Barrick Hit, Freddy Mac?, War Troubles, Dollar Flops, Gold Shares Rock

By Bill Murphy     June 13, 2003 www.LeMetropoleCafe.com

I was fortunate to be an attending member of Marble Collegiate Church in New York City while Dr. Peale was still giving sermons there.)What a great way for our camp to end the week! The gold action was classically BULLISH! Due higher, gold sold off quickly on the downside to test $350, with $351 holding. After the big beating it took on Tuesday, it is very normal for rallies to be sold - usually for the following week or more. So far, those sell-offs have been brief, checked by shorts that want to cover. The Comex open interest contracted once again, down 2138 contracts to 192,440. Gold is only $14 away from breaking out and the open interest is more than 53,000 contracts off its high earlier this year. The specs are exiting at the moment. As gold moves up, they will come back in on the long side. That might not happen for another $10 to the upside. This means there is an enormous amount of buying power that will enter the market at higher levels. Such buying power could propel gold through $370 in a blink.

Gold
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As mentioned in recent MIDAS commentary, the gold fundamentals are a "10+" and getting better. No sense repeating them again. Only the demented selling by The Gold Cartel has prevented gold from taking out $370 and $400. While they continue to win a battle here and there, they are losing the gold war. They will be carried out on a stretcher because everything is going against them. Murphy’s Law is kicking in. That is what CARTEL CAPITULATION WATCH has been about all these years. Stay tuned.Silver has bottomed and remains one of the great risk/reward commodity buys of all time. Morgan Stanley was the featured buyer again today as they continue to cover shorts. Maybe they have done so and are going long. The Comex open interest rose a substantial 3089 contracts yesterday to 83,378. This is very good news. The funds with a lousy silver trading record were the sellers yesterday. The trade was the buyer.

 

Silver
http://futures.tradingcharts.com/chart/SV/73

The John Brimelow ReportJune 13, 2003 Indian ex-duty premiums: AM $6.06, PM $5.42, with world gold at $354.35 and $354. Ample for legal imports. Several of the dealer commentaries refer to having seen physical appetite recently.Despite numerous negative remarks, gold in yen held steady in Japan this morning, with the active contract closing down 1 yen. This involved $US gold rising $1.40. Volume was quiet, down 27% to the equivalent of 32,225 Comex lots. Open interest fell the equivalent of 1,205 Comex lots. (NY yesterday traded an estimated 40,000 lots.)This week a "Bridgewater Daily Observations" discussed the apparently often forgotten fact that a sustained decline of the dollar (down 17% in the past 12 months basis the Dollar Index) tends to cause $- denominated commodity prices to rise. Today a WSJ article talks of extending this argument to US stock prices, a somewhat more arguable but nevertheless consideration-worthy concept. Yet, oddly, none of the numerous negative comments on gold surfacing in the past day or so seem to give this factor a passing glance. This despite gold being the most internationally fungible commodity of all. Since gold’s peak in early February the Dollar Index is down 7%; if gold had tracked the slide of the Index since the turn of the year it would have been over $382 this morning. The Bears are going into the teeth of a wind which shows every sign of getting sharper.The initiative may well be passing from the Bears’ paws – and it seems the gold equities can sense it.JBCARTEL CAPITULATION WATCH The dollar fell to 92.30, down .59, which is a new low close for the move and for the last 58 months. The euro rose more than a point to 118.64. (The dollar gold relationship is not as important as most people think. The dollar is making new lows, while gold is $16 off its recent high. What is most important, which no one in the mainstream gold world pays attention to, is the activity of The Gold Cartel, the crooks. When they are beaten, and that moment is getting closer and closer, gold will FLY!)

