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THE GOLDEN POT gold news & views - charts & more not so much a forum but rather a news archive

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Fiat -- Sharefin, 20:09:22 03/12/03 Wed

Banks seek change in hard-asset rule

It may be much ado about nothing, but a proposed change to the way commercial banks handle commodities has some hard-asset investors riled up.

The Federal Reserve, at the request of two giant banks, is considering a rule change that would let bank-holding companies take title of nearly all commodities, like barrels of oil, briefly. The request by Citigroup and UBS AG of Switzerland essentially would let banks deal in a wider range of hard assets when they are buying, selling or designing derivatives based on those assets.

Right now, banks on American soil use derivative contracts when they are buying, selling or structuring a loan, swap or other transaction that involves commodities. As U.S. Federal Reserve rules now stand, banks can take title of only precious metals when they are in the world of hard assets.

Commercial U.S. banks are said to hold more than $50 trillion of highly leveraged derivatives on their balance sheets, and even more on behalf of clients. (The latest derivatives numbers came out Wednesday - see below.) The growing amount of such contracts, which take the shape of forward sales, futures, options and dozens of other paper-linked transactions, led insurance executive Warren Buffett of Berkshire Hathaway (BRKA: news, chart, profile) to declare derivatives "financial weapons of mass destruction."

At the heart of the proposed rule change is the ability of banks to take title to hard goods on an "instantaneous pass-through basis." Critics contend that would limit or eliminate disclosure of derivative trades, say in the haywire energy markets. Such trades, involving billions of dollars of leveraged paper contracts, could ring alarm bells with investors if they became widely known, say some.

"It's just another rule change in a pattern of changes already well established, namely, to bend over backwards to give the banks everything they want regarding derivatives, including no disclosure," said James Turk, a former commodities financier and director of payment transaction company GoldMoney.com. "Basically my reading is that this change to the regulations is consistent with Fed policy to give banks what they want."

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Fiat -- Sharefin, 19:59:31 03/12/03 Wed

Treasurys see rare negative finish

10-year yield noses below October's four-decade low

A three-week Treasury market rally paused Tuesday amid stock market gyrations, but not before a punch through October's 1958 low for a benchmark 10-year yield.

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Fiat -- Sharefin, 19:47:01 03/12/03 Wed

It could always get worse

Bonds, dollar suggest it's far from over

One place bulls have been able to point their horns to over the past year is the economy. It may be slow, but it is growing. Once geo-political concerns are cleared up, surely the positive economic fundamentals will take over, and stocks will begin to rally.

But on Friday, the U.S. Labor Department showed us that the economy could get worse, when it said that non-farm payrolls fell by a too-big-to-be-real 308,000 jobs in February.

Then the yield on the 10-year Treasury bond ($TNX: news, chart, profile), which my mortgage banker said two weeks ago couldn't get any lower, did.

And financial markets are now pricing in yet another interest rate cut by the Federal Reserve (see Economic Preview), suggesting rates would go lower yet.

Things can't really get so bad that the overnight rate will drop to 1 percent and start approaching zero, can they?

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The Bankruptcy of The United States FYI -- Cyclist, 10:36:01 03/12/03 Wed

Subject: .The Bankruptcy of The United States
United States Congressional Record, March 17, 1993 Vol. 33, page H-1303
THIS IS IMPORTANT!!!!
Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House:

"Mr. Speaker, we are here now in chapter 11.. Members of Congress are
official trustees presiding over the greatest reorganization of any Bankrupt
entity in world history, the U.S. Government. We are setting forth
hopefully, a blueprint for our future. There are some who say it is a
coroner's report that will lead to our demise.

It is an established fact that the United States Federal Government has
been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1,
Public Law 89-719; declared by President Roosevelt, being bankrupt and
insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 - Joint
Resolution To Suspend The Gold Standard and Abrogate The Gold Clause
dissolved the Sovereign Authority of the United States and the official
capacities of all United States Governmental Offices, Officers, and
Departments and is further evidence that the United States Federal
Government exists today in name only.
http://www.apfn.net/DOC-100_bankruptcy.htm

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ChartsRus -- Sharefin, 04:37:55 03/12/03 Wed

This chart shows a different perspective to the Homestake vs Gold chart I posted prior.
Here you can clearly see that the general gold stocks were heading down from a high in 1927 through to the bottom in 1933.
It was in fact only after the sharemarkets bottomed & gold had been confiscated & the price raised that gold stocks began to head up on a major bull run.

Below this chart is a chart with the DJIA & Gold price on it with a common dateline so as to work out time relationships.

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Fiat -- Sharefin, 22:51:42 03/11/03 Tue

European banks exposed to credit derivatives

Many European banks have used derivatives to load up on credit risk rather than reduce it in an attempt to boost revenue, leaving them exposed to any sharp economic downturn, a study showed on Monday.

Fitch Ratings, the credit ratings agency, said initial results from a survey of the fast-growing credit derivatives market showed three-quarters of European banks had used credit derivatives to improve their results rather than reduce their exposure to defaults and bankruptcies.

The $2 trillion credit default swaps market, which doubled in size last year, allows users to buy and sell insurance-like protection against companies or countries failing to pony up on their loans or bonds.

The wide-ranging Fitch study seeks to uncover who in the global financial industry has ended up holding risk in the opaque credit derivatives market.

"The credit derivative's market rapid expansion, immaturity and relative lack of transparency present unique risks," the Fitch report said.

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Fiat -- Sharefin, 22:49:04 03/11/03 Tue

Bond Bubble in Europe?

To some financial experts, that means just one thing: A bond market bubble--inevitably to be followed by a bond market bust--is in the making.

How so? Start with sovereign debt, whose behavior often predicts how corporate bonds will fare. David Fuller, global strategist at Stockcube Research Ltd. in London, says euro zone government bonds are already oversold. Yields on German Bunds, the benchmark, have fallen from 4.92% to 4.02% over the past year. Although Fuller hesitates to use the word "bubble," he predicts "a shakeout in bonds." A quick end to the war with Iraq would hit government markets hard, he says. The equity markets would almost certainly revive, however briefly, leading investors to dump German, French, and Italian bonds. "They'd be wise to be out of government bonds once the offensive against Saddam Hussein gets under way," says Fuller. Even if stock markets fell again, he adds, the medium-term prognosis for bonds is bearish.

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Fiat -- Sharefin, 22:45:51 03/11/03 Tue

Banks Are Pushing Germany to the Brink

The German stock market has been the worst performer in the developed world over the past three years, and most of the emerging world, as well. Yet it is possible that the worst is yet to come in Frankfurt, as this epic plunge in equity values has only recently begun to erode the creditworthiness of German stocks' majority holders -- large banks at the country's moldering core.

The slow-motion collapse has not induced the sort of public anguish in Germany that the bear market has engendered in the U.S. because relatively few of the nation's citizens are shareholders. But bank failures -- in the unlikely event they're allowed to occur -- could change that, because most German workers put their income in savings accounts and depend on an increasingly shaky latticework of bank-backed bonds for their retirement.

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ChartsRus -- Sharefin, 21:37:13 03/11/03 Tue

Gold vs Gold Stocks vs US Indices

1927 Crash

Homestake Mining vs DJIA 1922-1936
Homestake Mining vs DJIA 1922-1936 - Log Format




Homestake Mining vs SP500 1923-1937
Homestake Mining vs SP500 1923-1937 - Log Format




1987 Crash

Homestake Mining vs SP500 1987 Crash
Homestake Mining vs SP500 1987 Crash - Log Format



Newmont Mining vs SP500 1987 Crash
Newmont Mining vs SP500 1987 Crash - Log Format

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Gold -- Sharefin, 05:40:37 03/11/03 Tue

GFMS Sees Gold Fall on Decisive Iraq Win, Then Recovery

Gold prices could tumble if the United States goes to war with Iraq and wins a swift victory, but bullish fundamentals leave room for renewed strength, an analyst with precious metals research firm Gold Fields Mineral Services (GFMS) said Sunday.
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"If the crisis is resolved quickly, this could result in a massive round of profit taking," Alway said. "However even if there is a downward correction in the price, we consider that the external economic and political factors will mean that sentiment toward the gold price will remain positive."
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The build-up toward a war in Iraq aligned with a slew of other gold-positive factors since last year.

