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Now Hear This!


By Bill Murphy          Printer Friendly Version
June 01, 2004

May 31 - Gold $395.10 up $1.40 - Silver $6.15 up 6 cents

Now Hear This!

The Midas title is to honor, on this Memorial Day, WW II Navy Submariner, my friend and veteran Café member/GATA supporter, Navy George!


A man is driving toward home in Northern Arizona when he comes upon a Navajo man hitchhiking.

Because the trip has been long and quiet, he stops the car and the Navajo man climbs in.
During their small talk, the Navajo man glances surreptitiously at a brown bag on the front seat between them.
"If you're wondering what's in the bag," offers the man, "it's a bottle of wine. I got it for my wife."

The Navajo man is silent for a while, nods several times and says, "Good trade."

That little ditty will certainly get me in trouble with some of our burgeoning number of female Café members, however, I couldn’t resist – it had me chuckling so much.

The London and New York markets were closed today for a holiday so we don’t really know how the oil and gold markets will react to the recent violence in the Saudi oil town of Khobar. Certain minor gold markets were open and bullion rallied $1.40 with silver gaining 6 cents.

The Saudis have given assurance oil supply and their coming production increase will not be affected by the massacre. We shall see. Tell that to the dead oil workers and their families. Three out of four of the murderers even escaped somehow to come back and haunt the Saudi oil industry at a later date. Oil may not rally too much, but the terrorists are coming closer and closer to seriously interrupting the Saudi oil flow. Besides, who in their right mind would want to work there? Also, who in their right mind would want to be short oil, unless hedged with a guaranteed supply source? Time will tell on the oil score.

Meanwhile, this development comes with gold specs the least long in over a year. The small specs are the least long in almost two years. Therefore we have a set up for gold to really rocket as the specs pile in on the long side, especially if gold takes out its 200-day moving average which is nearly $3 higher than Friday’s close.

The Café’s Sentiment Indicator leaped on Sunday after being very so-so for five weeks. This tells me the Saudi oil town massacre will affect those interested in the gold market all over the world.

The silver open interest is down approximately 25 % off its highs at 85,489. With the physical market has tight as it has been in memory, silver could fly at any time.

The caveat for our camp is The Gold Cartel. As we know, gold has become a "reverse barometer indicator." The days when it should take off most, cabal forces sit all over it to calm down financial markets. However, with the potential of 70,000 specs jumping on the long side in the weeks to come, they are going to have their hands full keeping gold down below $400.

There is every reason to anticipate gold and silver taking out their highs made early this spring in the months to come.


I am preparing for my presentation at Joe Martin’s Vancouver gold conference on June 13 and for a group of portfolio/hedge fund managers in Boston in the latter part of June who collectively handles over $1 billion dollars in client funds.

The theme is going to be why it is so important to be aware of what GATA knows and why this knowledge ought to lead to extraordinary investment gains in coming months and years. With the recent events in Iraq and Saudi Arabia, I thought it a good time on this Memorial Day Weekend to pound away at a portion of this theme to Café members. Those who remain short gold and silver for much longer will be memorializing for different reasons down the road.

For my upcoming presentations I am going to hammer home three key points:

*1 - Officialdom has lied to the investment world about what is really going on in the gold world.

*2 - They have done so to cover up a vast conspiracy concerning gold held for the world’s public; 11,000+ tonnes more than acknowledged of CB gold has left the vaults of the central banks in order to artificially suppress the press.

*3 - As a result, this "Gold Cartel" is running out of enough central bank gold to continue their scheme. More than half the central bank gold is GONE! With a growing supply/demand deficit of 1500+ tonnes per year, the price of gold has to explode to bring the supply/demand situation into equilibrium, whether that be next month, or next year!

My presentation won’t go into anywhere near this amount of detail, however, here is some support for just point one. Much of this will be review for vet Café members, yet it even astounds me when I reread what our team has come up with over the years and how it all fits into GATA’s long-standing gold price manipulation and cover-up accusations.

After the price of gold spiked in September 1999, following the surprise Washington Agreement, one which limited the sale of gold by 15 European countries to 400 tonnes per year and held the amount of lending to the existing amount at the time (there was no mention of swaps), the IMF called a meeting of its members in Santiago, Chile. During this meeting, the IMF directed its members to count gold left in its vaults via lending and swapping operations to be counted on their books as bank reserves, i.e., to perpetuate a hoax. GATA’s Mike Bolser made this discovery essentially finding The Gold Cartel’s playbook. As a result, Mike and the rest of the GATA ARMY have been all over this ruse for years by exposing this deception with concrete evidence. In the years to come, the horrific ramifications of this fraud upon the financial world will be astounding.