Dollar
http://futures.tradingcharts.com/chart/US/63

Treasuries trade like the US is headed into a depression as they close up sharply at 124, a new multi-year (decades) high close.Interesting: the US stock market has closed lower three years in a row, the first time since the 1930 era. The US bond market makes a decades high close, the dollar a 58 month new low close. All these closes are dramatic. Only gold is far away from doing the same, obviously because it has been rigged during that period of time. Yet, the true gold fundamentals are the most powerful of all financial market trends now in place. As The Gold Cartel falls apart, the incredibly positive gold fundamentals will assert themselves. The price of gold will head for $800/$1,000 per ounce!Once again the US economic news was not good. The big surprise was the U of M consumer confidence number. The pundits thought the number would rise, but it fell surprisingly. Before the number was released, the CNBC types hyped the number as the most important one this week. When it came out a bummer, they trotted out new pundits who said it was not that important. Disingenuous is too kind of a description for that sort of commentary.June 13 (Bloomberg) -- U.S. consumer confidence faded this month as rising unemployment sapped optimism, a University of Michigan survey found.

The university's preliminary June sentiment index fell to 87.2 from 92.1 last month, people with access to the report said. The measure reached a nine-year low of 79.9 in February and rebounded the next two months. –END-June 13 (Bloomberg) -- U.S. wholesale prices slipped for a second straight month in May, led by gasoline and home heating oil, adding to speculation the Federal Reserve may cut interest rates this month to head off a broader decline in prices.

The producer price index, which tracks payments to factories, farmers and other producers, declined 0.3 percent after a record 1.9 percent drop in April. Prices excluding food and energy, the so-called core index, gained 0.1 percent after falling 0.9 percent. The Working Group on Financial Markets was working overtime today. Every time the DOW (9117, down 79) went down more than 100, they brought it back. With an hour to go the DOW was down 115, an unacceptable drop for the PPT. So, they rallied it, not wanting a big fall to scare investors over the weekend. Boy, is this intervention obvious.As is, the DOW closed up for the week. No harm, no foul. The DOG, which has rallied for months, sold off 27 to 1626.GATA’s Mike Bolser:

Hi Bill:
Here is today's repo update for your review.

Only $1.5Billion has been added to the pool but this small add was offset by a $6.5 expiration [yesterday's overnight amount] thus the pool total stands at $29.25 Billion At this hour [12 Noon] the DOW is down about 100 and the dollar market is weak approaching a new low.

Pool funding may be diverted to aid is supporting the dollar and could explain why the DOW is weak today while the pool is still comfortably near $30Billion.

What the data seem to saying to us is that at $30Billion in repo pool totals either the DOW OR the currency can be levitated but not BOTH. Or perhaps the master juggler just dropped the repo ball?

Best, MikeChuck checks in:How close can we be? The put buying in the futures tell me that they are shorting the breakout here. Let's see how much bravado the gold market cappers have here. We should see some real fireworks imminently as the truth of the rigged markets is exposed. I started to say market and I made it plural. Might be an interesting finish. If not, it should come next week. Go GSS……... The pattern of the market's inverse relationship to gold shares is holding remarkably constant. The market opened up slightly today and the shares gapped down. The moment the market started to sell off, the shares started up. This augurs powerfully to the collapse mirrored by the blow out. To the naked eye, this will appear to come out of left field, but this has to be the weakest technical market in history right now…..One day and soon a day like today will bounce and then start a cascading decline. They will stop trading in this market for a day or two and drop it 2 or 3000 points. What is very evident and exciting is the reverse action in the golds. As you have said there are breakaway gaps just ahead as many sideliners decide to take their positions. I think that GG breaking decisively through 12 will be a key. If you look at gold and compare it to 1971-1980 we can see a similar exponential pattern. It's incredible that no one sees it. Enjoy!

ChuckOne of the latest features in my presentations at conferences is to highlight how spin has overtaken the importance of "the truth" in America and is threatening the very foundations which made America great. Examples abound from the Jessica Lynch "amnesia" cover-up to the grotesque disinformation about weapons of mass destruction in Iraq. Most of us in the GATA camp understand what has happened all to well for we know how The Gold Cartel has lied about gold these past many years and lied about the true state of the gold market. It has been "SPIN CITY" for a long time and remains that way.Contrast the US versus Japan. Remember this quote from the Asian press earlier this year: "There was an agreement between Japan and the US to take action co-operatively in foreign exchange, stocks and other markets if the markets face a crisis."

