US Dollar & Gold Potpourri

October 28, 2002
Robert Chapman

We repeat for new subscribers: sell the hedgers. That means Barrick, Placer Dome, Newmont, Anglo-Gold and the Australians, particularly Sons of Gwalia, which has run into a host of problems, such as lower grade, as Barrick has had. We said seven years ago that these mines, which were high grading, would run into trouble eventually and we were right. It could be with lower grade and higher gold prices that most all of these hedgers could not deliver against their derivative contracts. If that happens bullion banks will go bust and that could bring down the entire derivative structure. Gold is a linchpin and once pulled the financial carnage will be unstoppable.

Why hasn't COMEX gone back to regular hours over a year after 9/11? Is it because it makes it easier for the bullion banks to rig the market? What happens when one or two big players demand delivery of physical gold or silver? If the exchange settles for cash it destroys the whole market on COMEX and everyone will then move to other legitimate exchanges.

As we know JPM has a vested interest in lower or stable gold prices due to its preeminent position as leader of the gold manipulation cartel and that they have large short positions in gold derivatives in collusion with central banks. Elaborate schemes have been considered and used since the late 1980s to free up the value of gold in order to continue a fiat money system. Now that gold sales and leasing by central banks is less of an option they have resorted to false bookkeeping, such as, you lease your gold, which in actuality has been sold by another party, and you still carry it on your books as an asset. Not only do Morgan&Mac185;s derivative positions in gold and other areas look dangerous, so does the market&Mac185;s opinion of Morgan. When we looked at their fundamentals and the chart patterns at $56.00 a share we knew then that other large investors saw the same thing we did. They sold and we went short. We now also may be looking at the bursting of the bond bubble if the 10-year notes activities last week are any indication, having jumped from 3.59% to 4.26%. If that happens Morgan would be in additional serious trouble having written a huge number of interest rate swaps. Incidentally, we are sure the fall in 10-year notes and the rise in yield was in part caused by Fannie Mae getting its books straight. We figure they had to buy $200 billion in 10-year Treasuries. We knew they bought $60 billion worth and they may well have been a buyer as foreigners and other hedgers were sellers. We'll find out in time. All we know is it looks like yields want to go higher. As a sidestep 30-year mortgage rates have jumped by 1/2%, which kills a lot of refinancing, which in turn cuts into additional consumer liquidity. There are going to be massive debts out there that are never going to be repaid, which puts enormous volatility pressure on derivatives causing huge losses similar to what happened with LTCM in 1998. Morgan has $20 trillion in derivatives on the books. The amount is beyond comprehension. It can only be that Morgan is acting for the US Treasury and the Federal Reserve. How could any sane banker put itself at $200 billion in real risk? Morgan couldn't without the collusion of those elitists who run our country. Morgan's exposure to litigation could run easily over $20 billion. How would they pay such judgments? They'd go bankrupt of course and then be resuscitated in reorganization by the US Congress, but their failure would allow gold to trade freely again. Thus, the demise of Morgan is very important to the future of gold.

HONG KONG, Oct 18 (Reuters) - Physical gold dealers in Asia gave a mixed picture of demand on Friday, with Hong Kong firms unable to fill the flood of orders while Singapore and Malaysia reported only a mild pick-up in demand ahead of the holidays.

With the steady fall in the price of bullion this week, refineries and gold bar dealers in Hong Kong have run out of stock of good delivery kilobars bars.

"There is no stock. We have checked with Johnson Matthey and Lee Cheong and they don't have stock. They can't supply the market," said William Leung, a dealer at Standard Bank London in Hong Kong.

Dealers in Hong Kong were quoting premiums of US$0.15-0.20 an ounce over loco London prices, a turnaround from discounts of US$0.05-0.10 last week.

"BOMBAY, Oct 21 (Reuters) - Gold imports from India, the world's largest consumer of the precious metal, are likely to rise this week as global prices have fallen and festive buying has increased, traders said on Monday. "More and more people, including those who had earlier suspended buying due to firm prices, are now purchasing gold jewellery ahead of the peak festival season," said Nayan Pansare, a senior official of gold trading firm Inter Gold Ltd".

KUALA LUMPUR (AFX-ASIA) - Prime Minister Mahathir Mohamed is stepping up plans to use the gold dinar to trade with participating Islamic countries by proposing establishing a team to study the scheme. Malaysia plans to use the gold dinar mechanism to facilitate financial settlements between participating Islamic nations in gold, while at the same time increasing trade among Islamic nations. "I will propose to the Cabinet and if they agree, I will ask Bank Negara to establish a secretariat for the gold dinar (facility). Iran seems to be interested so we will contact them," Mahathir said at a press conference. He added that Malaysia is still in the process of explaining the concept of using the gold dinar to other Islamic countries. He said participating countries may have to revise their laws to comply with international financial regulations. Mahathir said Malaysia is looking for Islamic countries with a strong financial and economic background as participants. He added that the gold dinar will be valued according to the market price.

Singapore, Oct. 23 (Bloomberg) -- Global gold supply may fall next year by about 200 tons as producers reduce the volume of the metal they sell in forward markets, even if bullion prices fall, the Financial Times said, citing Goldman Sachs Group Inc. Gold miners this year have become net buyers, securing physical supply by buying back gold which was previously sold in the forward market, the paper said, citing Daniel McConvey, vice- president of global investment research at the investment bank.

"We do not expect a return to hedging if the gold price dips over the next year,'' McConvey said in the report. "Rather, we expect that downward moves in the gold price will be met with stronger hedge buybacks.'' -END- Gold demand is expected to increase 300 tonnes in China alone next year. Add another 200 tonnes of gold supply decrease here and you get the picture for next year. The Gold Cartel is in BIG trouble!!

THE INTERNATIONAL FORECASTER
An international financial, economic, political and social commentary.
Published and Edited by: Bob Chapman
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