CRB weekly
http://futures.tradingcharts.com/chart/CR/W

Weekly soybean chart
http://futures.tradingcharts.com/chart/SB/W

Weekly corn chart
http://futures.tradingcharts.com/chart/CN/W

Weekly wheat chart
http://futures.tradingcharts.com/chart/CW/W

Weekly silver – a smart upside reversal pattern:
http://futures.tradingcharts.com/chart/SV/W

HUI weekly
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8

Gold Firms Oppose IMF Gold Gale,
Citing Chance of Falling Prices

By Eric Onstad
Reuters
Friday, February 11, 2005

http://www.reuters.co.za/locales/c_newsArticle.jsp?type=businessNews&localeKey=en_ZA&storyID=7605233JOHANNESBURG -- The world's biggest gold firms are banding together against proposals to sell gold from International Monetary Fund stockpiles, fearing tumbling gold prices.

"Already the gold price has fallen $10 an ounce as a result of their announcement that they might be looking at it," said an official from industry body the Chamber Mines in South Africa, the world's top ranking gold producing nation.

On Thursday, the world's leading gold miner, U.S. Newmont Mining Corp., said it would lobby U.S. officials against the sale of IMF gold reserves to fund debt relief for the world's poorest countries.

Mining companies argue that sales of some of the IMF's 103 million ounces of gold reserves would hurt developing countries that depend on export revenue.

South Africa's Harmony Gold urged officials to take a quick decision on IMF gold reserves, the third biggest in the world, since uncertainty was hitting prices.

Gold slid to four-month lows of $410.50 an ounce this week on worries about IMF sales, although spot gold had recovered to $418.45/419.20 an ounce by 1454 GMT on Friday.

"The gold market cannot suddenly handle the quantum of gold that we're talking about here," Roger Baxter, the South African chamber's chief economist, told Reuters.

The World Gold Council, which groups global gold producers, said it would have to wait for specific proposals from the IMF conference in April to assess possible effects, but was worried.

"We are very concerned at the effect these undefined proposals have already had on the gold market, especially when bearing in mind that gold exports are a substantial source of revenue to a number of developing countries, including some of the poorest," the group said .

Opposition to the proposal also came from a dozen U.S. lawmakers, mostly from mining states, who told Treasury Secretary John Snow to oppose sales of IMF gold, a letter obtained by Reuters showed on Thursday.

Finance chiefs of the rich Group of Seven nations asked IMF Managing Director Rodrigo Rato last weekend to report by April on proposals for using IMF gold reserves to write off debts owed by the fund's poorest borrowers.

The South African Chamber of Mines, whose members include the world's second largest gold producer AngloGold Ashanti and fourth-ranking Gold Fields, has not issued a formal policy on the issue, but was due to plot strategy next week, Baxter said.

The body would likely take a stance similar to one six years ago when a similar IMF plan was floated, he added. Opposition from gold producers and governments such as South Africa was instrumental in sinking the previous proposal.

South Africa's Mining Minister Phumzile Mlambo-Ngcuka came out in opposition to IMF gold sales this week, even though her cabinet colleague, Finance Minister Trevor Manuel had earlier voiced cautious approval.

South Africa's Harmony, which ranks sixth in global output, urged a quick move by the IMF, whatever decision it took.

"Although we're against it, we would like certainty about it as well because it does influence the market...it's like an overhang in shares," Marketing Director Ferdi Dippenaar told Reuters.

"If these guys are intent on selling, and will listen to nobody, what they owe us is certainty as to how, in what quantities and over what time they sell it."

-END-

Wait? For what, death? Somehow 12 US Senators got it in their craws to decry the IMF gold sales for the most obvious of reasons, yet the World Gold Council has to think about it. Think about what? How to destroy the industry? They spend their time promoting gold in high fashion jewelry and then when they have a chance to speak out on a matter which will materially affect the market, they spend their time stuttering.

They are beyond pathetic. What is remarkable is you have an industry, like gold, in which the formal organization in existence to promote it is allied with those who want to suppress its price. Perhaps bizarre is a better adjective to describe gold and the WGC?

There is a significant vacuum out there when it comes to gold advocacy which is why it is time for some entity to step up to the plate. Seems that entity is GATA, which is why GOLD RUSH 21 is a big deal. Right about that time many of the world financial market leaders will be meeting in Jackson Hole, Wyoming. It just might very well be the more important meeting will be in Dawson City in the Yukon.

Too audacious a comment by me? I don’t think so. I say that because gold is a tiny market which stands for so much. There is no one out there as an advocacy group because the powers in the world want it that way. As my colleague Chris Powell says, the World Gold Council exists to make sure there is no real world gold council.

For many it is a lazy day Sunday, which brings me to the why for this MIDAS. One of the main reasons for GATA’s Dawson City conference is to take our organization to a higher level…to do what we can to make it a spokesorganization for gold companies and gold shareholders around the world – silver too - to fill that enormous vacuum.