The weak dollar also played a major role in the rally, along with the drop in U.S. interest rates to 40-year lows, which eliminated the financial advantage in selling gold forward and unleashed a wave of buying by gold companies to unwind forward hedge sales put on to lock in prices when gold was weak.

Alway said gold has not yet appreciated enough to stop a projected decline in mine production since the slide in prices in the late 1990s made it uneconomical for many inefficient mines to operate.

According to his calculations, even at an average of $375 an ounce gold production would drop 25 tonnes year to year. Gold at $325 could mean a 100-tonne drop in production year to year. World gold mine production was about 2,600 tonnes in 2001 and an estimated 2,543 tonnes in 2002, according to GFMS.

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Gold -- Sharefin, 05:38:02 03/11/03 Tue

GFMS foresees another 100 tonnes of dehedging

London based Gold Fields Mineral Services forecasts that the gold price will receive support from a further 100 tonnes of dehedging in the first half of this year. The research house expects the gold price to average $350, with a range of $330-$370 per ounce.
GFMS’s Bruce Always said gold producers had lightened their hedge books for three consecutive years for a cumulative reduction of 350 tonnes.

Dehedging has played an important role in supporting the gold price since it began to rally strongly in late 2001.

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Gold -- Sharefin, 05:26:33 03/11/03 Tue

PBOC plans to allow China's 4 major banks gold import-export opportunities to relieve shortages

The People's Bank of China (PBOC), the central bank, and the State Economic and Trade Commission (SETC) have applied to the State Council to open platinum trade on the Shanghai Gold Exchange (SGE), SGE's Administrative Office Manager Yin Bo told Interfax. Meanwhile the PBOC had agreed in principle to allow the four state-owned commercial banks to conduct gold importing and exporting.

The Shanghai Gold Exchange has been conducting a feasibility study on opening up its floor to platinum trading for quite some time, said Yin. However, Yin admitted there is a way to go before platinum can be traded on the Exchange due to value-added tax issues, which once were responsible for stalling the launch of the gold exchange.

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Platinum import and consumption figures for 2002 have yet to be released. In 2001, Chinese companies imported a total of 40 tons of platinum, accounting for 55% of the world's total imports, while platinum consumption nationwide exceeded USD 2 bln, the world's highest.

Meanwhile, Yin also told Interfax that the PBOC had agreed in principle to allow the four state-owned commercial banks to conduct gold importing and exporting. The four state-owned banks are the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank and the Agricultural Bank of China.

The move, which will provide a conduit for foreign gold supplies to access the Chinese market, will significantly alleviate the physical gold supply shortages being experienced by the Shanghai Gold Exchange, noted one official, speaking on the condition of anonymity. The Shanghai Gold Exchange is currently off-limits to foreign gold suppliers and buyers. All its 108 members are domestic companies who have passed the exchange's stringent licensing requirements.

Yin hoped the PBOC initiative would also help dampen gold prices. "For 80-90% of the exchange's trading days, gold prices trade higher than on international markets," he said. According to statistics released by the Shanghai Gold Exchange, China is experiencing a gold supply shortage of 50-60 tons a year, with that gap likely to widened further over coming years if no measures are taken to increase gold supplies.

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Fiat -- Sharefin, 05:23:42 03/11/03 Tue

Resource Fund Manager: Mining Financings "Need Integrity"

While he's calling for a strong commodity recovery by 2005, portfolio manager Bill Belovay described elements of mining equity markets as greedy and rife with conflicts.
Belovay, of Jones Heward Investment Counsel Inc., manages the BMO Resource Fund and the BMO Precious Metals Fund. Jones Heward is a unit of Bank of Montreal .

Mining and exploration companies need to "clean up their act" with more disclosure, more integrity and expertise, while "investment bankers and analysts need an integrity transfusion," Belovay said Monday at a large Canadian mining conference.

In his view, sell-side analysts have invented "far too many exotic methods of valuation," reminiscent of the high-tech revolution. These valuation methods influence mining deals, and weaken acquisitor companies because the companies feel pressured to buy "hot potatoes," Belovay said.

Long-term investors such as pension, insurance and mutual funds have been " sacrificed" and are being replaced by high-risk rollers who take short-term positions, he also said. For example, he referred to warrants as "lingering land mines" that only benefit hedge funds and devastate long-term shareholders' performance.

Belovay said investment decisions are "plagued" by the continued collusion of investment bankers, corporations and analysts. "We all know about it, there's nothing more that needs to be said about it," Belovay said of conflicts of interest, adding that broker research is "bad for your health - well, bad for your wealth."

He added that mining companies themselves need to release more details about their activities and finances. Resources are the lifeblood of the business, but are poorly disclosed, he said. For example, in some annual reports there's no hint of the company's sensitivity to commodity prices, to working cost changes, or to different capital expenditure requirements, Belovay said.

He also said a conflict of interest exists within mining companies, because reserves are calculated internally. "This is the same as a corporation approving their own financials - why isn't this done by an independent body, so a consultant would put its name down on the line and say these reserves are there or they're not there?" Belovay said.

As for prices, Belovay said he foresees a strong commodity recovery in 2005 as the European, U.S., Japanese and Chinese economies "awake." Gold, nickel and aluminum prices could rise about 25% by 2005, while the price of copper could double by 2005, he said.

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Fiat vs Gold -- Sharefin, 05:18:16 03/11/03 Tue

Bush’s War Will Unify Peoples Of The Muslim World And Promote The Gold Dinar As A Trading Currency.

The Islamic gold dinar was officially re- launched in November 2001 by the Islamic Mint in Dubai but, as Minews reported last November, its acceptance will take a very significant step forward when an electronic version is introduced later this year to settle bilateral trade among Muslim countries. This trading version of the gold dinar will go live at the Organisation of Islamic Conference which is due to take place in Kuala Lumpur in October when it will officially be introduced by the Prime Minister of Malaysia Mahathir Mohamad, The western world should reflect long and hard on this fact before it goes charging into war with Iraq as the dinar is a symbol of independence to the Muslim world. According to the Islamic Mint it was the currency of the Muslim community from its beginnings up until the fall of the Osmanli Khalifate.

At that time it was undermined by financial instruments from the west which did not conform to Shari’a. In its literal interpretation Shari’a means the ‘well worn path made by camels leading to the watering place.’ What it means in real life is the path or pattern which Muslims strive to follow in their lives. Western currencies have held sway for many years now, but the Muslims have always held on to the idea of Ummah which is the vision of a single human family deriving its life and guidance from God and returning its life and obedience to him. The gold dinar could be the catalyst which helps the Muslim countries become a cohesive trading unit again and this could signal a major swing in geo-political power.

One of the five pillars on which Islam is built is zakat whereby all Moslems are required to contribute 2.5 per cent of their savings to the needy and disadvantaged in their community. This zakat cannot be paid in paper money which is an IOU from a government, but only in gold, silver or certain merchandises. Deep in the Muslim psyche, therefore, there is a deep distrust of western currencies. This was expressed in a very straight forward manner by Malaysia’s prime minister when he explained to the Al Baraka symposium of Islamic Economies last year that “the use of the Islamic dinar will effectively create an Islamic trading bloc. The international trading version is quite achievable and can be the beginning of closer economic co-operation between Muslim countries.”
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As we read in the newspapers of mass anti-war rallies in Indonesia and Pakistan it is worth reflecting just how big a slice of the world’s population is accounted for by Muslims. The figure is 1.6 billion which compares with a paltry 60 million in the UK. And these people are not strange heathens as 90per cent of American citizens who have never applied for a passport to venture abroad seem to think. The Qur’an (Koran) in Muslim belief is the revelation to Muhammad in Arabia in the seventh century of the Christian era. To them Muhammad is a prophet and they recognise Jesus also as a prophet. That is why Christians are called People of the Book, because they too received exactly same revelation through their prophets. It is all explained in an excellent book called “What Muslims believe” by John Bowker and published by Oneworld, Oxford.