Some examples of the various "officialdom" deceptions:

From GATA’s Sid Reynold's October 23, 2003 commentary at The Matisse Table:

#11. IMF has directed CB’s not to disclose how gold is leased/swapped, only total reserves (proof below).

The IMF has denied this in writing, "This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets." Refer, and search for "correct"

However, numerous member countries/entities have proven the IMF has lied ie
• Philippines: "Beginning January 2000, in compliance with the requirements of the IMF's reserves …, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap." Refer, and search for "swaps"……

• European Central Bank: "Following the recommendations set out in the IMF operational guidelines of … developed in 1999, all reversible gold transactions, including gold swaps, are recorded as collateralised loans in balance of payments and international investment position statistics. This treatment implies that the gold account would remain unchanged on the balance sheet."….


Clearly this reveals the IMF is lying with the ECB unintentionally acknowledging this lie. The fact the GATA ARMY has caught the IMF not telling the truth is bad enough. Then there is the Treasury/Exchange Stabilization Fund, which has been caught fabricating too thanks to the brilliant work of James Turk (, whose discovery made it into Reg Howe’s superb law suit in Boston Federal Court. This was recently rehashed by GATA’s Andrew Hepburn and the Netherlands' Mihaly Schroth. Mihaly writes on April 26:

Hi bill,
In the past we had a debate whether or not the Exchange Stabilization Fund (ESF) was active in the gold market (Reg Howe & Andrew Hepburn). A bit from Andrew Hepburn's essay:

The U.S. Treasury explicitly denies that the ESF has been used for gold market interventions. On the "Frequently Asked Questions" section of their website, the following claim is made: "The ESF has not been used to manipulate gold prices. In fact, the ESF has not held gold since 1978."

As noted above, the Treasury claims that, "The ESF has not held gold since 1978." This is demonstrably false. The Federal Reserve's Statement of U.S. Reserve Assets for January 2001 contains the following line item: "Gold Stock, including Exchange Stabilization Fund."

Keep in mind that one month earlier, Reg Howe filed suit against (among others) the Secretary of the Treasury. That might explain why the above line item was altered for the February 2001 Statement of U.S. Reserve Assets to read: "Gold Stock."

As is apparent, the Federal Reserve removed the explanation, "including Exchange Stabilization Fund." No reason was provided when the line item was altered. More importantly perhaps, the Fed has stonewalled repeated inquiries asking why this change was made. While Fed officials have responded to letters on the subject, at no point have they explained the rationale behind the removal of the ESF reference.


So, the Federal Reserve altered the Statement of U.S. Reserve Assets. First the ESF was included, and then removed. My guess is they will have to remove some more, because I found the following on:

Salient Statistics-United States: 2003e
Stocks, yearend, Treasury 38,140
And now watch the footnote:

3 Includes gold in Exchange Stabilization Fund. Stocks were valued at the official price of $42.22 per troy ounce.

So, how long will it be before they are gonna remove it from this site.


OK, now let us go back in time:

Washington, D.C. 20551

June 25, 2001


The Honorable Jim Bunning
United States Senate
Washington, D.C. 20510

Dear Senator:

Thank you for your recent letter requesting information related to an inquiry received from two of your constituents, Mr. and Mrs. Rupert Raymond. The Raymond's letter principally concerns remarks made at a January 1995 meeting of the Federal Open Market Committee (FOMC) by Virgil Mattingly, in his capacity as general counsel to the FOMC. A memorandum addressed to me from Mr. Mattingly on this matter is enclosed for your information. The memorandum responds to the matter raised by the Raymonds in their letter.

I would like to take this opportunity to confirm the statements I made last year regarding the Federal Reserve and gold in a letter to one of your colleagues, Senator Joseph Lieberman. In that letter I said:

"The Federal Reserve owns no gold and therefore could not sell or lease gold to influence its price. Likewise the Federal Reserve does not engage in financial transactions related to gold, such as trading in gold options or other derivatives. Most importantly, the Federal Reserve is in complete agreement with the proposition that any such transactions on our part, aimed at manipulating the free price of gold or otherwise interfering with the free trade of gold, would be wholly inappropriate."

These statements accurately reflect the facts and long standing Federal Reserve policy to gold.

I hope this information is helpful. Please let me know if I can be of further assistance.