As I mentioned the other day, the response thus far is already more than encouraging, even though we are only in the early stages of sending out invitations. There is no doubt in my mind we will be sold out. As this is a new venture, we are learning as we go along on how to make this gathering in a relaxed setting (no suits) the success we expect it to be. What strikes me the most so far is the effect YOU can have by simply making a phone call to your favorite gold company CEO and asking him, or her, to consider attending the conference on behalf of shareholders. From the feedback I have been receiving thus far, it is making a difference and has a number of these CEOs paying serious attention.

I am sure all of you are aware of the enormous effort it takes to make this international conference a world class affair. The GATA team will be working every day for the next 7 months to get the job done. I am asking you to give us a few MINUTES of effort to leave nothing to chance and assure us (thus YOU) of success. Please call your gold company CEO about the conference. Tell him what we are doing and why it is so important the firm be properly represented in Dawson City. I realize it sounds strange, however the days when a gold company CEO would run from a GATA picture will gradually end. As time goes by, those who are not involved in what GATA is doing for the gold industry will seem Neanderthal.

MINUTES...that is all we ask of your time. If you are not happy with your gold/silver investments of late because of what The Gold Cartel is doing to you, then do something about it. Don’t just sit there and whine and complain. Don’t let your fellow investors run with the ball all by themselves. Here is a sample of what is being done, from fellow Café members:

February 11, 2005

Richard D. Caccavale
203 Pine Knot Trail
Hendersonville, NC 28739

Chief Executive Officer
Board of Directors
Re: GATA’s Gold Rush 21

Dear Sir or Madame:

As a shareholder with a significant position in your company, I have suffered exceptional losses during the past year. Moreover, I have studied the precious metals bullion markets on a daily basis and observed disproportionate selling in a manner commensurate with price fixing. Seemingly, this manipulation is conducted by a cartel of bullion banks, including but not limited to: J.P. Morgan, Morgan Stanley, Goldman Sachs, Deutsche Bank, Citibank, etc. Astute investors recognize this price fixing as the carry trade in which central bank gold is leased to increase the perception of supply. It is the proverbial elephant in the room that everyone notices, but no one discusses. However, the tacit acceptance and long term silent acquiescence to this price fixing can no longer be tolerated by producers, because investors are being forced to cut their losses and reallocate their portfolios to other hard asset groups, which are not manipulated.

Accordingly, I strongly suggest that you proactively address this precious metal price fixing and become involved in the marketing of your product in a manner comparable to other industries. Otherwise you risk the total disgust of your investors and their capitulation of share ownership.

In this connection, you now have a fantastic opportunity to exponentially increase the amount of consumers of your product, as well as having a public relations promotional campaign that will serve to expose and eliminate this sinister, covert price fixing. This is a win, win situation for the producer and investor, because substantial increases in product consumption at a much higher price will benefit both.

Accordingly, I urge you to attend, or otherwise support, GATA’s Gold Rush 21 conference being held on August 8^th and 9^th, 2005 in Dawson City, Yukon, Canada. I have provided a link to the conference’s web site (www. goldrush21.com), which will describe the agenda and guest speakers. In the event that you are unaware of GATA (Gold Anti Trust Action Committee), suffice it to say that they are a non-profit, educational organization, whose sole purpose is to make the public aware of the price manipulation of gold, and the greatly diminished supply of bullion due to the carry trade leasing. Additionally, GATA promotes precious metals bullion as a currency, which is both a safe harbor investment and hedge against inflation. That message better serves both the investor and producer because it markets the bullion product to a much greater audience than the existing jewelry consumer. Imagine the phenomenal financial benefit that you could achieve if every equity and bond investors’ portfolio consisted of just a five percent holding of bullion.

For the past six years GATA has stood alone, with minimal corporate support, battling the cartel of bullion banks as they manipulated the bullion price. Moreover, GATA has denounced the disinformation campaign by the World Gold Council, which relegates precious metal ownership to only jewelry applications, and also aligns itself with the hedging producers; who both are rewarded by lower bullion prices.

In closing, please take advantage of this watershed event and learn what GATA can do for you. Even if you can not attend this conference and directly benefit by the message of the renowned guest speakers, I implore you to utilize GATA as your industry representative so we both can enjoy a more prosperous future.

Sincerely,
Richard D. Caccavale
Ricgin2@mchsi.com

***

Peter, good speaking with you briefly today regarding the Gold Rush 21 summit being hosted by Bill Murphy, Chris Powell and the folks at GATA.

I am a shareholder in both WHT and GG and look forward to holding these shares in the combined company. Congratulations on the 1^st vote; my WHT shares have been tendered. I look forward to the 2^nd vote.

