Spot Gold $252.50 up 30 cents - Spot Silver $5.12 up 5 cents

No surprise today. Gold up - no excitement. Dow, Nasdaq and the S&P down as expected and right on cue.

The XAU (senior North American gold shares) action continues to diverge from the gold market action. As usual, gold was whacked late in the day. Yet, while the stock market was diving, the XAU rallied back up to close on its high of the day at 67.16 up 2.14. A rally from here will penetrate a well defined downtrend.

As has been the case for many months now, the bears cannot keep a good man down. Silver popped up 5 cents and we hear the Comex floor is very bullish.

After the close, the Comex released figures revealing that 1,410,821 ounces were withdrawn from the Comex warehouses leaving the silver stock figure at a little under 80 million oz. That is the biggest one day withdrawal in some time. The bullish consensus in silver is only 28. Gold is back in the teens at 19% bulls.

There is an eerie tone out there and it bodes well for gold bulls. This morning the Singapore Monetary Authority denied it was freezing the assets of hedge fund giant, Tiger. Stories that Tiger is under a rather sizeable contraction fail to go away. I understand their fiscal year ends at the end of this month, so "what is what" here should surface very soon.

Gold positives:

1. Physical demand extremely robust - Reuters - Aug 26 - "Another dealer reported increased physical demand. " The physicals have been phenomenal. India's been excellent and the Middle East is kicking in. I would not be surprised to see us ending the week closer to $260 than $250," he said.

2. We are hearing more and more talk that the Bank of England gold sale will be altered in some way that will be bullish for the gold price. Midas got the inside scoop on this weeks ago.

3. The IMF gold sale is even more kaputzky than we told you months ago. The bullion dealers are blaming this revelation on the new scandal regarding the Russian money laundering of IMF loans - perhaps to the tune of $15 billion. Maybe they should pay a bit more attention to some of the Midas commentary. Won't have to be so blindsided that way and come up with a lame Russian excuse for their incorrect assessment on this issue.

4. The Swiss gold sale (again, as our camp told you) is no sure thing. A letter to the FT by Mr. Andre Duperrut:

Sir,

Christopher Adams is right to say that the Swiss National Bank planned to sell 1,300 tonnes of gold some time ago. ("Panning for the Bank chief's views on a multi-billion pound gold sale," August 16). But he should also mention that until now none of this gold has been sold on the market, while other central banks did not announce their move in advance but sold when prices were higher.

The plans to sell gold may even be defeated by a Swiss citizen's vote. The disposal of gold needs a prior revision of the Swiss Coinage Act. The revised law is expected to come into force in spring 2000, unless 50,000 Swiss citizens request a referendum.

In a country where direct democracy prevails, one should not exclude the possibility that citizens' opinion may oppose central bank and parliament views, and that in the end the planned gold sale may never occur.

5. The lease rates remain strong. They back off slightly today, but the six month rate is still a very formidable 3.62%.

6. Hedge funds are scouring the bullion banks looking for credit lines - either to increase them or replace credit lines that are withdrawing. We know first hand of a bullion dealer who turned them down the past month. This is another sign that "easy street" for the "gold borrowing spec crowd" may be a thing of the past.

This is very important to know. It has come to my attention that just four hedge funds are short up to 50 million ounces of gold. That is around 1500 tonnes. According to my sources the four culprits are the Soros operation, Tiger, Martin Armstrong and Moore Capital. What do you think the price of gold will do when they try and cover?

Not only does Tiger time come due at the end of August. We will also know then if Ecuador follows through on its announced intentions of defaulting on its Brady bonds. In a radical shift in default solutions, the IMF stated recently that the private sector will have to share in the "bailout burden." Free lunches may be a thing of the past. Will Ecuador be to Latin Ameria what Thailand was to Asia?

Maybe so! Looks like a collision course in Brazil too.

Brasilia, Brasil (AP) - Aug 26 - Tens of thousands of Brazilians, fed up with belt-tightening reforms that keep unemployment high and wages low, converged peacefully on the Capitol Thursday with a loud message for the government: change course or face growing social unrest.

Meanwhile Alliance Capital, a significant investor in Latin America, stated publicly that until the IMF requires the Brazilian government to reform even further, it will do any further investing in Brazil.

Something has to give here!

A relative unknown floor trader bought 7,000 Dec. 260 calls on Comex today. Unknown the gold pits that is. This trader does the copper trading for famed commodity trader, Paul Tudor Jones. I thought it of interest that a former top dog at Tiger is now working for the PTJ outfit.