Alan Greenspan


June 8, 2001

TO: Chairman Greenspan
FROM: J. Virgil Mattingly
SUBJECT: Inquiries regarding "gold swaps"

This memorandum responds to your request for information related to recent inquiries the Federal Reserve has received regarding remarks I made at a January 1995 meeting of the Federal Open Market Committee ("FOMC") in my capacity as general counsel.

These inquiries focus primarily on a statement attributed to me that appears on page 69 of the published transcript of the January 31-Feb1, 1995, FOMC meeting to the effect that the Exchange Stabilization Fund ("ESF") has engaged in "gold swaps." Given the passage of time, some six years, I have no clear recollection of exactly what I said that day but I can confirm that I have no knowledge of any "gold swaps" by either the Federal Reserve or the ESF. I believe that my remarks, which were intended as a general description of the authority possessed by the Secretary of the Treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled. The Federal Reserve's lack of involvement with gold and gold-related financial instruments is set forth accurately in your January 19, 2000, letter to Senator Lieberman, a copy of which is attached. My remarks should not be interpreted as modifying in any respect what is set for that letter.

With respect to activities of the ESF, I note the Treasury Department stated in a recent federal court filing that the ESF has not held any gold since 1978.


Now, wait a minute! We have just shown above that the ESF HAS HELD gold since 1978. Mattingly, with his "garbled" remark reveals how disingenuous and murky he is as a Fed lawyer. Clearly, he is copping a plea about the ESF when he cites the Treasury Departments incorrect statement, in an attempt to cover his own deceptive butt.

Here is the Howe vs. BIS court filing Mattingly is referring to:

The U.S. Treasury also denied intervening in the gold market. In a court filing dated March 15, 2001, then-Secretary of the Treasury Paul O’Neill asserted:

Although unnecessary at this juncture, the secretary specifically denies that the Treasury or the [Exchange Stabilization Fund] since 1978 has traded in gold or gold derivatives for the purpose of influencing the price of gold or the exchange value of the dollar. In fact, the ESF has not held any gold since 1978.



Then, there is the devious Greenspan with his "wholly inappropriate" comment - YES INDEED inappropriate – yet, his words too do not pass any kind of smell test:

On July 24, 1998, Greenspan told the House Banking Committee: "Central banks stand ready to lease gold in increasing quantities should the price rise." He repeated that statement a few days later to the Senate Agriculture Committee:

Is the Federal Reserve the only central bank Greenspan is NOT referring to? If so, why did he not say so? This is what the Reserve Bank of Australia, whose government is our strategic ally, has to say on this subject on Page 31 of its annual report for 2003:

"Foreign currency reserve assets and gold are held primarily to support intervention in the foreign exchange market. In investing these assets, priority is therefore given to liquidity and security, in order to ensure that the assets are always available for their intended policy purposes."

The Reserve Bank of Australia's admission can be found here:


This brings us back to Greenspan. How does he explain this GATA ARMY revelation:

These denials do not square with a remark found in a January 1995 Federal Open Market Committee meeting transcript. Responding to a question raised by then Federal Reserve Board Governor Lawrence Lindsey about the legal authority of the U.S. Treasury’s Exchange Stabilization Fund to engage in the financial rescue package for Mexico then under discussion, J. Virgil Mattingly, general counsel of the Fed and FOMC, stated (p.69):

It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The statute [31 U.S.C. s. 5302] is very broadly worded in terms of words like 'credit' -- it has covered things like the gold swaps -- and it confers broad authority. [Emphasis supplied.]



Hello??? Mattingly??? ESF authorized gold swaps??? This shoots down Mattingly and the US Treasury once again!

Meanwhile, with what we have learned over the past six years, there is no way the Fed has not actively been involved in the gold market for some time. Yes, Lindsey is referring to the ESF, further proof of lying by the Treasury higher ups, however, no way the Fed is not directing some of the activity utilizing Greenspanesque language to define what the real meaning of "IS" is.

Not only do the statements by the ESF, Treasury, Mattingly, and Greenspan not pass the smell test, the above evidentiary material reveals them to be speaking falsehood after falsehood (which would not hold up in any court of law under scrutiny), and that is putting it both mildly and politely. When the gold scandal comes to fruition, all of these characters and institutions should be held accountable.

There has not been a legitimate audit of US gold in 50 years. Congress is up in arms about proper due diligence in the corporate sector and appropriate accounting procedures as a result of recent scandals. Then why won’t they approve a legit audit of the US gold reserves?