As Rob McEwen is frequently quoted, "Gold is Money." I am also a firm believer in this position. What bothers me today is the constant manipulation that occurs by the activities promoting their alternatives to real money. This manipulation has a highly leveraged negative impact on the price of our shares. There are many ramifications that I could go into but I doubt there is anything new that I can offer as you’re better versed in this market than most.

I would like to request that you and Ian Telfer support this conference by attending. We need executives like yourself to understand and work together to expose the behind-the-scene manipulation. I believe that ending this price manipulation will have a far greater impact on our share price than any operational efficiency, merger of other activity.

I am attaching the brief from GATA below in case you have not seen it. Please discuss this request with Ian when he is back in the office.

Thanks, Steve

***

The Gold Anti-Trust Action Committee is pleased to announce that we will be hosting an international conference on August 8 and 9 in Dawson City in Canada's Yukon, the center of the Klondike Gold Rush at the turn of the 19th century.

Since it represents the golden excitement of the past, this historic location is just the place for our conference as we enter a new time of excitement for gold. So we will call our gathering GOLD RUSH 21 and here's what we aim to do there:

• Expand GATA's role as an advocate for the precious metals industry.
• Offer the mining industry and precious metals investors an alternative to the World Gold Council, which represents no more than 20 gold companies and has done so little for those it purports to represent. GATA will seek to include more of the industry, and we will not align ourselves with the bullion banks and jewelry interests, which want precious metals prices suppressed. More than 40 mining and precious metals-related companies have supported GATA in recent years. We believe we can raise that total to 200.
• Spread GATA's message that the gold and silver markets are not free and not fair, and develop ways to change that. Renowned gold experts from five continents will explain and discuss the price manipulation committed by the gold and silver cartels. We will cover who has done it, why they did it, and what can be done about it.
• Give conference participants a memorable trip to Klondike Gold Rush country so they can see what a gold rush was and what one might be again. We expect that conference participants will forge some memorable relationships.

• Receive suggestions from conference participants about how GATA can best build long-term support from the precious metals industry.

The speakers at GOLD RUSH 21 will include:

• Ferdinand Lips of Zurich, Switzerland. He has been managing director of Rothschild Bank AG in Zurich, CEO of his own private bank (Bank Lips), and a director of Randgold Resources, Durban Roodeport Deep, and Aflease. Now he is chairman and manager of the Top-Gold Fund, based in Liechtenstein. He has written four books on the gold market, his latest being "Gold Wars."
• Peter George of Cape Town, South Africa. A graduate of Oxford University in England and the University of Cape Town, where he received his MBA, George was a member of the Johannesburg Stock Exchange from 1969-1981 and was senior partner of the Johannesburg stockbrokerage Saunders & Taylor. He became known as South Africa's "Mister Gold," during that period. Peter helped organize the GATA African Gold Summit in Durban, South Africa, in May 2001. Five sub-Saharan African nations attended that conference, along with representatives of major South African gold producers and the South African mine workers union. The summit was heavily reported by the South African Broadcasting Co.
• John Embry of Toronto. Just as George is known as "Mister Gold" in South Africa, Embry is becoming known as "Mister Gold" in Canada. After an illustrious career at the Royal Bank of Canada, where he oversaw $5 billion in mutual fund assets and recorded an astounding return of 153 percent in 2002, in 2003 Embry became chief investment strategist at Sprott Asset Management. He was co-author of Sprott's important research study, "Not Free, Not Fair: The Long-Term Manipulation of the Gold Price," which validated GATA's work. There is no more admired figure in the mining industry.
• Hugo Salinas Price, who may be regarded as Mexico's "Mister Silver." Salinas Price is leading the campaign to remonetize silver in his country, the world's foremost producer of silver. Last November governors of all 31 Mexican states sent a letter to the Ways and Means Committee of the Mexican House of Representatives to urge approval of legislation to remonetize silver. Nearly 200 Mexican journalists signed a declaration in support of the legislation. A poll by the Mexican television network TV Azteca found that 96 percent of viewers approved the remonetization of silver. It seems that the only major opponent of the silver legislation in Mexico is Mexico's central bank.
• Reginald H. Howe of Massachusetts. A successful trial lawyer in Boston and proprietor of the GoldenSextant.com Internet site, Howe took on the entire Gold Cartel in U.S. District Court in Boston in 2001 by suing the Bank for International Settlements, the U.S. Federal Reserve Board, the U.S. Treasury Department, J.P. Morgan & Co., Chase Manhattan Corp., Citigroup, Goldman Sachs Group, and Deutsche Bank AG. Howe stood against more than a dozen of the highest-powered lawyers in the world. His lawsuit has been renewed by Blanchard Coin & Bullion's suit against J.P. Morgan Chase and Barrick Gold in U.S. District Court in New Orleans.
• James Turk of New Hampshire. Turk, a former banker and manager of the commodity department of the Abu Dhabi Investment Authority, is editor of the Freemarket Gold & Money Report and founder of GoldMoney.com. He is also the co-author of "The Coming Collapse of the Dollar," just published by Doubleday.