The economies of the countries of the Middle East and Asia have long been vulnerable to the exchange rate between their local currencies and those of the western world. As Mahathir Mohamad explained,. "The gold dinar could be an important facilitating mechanism to help the smaller countries of the world move away from an inherently unstable and ultimately unjust global monetary system," he said. Central to the proposed plan for the trading dinar is the requirement that central banks in member countries would settle dinar trade balances every three months by transferring the beneficial ownership of gold held in a custodian bank, such as the Bank of England. These central banks would then settle with exporters and importers in the local currency.

What is very clever is the way the dinar has been introduced as a simple gold coin well before its adoption in a major trading role. It will give the people of the Muslim world plenty of time to reflect on its significance as part of the Islamic cultural heritage. And people from other countries should ask themselves what it could do for the price of gold.

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Fiat vs Gold -- Sharefin, 05:14:43 03/11/03 Tue

SDR to replace gold franc at the BIS

The Bank for International Settlements (BIS) today announced that the Special Drawing Right (SDR) would replace the gold franc as the Bank's unit of account as from 1 April 2003. This decision was made today at an Extraordinary General Meeting of member central banks of the BIS. The Bank also decided to take steps towards modernising its financial accounting and reporting practices.

Used by a number of international organisations, the SDR is an international unit of account defined by the IMF and based on a basket of major currencies. The gold franc has served as the unit of account for the BIS since its establishment in 1930.

Commenting on the change, Andrew Crockett, General Manager of the BIS, said: "I welcome the introduction of the SDR. Along with a strengthened accounting framework, it will assist in managing the Bank's operations and economic capital more efficiently and enhance the transparency of its accounts."

Mr Crockett added that the changes would not affect the fundamental nature of the BIS's banking activities and would not have any implication for its policy towards its holdings of gold.

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Gold -- Sharefin, 05:12:47 03/11/03 Tue

Australian miners cut gold hedges by 800,000/oz

Australian gold miners, seeking to boost their exposure to firm bullion prices, cut gold hedging by 800,000 ounces in the fourth quarter of 2002 to 15.4 million ounces, investment bank JP Morgan said on Tuesday.

The drop follows a reduction in hedges in Australia by 734,000 ounces in the third quarter and a steady quarterly decline over several years, according to JP Morgan gold analyst Geoff Breen.

Hedging -- the act of selling yet unmined nuggets forward at fixed prices -- is a popular tactic to lock in revenue and thwart cyclical downturns in bullion prices. But in a rising market, miners run the risk of being forced to sell their caches below current value.

"There were over 45 million ounces of gold hedged in Australia just two to three years ago -- the landscape has shifted," Breen said.

Hedging has declined in all but one of the last 12 quarters, Breen said.
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The remaining gold hedges in Australia were divided between 8.8 million ounces in the form of forwards and 6.7 million ounces as put options priced at an average A$615 an ounce, Breen said.

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Buffett buying more Precious? -- giovanni dioro, 04:52:34 03/11/03 Tue

Commodities are classified under "other investments" in Berkshire's balance sheet. This number jumped 78.6% from last year, or by $1.78 Billion. While this asset class includes other assets besides commodities, such as commercial loans, it is definitely possible that Buffett has added to his silver stake with a similar investment in gold.

Buffett invested $700 million in roughly 130 million ounces of silver in late 1997. Silver is currently selling at about a 15% discount when compared to Buffet's cost per ounce.

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Gold -- Sharefin, 02:53:33 03/11/03 Tue

The Ultimate Portfolio Insurance

Centuries have passed, but the yellow metal has not lost its glitter. Studies have revealed that portfolios that have included gold or gold shares have outperformed those portfolios, which included just stocks and bonds. Holding gold assets not only help in generating good long-term returns, but also help in reducing the risk element in periods of economic instability. It has been found that investment in gold and gold shares is best suited for long-term funds like the pension and retirement funds. Surely the glitter still remains.

Many techniques have been used to develop a solid program to hedge portfolio risk. But instead of just looking at sophisticated computer models and financial derivatives, perhaps we should simply turn to one of the oldest monetary assets known to man: gold.

Many extensive studies have found that holding gold assets (i.e. gold bullion or gold shares) as part of an investment portfolio may help to improve long-term returns while reducing risk versus holding just stocks and bonds.

Gold is one of the oldest monetary standards in the world. It is recognized by every country in the world, and many countries have actually used it as their currency at one time or another. Gold is liquid, it is portable, and its value is accepted everywhere.

Gold draws its strength as a preserver of wealth from its relatively consistent price parity with other commodities throughout history. Two studies have documented this historical stability. The first, The Golden Constant, by Roy W. Jastram, published in 1977, analyzes gold prices in comparison to other commodities, represented by the wholesale price index, in Britain and the United States. The second, Gold as a Store of Value, a Research Study for the World Gold Council by Stephen Harmston, extends this study to France, Japan and Germany.

The studies demonstrate that in these five industrialized nations, gold has historically maintained a stable purchasing-power parity, with the United States and Britain recording the most stable trends. (The purchasing-power parity of gold is calculated by dividing the gold index by the wholesale price index.) This relative stability can be seen in the graph, which compares the fluctuations in the gold index with the wholesale price index in the United States (see Figure1).

The trends in purchasing-power parity are comparable in each of these five countries. It is this historical consistency that makes gold an effective wealth preserver during economically unstable times. Consider the following quotes:

• "Over time, gold has proved to be an effective preserver of wealth. In periods of economic and social instability, when the value of other assets has been all but wiped out, gold has been a safe haven." Stephen Harmston, Gold as a store of value.

• "Gold provides a stabilizing effect in a world of entirely flexible currencies."-Economist Robert Mundell, 1999.

Gold bears point to gold's characteristic stability when they argue against investing in it. They state that returns on gold tend to underperform returns from stocks and bonds. However, when gold is introduced into a diversified portfolio, the portfolios diversified with gold outperform portfolios without gold.

Two separate studies, one performed by the World Gold Council and one conducted independently, determined that investment portfolios that include a 15%-25% weighting of gold or gold shares tended to outperform no-gold portfolios.

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Gold -- Sharefin, 01:50:54 03/11/03 Tue

CAN GOLD REALLY DO WELL IN A DEFLATION?

A very astute investor on the west coast and a friend of mine sent me the following e-mail message this past week. He is worried about our contention that gold can do well in a deflationary environment. That is a troubling concept to many investors who have only experienced gold performing well in an inflationary environment during the 1970's. For the benefit of all subscribers here is my friend's question followed by my response.

"With respect to the most recent hot-line update:

"As Ian Gordon has pointed out, gold does very well during the inflationary Kondratieff summers when inflation is THE problem. But it does even better during the Kondratieff winter, when deflation implodes a countries currency to oblivion."

"As I observed previously, Prechter is in direct contradiction to this premise, based as best as I can see, on following the course of events and charts from the LAST Kondratieff in 1930's ..

"Some resolution is needed between the contention on the one hand that Homestake and gold was a good hedge and a profitable position in the 30's deflationary depression, and on the other hand Prechter's claim that gold did not start to rise until the economy began to recover in the 30's.

"Perhaps the difference lies in the fact of the underlying debt which the U.S. is in this time around .. but that is pure speculation on our parts that 'this time is different' if Prechter is correct (?).

"This needs to be nailed down, it seems to me. As I said before, the divergence between yourself and Prechter is worrisome especially since you both seem to accept the Kondratieff cycle/validity, but come to divergent conclusions on the issue of gold."

