10:15p ET Thursday, February 22, 2001 Dear Friend of GATA and Gold: Here are two more dispatches tonight from GATA Chairman Bill Murphy to his subscribers at www.LeMetropoleCafe.com. CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. --------------------------------- By Bill Murphy www.LeMetropoleCafe.com February 22, 2001 The World Gold Council today sent a letter today to its members. It spoke of problems in the physical gold market. I was told that such a letter is highly unusual. As the day progressed, there was continued talk in New York about a physical gold problem. It appears that while there is central bank gold around, there is not enough refined gold needed by gold users. What was being used for lending is gone, used up -- and is now jewelry around someone's neck in India. The Bank of England and others are scrambling to cover current needs. That could explain why some official-sector entity is selling gold right now -- so that it can be sent to refineries. Another story has it that a gold producer wants to cover some forward sales and return borrowed gold to the central bank. That means the bullion banker lender must buy physical gold and return it to a central bank. That tightens up the spot market. Cafe member Marcia Peters sent the following about the lease rate situation: "On Jan. 3, 2001, gold could be leased for a one-year term at 1.4 percent. Bullion banks (or whoever lends the stuff) were confident enough that this price adequately captured whatever risk they could confidently predict for a year in advance. One-month rates were at three-quarters of a percent. "By last week (Feb. 15) the one-year rate that had stayed flat in the low 1.35 percent range for six weeks aggressively moved up to 1.5 percent, and one-month rates were at 1 1/4 percent. Change in confidence? Unforeseen change in economic conditions? I'll say. "By today (Feb. 22) the lease rates for one, two three, and six months are all in the neighborhood of 1.54-1.59 percent. Suddenly the 1.40 that they were willing to lock in for a year just six weeks ago looks like a very bad deal. Likewise the 0.9 percent they were willing to lock in for a six-month lease. What has changed? Perception of risk, obviously." Regarding the meeting I had with the Reserve Bank of South Africa.... So there is no confusion, it was arranged during a Cape Town breakfast meeting with the minister of Minerals and Energy, Ms. Phumzile Mlambo Ngcuka, at her request. Actually, that moment gave me a chuckle. During the phone call to set up the meeting, the ministry official on the phone started smiling, so I asked him about it. He told me that his colleague in Pretoria had asked, "What is he up to now?" Other useful info sent my way.... The Reserve Bank of South Africa is owned by private shareholders. Who are they? No one could tell me while I was in the country. But the talk is that many are the same financial institutions that are the shareholders of the Federal Reserve Bank in the United States All one big happy cabal family. Word also to me is that the Oppenheimer family of Anglogold fame is a big Reserve Bank shareholder. Perhaps that is what the recent email to me from South Africa was all about. The plot thickens everywhere we turn. I wonder why British Prime Minister Tony Blair is suddenly headed to Camp David to meet with President Bush? Sir Peter Tapsell of the House of Lords in England is making noises about the gold market again. One of the leading newspapers in London is back on the case too. Hmm. As usual, gold sold off after London closed today and the stock market was saved from oblivion via "massive futures buying" by "well-known players," according to a report on CNBC. No matter, the stock market could not rally and gold held steady. What is important here is that all the evidence suggests that President Bush and his no-nonsense vice president, Dick Cheney, and Cabinet members (Rumsfeld, Ashcroft, Powell) are going to end the Wall Street shenanigans of the previous administration. My guess is that they are doing so now, but in a way that is calculated and prudent. Remember: Reg Howe, Frank Veneroso, Chris Powel,l and I gave a dissertation about the gold market scandal last May 10 to the speaker of the U.S. House of Representatives, Denny Hastert, at the U.S. Capitol. He was so interested that he set up a meeting two hours later with Rep. Spencer Bachus, chairman of the House Subcommittee on Domestic and International Monetary Policy. This committee has gold oversight responsibility. Both are Republicans. We told them that we were like doctors who had found a terrible cancer. The patient needed chemotherapy and the side-effects would be unpleasant and painful, but the patient would survive with proper treatment. We said: To go into denial and do nothing would mean death. If you win the election and nothing is done, the gold market will blow up on your watch and you will be blamed. My guess is they have known everything all along, but did not know how to deal with the fraud until now. Let us hope that is the case. As related to me today by Cafe member Michael B.: Is Alan Greenspan now out of the loop? A week ago Tuesday he spoke to Congress and made no mention of inflation problems. No Greenspan "isms" on the subject, no warnings of the PPI and CPI bombshells coming the following Friday and Tuesday. Is the no-nonsense Bush administration upset with Greenspan for his role in the sleazy financial market maneuvers of the Clinton administration? Fasten your seat belts and stay tuned! * * * Quotes from the unusual letter that the World Gold Council sent its members today: "According to usually reliable market sources, the Bank of England has not been lending gold over the past few days. This is unprecedented, as its short-term lending is considered a vital tool in the smooth running of the London market. The bank's explanation for this (confidentially) is that many client central banks had lent out for longer periods than normal around the Washington Agreement period, and that as the loans matured they were not being renewed, creating a temporary tightness in liquidity. The market is regarding this explanation with some suspicion, however, suspecting that more may be involved. "It has indeed been suggested that another joint central bank move on gold lending may be imminent, cutting the amount of gold available for lending. "We have no firm evidence for such a move. However, if this were to happen, then lease rates would soar; non-Washington Agreement countries have increased their lending substantially in recent months and it is unlikely that they could fill any liquidity gap produced. In these circumstances, a price spike could easily develop; shorts would be quick to cover while other borrowers would be forced to buy as the rolling over of existing loans became more difficult to achieve." Can you smell the smoke? -END- ------------------------ Yahoo! Groups Sponsor ---------------------~-~> <FONT COLOR="#000099">eGroups is now Yahoo! Groups Click here for more details </FONT><A HREF="http://us.click.yahoo.com/kWP7PD/pYNCAA/4ihDAA/WyOVlB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------_-> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