I am proud to call these distinguished men my friends. They fight every day for you gold and silver investors and the mining companies exhibiting in the next room.

Facilities in Dawson City are very limited, so we will have to restrict invitations to mining company executives and investment fund managers, the people who are in the best position to help us push the industry forward. Mining company executives and fund managers who would like to attend GOLD RUSH 21 should write to us by e-mail at GATAComm@GOLDRUSH21.com and we'll send confirmations soon after that. More information about the conference can be found at its Internet site: http://www.goldrush21.com/

GATA extends its profound gratitude to Samex Mining and Klondike Star for their exceptional efforts behind the scenes to make this international conference a huge success.

Thank You,

BILL MURPHY
CHAIRMAN
GOLD ANTI-TRUST ACTION COMMITTEE

***

February 14, 2005

Ian Telfer, CEO
Wheaton River Minerals, Ltd.
200 Burard Street, Suite 1560
Vancouver, BC
V6C 3L6 Canada

Dear Mr. Telfer:

As a shareholder of Goldcorp as well as Wheaton River, may I say that I'm delighted at the turn of events that will place you in Goldcorp's driver's seat one of these days soon. I cast my 5000 share proxy at GG for the Wheaton acquisition, needless to say, and will be voting my 5000 shares of WHT in the same direction.

Of course anyone as savvy as you obviously are would necessarily be aware of the price of gold manipulation, and therefore GATA's heroic work in attempting to correct this malfeasance. To use street vernacular, we gold shareholders are being 'ripped off', royally, and that the mining companies would repeatedly turn the other cheek is a never ending source of amazement to me.

While Rob McEwan has done a brilliant job in taking Goldcorp as far as he has, it's time for a more aggressive CEO and, bless his heart, he knows it. Some months ago, I wrote to him about the gold suppression scheme and accompanying cartel, to no avail as I never received a reply. "Well," I said to myself recently, "I'll bet Ian Telfer will take action!" You have, after all, made Wheaton grow exponentially, much to your credit.

So I am writing to urge you to attend an international conference August 8 and 9, 2005, entitled Gold Rush 21, in Dawson, Yukon. Presented by GATA, such luminaries in the precious metals world as James Turk, Ferdinand Lips, John Embry, Hugo Salinas Price, Reginald H. Howe will be speakers. Let's see some solidarity in the world of mining; let's see all of you put your heads together, resolving to eliminate the criminality involved in manipulating the price of gold and silver. Please see: http://www.goldrush21.com

Your shareholders need you to be in attendance at this conference in August. (Off the record, word has it that the former chairman of Harmony Gold, Adam Fleming, as well as Neal Froneman of Aflease in SA have offered their support.) I should be interested in learning of your own intention, Mr. Telfer.

Thank you.

Sincerely,

Marilyn A. Guinnane
973 Mirror Lake Drive
Reno, Nevada 89511

maguinnane@cs.com

***

While the brain-dead World Gold Council contemplates whether IMF selling gold might be negative for our market, others with half a brain know in a nanosecond such a move would be negative for the price and sub-Saharan economies for some time. While the cowardly timid WGC remains mute on the issue, GATA has been jumping up and down and blasting the initiative for many weeks now. Why gold companies pay over $60 million to this useless outfit is beyond me. Heck, look how the Congressional Black Caucus responded to the same initiative nearly 6 years ago:

EE CONGRESSIONAL RECORD COPY
of the CONGRESSIONAL BLACK
CAUCUS and GOLD BELOW:

Congress of the United States
Washington, DC, June 30, 1999.

Hon. William Jefferson Clinton,
President, U.S. Of America, Washington, D.C.

Dear President Clinton: South Africa has just inaugurated its second democratically elected President, Thabo Mbeki. Among the many challenges he faces is an immediate crisis--the terrible shock to his country's economy caused by the dramatic drop in the price of gold over the past three months. The many other gold -producing countries in sub-Saharan Africa are struggling with the same blow to their emerging economies.

Ironically, tragically, the $30 decline in the price of gold can be traced in part to announcements of support for the sale of some of the IMF's gold reserves to fund debt relief for some of these very countries. The IMF announcement, coupled with the proposal by the British government to sell some 14 million ounces of their gold reserves, saw the price of gold plummet in just a few days from nearly $290 an ounce to below $260. This drop has already reduced the export earnings of the gold -producing Heavily Indebted Poor Countries (HIPCs) by more than $150 million per year.

While we cannot change the decision of the British government to sell its gold reserves, we can prevent the IMF from further damaging the economies of the very countries it seeks to help. The IMF cannot sell any portion of its gold reserves without approval of the US representative to the IMF . And the Treasury Department must obtain Congressional authorization before the US representative can approve such a sale. When this proposal comes before Congress for consideration, we will oppose it vigorously. Make no mistake, we believe strongly in debt relief, and we intend to pursue every avenue to provide as much real relief as quickly as possible. However, selling gold reserves is the worst possible method of financing debt relief.

