'MIDAS' COMMENTARY FOR SEPTEMBER 18, 2001 COPYRIGHT 2001, WWW.LEMETROPOLECAFE.COM By Bill Murphy www.LeMetropoleCafe.com September 18, 2001 Gold $286.50 down 95 cents Silver $4.43 up 6 cents The drama behind the scenes in the gold market has never been more intense. The reckless behavior of the Gold Cartel to continue to suppress the price of gold, after the world completely changed a week ago, is not only insidious and criminal -- it is going to go down as one of the most foolish and irresponsible financial maneuvers of all time. This is how I see what is going on here. For the second day in a row, the goons have sold down gold on the Comex after strong fixes in London. Yesterday's PM fix was $293.25. Today it was $289.40. The daily trading charts in New York are practically identical. Right after the PM fixes, the likes of J.P. Morgan Chase and Goldman Sachs slam gold and the longs on Comex. There is a reason for that. Serious physical buyers who want to buy gold in size do so at the London fixes. That is because that is where the big sellers are too, and large gold buyers can conduct business without running the price up too much. The Gold Cartel waits until that business is finished, so as not to take on the buyers, and then tries to break down the gold price at the vulnerable Comex. It could not be more obvious what the desperado cabal is doing. But I don't think it is going to work this time. * Demand for physical gold right now is soaring all over the world and physical gold is hard to buy. Coin dealer after coin dealer tells me the same thing. Even if the coin dealers can get gold for you, the price is way above that quoted on Comex. A friend of mine paid $301 for Kruggerands today, which is down from $306 yesterday. The comment is always the same if you want to buy: Forget the Comex price; the real gold world price is higher than on Comex. * The terrorist attacks on U.S. soil have changed everything in terms of the notion of what a safe haven is. That is not going to change anytime soon. Investors all over the world are turning to gold again. The problem for the central banks and bullion banks is that they have about 14,000 tonnes of it lent out and can't get it back without driving the price many hundreds of dollars per ounce higher. They are in sheer panic that another Washington Agreement kind of surprise is upon them. But this one is 10 times worse. Herve Fervani, one of the senior executives at the Banque de France, has repeatedly warned other bankers about lending gold out for such little interest income, because he said in the end they might not get their gold back. Defaults of that nature could be right around the corner. Cafe members know all about that drill so I shall not go there again. Too many new goodies to go over. Take a gander at excerpts from this Bloomberg story: * * * U.S. Terrorist Attack Prompts Many Asians to Buy Gold Jewelry By Rajat Bhattacharya Bangkok, Sept. 18 (Bloomberg) -- Consumers in Thailand, India and some other Asian countries reacted to the terrorist attacks in the United States by heading for the jewelry store to buy gold, retailers said. Buyers in Thailand, where gold demand dropped by half in the last five years, led a return to the precious metal as a haven for investment after terrorists destroyed New York's World Trade Center a week ago, sending stock prices tumbling. Asia purchases more than half of the world's gold each year and Thailand is the second-biggest gold buyer in Southeast Asia after Indonesia. "We saw people storming into our stores to buy gold," said Jitti Tangsithpakdi, president of goldsmiths Chin Hua Heng and president of the Thai Gold Traders' Association. Last Wednesday, traders sold as much gold jewelry as they did in an average month this year, he said… In India, the largest gold buyer, sales also increased. "My sales have gone up 25 to 30 percent," said Pratip Zaveri, director at Tribhovandas Bhimji Zaveri, India's biggest jewelry retailer. The rising prices lured some people to buy gold as a investment, he said. "They've seen prices moving up again after a long time." India makes more than one-fifth of all gold jewelry and exports more than $8 billion worth each year. "With interest rates so low, and stock markets down, gold remains the best investment," said Jitti. "Other investments are simply not that interesting." Thailand's benchmark stock index has lost two-thirds of its value in the past five years. In China, the second-biggest gold user in Asia, consumer demand may also be boosted by deregulation of the market. The price of