My Response:

In fact the price of gold was fixed for Americans at $20.67/oz. Then reflecting the realty of the global market forces of supply and demand for gold, after taking the gold from the American people, Roosevelt devalued the dollar by increasing the leading monetary asset of that time, namely gold by nearly 69% to $35/oz. The depth of the depression was commonly believed to have been in 1932 or 1933. In January 1934, the price of gold was increased by decree from Roosevelt to $35, so it is correct to say that gold did not rise before the economy bottomed out. However, IT IS NOT CORRECT TO SAY THAT DEMAND FOR GOLD DID NOT RISE UNTIL AFTER THE ECONOMY BOTTOMED!

In fact, quite the contrary was true. In 1932 Hoover's Secretary of the Treasury reportedly warned his boss that so much gold was being demanded from the U.S. Treasury by U.S. citizens and from people abroad in exchange for paper dollars that the U.S. Treasury would soon lose all of its gold. That's why on January 31, 1934, Roosevelt forced American citizens to give up their gold or face a $10,000 fine and 10 years in jail. And as an aside, I think it is interesting to note that one day after the gold was stolen by the government from the American people, Roosevelt increased the price from $20.67 to $35. And get this! With the 69% revaluation of gold from $20.67 to $35, the government booked a $2 billion profit which it socked away in THE EXCAHNGE STABALIZATION FUND which according to GATA to this day is being used to manipulate the gold price.

But the point I am trying to make is that in the midst of the deflation, people were trashing paper money and demanding gold. Why? Because they KNEW, just as Japanese people today know that their money would not be safe in the bank. They instinctively opted for gold - an asset money rather than paper money which is a liability money!

Prior to the confiscation of gold, many Americans began gold and also Homestake Mining shares as a proxy for gold, just as investors are now doing. From 1929 through 1940, the closing year end prices of a share of Homestake Mining shares were as follows:

1929 - $78.50
1930 - $80.625
1931 - $128.00
1932 - $150.00
1933 - $315.00
1934 - $376.00
1935 - $486.063
1936 - $422.00
1937 - $471.00
1938 - $513.50
1939 - $468.00
1940 - $$404.00

While the DOW was mercilessly hammered in the Great Depression, Homestake Mining relentlessly appreciated.



Again, bear in mind that these huge increases in the price of Homestake came when major DEFLATIONARY forces were taking place. American bought gold shares as a proxy for gold because they were not allowed to by gold. But gold was in huge demand as money around the world when the value of the dollar was actually buying more! The fact is that as huge numbers of people and businesses were defaulting on their dollar obligations, people preferred to get paid in gold rather than paper because gold was an asset money while money that would retain its value even as massive defaults rendered paper money worthless.

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Fiat -- Sharefin, 00:54:08 03/11/03 Tue

The dangers of derivatives

Leverage is a double-edged sword. Leverage enables derivatives to offer a more efficient use of capital for hedging or investing, and at the same time it reduces the amount of capital backing a given amount of price exposure (ie, the size of a position). Raising the risk-capital ratio weakens the stability of each investor, and in turn it increases everyone else's exposure to the repercussions from investor failure. In short, it increases system risk by socializing individual risk while privatizing the rewards.

The presence of a market for foreign exchange derivatives can undermine the stability of a fixed exchange rate system in several ways. Derivatives provide greater leverage (lower capital costs) and lower transactions costs for investors taking a position against the success of the fixed exchange rate. Such investors are often referred to as speculators, attackers or hedge fund operators. Lowering the costs of betting against the fixed exchange rate will only encourage this behavior and strengthen the effects of those efforts. The greater the volume of positions that are short the currency, ie, against the fixed rate regime, the greater the necessary size of central bank intervention or interest rate hikes needed to defend the currency peg.

The presence of foreign exchange markets means that the central bank is faced with the greater task of having to peg the exchange rate in two markets: the spot markets; and the forward or swap market for foreign currency. Whereas the spot market is generally large in relation to the amount of foreign reserves at the central bank, and thus the central bank's potential for intervention is small in regards to the overall size of the market, the size of the derivatives market is unlimited. Together they increase the critical size for a successful central bank intervention.

Another problem posed by the presence of foreign exchange derivatives markets is that price discovery process in those markets will, under many circumstances, indicate a future devaluation. There are two reasons for this. First, interest rates in developing countries are in most circumstances higher than in advanced capital markets or developed economies. This interest rate differential means that the equilibrium forward or swap rate will always be higher than the spot rate - thus indicating that the currency will depreciate at the rate as the interest rate differential. Second, if the credit market in the developing country is not perfectly efficient, then foreign exchange market makers will not provide forward and swap contracts at rates that do not include a market risk premium. If a market risk premium is added to the interest rate differential, then the forward and swap rates will indicate a greater rate of depreciation.

In the event of a devaluation or a sharp downturn in securities prices, derivatives such as foreign exchange forwards and swaps and TRS functioned to quicken the pace and deepen the impact of the crisis.

Derivatives transactions with emerging market financial institutions generally involve strict collateral or margin requirements. Asian firms swapping the TRS on a local security against LIBOR were posting US dollars or Treasury securities as collateral; the rate of collateralization was estimated at around 20 percent of the national principal of the swap.

If the market value of the swap position were to decline, then the East Asian firm would have to add to its collateral in order to bring it up the required maintenance level. Thus a sharp fall in the price of the underlying security, such as would occur at the beginning of a devaluation or broader financial crisis, would require the Asian firm to immediately add dollar assets to their collateral in proportion to the loss in the present value of their swap position. This would trigger an immediate outflow of foreign currency reserves as local currency and other assets were exchanged into dollars in order to meet their collateral requirements. This would not only quicken the pace of the crisis, it would also deepen the impact of the crisis by putting further downward pressure on the exchange rate and asset prices thus increasing the losses to the financial sector.

The BIS "Lamfalussy Report" defined systemic risk as "the risk that the illiquidity or failure of one institution, and its resulting inability to meet its obligations when due, will lead to the illiquidity or failure of other institutions". Similarly, contagion is the term established in the wake of the Asian financial crisis of 1997 to describe the tendency of a financial crisis in one country to adversely affect the financial markets in other, and sometimes seemingly unrelated, economies. It is the notion of systemic risk taken to the level of national and international markets.

The presence of a large volume of derivatives transactions in an economy creates the possibility of a rapid expansion of counterparty credit risk during periods of economic stress. These credit risks might then become actual delinquent counterparty debts and obligations during an economic crisis. The implication is that even if derivatives are used to reduce exposure to market risk, they might still lead to an increase in credit risk. For example, a bank lending through variable rate loans might decide to reduce its exposure to short-term interest rate variability, thus the volatility of its income, by entering into an interest rate swap as the variable rate receiver. If short-term rates were to rise, then the fair market value of the bank's swap position would rise, and thus would increase the bank's gross counterparty credit exposure above that already associated with the loans which were being hedged.

In so far that derivatives increase counterparty credit exposure throughout the economy, they increase the impact of one entity becoming unable to fulfill its obligations. And to the extent that derivatives are not used to reduce firms' exposure in the market, then the greater leverage brought to speculative investments increases the likelihood of such a failure. In this way, derivatives contribute to the level of systemic risk in the financial system.

The presence of derivatives can also increase the global financial system's exposure to contagion by the international nature of markets. Many derivatives involve cross-bred counterparts and thus losses of market value, and credit rating in one country will affect counterparts in other countries. The second channel of contagion comes from the practice of financial institutions responding to a downturn in one market by selling in another. This demand for collateral assets can be sudden and sizable when there are large swings in financial markets, and thus this source of contagion can be especially fast and strong.