Gold mineral reserves are a large part of the natural wealth of many poor countries, and is therefore one of the few avenues for economic development. More than three fourths of the HIPC nations targeted for the IMF debt relief plan are gold producers, and gold plays a crucial role in the economies of 10 of those countries. Since the mining industry draws much of its workforce from the poorest and most rural communities in the subcontinent, often 10 people or more are dependent on the earnings of each miner. If the price of gold remains at the current 20-year low price of about $258, 40% of South Africa's gold production will become unprofitable, more than 80,000 miners will lose their jobs, and upwards of 800,000 Africans will be plunged into absolute poverty.

Debt relief does not require IMF gold sales in order to be effective. In fact, the proceeds from the gold sales which are actually targeted to debt relief are virtually nil. According to one calculation, there would be less than $60 million per year available to retire the estimated $220 Billion HIPC debt. There are alternatives to gold sales which would provide more debt relief in a shorter period of time.

We will not support central bank gold sales; we will oppose them in whatever form they are presented to the Congress. We intend to examine more realistic, more productive, and less harmful alternatives. We hope you will join us.

Sincerely,

James Clyburn, Sanford Bishop, Eva M. Clayton, Robert Scott, Bennie G. Thompson, Albert R. Wynn, Eddie Bernice Johnson, Melvin Watt, Edolphus Towns, Bobby Rush, Carolyn Kilpatrick, Danny K. Davis, Elijah E. Cummings, John Conyers, Juanita Millender-McDonald, Harold Ford, Jr., Earl Hilliard, Gregory Meeks, Carrie Meek, Charles B. Rangel, Major R. Owens, Stephanie Tubbs Jones, Alcee L. Hastings, Julian Dixon, Sheila Jackson-Lee, John Lewis.

IMF GOLD SALE PROPOSAL -- HON. BENNIE G. THOMPSON
(Extension of Remarks - July 21, 1999)

*Mr. THOMPSON of Mississippi. Mr. Speaker, on Saturday, there will be an historic march in Pretoria, South Africa. For the first time ever, gold miners will march shoulder to shoulder with the management of the gold mining companies which employ more than 250,000 union miners. They will march from the National Union of Mineworkers Building to the British Embassy and to the Swiss Embassy to protest gold sales from those countries' central banks. Just the threat of central bank gold sales has caused the price of gold on the world market to plunge to 20-year lows over the past two months, endangering more than 80,000 jobs and the means of support of almost a million sub-Saharan Africans.

*James Motlatsi, president of the NUM, and Bobby Godsell, head of the Chamber of Mines, will return from London--where they are petitioning the Bank of England to stop further sales--to lead the march.

*Mr. Speaker, Mr. Motlatsi and Godsell came to Washington two weeks ago to warn of the dreadful consequences for their miners and their continent of central bank gold sales. They came here to tell us that the well-meaning efforts of many of the world's greatest powers, including the US, would cause some of the world's poorest countries to suffer needlessly.

*The proposal, endorsed by the G-7 last month, to sell some of the gold reserves of the International Monetary Fund to provide a token contribution to debt relief for the poorest countries, is totally misguided and must be stopped. Because of the weighted voting structure of the IMF, it cannot sell any of its gold without the support of the US representative to the IMF. And, under US law, our IMF representative cannot support any gold sale without first obtaining approval of Congress.

*Mr. Speaker, we here in Congress do not have the ability to stop the sale of gold from other central banks, although we can make our disapproval manifest. However, we can stop the sale of IMF gold , and we need to do it now. Our disapproval of the gold sale is not an obstacle to debt relief--there are many ways to deal with debt relief without IMF gold sales.

*Mr. Speaker, Members of the House on both sides of the aisle have written to the Treasury Department and to President Clinton stating our unequivocal opposition to gold sales by the IMF , and without objection, I would like to enter into the record copies of those letters.

*Before the South Africans begin their march on Saturday, I urge the President to respond to this crisis by withdrawing his support for IMF gold sales, and withdrawing Treasury's request for authorization to support it. The countries we are pledging to help should not be cursed by our misguided generosity.

*Stop the gold sales now.

END OF CONGRESSIONAL RECORD

***

And the World Gold Council has to think about what to say about the IMF gold sales. What a joke. GO GATA! To get to the point:

Bill,
Weird thing... today when thoughts of the Gold Cartel crossed my mind, I found myself spontaneously singing or humming...
Nah Nah Nah Nah
Nah Nah Nah Nah
Hey Hey Hey
GoooodByyyyyyyyyye!
Wondering if anyone else experienced the same phenomena?
Bob Erickson

Might as well throw the WGC into the same tune.

GATA BE IN IT TO WIN IT!