The Japanese admit to their market rigging, the US remains silent, or makes denials. Yet, it could not be more obvious they have interfered in all the US financial markets these past months. The latest from the truthful Japanese: Japan's Central Bank to Buy Securities
Wed Jun 11, 8:08 AM ET

By YURI KAGEYAMA, AP Business Writer TOKYO - Japan's central bank decided Wednesday to take the unusual step of buying up to $8.5 billion in securities in an effort to help revive the nation's struggling economy. The move, which came at the end of a two-day policy board meeting, marks the first time the Bank of Japan will buy asset-backed securities. Previously, the bank has bought government bonds, which carry less risk than securities…..The bank said the purchases of up to 1 trillion yen in securities will start as early as next month and last through March 2006. Bank of Japan Gov. Toshihiko Fukui said the intention is to nurture the securities market, rather than interfere in its "natural growth," and the bank's purchases won't continue indefinitely…..Fukui played down hopes for any immediate effect on fund-raising for businesses. Details on what securities will be purchased will be worked out in coming weeks, but Fukui said a proper weighing of risks is critical. The announcement comes a day after the government formally approved an injection of nearly 2 trillion yen ($17 billion) in public funds into cash-strapped Resona Holdings, the nation's fifth largest banking group, to avert a financial crisis. -END-The news from Iraq (you know, the war that ended) and Afghanistan is dreadful, boding poorly for the dollar and well for gold:BAGHDAD, June 13 (IslamOnline.net & News Agencies) - An Iraqi oil pipeline was burning Friday, June 13, after being attacked by twin bomb attacks, despite an offensive by U.S.-led forces against opponents of their occupation regime.

Fires blazed on the major pipeline from Iraq's northern oilfields after what residents said were twin bomb attacks aimed at sabotaging exports through Turkey, reported Agence France-Presse (AFP).

An AFP correspondent saw two separate fires on the pipeline, 15 kilometers (nine miles) from the key refinery town of Baiji, close to the main highway between Baghdad and the northern regional capital of Mosul. –END-This one is really the pits: US turns to the Taliban

http://atimes.com/atimes/Central_Asia/EF14Ag01.html By Syed Saleem Shahzad

KARACHI - Such is the deteriorating security situation in Afghanistan, compounded by the return to the country of a large number of former Afghan communist refugees, that United States and Pakistani intelligence officials have met with Taliban leaders in an effort to devise a political solution to prevent the country from being further ripped apart.

According to a Pakistani jihadi leader who played a role in setting up the communication, the meeting took place recently between representatives of Pakistan's Inter-Services Intelligence (ISI), the US Federal Bureau of Investigation and Taliban leaders at the Pakistan Air Force base of Samungli, near Quetta. –END-

Barrick, the anti-gold company, was hit with another lawsuit yesterday. What goes around comes around. The executives of that company are not much different than the ones on Wall Street that bilked internet and high tech investors out of hundreds of billions. Barrick induced people over the years to invest in their company and then conspired with The Gold Cartel to keep the gold price from going up. May the Barrick executives still around all go the way of ex-president Randall Oliphant who was fired. Globe/Bloomberg say legal suits rain down on Barrick

Fri 13 Jun 2003
The Globe and Mail reports in its Friday, June 13, edition that Barrick Gold, the world's third-biggest gold producer, is being sued by law firms that claim the company misled investors by forecasting higher earnings than it delivered last year. A Bloomberg News dispatch to The Globe reports that Milberg Weiss Bershad Hynes & Lerach filed a lawsuit and asked a federal court in New York to grant it class-action status on behalf of all investors who bought Barrick stock between Feb. 14, 2002, and Sept. 26.