The process of policy formation was much more straightforward in the wake of the 1980s' debt crisis. The borrowers were mostly governments, and the private lenders were the large money center banks. This meant a single representative borrower for each debtor country was therefore represented by a single borrower, and the key lenders could be gathered into a single room. Together with the relevant multilateral institutions, all the parties could negotiate a plan to restructure debt payments.

The policy making process became much more complicated in the 1990s. There were many different private and public debtors and issuers of securities. There were many investors and many different types of claims on parties in the affected developing countries. Capital flows in the form of stocks, bonds and structured notes meant that there were hundreds of major investors and millions of lesser investors. These claims were all the more complicated because of derivative contracts. Derivatives added to both the number of potential counterparts and raised problems as to who held the first claim on outstanding debts and other obligations.

Moreover, losses on derivatives are not the same as late payments on loans. Debt payment problems do not necessarily have to result in loses to either side. Some loan payment problems are short-term liquidity problems that can be solved by merely restructuring the loan payment schedule. Derivatives losses, in contrast, are already lost and cannot be mitigated. These loses must be paid immediately, although the payments can feasibly be financed by acquiring additional debt. What is more, changes in market interest rates and exchange rates can cause derivatives losses to occur more suddenly, accumulate more quickly and sum to greater magnitudes than the losses associated with dollar denominated variable rate bank loans.

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Fiat -- Sharefin, 00:50:49 03/11/03 Tue

Fed's Poole: Fannie Shocks Could Spread

An unexpected financial shock at either of the top U.S. home finance companies, Fannie Mae or Freddie Mac, could inflict heavy damage to the U.S. economy, St. Louis Federal Reserve Bank President William said on Monday.

"Should either firm be rocked by a mistake or by an unforecastable shock, in the absence of robust contingency arrangements the result could be a crisis in U.S. financial markets that would inflict considerable damage on the housing industry and the U.S. economy," Poole said at a conference on the two government-sponsored enterprises, or GSEs.

Surprises that destabilize financial markets can and do occur with some frequency, Poole said. Because of the scale of the short-term debt obligations of Fannie Mae and Freddie Mac, a problem at either company could spread quickly, he said.