Appendix

A blast from the past below. I bring this to your attention again because it highlights the kind of effort GATA has given to the gold world compared to what the World Gold Council does with all their money. The WGC promotes high fashion jewelry to the wealthy. GATA pounds the table for you gold owners and gold shareholders.

1/29/00 (with gold at $280)

VENEROSO ASSOCIATES

Veneroso Associates is a global investment strategy firm. We seek to identify markets that are in extreme disequilibrium, understand the dynamics generating such disequilibria and identify turning points in these dynamics.

Veneroso Associates provides global economic analysis to an array of money managers, governments, and multilateral agencies. FRANK A. J. VENEROSO

Mr. Veneroso is currently the head of Veneroso Associates. Formerly he was a partner of Omega Advisors, where he was responsible for investment policy formulation. Prior to this, acting through his own firm, Mr. Veneroso has been an economic consultant and investment strategy advisor to governments, international agencies, financial institutions, and corporations around the world. He acted as an economic policy advisor to international agencies and governments in the areas of money and banking, financial instability and crisis, privatization, and the development and globalization of emerging securities markets. His clients have included the World Bank, the International Finance Corporation, and the Organization of American States. He has been an advisor to the governments of Bahrain, Brazil, Chile, Ecuador, Korea, Mexico, Portugal, Thailand, Venezuela, and the United Arab Emeritus. Mr. Veneroso graduated cum laude from Harvard University and has authored several articles on subjects in international finance.

Summary
ཉ The Senate and Congress Question the Fed and Treasury About Gold Price Manipulation
ཉ The US Issues A Blanket Denial
ཉ The Fed's Denial Provides Grounds for Suspecting Official Intervention
ཉ Large Undisclosed Official Supplies Reversed the Fall 1999 Gold Price Rally
ཉ If Such Supplies Are From Scattered Central Banks, the Gold Price Will Explode Sooner
ཉ If Such Supplies Are From the US Authorities, It Will Explode Later But More Violently

At the beginning of this year we decided to discuss the issue of whether the US Federal Reserve or the Treasury was intervening in the gold market. For us, the question is posed by a simple process of inference.

All of the price and income determinants of gold demand suggest a strong recovery in demand should have occurred since mid 1998. World Gold Council demand surveys provide confirmation. Scrap supply from distress selling in the Far East has stopped. Mine supply has been flat. With such a dramatic improvement in the market's overall supply/demand framework, the price of gold should have recovered like oil, copper and most other commodity prices. It has not. One must posit a very large undisclosed supply of gold to explain current depressed prices.

In the past, we could attribute such a supply to short selling by funds, bullion banks and producers. Because of the Washington agreement reached by the fifteen European central banks in September 1999 and the subsequent upside explosion in the gold price, these former private sector short sellers no longer regard selling short gold as a one way bet; their risk perceptions have changed. There is a great deal of evidence that producers have been reducing hedge positions. There is evidence as well that funds and bullion banks have moved to reduce short positions. Therefore, former private sector short sellers in aggregate have been buyers, not sellers. This implies the existence of large official supplies. The Netherlands has sold 64 tonnes since late September. The UK has sold 50 tonnes. Some additional small official sales have been reported. We hear rumors that Brazil may have sold all of its gold in recent months (perhaps 200 tonnes). Gold Fields Mineral Services has reported that two large holders who presumably do not report to the IMF were significant sellers in the fourth quarter. These quantities taken together may or may not explain the implied large undisclosed selling of recent months. The Washington Agreement of September 1999 makes it unlikely that there were additional substantial official supplies of European origin.

There are only 6000 tonnes of official gold held by countries outside Europe and North America that are reported to the IMF. Much of it has been lent out. Most of these countries are not likely candidates for large official gold sales. Furthermore, the expressed intention of the Washington Accord was to improve gold market sentiment, reduce gold supplies, and thereby raise the gold price. Why would other central banks, who surely must be aware of this, become massive sellers of gold at current depressed price levels?

We believe there are perhaps 2000 to 3000 tonnes of official gold held by Saudi Arabia, the Vatican, Brunei, China, and others that have not been disclosed to the IMF, and which could be under liquidation. The current high oil price removes any direct financial requirement for oil exporting nations like Saudi Arabia or Brunei to sell gold. These official bodies must also know the intentions of the fifteen European central banks regarding the gold market. A sudden avalanche of selling by these parties at current depressed prices amid rising global demand and commodity prices makes little sense.

It is possible that numerous official holders have sold large quantities of gold over the last four months and that very little of such selling has been disclosed. But it is equally possible they have not. Given this, by a process of elimination one must consider it possible that the US is the undisclosed seller as it may be the only official body with the resources to sustain the supplies implied by the prevailing supply/demand framework. This possibility is strengthened by the US open policy in recent years of encouraging a lower gold price. When most of the European signatories to the Washington accord were planning last summer to act to improve gold market sentiment and restrict gold supply, the US Treasury was aggressively pushing for IMF gold sales, knowing full well that its words and actions were depressing market sentiment and the gold price. Clearly, the objectives of the US Treasury were very different from those of the Europeans who must have made their views and objectives known to the US. Lastly, there are persistent reports that Goldman Sachs has been the featured seller in the gold market on price rallies. In the past, Goldman Sachs has not been the lead dealer for official sales, reducing the odds that the large undisclosed selling of recent months has been from one or more central banks outside Europe and North America. The dominant role of a US dealer with close connections to the current administration increases the possibility of the US as the source of undisclosed official selling in the gold market.

