derivatives. May I add some observations based on 10 years as a bullion banker and 11 as a gold producer and one who has seen it from both sides of the fence?

The Professor concludes that because the banks’ derivative positions in gold are just 0.3% of their total derivatives this exposure is inconsequential. What he does not tell us, or not in the Executive Summary that I have downloaded, is what the absolute numbers are, nor does he compare these paper promises of gold to the real thing.

He does not remark on the very small (when compared, say, to the Foreign Exchange market) turnover in real gold, nor the very shallow nature of the physical gold market. He should have compared this to the volume of its derivatives

It is important to do this because gold is gold and money is an invention. Governments and Central Banks can increase the supply of the underlying item in almost all financial derivatives from Aus$ to Zloty but only us miners can deliver the gold. That means that unbridled creation of gold derivatives is inherently dangerous.

To combat this risk the prudent bullion banker requires his derivatives counterparty to put up initial and variation margin on the position. I learnt this credit policy from my then Chairman and Proprietor, Dr. Henry Jarecki, himself the principal counterparty to the Hunt brothers in their attempt to corner the silver market in 1979.

My inquiries at the Bank of England and the Treasury, however, lead me to believe that this is not what the UK is doing. Rather the Bank of England, on behalf of the Debt and Reserve Management Office of HM Treasury is engaged in "Balance Sheet" or unsecured lending of our gold. It would also seem that there are no provisions for the borrower to mark-to-market the monetary value of the gold loans they have taken.

The corollary to this recklessness is the extension of margin-free facilities by the bullion banks to their downstream customers: many of whom are struggling miners with little or no cash reserves and who, if the market rises substantially, would find it impossible either suddenly to make physical delivery of the gold they have sold forward or to find the cash equivalent. That is why the sudden gold price rise was so damaging to Ashanti, where such large gold derivative positions had been created.

When I was a bullion banker and before I became a producer, I believed that Gold-in-the-ground + equipment = Gold in the bank.

On this basis I thought our gold lending was almost risk free. I now know, from experience as a producer, that my rule of thumb was wrong. Mining is much more difficult than that.

It seems likely that this Pauline conversion on my part may well also have happened to Ashanti’s counterparties when they understood the yawning void in their profit and loss accounts that another increase in the spot price could create from nowhere.

A 10% move on the 7,000 tons of loans the Professor identifies is roughly US$ 6 billion. How simple then, and how sensible it would be to use their big balance sheets in the little gold market to keep things stable. It would be easy, too, in a market he describes as lacking transparency. The only people to get hurt are the mines’ workforce and their shareholders.

As Professor Neuberger so clearly says "They [also] have an interest in acting in a way that maintains an orderly market" which is what GATA believes and you describe as a conspiracy theory. Given the sound economic reason he sets out for such manipulative actions, is it not possible that his paper serves more to confirm than to debunk the popular myth?

-END-

Speaking of the smart ones. Throw in Mark Wellesley-Wood, Chairman of Durban Roodeport Deep, Limited. He picked up on one of the most important points of the summit and stated so in his recent comments on GATA and our summit:

"Bullion bankers, many of whom are our counterparties, are increasingly in what GATA's Frank Veneroso termed an "inadvertent corner." They will be under increasing pressure to unwind their positions. Let's just hope that they do not create too much havoc in the industry in the process."

Frank told the attendees how the jewelry buying women of the world had cornered the gold market inadvertently and that many bullion dealers had become a "prisoner of their own shorts." Friday's stunning move up is evidence that is true and that is what gold players are finding out.

Mark Wellesley-Wood's on the record support of GATA is a major breakthrough for GATA and gold shareholders all over the world. It will help us immensely in our African efforts. Therefore, I urge gold shareholders everywhere to buy Durban Deep shares.By doing so, you can send a message to other gold producers that it is time to wake up and stand up.

This is no charity request. Durban Deep has significant gold reserves that require a higher gold price to make them profitable to mine. Few gold producers will benefit like Durban Deep as gold rises to $600 or more per ounce. The share price of Durban Deep will fly. The more gold producers follow Durban Deep's example and help draw attention to our claims, the more the massive gold shorts will be forced to cover. The price of gold will then rise even further. You will then make more money on all your other gold/goldshare investments.

We are at the initial planning stages of a www.LeMetropoleCafe.com and GATA extravaganza at the Blanchard Gold Conference this Fall in New Orleans. Details will be forthcoming shortly. Durban Deep was a big favorite of the legendary Jim Blanchard, whom I had the pleasure of meeting. It will be most fitting for many of us to finally meet at his conference and celebrate the good times and our winnings.

By buying up the Durban Deep gold shares, you can actually contribute to your own financial good fortune as a Durban Deep share price spike up will call attention to the company's support of GATA. The more public focus GATA receives, the more the gold price will go up as more and more investors realize what is coming and why. It would be wonderful if gold shareholders all over respond to GATA's suggested action and buy up the Durban Deep shares to make a definitive statement to other gold producers. Please send this GATA heads up to all gold investors. This is a win-win situation for all of us.

The term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.