gold, which was freed from government control in July, has risen 6 percent in the past week, to 90 yuan a gram. "Gold is great because it appreciates in value and is a good store for value," said Meng Fanqiang, 32, who bought a 1,700 yuan ($205) bracelet for his wife from Ming Pai Jewelry Shop on Shanghai's Nanjing Road. Other consumers in the region bought gold coins and ingots. "Our retail over-the-counter demand for coins and bars was huge all day," said Alison Puchy, public affairs manager for the Western Australia government's Gold Corp., which owns the Perth Mint. "It went on and on." Inquiries from overseas investors seeking "depositary" certificates to buy gold held in its vaults also increased, she said. * * * Pakistani Gold Prices Soar to All-Time High Following US Attacks KARACHI, Sept. 18 (Asia Pulse) -- The local bullion market continued to face an uncertain global market situation after Tuesday's attacks in United States, as gold prices surged to all time high of Rs6,125 (US$95) per 10 grams on Saturday. The price of 10 tola gold (600 grams) is now quoted at Rs72,500 from Friday's rate of Rs71,400. * * * We know that demand for physical gold is already soaring around the world. What is going to happen to gold demand when US retaliation against the terrorists kicks in? Safe-haven buyers around the world will turn to gold even more -- sidestepping the dollar then and for years to come. That is what is going to happen. It will be in-your-face time for the Gold Cartel. Meanwhile back at the ranch, various gold shorts have all sorts of problems that have surfaced simultaneously, as a result of the terrorist attacks. * Half the deliverable gold that was available to be delivered to Comex longs belongs to Scotia Mocatta and is buried beneath the World Trade Center rubble. Something is not right about that gold. Either it is not there (as per the Fox TV statement), or the shorts know they are in big trouble come the October delivery period because they can't get to the gold to deliver it, if necessary. I say that because a reporter called me today and told me that Scotia will not answer any questions regarding the matter. "Why not?" he asked me. * Some of the big overseas physical gold buyers have contracted to buy gold here in the United States from various suppliers to satisfy the demand mentioned above. They need the gold, as it is committed to their clients. But these buyers are used to doing the actual buying on price dips. Thus, word to me is that they are short and very exposed to a price run-up. Sources tell me this same crowd was short, like they are now, before the Washington Agreement was announced. Part of the run-up in September 1999 was due to their frantic buying of physical gold. Do we have deja vu all over again? * With little fanfare the Australian gold price has gone thru the roof. It finished the day in New York at A$588. That is because while the world gold price has soared, the Aussie dollar has tanked to 49.34, only a point off of multi-year lows. About a year ago, I was going on and on that many of the Aussie gold producer hedge books were going underwater. It was widely reported that many bullion dealers were feeling the financial stress and that was with an Aussie gold price of only around A$520. The bullion dealers are already in a panic about what could happen in the financial arena in the weeks to come. The credit departments of these banks have all kinds of issues to suddenly address that are of mega importance. Some of them, like J.P. Morgan Chase, could have serious financial trouble themselves as expressed in Midas commentary last nite. How will they handle the over-exposed Aussie gold producer? Will they let their margin situations get into the billions? Will these producers be forced to cover? Put this one back on the radar screen again, big time. Speaking of J.P. Morgan Chase, Lee Lafferty and Mike Bolser report: "Don't know if you've checked recently but the Office of the Comptroller of the Currency data for Q2 2001 is posted. JPMChase 2001 Q2 is up to $19.292 trillion, up 8.82%. Overall interest rate derivative positions for all banks is up 8.56 percent to $30.092 trillion. Total number of banks reporting continues to decline, dropping to 367." Good, J.P. Morgan Chase. Nice timing. Have you gone mad? More on the volatility problem of J.P. Morgan Chase presented in yesterday's Midas. Many market analysts expressed surprise at the lack of volatility in today's financial markets. Not us. All stock market indices were due sharply lower. They all opened slightly higher