Because of the obvious logic of the above argument and because more and more market participants have been discussing possible US manipulation of the gold market, we decided to consider this issue in a straight forward fashion as of the beginning of this year. In the past, we argued against such intervention on the grounds that it made little sense for the US Treasury or Federal Reserve to intervene in the gold market. In effect, we lacked a compelling motive. We suggested that, if the gold market were under manipulation by the US authorities, it would have to be part of a broader policy of management of expectations in more important markets. For that reason, we distributed to clients an analysis of the public record on possible Fed or Treasury intervention in the stock market. We concluded that the public record suggested such intervention was possible, though it did not provide strong evidence of such intervention.

Since our last Gold Watch on this subject, there have been several inquiries along these lines made by the US senators, Senator Dodd and Senator Lieberman of Connecticut. It has also come to light that Representative Canady posed similar questions last fall. Unlike the questions posed by representative Ron Paul on possible Fed or Treasury intervention in the stock market, where the Treasury failed to respond for more than a year, these inquiries received prompt responses. In the case of Canady's inquiry, across the board denials were provided by both the Fed and Treasury. Only the Treasury responded to Dodd. So far, only the Fed has responded to Lieberman. Though the individual responses ignore or avoid some aspects of these questions, taken together they look like an across the board blanket denial of any Fed or Treasury intervention in all markets: stocks, bonds, commodities or gold.

Does this finally settle the issue? At first, we thought it might. However, on review we have concluded that it does not for the following reasons.

1) The questions posed by Senators Dodd and Lieberman and Representative Canady were provided by the Gold Anti Trust Action Committee (GATA). We understand that several other House and Senate members have taken an interest in this issue. According to GATA Texas senator Phil Gramm, Chairman of the Senate Banking Committee, has prepared similar questions for the Fed and the Treasury. Also, Congressman Jim Ryun from Kansas has contacted GATA for information in order to prepare similar questions in response to demand from constituents for answers. This surprises us. The United States is a responsive representative democracy. GATA has been very active in the pursuit of its objectives. Nonetheless, it strikes us as unusual that so many House and Senate members would have responded to GATA's efforts with repeated questions to the Fed and Treasury. First, posing such questions that have already been answered in response to an earlier inquiry implies that the Senators and Representatives involved believe that it is possible the prior Fed or Treasury responses have not been completely straightforward. Second, their willingness to pose such questions suggests that there is considerable interest among their constituents on this issue. Suspicions apparently extend beyond those of GATA. Lastly, it is possible that the government has intervened in markets in the past at times of crises and that it informed key members of the legislature who were bound to secrecy. Therefore, such interventions may seem more plausible to members of the House and Senate than to the general public.

2) The Treasury and Fed have provided blanket denials of intervention in the stock market. Their blanket denials encompass 1987. It is well known that many market participants claim to know of such an intervention at the time of the stock market crash of in October 1987. For such market participants, the blanket nature of these denials places these overall denials of the Fed and Treasury in doubt.

3) Lastly, Chairman Greenspan of the Fed responded directly to Senator Lieberman in a signed letter which is available on the gata.org web site. In this letter he responds to a question about a statement he made in congressional testimony to the effect that "central banks stand ready to lease gold in increasing quantities should the gold price rise." Greenspan argued that his testimony was in the context of hearings on the regulation of over-the-counter derivatives and has been taken out of context. We have made this very point in past reports in which we concluded that Fed or Treasury involvement in the gold market was not likely. However, we find Greenspan's explanation of his remarks open to serious question for the following reasons.

a) In this most recent response on the issue Greenspan states that he presumed that everyone would know that his statement was not referring to the Federal Reserve since (in the words of Greenspan) the Fed's "own public balance sheets indicate no ownership of gold…I did not think it was necessary to indicate that the Federal Reserve was not part of the group of central banks who do lease gold since the Federal Reserve owns no gold." In some countries such as the UK the Treasury legally owns official gold. However, it is common parlance that it is also the central bank's gold since it is classified as a reserve asset. In addition, such common parlance has considerable justification. If one looks at the Fed's own balance sheet, there is a line item on the asset side labeled "gold stock". Its total is $11 billion. Valued at its "official" value of $42 an ounce, it appears to encompass the entire US official gold reserve. It has been explained to us by James Turk that this gold stock refers to gold certificates held by the Fed, which are "paper" claims on the Treasury's bullion holdings. However, this would not be apparent to most observers from a reading of the Fed's balance sheet and its accompanying notes. Chairman Greenspan is surely aware of these points.