There is a good deal more of additional GATA evidence catching these people in their nefarious games, games which are going to terribly harm the average American from a financial market point of view in the years to come.

One of those bits of evidence relates to Fed/Treasury gold swaps and US government covert gold activity caught by GATA’s Mike Bolser, publicized by James Turk, and then covered up by the U.S. Mint in a ludicrous manner:

"Bolstering GATA's allegation that gold swaps may have jeopardized the ownership of a substantial portion of the U.S. reserve is an accounting change made in September 2000. The U.S. Mint reclassified approximately 1,700 tonnes of gold at West Point, New York, to "Custodial Gold Bullion" from "Gold Bullion Reserve." This, of course, suggests that the gold was being held in custody by the mint for its real owner. (Online copies of the August 2000 and September 2000 Status Report of U.S. Treasury-Owned Gold are no longer available. However, a reference to the accounting change is made on the Frequently Asked Questions section of the Treasury’s website:

The mint did not explain why the West Point gold was reclassified and the gold at Fort Knox and Denver was not. But before it could be pressed on the issue, in July 2001 the mint redesignated 94% of the U.S. gold reserve as "Deep Storage." Once again, no reason was provided for the accounting change."


Clearly again, the GATA ARMY caught the Treasury and Fed with their pants down. The Treasury panicked and classified all denominated US gold as "DEEP STORAGE GOLD," so as not to deal with this custodial gold issue any further. As it seems to appear from this comical change of classification, a good portion of our US gold might be gone and could actually be spoken for in surreptitious swap transactions – and could mean our gold reserves are really in the ground to be delivered to the US in the future by the likes of Barrick Gold, etc. Thus, the Treasury/Fed appears to be saying, "You caught us, thus we are covering our big dumb behinds." When you follow this "Mint" classification flow, it reads like Abbot and Costello’s "Who’s On First" routine.

What is most important to understand is that GATA is right and this means the gold loans/swaps are 16,000+ tonnes (as extrapolated over and over again in previous MIDAS commentary), meaning more than half of the central bank gold is already spoken for, which also tells us The Gold Cartel is gradually running out of bullets to keep the gold price from exploding. Gold and silver are TIME BOMBS! We have some real gold price excitement ahead of us.

An excerpt of an excerpt from outstanding outside Cafe commentary by Ken Gerbino. It is important to keep in mind gold soared in 1993 with the dollar going UP, not down:

The Fed Can't Stop Inflation

Kenneth J. Gerbino
Posted May 28, 2004

The following is an excerpt from a recent client letter
Here are some hard-core facts that you need to consider

Here is something else important to understand. The dollar is not always that good a barometer of the gold price. From 1976 to 1980 the dollar index went from 106 to 92, down only 13%, yet gold during this time went from $103 to $850, up over 700%.

From 1985 to 1995 the dollar index collapsed from 140 to 80, down 43%. Gold during this time went from $325 to $390, up only 20%. Gold should go opposite to the dollar but the magnitude of the move has a life all its own and regardless of all complexities and theories the bottom line is that it is the world's heavyweight champ of money and liquid wealth, regardless of whatever everything else is doing. Besides, the price of gold is based on supply and demand of gold not dollars. If the top 10 gold mines in the world closed down for any reason, that would take 20% of the mine supply off the market. Regardless of the dollar, you could bet gold would go up. The gold/dollar relationship has merit, but it is not the key determinate to the ultimate value of gold. Gold is headed higher regardless of the dollar, the Fed, or interest rates. The gold stocks are also. The current sell-off in the mining shares is a buying opportunity.


China continues to dominate much of our news:

Good Morning Bill,
I subscribed to this thing hoping to get the full article for you. This part of it I found on one of the message boards...should they email it to me, I will forward to you.

China Reform Monitor No. 546, May 28, 2004
American Foreign Policy Council, Washington, DC

Editor: Al Santoli
Associate Editors: Miki Scheidel, Lisa-Marie Shanks


May 12:

China is considering diversifying its foreign exchange reserves out of U.S. dollars, according to Guo Shuqing, Beijing’s top foreign exchange manager, reports China Business Weekly. Due to concerns over the weak U.S. dollar, the country’s US$440 billion foreign exchange stockpile is being altered to include more European and Asian bonds. The possibility of Beijing offloading some of its vast U.S. Treasury holdings sends shivers through the investment community, as
it risks further deterioration in the U.S. foreign exchange deficit and increases the possibility of a weaker dollar.