A similar suit was also filed by law firm Cauley Geller Bowman & Rudman. Barrick's "operating challenges were presented as they came to our attention," said Barrick spokesperson Vince Borg. He said the company would respond more fully once it had a chance to review the documents. Barrick is accused of issuing a series of "materially false and misleading statements" to the markets during the time period. The company failed to disclose that its mining costs would rise and that it would not meet earnings forecasts of between 42 U.S. cents and 47 U.S. cents a share for the year, the law firm said. The charges have not been proven in court, says Bloomberg News. –END-The suit:

http://www.milberg.com/mil-cgi-bin/mil?case=barrick

Notice of Opportunity to Serve as Lead Plaintiff
To Barrick Gold Corp. Security Shareholders:
On 06/12/03, Milberg Weiss filed a complaint alleging violations of the federal securities laws by Barrick Gold Corp. and certain of its officers and/or directors. The class action was commenced in the United States District Court for the Southern District of New York on behalf of purchasers of Barrick securities between February 14, 2002 and September 26, 2002, (the "Class Period").

If you purchased Barrick securities between February 14, 2002 and September 26, 2002 you may qualify to serve as a lead plaintiff in this action. To inquire about serving as lead plaintiff, please complete the following electronic certification.

-END-

From a GATA colleague on Barrick:

Today's New Suit Against Barrick, Wagner v. Barrick Gold Corp., et al. Go to http://securitiesclassaction.comThe lesson of this suit is "Never, BS Stockholders!!!!!" ABX is a stone loser on this one.

Barrick's drop in earnings is a result of the new accounting rules that required that derivatives be attached to the operations that they hedge and because of Barrick's accounting selection which requires that the losses from derivative hedges be applied to the project they are hedging and be realized in the quarter in which they occurred. As gold turned against Barrick hedges, Barrick chose not to be totally truthful but to via spin city talk attribute the loses to each project saying the economics, of say, the Bulyanhulu project had turned bad and therefore Bulyanhulu had not performed well resulting in lower profits. People assumed ABX was speaking about something had gone wrong with the mining economics of the Bulyanhulu when this was not true. The absolute truth was the mine economics performed perfectly but the hedge cost Bulyanhulu's bottom line. Management was predicting good earning based on the true operating results then came the blow from the costly hedges resulting in lower profits. Barrick spin city talked, saying it was a shift in the economics of 12 of their projects all at once. It was not. It was the hedges losing money being applied to the projects that hurt their economics. This is proven by the comments in the last annual statement for instance concerning the mine economics of the Bulyanhulu that has functioned perfectly. Lawyer talking which spin city talking is so closely approximates lying actually to your shareholders always get you in deep trouble. When gold was dropping sharply in the long Bull market ABX had no problem telling the world all the money they made on the hedges short [position of gold as they helped gold go lower orally and by their trading. Now that gold is going up and their hedges are costing them money the spin city talk to keep the focus off their now losing gold commodity trading operations they call hedging.

This suit is a product of that spin city talk to stockholders rather than admitting that the damn hedging is killing you.

The problem with ABX is the old man Munk cannot get off his proposition that hedging which he brought to the gold industry is a wonderful contribution when it was the worst thing that ever happened to gold.

Unless ABX follows in NEM's fine example and dumps their hedges they can announce twenty stocks buy backs but all they will do is buy their stock back and go private at a low price. –END-Barrick is getting pounded from all directions. Kelly O’Meara of Insight Magazine touches on the Blanchard suit and the gold price manipulation issue at: http://www.insightmag.com/news/439175.html The Wall Street/Washington spin on the Freddy Mac scandal is that it is no big deal. Maybe, maybe not. It sure stinks to high heaven to me. When Enron CEO Jeff Skilling resigned for personal reasons months before Enron blew up, the spin was it was no big deal either. He resigned to spend more time with his family. Yeah, right! As we all know now, he quit because he allowed his firm to blow up.A New York Post story today on the Freddy Mac debacle: Here is an important article By Paul Tharp
Criminal Inquiry Hammers Freddie