The following statement comes from the legislation that created the Fed in 1913. It appears to involve the Fed directly in the gold market and authorized the lending of gold. We understand that, in the opinion of GATA's lawyers, Berger and Montague, this clause is still applicable, despite changes in monetary regimes since 1913.

"Every Federal reserve bank shall have power to deal in gold coin and bullion at home and abroad, to make loans thereon, exchange Federal Reserve notes for gold, gold coin, or gold certificates, and to contact for loans of gold coin or bullion giving therefor, when necessary, acceptable security, including the hypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold."

We presume that Chairman Greenspan is aware of this as well. We conclude that Chairman Greenspan's explanation of his statement that "central banks stand ready to lease gold in increasing quantities should the gold price rise" is close to a ruse.

b) There is no evidence we know of which suggests that central banks stand ready to lease gold in increasing quantities should the gold price rise. Central banks who admit to leasing gold indicate they do so to earn interest on an otherwise barren asset. Earning interest is their avowed motivation. The lease rate on gold has always fallen on gold price rallies. Therefore, the propensity of central banks to lease gold should fall, not rise, on such rallies. The Chairman says that he was not referring to the Fed but only to "more than one central bank" other than the Fed that stand ready to lease gold. Since September of 1999, this statement no longer applies to the fifteen European signatories to the Washington Accord. How does Greenspan know that other such central banks stand ready to lease gold in "increasing quantities should the price rise"?

c) In his congressional testimony regarding possible CFTC regulation of OTC derivatives markets, Greenspan was apparently referring to the possible manipulation of commodity markets by "private counter parties" who might "restrict supplies". Greenspan appeared to be arguing that there was no need to extend CFTC powers to the OTC gold market since a Hunt-type manipulation of the gold market could be prevented by the authorities through the leasing of gold. However, even if central banks stand ready to lease gold in increasing quantities should the price rise, this will not in and of itself curb any rise in the gold price due to a restriction of supplies by private counter parties. Though central banks might be willing to lease gold on a price rise, there must be willing parties to borrow that gold if the increased propensity to lease of these central banks it is to matter in any way to the gold market.

The historical record suggests that, when the gold price rises, private market participants in aggregate do not add to short positions. Producers sometimes do add to short positions on a scale up, but speculators almost always cover short positions and go long. The fact that lease rates fall on price rallies suggests that private market participants, taken in the aggregate, reduce rather than increase short positions when the gold price rises. Therefore, the increased propensity of "more than one" central bank to lease gold in increasing quantities would not tend to curb a Hunt-like manipulation of the gold market. Only if another central bank was willing to borrow such gold and sell it into the market would increased lending frustrate a Hunt-type manipulation.

It seems to us that there is a hidden implication in Greenspan's remarks that some central banks stand ready to borrow gold leased by other central banks should the gold price rise. Greenspan is arguing that CFTC regulation of the OTC gold market is not necessary because central banks can handle possible manipulations. How would Greenspan know about such official short selling of increased gold available for lease? Is there an implication here that the Fed knows of such contingency measures to preserve gold price stability that the market is unaware of? Is there an implication that the US need not extend CFTC supervision to the OTC gold market because other US government bodies (the Fed, the Treasury?) stand willing to sell leased official gold should the gold price rise? Conclusion

The debate about whether the Fed is part of a manipulation of the gold market has now blown wide open. Despite Fed and Treasury denials, we remain open to the possibility of such intervention for the reasons we have set forth above.

We are more certain than ever that our supply/demand framework for the gold market is correct. That means that there have been large undisclosed official sales depressing the gold price. If these sales have been by official bodies outside Europe and North America, such as Saudi Arabia, the Vatican etc., the current large gold market deficit and the new propensity to cover gold shorts by private market participants will exhaust these supplies sooner rather than later and the gold price will explode.

If these supplies involve coordinated intervention by bullion banks with official support, possibly from the US, the price will be contained for a longer period of time. If the US Fed or Treasury is manipulating the gold price, our supply/demand analysis suggests they will eventually fail and in a fairly spectacular fashion. We could conceive of no outcome that could be more bullish for gold. If the Fed or Treasury thought gold was so important as to manipulate its price, the disclosure of its manipulation would lend greater luster to gold. When the manipulation was eventually overwhelmed by market forces, the failure of the clandestine official effort would lend greater luster to gold. If this all occurred amid a bursting of the US stock market bubble and the long and deep decline of the dollar that inevitably must follow in the wake of a record US current account deficit, yet greater luster would be restored to gold. Under such circumstances, investment demand for gold, which we have always disparaged, would probably soar. It might well eclipse the commodity case for gold that we have always made---which will prevail in the end in any case.

-- Posted Tuesday, 15 February 2005 | Digg This Article