in a complete surprise and remained quiet. No big rally ensued. Just quiet, although the stock market sank late when a new internet virus began plaguing brokerages -- the concern being that it is terrorist-related. The currencies: no real action at all. Gold was held in check in New York as always in times like this. Bottom line: just what the U.S. government ordered: very little volatility and another day that J.P Morgan escaped the guillotine. One fly in the appointment: the bond market. December bonds closed at 103.22 down 1.22. The bond vigilantes realize that the U.S. government "guns and butter" policies, along with billions of dollars of paper flooding the markets, is very inflationary. Bond yields soared back up to 5.5 percent. This could be a financial market horror show for J.P. Morgan Chase. Rising long-term interest rates could be their death knell, from all the GATA camp can figure -- a derivative undoing of the firm due to Titanic-like, Wrong-Way Harrigan gold and interest rate positions. We shall see. A couple of notes to close on: * Silver is quietly moving up with little fanfare. When the silver games end, and that might be beginning to happen now, silver could double in price in a blink. * The Comex has big manpower problems. The marginal traders and clerks just do not want to work there. Many of them come in from New Jersey by water taxi, as no cars are allowed -- then they have to go by the bomb scene to get to the Financial Center. There are no services at the moment, like restaurants, and the hours have been reduced from 9:40 to 12:40. There was a bomb scare today and everyone had to clear out for awhile. Many employees never even bothered to show up for work in New York. More will not show up tomorrow. Will this exchange even exist in the weeks to come? * The stock market PE ratio was anywhere from 24 to 34 before last Tuesday's attack. The historic norm is 14. Not a bear market low, just the norm. That would suggest, as the Cafe contributors have been saying for a long time now, that the stock market is going to go much lower. Earnings are going to plummet for the foreseeable future for most all industries as a result of last Tuesday. Based on that certainty, it is more than MOST likely that stock market share prices have a LOT of downside in them. Nasdaq 500 brought to your attention 18 months ago looks more possible by the day. * Fed Chairman Alan Greenspan has a closed session with congressional leaders tomorrow. Hmmm. Look who is in on deal: "WASHINGTON (Reuters) -- Federal Reserve Chairman Alan Greenspan plans to hold a closed-door meeting with U.S. congressional leaders on Wednesday in the wake of last week's devastating hijack attacks, aides said. The meeting comes as Congress weighs new measures aimed at bolstering the U.S. economy and aiding the airline industry, and two days after the central bank cut interest rates by a half percentage point. In addition to Greenspan, White House economic adviser Lawrence Lindsey and former Treasury Secretary Robert Rubin were expected to take part in the 3 p.m. meeting with Republican and Democratic leaders in the House of Representatives and the Senate, aides said on Tuesday." Anybody smell a rat? Oh-oh, I just received a call from a GATA supporter who heard from one of his reliable sources that in addition to his going to the Bank for International Settlements meeting Switzerland, Greenspan solicited the Swiss government to sell its gold in accelerated fashion, or lend more of it out. As the GATA camp has been suggesting the past months, it appears that the Gold Cartel is running out of bullets to keep the gold price from exploding. That is what our accumulated evidence suggests. Seems like Murphy's Law just entered Alan Greenspan's life too. He was there when the terrorists struck. How can the Swiss accommodate Greenspan now? If anything, they are going to need the gold to bail out the gold loans of THEIR OWN BANKS, which have lent out at least 2,500 tonnes of bullion. Will Greenspan and Rubin now have to beg Congress to sell U.S. gold to bail them out of their nefarious doings? The hearing on Reg Howe's lawsuit against the Gold Cabal in U.S. District Court in Boston is only a few weeks away. * Gold is at all-time highs in Pakistan. It is closing in on A$600 in Australia. It served the Asians well during their financial crisis. It will serve the world well in the world financial crisis that is bearing down upon us. Buy gold and the right gold shares. It might just save the day. -END- Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