Hey Bill,
I work for a utility in western Canada and they can't get enough gas meters; management's initial response was that the supplier out of the US is reported to have production/labour issues. Typically our customer service people would hang about 10-12 meters per day and now, in the middle of a housing boom, they are doing only 4-5 per day. They say there is a huge back log of angry customers wanting hook up. Now management has changed their story to say that more and more customers are choosing electricity over natural gas as the cost is now about the same....but of course they would turn to electricity after they give up waiting for gas!!

Steel drywall studs are now almost impossible to find as well. The main distributor, who has locked up his supplier to a 10 year deal, says he is making a killing selling to China and is no longer selling to his Western Canadian outlets. He will have too much money to care about his old customers after just a few years of this frenzy - never mind 10 years from now!!


Don't believe I've seen this before. GATA's bullishness cited by analyst as a countervailing negative in investor sentiment assessment. You guys are becoming distressingly mainstream...


Seems more and more in the mainstream are getting GATA confused with MIDAS commentary.

Some thoughts on the XAU:

Hi Bill:
Island Reversal (confirmed?)

The XAU seems to have completed and confirmed an island reversal formation. The island is formed between the levels of 76 and 86 between April 28th/29th when the XAU gaped down at the 86 level and May 19th, 21st and again on the 25th when the XAU gapped up at the 83 level, at the 85 level and again at the 86 level. Though this island is on the daily charts instead of the more powerful weekly charts it could be significant.

Jack D. Schwager writes in his book "Getting Started in TA":

Island reversals can often signal major trend transitions and should be given significant weight unless the gap is eventually filled. …it is usually a good idea to wait at least three to five days after the island reversal’s initial formation before concluding that it is a valid reversal signal.

We have had seven trading days since the breakout of the 19th of May, five trading days since the 21st and three trading days since the most recent upside island gap of the 25th without filling any of the gaps.

In conjunction with the USDX’s breakdown from its wedge formation as pointed out by Sinclair, things are looking quite good for the PM’s.
All the best,

Thought you might like to see some pictures from Mahendra’s presentation and his reception at Sipango in Dallas last Thursday. A special thanks to long time GATA supporter and Café member Nancy Klune, our designated photographer:

Picture one is myself and my webmaster Mike Cunningham ( those in search of a very good one can reach Mike, also an accomplished pilot, at Picture four is of me and Mahendra. Picture 5 depicts Mahendra speaking to the attendees. Picture 7 is of Nanik Daryanani, who flew in from Spain to meet Mahendra.

A few points concerning Mahendra:

*Mahendra, who has been compared to a Nostradamus-like persona at a VERY young age, is someone who connects with nature. He is not about religion as far as his work is concerned, which he realizes upsets certain conservatives in the US and followers of certain other religions. However, what he emits is certainly about his own spirituality (he does not smoke or drink, is a strict vegetarian, meditates 4 hours a day, supports charities and adopts orphans). Ironically, some of his biggest Cafe fans are devout Christians.

*Most of his major clients are institutional money managers and there are even a few out there with even more mainstream stature.

*A brief review of his market predictions (since this MIDAS may be read by those who don’t read my daily commentary – for those who want to know more they should go to

  1. Silver is his number one pick. Look for around $12 this year if silver holds above $7.95 for 21 days. In the years to come, look for $48 per ounce to $98 per ounce.
  2. Gold will trend higher. Could soar anytime after September 4. His target is $1600, then to fall back to a $1,000 new base before advancing again.
  3. Oil could go as high as $100 per barrel. The play is a five year one.
  4. The risk reward ratio in the US stock market is lousy. Exit on rallies. Look for the Dow to tank to 5,000 to 7,000.
  5. The US housing market is in big trouble.
  6. Around 10 days ago, Mahendra jumped on coffee and suggested we all do so, which was one of his biggest new positions. It has exploded. Have no clue when he will get out.

To order Mahendra’s 2004 book:

Ironically, many of Mahendra’s positions have been ones I have expounded on for years. The fact that many of our predictions and posits of what is to come in the financial markets happen to coincide is just the way it has worked out and is MOST comforting to me. Mahendra does his thing. I do mine. Seems a "twain" has been met here. I will continue to do all my own work, however you can bet your booty I will want to know what Mahendra is thinking and what he sees ahead for the financial markets and for the ensuing precious metals bull market journey.

One thing for SURE, if both of us are right and you want to hit an investment home run in gold and silver, then you:





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