Keep your eye on the oil market. The Germans announced that they are releasing oil from their strategic stockpiles and will be feeding oil into the market. An overbought oil market reacted to the news, but has already bounced back to $21 per barrel. The Brent London market continues to tighten vis-`-vis WTI Crude in the states. A bullish sign. I suspect oil will continue to go higher than the pundits think. This can only strain the "cabal" trying to hold down the price of gold.

Gold smuggling in India is on the rise. The 15% drop in the gold price these past months is spurring on the smugglers who are evading import duties.

It is very clear that the "gold cartel" crowd is losing control of their manipulation - but they have not lost it yet. They will. Just a matter of time now. Bank problems and credit market deterioration could be their doom.

Top dog banking analyst and Cafi contributor, Charles Peabody, has alerted us that he feels a crash of the banking stocks is coming. It is his opinion that there will be severe credit market deterioration. Banc One may have been the first shoe to drop according to Charles. Today the bank index dropped another 22 points and looks very vulnerable technically.

I chatted with Charles today and he told me he attended a luncheon for portfolio managers this afternoon. The subject today was the bank stocks. Over the past couple of years, whenever the bank stocks set back like they did these past days, the fund managers have always commented that they were buying the dip. NOT TODAY ! This time there was talk of selling. Not buying. This is a significant shift in fund manager attitudes towards the bank shares.

There is the strong air that all is not right in financial land. If Charles is correct and I believe he is, then it can only spread to the most vulnerable and dangerous credit market situation in the world - gold. The gold loans are already 10,000+ tonnes. The "cabal" needs an increasing supply of this borrowed gold to hold down the gold price. The natural supply/demand deficit is over 160 tonnes per month now. Each and every month. The continued high lease rates tell us that this borrowed gold is much harder to come buy.

How hard do you think it will be to come buy when a credit market alert sweeps through the banks? When Y2k fears kick in? The gold shorts are on a "short lease." That simple.

From Cafi member, Richard 'The General" Harmon:

Bill,

Just got this from Austin Rare Coins, looks like we are winning - One oz at a time.:

"Overnight the U.S. Mint announced they're raising prices of Gold American Eagles by 1% due to increasing production costs. Official reports of planchet shortages indicate the U.S. Mint simply can't keep up with record demand driven by Y2K. And this is just the beginning. We see a huge gold rush coming as most people will procrastinate and wait till the last minute to buy Y2K gold."

In my opinion, gold, silver and the shares still represent one of the great buys of all time from a risk reward standpoint. The evidence of that assessment grows by the day.

Midas

-- Andy (2000EOD@prodigy.net), August 26, 1999

Answers

Damn, I knew I should have bought more bullion coins last week. Oh well, the markets so far have been rather kind to my procrastinations.

Got liquidity?

-- nothere nothere (notherethere@hotmail.com), August 27, 1999.

The time is not right. Gambling can be a wicked lesson. There are people that know, and you are not their friend. A little here and a little there, you win some and you lose some, the cards are not in your favor. Who can profit the most, the one who gives you advice or you who can keep the money in your pocket? You pick which one.

-- keeper of the cards (keeperofthecards@keeperofthecards.cpm), August 27, 1999.

The time IS right.

There is little TIME left...

You can sit on your ass, do nothing, be a victim.

Or you can be pro-active, prepare, protect your wealth as best you can, take your best guess...

You're full of shit keeper of the cards - fold 'em.

-- Andy (2000EOD@prodigy.net), August 27, 1999.

Andy, I'm not being sarcastic, but I have a natural suspicion about companies that sell gold. Why would they sell something so precious with such a short time remaining before the commodity they now hold will increase so dramaticly in value.

Why do they want our "fiat" money? Are they stupid? I don't think so. Are they such "good samaritans"? I also find that hard to believe.

Your monetary postings are interesting as I do agree the market is in for a sharp drop. The definitive reason or trigger I'm not to sure of.

-- Chief (bmc@sealres.chitown), August 27, 1999.

Chief, nobody knows what the future holds. And the reality is that fiat money will probably be with us for some time to come.

In my own case, my gold consists entirely of American Eagles, predominately 1/10 ounce, but a few 1-oz also. The former is for use in a Y2K meltdown/barter scenario, and the small size is intended to deliever maximum transactions per ounce. The latter coins are for exchanging for fiat money if and when needed.

We certainly are not going to go from paper money backed by nothing to the use of gold and silver coins overnight, regardless of Y2K or anything else. Being prepared for many scenarios just makes good sense.

-- Jack (jsprat@eld.net), August 27, 1999.