By Michael Kosares www.USAGold.com July 30, 2001 Gold is down in early trading after a quiet session overseas. Some traders await the decision on whether or not South African miners will strike three South African producers -- Goldfields, Harmony, and Durban Roodeport. AngloGold , South Africa's largest producer, has come to terms with its workers. The National Union of Mineworkers plans to strike the three producers on Wednesday if a settlement is not reached. Goldfields and Harmony rank two and three in South African production. UBS/Warburg says, "With the settlement of the wage dispute with the largest gold producer, Anglogold, the chances of a protracted strike materially reducing supply has receded, although small disruptions remain possible." As a result, gold is tracking down this morning. With all the talk of the United States government being involved in international gold swaps, thanks largely to revelations discovered in the minutes of Federal Open Market Committee meetings by investigators working on the gold manipulation lawsuit now before the court, one should not discount the potentiality that the International Monetary Fund could be participating, if not the lead dog, in swapping gold in connection with its need to bolster failing Third World economies like Brazil and Argentina. (Have you ever wondered where the IMF with all its funding difficulties finds this steady stream of capital for these endless bailouts?) The steady fall of gold since the problems in Latin America made the front pages recently may be connected to the need to raise capital for these bailouts, and the mechanism used could be "swaps." At the moment, ruminations like these must fall under the "suspicions" column by necessity since the IMF is not obligated (as far as I know) to making such operations public. I do not know what the IMF charter allows with respect to gold, but we should not forget the heavy pressure from Britain and the Clinton administration to sell IMF gold a few years back under the guise of providing relief for troubled Third World economies. Those attempts were rebuffed by the U.S. Congress after gold owners and advocates mounted a campaign to force Congress to stymie the sales. Essentially, the relief mentioned takes the form of debt that eventually becomes impossible to pay without further infusions from the IMF -- and, though the IMF and country in trouble by time, the cycle moves to the next level of instability. In Indonesia the result of IMF attention was rioting in the streets and the imposition of a police state. Be assured, the international banks and IMF will not cry for Argentina. They will demand the austerity required to pay back the loans. It will not end happily. The riots will begin down the road and everything will be done to disassociate the riots from the IMF's lending activities in the public's mind. Noted gold analyst Timothy Green in his "The Gold Companion: The A-Z of Mining, Marketing, Trading, and Technology'" defines a "swap" (beyond a simple trading of one hallmark for another) as the "simultaneous spot sale of gold with a forward transaction to buy the same amount back at a later date. For governments and central banks it has become a way either of raising cash to meet short contingencies or simply to invest the money on an interest-bearing basis." It is also a way to keep gold on the asset side of the ledger while enjoying the benefits of its utility. For the IMF it might be a convenient way to end run the restrictions the U.S. Congress put on selling the metal. However, it defies the intent of Congress which was to keep the IMF from depressing the price of gold, and by extension, undermining various Third World economies. I note that in the Federal Open Market Committee discussions under scrutiny, the subject of the discussion was the collapse of the Mexican peso and banking system. Surely, the discussion had to be how a bailout was to be structured. Now we have Argentina near collapse and a Reuters headline this morning reads "U.S. says Argentina could get IMF cash early." In these carefully crafted public relations tap dances, it is difficult to see through the haze and discover what's really going on behind the scenes. That usually comes later -- sometimes years later -- when the memoirs are written and the responsible parties have moved on to "private" pursuits. We can only surmise. -END- ------------------------ Yahoo! Groups Sponsor ---------------------~--> <FONT COLOR="#000099">Small business owners... Tell us what you think! </FONT><A HREF="http://us.click.yahoo.com/vO1FAB/txzCAA/ySSFAA/WfTolB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------~-> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/