A new criminal probe of cooked books at home mortgage giant Freddie Mac is opening a can of worms that's scaring investors. Federal prosecutors disclosed yesterday they're digging into missing documents and possible cover-ups of shaky derivative investments at Freddie Mac, which holds $1.3 trillion in investments - including one of every six home mortgages in the United States. The criminal probe stunned the mortgage lending community, and caused some fast footwork yesterday by Freddie Mac and its sister, Fannie Mae, to prop up their market. The two agencies took steps to pour up to $12 billion into buying up their mortgage securities to stabilize the market, at least for now. "This sounds like the derivatives disaster that nearly wiped out everyone back in 1998," said one bank chairman, who asked to remain anonymous, recalling the infamous collapse of hedge fund Long Term Capital Management. Long Term's collapse - which involved more than $4.8 billion in wrong-way derivatives gambles - put more than $1 trillion of investments at risk of default until the Federal Reserve and 14 top banks bailed out the fund with billions, preventing a global financial disaster. "It frightens a lot of us that it could happen again, but worse," the bank official said. Federal prosecutors are looking at alleged document tampering by David W. Glenn, the former president and chief operating officer who was ousted Monday with his two bosses. Glenn, a 13-year veteran at Freddie Mac, allegedly altered and ripped out pages of his notebooks before handing them to regulators probing the company's accounting practices. Also ousted were Chairman and CEO Leland Brendsel and CFO Vaughn Clarke, who were allowed to resign and weren't accused of altering documents. Freddie Mac said its books have been under a separate investigation by the Securities and Exchange Commission since January. Freddie Mac said it will restate its earnings for the past three years, following complaints by its new auditor, PricewaterhouseCoopers, that the agency's handling of its complex derivatives investments was questionable. The probes also increased political pressure on Freddie Mac, and raised questions as to whether it should exist at all as a government-sponsored company with exclusive, easy access to cheap federal funds. Since the bookkeeping scandal erupted three days ago, numerous bank leaders around the United States have privately called for a new industry lobbying effort to restructure or eliminate Freddie Mac. "The industry feels that now's the time to do something before this turns into a catastrophe," said one New York banking official. Politicians are starting to weigh in on the controversy, and several plan to hold hearings on the debacle. Freddie Mac's stock has sunk 17 percent this week, wiping out nearly $6.9 billion in shareholder value. -END-It is only a matter of time before the GATA and Warren Buffett warnings of a coming derivatives disaster comes into being. Perhaps a derivatives nightmare is already upon us? Here is a good one. The FOX is to be put in charge of watching over the Freddy Mac chicken pen:Dow Jones Business News

White House Sends OFHEO's Brickell Nomination To Senate
Thursday June 12, 5:13 pm ET
By Dawn Kopecki, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- After months of delay, the White House hurried to the U.S. Senate Thursday the formal nomination of a new director of the federal agency that regulates Freddie Mac , just three days after the company booted its top executives over problems with its accounting practices.

The White House tapped Mark Brickell, a former managing director for J.P. Morgan's derivatives group, to replace Democratic-appointee Armando Falcon at the Office of Federal Housing Enterprise Oversight just as the agency comes under fire for mishandling possible accounting misdeeds at Freddie Mac…. -END-From a perceptive, fellow Café member on the Freddy Mac issue:

Freddie and Fannie, along with Ginnie, are widely held by the money market funds in search of yield, and since they are GSE's they are often holding of funds that even purport to be 'government holdings' but not exclusively Treasuries.

If Freddie were to implode, it would most likely impact the NAV's (Net Asset Value) of some of the money market funds which are NOT guaranteed by the Feds, as Freddie is not guaranteed by the Feds. Mom and Pop may be shocked to learn that the NAV of the money market fund is taking a four or five percent immediate decline, along with a drop in yield.