"A market crisis could become acute in a matter of days, or even hours," Poole warned.
~~~~~
The regional Fed bank president expressed concern that ties the two companies have to the government have led to a perception in the market that the government would rise to the rescue in the event of a crisis, even though their debt carries no federal guarantee.

Poole recommended the government withdraw one of the advantages Fannie Mae and Freddie Mac enjoy -- the Treasury's ability to lend either firm billions of dollars. This would make clear to markets the U.S. government feels no obligation to guarantee the companies' debt.

Fannie Mae and Freddie Mac also should be required to hold greater capital, Poole said, noting their capital is well below the levels required of banks. "My sense is that the firms are vulnerable to nonquantifiable risks because their capital positions are so low," he said.

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Fiat -- Sharefin, 00:13:56 03/11/03 Tue

Buffett says large reinsurer stops paying claims

Billionaire investor Warren Buffett said a large unnamed reinsurer has "all but ceased paying claims," which he said would lead to billions of dollars of write-offs by insurers who bought policies from the company.

His comments, along with general unease over the economy and a potential war, sent insurance stocks sharply lower in Europe and the United States.

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Fiat -- Sharefin, 00:12:48 03/11/03 Tue

Tokyo nervous after latest North Korea missile test

As the United States and its allies focus on Iraq, North Korea is refusing to be ignored.

Politicians in this region are trying to play down Pyongyang's latest test-firing of a cruise missile into the Sea of Japan, but the people of Tokyo, who are well within missile range, are getting very nervous and regional financial markets are also feeling jittery, with the Nikkei Index at a twenty year low and a big sell-off of the South Korean Won.

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Fiat -- Sharefin, 00:11:25 03/11/03 Tue



Fingers are pointing in the direction of Iraq to explain why Tokyo stocks hit a new post-bubble low Monday, but analysts say the blame may lie closer to home.

The Nikkei 225 index closed at 8,042.26, down 101.86 points, or 1.25 percent, from its close Friday. The index briefly dropped below the 8,000 mark in early afternoon trading, for the first time since March 1983.

The continued slide in stock prices, which began last week as a U.S.-led attack on Iraq began to appear inevitable, rang alarm bells with banks and life insurers. They are preparing to book their large shareholdings at the end of the fiscal year this month. Analysts say other major businesses are facing the same problem.

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From the Far Side -- Sharefin, 23:59:40 03/10/03 Mon

Ist unser Gold bei Kriegsherr Bush noch sicher?

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From the Far Side -- Sharefin, 23:57:30 03/10/03 Mon

Swiss may want to re-take physical delivery
(teo) Mar 09, 20:36

Big Headline today in the major Swiss sunday paper "SonntagsBlick":

Swiss politicians worried about US holding Swiss gold. The Social Democrat
Party announced they would ask the Federal Council (ie the government) to
check the possibility of calling back the Swiss gold reserves HELD IN THE
UNITED STATES OF AMERICA as it was no longer safe there should the US get
engaged in an Iraq war.

The article also said nobody knows where and how much exactly of the Swiss
gold is deposited in the US. Wait for public outcry when they realize that
their gold is not only unsafe in the US but already sold by the US bullion
banks.

Here is a link to the original story, in German.
http://www.blick.ch/PB2G/PB2GA/pb2ga.htm?snr=47592

Here is an Altavista Babelfish translation for those that read English but
not German. The translation is not perfect, but I think you get the idea. As
Kurt says the Swiss are a little concerned about how safe their gold is, if
Bush goes to war.

********************************************
Article from 9 March 2003/source: Sundays view

Is our gold still safe with war gentleman Bush?

BY HENRY HABEGGER

Where do the 2000 tons of gold reserves of Switzerland lie? The central bank
is silent. According to rumors a majority is to be loaded hoppers of it in
the American Fort Knox. That could have uncomfortable consequences, if US
president Bush without UN mandate pulls into the war.

"white I", does not say the inhabitant of zurich SVP national council Bruno
Zuppiger, member of the finance committee. "white I", does not say the pc.
Galler CVP national council Felix Walker, Mitglied of the financial
delegation and former boss of the Raiffeisen banks. "white I", does not say
those Bernese to FDP Nationalraetin Kaethi Bangerter, member of the bank
advice of Swiss central bank (SNB) and the finance committee.
The question, the Sundays view this week to some financial politicians
placed: Where is our gold? Where does the central bank keep its gold
reserves? The "national wealth", of which so much is the speech, because it
is sold to the half and the use of proceeds is politically disputed. The
"gold treasure", which amounts at present still to approximately 2000 tons.

Where is our gold? Exactly that wants to now know that Bernese FR national
council Paul Guenter. In the question time of the parliament Monday the
safety politician places tomorrow to the Upper House of Parliament three
questions:

Is it correct that the gold reserves of Switzerland are stored to a
substantial part in Fort Knox in the USA?
Are there still substantial gold camps of Switzerland at other places and in
other countries?
How rapidly, under which circumstances and of whom this gold can is if
necessary withdrawn?
The gold mystery. Today there are only rumors. A part is to store under the
federal place in Berne. A part in Fort Knox in the US Federal State Kentucky,
most important repository of the US gold reserves and depot of all European
central banks. A further part in London, the center of the international
goldhandels.

Sundays view inquired with the central bank. But speaker Werner Abegg gives
itself covered: "over the gold the most diverse rumors circulate to the
central bank. For safety reasons it is not possible for us to commentate
and/or rectify it." Only so much can be drawn the speaker of Swiss issuing
bank: "the gold is stored at different places abroad the in and." According
to Abegg after the slogan: "the intelligent farmer does not put all eggs into
the same basket."

The fear is clear: The gold could be stolen. The fear seems so large that the
central bank refuses each still so small specifying to the repository
(countries, continents).

FR man Guenter has completely different doubts. "if it tunes that a majority
of the gold lies in Fort Knox, then is extraordinarily uncomfortable the
situation. If the USA lead an Iraq war without UN mandate, the gold is there
at the wrong place - then it must be fetched back."

It justifies: "at a prominent nation we cannot keep nevertheless our gold for
war. And which is, if the USA, which act in the Iraq question scruplesless,
extort us suddenly with the gold?" Guenter is afraid that the USA could
freeze the gold. "that would be a clear offence against international laws.
There we would have to resist with the Court of Justice in Strasbourg (F) ",
say ourselves to that Bernese SVP national council and financial politician
Hermann Weyeneth.

Retreat of the gold. That demanded before five years also the Appenzeller CVP
Staenderat Carlo Schmid. When in the Holocaust debate a US collecting
complaint threatened against the central bank, it required: "all gold
reserves in the USA must be withdrawn." If the gold is really there. Safe is
only: Originally the SNB had 2600 tons. Half is sold, to end of 2002 left to
660 tons. Daily a ton is sold at present, for approximately 15,000 Franconias
the Kilo

Do we know more on Monday? Hardly. Minister of Finance Kaspar Villiger is not
betrayed also in the parliament, where the treasure is kept. For "safety
reasons". "those have nevertheless something to hide", argwoehnt Guenter.
That Bernese financial politician Weyeneth scoffs: "those probably think,
Napoleon come back. And it transports the gold starting from as before 200
years Bernese the treasury."

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Gold -- Sharefin, 23:39:19 03/10/03 Mon

Blanchard vs Barrick - Second Supplemental and Amended Complaint - pdf file

SECOND SUPPLEMENTAL AND AMENDED COMPLAINT
NOW INTO COURT, through undersigned counsel, come Plaintiffs Blanchard
and Company, Inc. ("Blanchard"), Herbert Davies ("Davies"), and James F. Holmes
("Holmes") and file this Second Supplemental and Amended Complaint for Injunctive
Relief against Defendants, Barrick Gold Corporation ("Barrick"), and J.P. Morgan Chase
and Co. ("J.P. Morgan"), and ABC Companies. Plaintiffs adopt by reference and
incorporate all the allegations and paragraphs of their original Complaint for Injunctive
Relief and their First Supplemental and Amended Complaint as if fully set forth herein
and supplement and amend as follows. This Second Supplemental and Amended
Complaint contains the same allegations of fact and law as set forth in the First
Supplemental and Amended Complaint, except with respect to Paragraphs 34, 38, 52, 87
and 94. Except for Paragraphs 34, 38, 52, 87 and 94, all other allegations of fact and law
remain the same as set forth in the First Supplemental and Amended Complaint.

I. JURISDICTION AND VENUE

1. Federal Question Jurisdiction. Pursuant to 28 U.S.C. § 1331, this Court
has federal question jurisdiction as this action arises under the Sherman and Clayton Acts,
15 U.S.C. § 1 et seq. and 15 U.S.C. § 12 et seq., respectively, and the Commodities
Exchange Act, 7 U.S.C. § 1 et seq.. Supplemental jurisdiction over the state law cause of
action pleaded herein arises under 28 U.S.C. § 1367, in that the state law claim is so
related to the federal question claims that it forms part of the same case or controversy.

2. Venue. Venue in this district is proper. Barrick is a Canadian corporation
with significant contacts with the United States of America, including without limitation,
the ownership and operation of extensive mining facilities in this country. The Alien
Venue Act, 28 U.S.C. § 1391(d), provides that an alien may be sued in any district. J.P.
Morgan is one of the largest banking institutions in the United States. 15 U.S.C. § 22
provides that an antitrust action against a corporation may be brought in any district
where the corporation transacts business. Upon information and belief, J.P. Morgan
transacts business in this district.

3. Personal Jurisdiction. 15 U.S.C. § 22 provides in full: "Any suit, action,
or proceeding under the antitrust laws against a corporation may be brought not only in
the judicial district whereof it is an inhabitant, but also in any district wherein it may be
found or transacts business; and all process in such cases may be served in the district of
which it is an inhabitant, or wherever it may be found." Because 15 U.S.C. § 22 provides
for worldwide service of process in federal antitrust actions, Barrick and J.P. Morgan,
which upon information and belief have the requisite "minimum contacts" in the United
States and specifically in this district, are both subject to personal jurisdiction in this
district.

II. PARTIES

4. Plaintiffs
(a) Blanchard is a corporation organized and existing under the laws of the
State of Louisiana with its principal place of business located at 909 Poydras Street, New
Orleans, Louisiana 70112. Blanchard is a retail dealer in rare coins and precious metals.
(b) Davies is a natural person of full age of majority who is a domiciliary and
resident of Montgomery County, Pennsylvania. Davies is an individual investor in gold
and/or gold coins.
(c) Holmes is a natural person of the full age of majority who is a domiciliary
and resident of Jefferson Parish, Louisiana. Holmes is a partner in a gold mining
enterprise.

5. Defendants
(a) Barrick is a corporation organized under the laws of Canada, with its
principal place of business at 200 Bay Street, Toronto, Canada. Barrick is one of the
largest gold mining companies in the world.
(b) J.P. Morgan is a corporation organized under the laws of Delaware, with
its principal place of business at 270 Park Avenue, New York, New York. J.P. Morgan is
one of the largest banking institutions in the United States.
(c) Fictitious Defendants ABC Companies represent all of the unknown
Defendant corporations that participated in the antitrust violations set forth in this
complaint. ABC Companies will be replaced with the specific names of such
corporations as soon as their identities have been ascertained.

III. FACTUAL BACKGROUND

6. This antitrust action is based on the unlawful combination of Barrick, one
of the largest and most powerful gold mining companies in the world, and the bullion
banks, including without limitation J.P. Morgan, with which it has contracted. Engaged
in far more than mere "hedging" to protect against price fluctuations, Defendants have
violated United States’ antitrust law by unlawfully combining to actively manipulate the
price of gold through a process whereby millions of ounces of gold are removed from
central bank vaults and physically sold into the spot market, repeatedly driving down the
spot price or suppressing a rally in the spot price. Barrick and the bullion banks have
benefitted from the suppressed price of gold at the expense of individual investors, gold
retailers (of which Blanchard is the largest in the U.S.), and gold producers.

7. Plaintiff, Blanchard, as a retail dealer of gold and other precious metals,
Plaintiff, Davies, as an individual investor in gold, and Holmes, as a partner in gold
mining enterprise, have suffered and will continue to suffer damages as a direct and
consequential result of the violation of the antitrust laws that the Defendants have
committed. In addition to damages already incurred, Plaintiffs also face a threatened
injury.

8. This suit seeks injunctive relief pursuant to Section 16 of the Clayton Act
and the Louisiana Unfair Trade Practices and Consumer Protection Act, in the form of an
order of the Court directing that the Defendants cease and desist from, and otherwise
terminating, the unlawful scheme and combination that they have engaged in violations of
the United States’ antitrust laws and the Louisiana Unfair Trade Practices and Consumer
Protection Act. Plaintiffs are subject to a threatened injury that makes injunctive relief
appropriate under the circumstances.

Barrick’s Rapid Growth Through Acquisitions

9. Gold mining companies have traditionally grown through exploration.
Barrick, however, catapulted from obscurity to the dominant player in the industry
through other methods. In 1983, Barrick was incorporated as a relatively small Canadian
company with a single mine in that country. Less than twenty years later, Barrick has
become the world’s second-largest gold producer with the largest market capitalization in
the industry. Barrick produced 6.1 million ounces of gold in 2001, and has proven gold
reserves of 82.3 million ounces. Barrick has the industry’s only "A" credit rating, and its
off-balance sheet assets have been worth more than the market capitalizations of the next
five biggest gold mining companies in the world - combined.

10. Barrick’s process of transforming itself from a small, upstart mining
company into an enterprise that could negotiate and take advantage of the favorable terms
involved in its "Premium Gold Sales Program," discussed below, centered in large part on
what former Budget Chief Leon Panetta described as a "multi-billion-dollar rip-off."
In the late 1980s - around the same time that the "Premium Gold Sales Program" began -
Barrick acquired private claims to the prized Goldstrike property, located on federal land
in Nevada. In exchange for less than $10,000, Barrick obtained rights to gold deposits
worth more than $10 billion. Barrick Goldstrike is now the largest gold mine in North
America. With the Goldstrike property bolstering its reserves and production capacity,
Barrick embarked on a program of growth through acquisitions. Key components of the
expansion plan were the so-called "Premium Gold Sales Program," discussed below, and
the related steadily declining price of gold.

11. When Barrick began its "Premium Gold Sales Program" in 1987, the
average price of gold was $450 per ounce. Over the following 14 years, Barrick’s
"Premium Gold Sales Program" steadily grew in size and market impact. By 2001, the
average price of gold had fallen to $271 per ounce. Over that same 14-year period, as
other producers struggled to survive the tremendous and unrelenting decline in price,
Barrick grew exponentially by acquiring a number of gold mining and exploration
companies.

12. In 1994, for example, Barrick took over Lac Minerals, Ltd., an
international gold mining company with operating mines in Canada, the United States,
and Chile. The acquisition gave Barrick control of the El Indio belt, one of the richest
gold districts in South America. The district also included the Pascua-Lama Property,
now unified as the Pascua-Veladero District as a result of Barrick’s merger with
Homestake Mining (discussed below). With gold reserves of over 25 million ounces and
71.3 million ounces of silver reserves, Pascua-Veladero is the largest undeveloped gold
and silver mining property in the world.

13. Two years later, Barrick bought out Arequipa Resources Ltd., a natural
resources company engaged in the acquisition and exploration of mineral properties in
Peru, including the Pierina early exploration stage property. Within four months of the
acquisition, Barrick brought an initial 6.5 million ounces of gold into reserves at Pierina.
The property commenced production in November 1998, and has produced over 2.6
million ounces of gold through December 31, 2001, at an impressively low average total
cost of $42 per ounce.

14. The year 1999 marked Barrick’s expansion into a third continent, Africa,
with the acquisition of Sutton Resources, Ltd., an exploration company with mineral
properties in Tanzania, including the Bulyanhulu Gold Project. In 2000, Pangea
Goldfields Inc., with properties in Tanzania, Canada, and Peru, fell into Barrick’s ever-expanding
empire. Barrick’s buying spree culminated in 2001 with the acquisition of
125-year-old Homestake Mining Company. Homestake, a large S&P 500 enterprise with
gold reserves of 20.8 million ounces spread across North America, South America, and
Australia, was Barrick’s biggest acquisition to date. At the time of the announced
merger, Barrick boasted that the acquisition would result in a company with the highest
earnings and cash flow in the industry and a market capitalization of $9 billion - double
that of the nearest competitor.

15. Barrick’s rapid growth from obscurity to dominant global mining
enterprise was unprecedented. So, too, was the program by which the company, together
with crucial assistance from J.P. Morgan and other bullion banks, made it happen.

Defendants’ Premium Gold Sales Program:

The Vehicle for Price Manipulation
16. A short sale of gold is a technique used to take advantage of an anticipated
decline in the price by borrowing gold and selling it immediately into the spot market. In
making short sales, producers borrow gold from bullion banks, who in turn borrow that
gold from central bank reserves. The producer (or the bullion bank acting for the
producer) then sells the gold into the spot market, leaving the producer with the
obligation to repay the gold loan at some time in the future. The producer invests the
proceeds from the sale in money-market instruments that provide a higher return than the
lease rate on the gold. The difference between the rate of return and the lease rate (the
"contango" or "interest premium") is profit to the producer, as long as the price of gold
doesn’t go up.

17. The inevitable criticism of short selling is that, in buying an asset and
selling it into the market, the short seller adds additional supply that serves to depress the
price. However, the universal answer to that criticism is that short sales are normally for
short periods of time, and the depressing effect of the short sale will be exactly offset by
the stimulating effect that occurs when the short seller covers by buying and delivering
the asset.

18. Since most short sales of gold require that the repayment of the gold must
occur in a relatively short period of time, they involve a very real element of risk. The
maximum return that a short-seller can realize, if the asset sold short becomes completely
worthless, is the amount of sale. However, since the upside potential of the asset is
unlimited, so is the amount of the short-seller’s potential loss. The inherent risks create
the requirement for collateral (margin) for short positions in stocks and in exchange
traded stock options and commodities. If the price moves against the short-seller, he is
required to post additional margin to make up for the difference in his position.

19. Because of the unlimited risk, and because of the requirement that he put
up additional margin as prices move higher, the short seller is normally forced to
scramble to cover his short positions whenever the price of gold moves up. When short
sellers cover their short positions, their covering reduces supply, pushing the gold price
even higher.

20. In 1987, as Barrick moved to take over what would become North
America’s largest gold mine from the American public, the company, in concert with J.P.
Morgan and other bullion banks, began an off-balance sheet program that would enable it
to manipulate the price of gold for an indefinite period of time. As other gold mining
companies with higher operating expenses buckled under a 14-year slide in the price of
gold - from an average $446 per ounce in 1987 to $272 in 2001 - Barrick had the money
to go "bargain shopping." Barrick, which emerged from a decade of expansion as an
industry Goliath, calls its off-balance sheet price manipulation scheme the "Premium
Gold Sales Program." Barrick boasts that, since 1996, the program has generated over
$1.7 billion in additional revenue for the company.

21. Barrick describes its "Premium Gold Sales Program" as "a hedging
program." But such a label is misleading, since the program’s mechanics are unlike any
hedging program as that term is commonly understood, and because the program has as
its purpose the unlawful goal of price manipulation.

22. Hedging generally is regarded as a transaction that reduces risk on an
already existing position, such as all or part of an annual production of a specific
commodity. Barrick’s "Premium Gold Sales Program," however, involves something far
different than a simple agreement by Barrick to sell an annual production at a fixed price.
The program involves a unique arrangement whereby Barrick, and the bullion banks with
which it operates in combination, can flood the market with central bank gold - with an