Could this cause a financial panic? Well, what do you think? And where are most of the money market funds held? Oh yeah with the brokerages. What impact would that kind of liquidity withdrawal have on them? What would the impact be on the other holdings of money market funds, like corporate bonds, if there was a rush to withdraw money and put it somewhere "safe" like an FDIC bank? Will the Fed take all measures to put another finger into the dike ahead of this latest unexpected catastrophe in the making before it becomes a public issue? How long can they keep it up?

I can hear the printing presses slipping into high gear........

"Jesse" Dave LewisThe Winter of THEIR discontent Bill
Imagine, if you will, a community of settlers in some northern region of the world, numbering 100 people. Imagine as well that after 2 successively warmer winters one of the settlers gets the idea that winter will soon be a thing of the past. Given the tremendous amount of work required to prepare for winter, once this settler started sharing his views with others, the idea gained credence, at least in the minds of believers. As spring turned to summer the debate raged, with social pressure put on those few who were quite sure winter would return, to keep their views to themselves. That summer would prove to be a glorious summer and, as most people were confident of the new world view, many settlers thoroughly enjoyed it, electing the visionary to be their new leader.

However, as summer gave way to fall, doubts began to replace the calm confidence. The leader, now quite used to his position of power, implemented new rules, authorizing expulsion from the settlement as punishment for speaking about winter. Despite a few expulsions, fall proved to be far colder than the previous two. Unfortunately, having squandered the summer growing season those settlers still remaining began more and more to resemble deer transfixed by headlights, blindly staring at their oncoming doom. The first snows brought about the expulsion of their leader and a reconciliation with some of those who had saved for the winter. Their chief became the new leader and never again did his people forecast an end to winter.

The moral of the tale is that the truth, as they say on X-Files, is "out there". Thoughts, to be utile, should aim to conform in some way to the reality of experience and in no way can voluntary or involuntary ignorance change the facts of reality, only your responses to them. While a few anomalous years and a lot of greed led people to their faith in the new economy, the summer of fiat money is always followed by a dismal winter. This is true regardless of current opinion, which, in the case of the financial markets is expressed in terms of price. In a sense this is the hardest part of the road, as people are no longer in a position to gracefully swap world views, clearing the way, in their minds, for any action if it will only bring back summer. The cornered beast, as they say, fights hardest. Looking outside my window, however, I see a few Freddie Mac sized snowflakes.

It looks to me like the winter of our discontent, despite no warning from the pundits, is fast approaching, unless you happen to be a Gold bug.

regardsDave Lewis
http://www.chaos-onomics.com The gold shares were robust all day long, even with a late sell-off. The XAU rose 1.61 to 78.29. The HUI moved up 2.93 to 149.20. Once again, Golden Star Resources (my largest gold share holding) led the way, climbing 23 cents, an 8.3% move, to $2.73. The shorts in that stock are getting their deserved comeuppance. Somebody took Golden Star to $2.90 midday – must have been their desperate buying that took GSS up so high, so fast. By high, I mean for the day. Golden Star will take out its old high of $21 before all is said and done. Nothing else new there. You heard that prediction from MIDAS with Golden Star at 58 cents less than two years ago. HUI
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8 The HUI breached 150 for a while. It has taken out its heaviest technical resistance approaching 150. There is less formidable resistance running up to 155. With the gold fundamentals so extremely bullish, the gold shares ought to continue to move up and blow through 155 fairly easily. A gold share buying panic is coming as the investment world becomes aware of what you know already. Let them pay up. I ended my presentation at Joe Martin’s Vancouver Gold Conference with the following. Perhaps it will be of help to newer Café members: "Do your homework. Study and learn what GATA knows. Once you understand what has happened to the gold price these past years and why, you will know what has to happen in the years to come. It is a roadmap to a fortune." GOT TO BE IN IT TO WIN IT! MIDAS Appendix If any Café member wants to contribute to our efforts to help the ZULU orphan kids, here are the wiring instructions: Rotary Club of Durban - AIDS ORPHANS
Account no: 1305703014
Clearing Code: 130526
Swift Code: NEDSZAJJ

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