unbelievably insignificant amount of financial risk.

23. Barrick’s "Premium Gold Sales Program," like "hedging," does involve a
promise by the company to deliver gold at some future point in time. But that is where
any resemblance to traditional "hedging" ends. Because gold, unlike other commodities,
is stored in vast quantities in numerous central banks throughout the world, it is possible
for Barrick to leverage its gold reserves with central bank gold to generate income in the
form of "contango" The process generally works as follows:
A. When Barrick engages in a "Premium Gold Sales Program" transaction, a
bullion bank, such as J.P. Morgan, borrows gold from a central bank, then sells the gold
into the spot market. This step of the program involves the physical removal of gold from
the central bank and the physical sale of such gold into the market; it is not a mere paper
transaction.
B. The bullion bank takes the money raised by the sale of the borrowed gold
and deposits it in the bank, where it earns interest (for example, 5%). The bullion bank
pays the central bank a lower "gold lease rate" for the borrowed gold (for example,
1.5%). The difference between the gold lease rate and the bank deposit rate (in this
example, 3.5%) is called "contango."
C. Barrick, for its part in the transaction, agrees to deliver gold to the bullion
bank at some point in the future. When Barrick does deliver the gold, which it has either
produced or bought, the bullion bank in turn sends it to the central bank in satisfaction of
the outstanding gold lease. Barrick then receives the original proceeds from the spot sale
of the borrowed gold, plus the "contango."

24. The effect of Barrick’s "Premium Gold Sales Program" is to control the
price of gold, which is price manipulation. Barrick’s price manipulation could not take
place without the integral assistance of J.P. Morgan and other bullion banks. For it is the
bullion banks who hold the keys to unlock vast quantities of gold from central banks -
gold that, through coordination with Barrick, can be, and frequently is, dumped onto the
spot market to drive down the price or stall a rally.

25. The impact of the "Premium Gold Sales Program," and Barrick’s ability to
use it as a means of suppressing the price of gold, is based upon the unique terms of the
contracts that Barrick and the various bullion banks have crafted. J.P. Morgan and other
banks have, for the past fifteen years, entered into contracts with Barrick that place the
company in an unparalleled position to sell forward tremendous quantities of gold with
minimal risk.

26. Barrick enters into what it calls "spot deferred contracts" with J.P. Morgan
and other bullion banks at impressively favorable terms for Barrick - terms that other
gold mining companies could not secure, that enable it to periodically manipulate the
price of gold upward, as well as downward, and to profit from doing so.. Pursuant to
these spot deferred contracts, Barrick can postpone indefinitely the date on which it must
provide gold to the bullion banks. The initial spot deferred contracts allow Barrick to
postpone the gold delivery date for 10-to-15 years, at Barrick’s sole discretion.
Moreover, the contracts contain "evergreen" provisions that restart the 10-to-15 year
repayment deadline each year unless the bullion bank takes affirmative steps to override
the "evergreen" clause - something no bullion bank has ever done in connection with a
Barrick spot deferred contract.

27. Further augmenting Barrick’s power is the fact that its spot deferred
contracts do not allow the bullion banks to make margin calls - ever. The price of gold
could collapse or skyrocket, and Barrick would never be faced with a margin call.
Together with the indeterminate delivery date and vast gold reserves from which to
engage in large spot deferred contracts, Barrick and the bullion banks have put together a
program no other company can match.

28. Barrick recognizes that its "Premium Gold Sales Program" is unique. As
Barrick states: "Backed by the industry’s only A-rated balance sheet, Barrick’s credit
lines are unparalleled, while Barrick’s proven assets give it the production capacity to
cover its hedge positions. As a result, no other company can match Barrick’s ability to
roll contracts forward - as far as 15 years in some instances." Barrick admits that, "[t]o
[its] knowledge, no other gold producer has available to it the combination of margin-free
hedging, 10 to 15 year terms and flexible delivery dates that are available to Barrick."
The result: in combination with its bullion banks, such as J.P. Morgan, Barrick, alone
among gold mining companies, is positioned to manipulate the price of gold, at will, with
extremely limited downside risk.

29. Since Barrick is able to defer repayment of the borrowed gold and has no
margin calls at any gold price, it is able to do just the opposite of the normal short-seller
when gold prices rise. While other short sellers have to cover or add additional margin
when the price of gold goes up, Barrick already has pre-arranged derivative contracts in
place that give it the ability to add to its short positions at the higher prices. Rather than
being forced to cover its short sales, pushing the gold price higher, Barrick is able to add
large amounts of physical supply as the market hits those higher prices, eventually serving
to drive the price back down. By adding to its short sales at the higher prices, Barrick
increases the "contango" or interest premium it earns; increases its short-selling profit
when the market turns down; and adds physical supply that helps to depress the price,
adding a self-fulfilling element to its short sales of gold.

30. The best of all possible worlds for Barrick is one in which the price of
gold periodically goes up, permitting Barrick to make its short sales at the highest
possible price, but then falls again, giving Barrick an additional profit over and above the
"contango" or interest premium.

31. Because of the extraordinary flexibility of its derivative transactions with
J.P. Morgan, and particularly their long and variable durations until expiration, Barrick
can afford to manipulate the price of gold upward (i) by making negligently or
deliberately false or misleading statements that supposedly communicate its bullish
prognosis and plans for gold, and its intention to make changes to its short positions that
would serve to reduce physical supply; (ii) by sponsoring bullish investment
representations about gold by the World Gold Council that are negligently or deliberately
false or misleading; and (iii) by sponsoring the publication of bullish statistical data about
gold’s supply/demand fundamentals that Barrick knows to be false, and knows to be false
because of Barrick’s own activities.

32. Barrick manipulates the price of gold downward by injecting massive
amounts of additional supply through its short sales of gold - short sales that have a
negative impact on the gold price equal to the amount of the sale and which, because of
the interest premium it earns, Barrick has a strong financial incentive to leave in place for
15 years or more.

33. Barrick has recognized that it has the ability to manipulate gold prices. In
an interview in the June 1, 2001 edition of the Canadian Mining Journal, Barrick’s Chief
Financial Officer, when asked if the company’s hedging depressed the price of gold,
responded: "No, not over time. We are careful to manage the hedge position so as not to
disrupt the gold price." The CFO merely confirmed what is obvious from the company’s
size, and the scope of its Premium Gold Sales Program, effected in combination with the
bullion banks: Barrick is capable of using its "hedging" program to move the price of gold.

34. Paragraph 34 is intentionally deleted in its entirety.

The Gold Sales Program Is Used to Manipulate Price

35. Barrick has done far more than make advance arrangements to safeguard
itself from losses should the price of gold decline. Instead, the very program that
ostensibly exists to protect Barricks downside exposure serves as a means of (a) locking
in guaranteed minimum gold prices for years’ worth of Barrick’s production, while (b)
suppressing the price of gold in order to weaken competitors and enhance acquisition
opportunities. Because of its highly favorable contracts with J.P. Morgan and other
bullion banks, Barrick accomplishes its goals with minimal financial risk.

36. Unlike a typical company engaging in forward sales, Barrick is not
constrained by the fear that, should too much future production be locked in at a
particular price, a significant rise in the price of gold would lead to too-great an
opportunity loss, or worse, financially painful margin calls from the bullion banks.
Instead, Barrick’s forward sales contracts do not have margin calls, and if the price of
gold unexpectedly and uncontrollably rises, Barrick can sell current production into the
higher-priced spot market and roll its obligation to repay the bullion banks into the distant
future. Consequently, Barrick’s "Premium Gold Sales Program" puts the company in an
unprecedented position from which it can manipulate gold prices. Barrick, in
combination with J.P. Morgan and other bullion banks, can dump millions of ounces of
tangible central bank gold into the spot market at any time without risking the company’s
financial future. In fact, as further discussed below, such conduct is highly favorable to
Barrick, weakening its competitors and allowing it to acquire additional reserves at
bargain prices.

37. Barrick’s "Premium Gold Sales Program" allows manipulation by
preventing the normal laws of supply and demand from determining the price of gold.
Barrick has suppressed the price by its combinations and contracts with J.P. Morgan and
other bullion banks whereby significant amounts of additional gold, once locked and
stored in the vaults of central banks, are physically sold into the marketplace.

38. The resultant weak gold prices have not harmed Barrick because of the
guaranteed minimum prices from the forward sales contracts. In prior years, Barrick
delivered all of its gold production to cover forward sales contracts, rather than sell the
production into the depressed spot market, while entering into additional spot deferred
contracts to increase the total volume of gold entering the market. At the same time, it
took advantage of its weakened competitors, who did not have analogous "Premium Gold
Sales Programs" of their own with which to withstand Barrick’s price suppression
activity. As Randall Oliphant, Barrick’s President and CEO, stated on May 8, 2002:
"With weak gold prices we acquired quality assets when others lacked the confidence to
build their asset bases." Two years earlier, Mr. Oliphant said: "Hedging allowed us to
seize the opportunity to buy the Bulyanhulu Mine as the gold market was headed down.
Isn’t that what business is all about - buying good assets for a good price? You can’t be
opportunistic without money - and the confidence to act." Of course, Barrick’s
confidence no doubt was boosted by its unparalleled ability to flood the gold market with
additional physical supplies that, in some years, exceeded global investment demand;
exceeded the net amount of physical supply added by the world’s two dozen major
bullion banks, combined; and exceeded the net amount of physical supply added by the
world’s major hedge funds, combined. These massive injections of supply inevitably had
a downward impact on price. And Barrick has had the ability to scale down or terminate
its forward-selling activity and create a positive pricing impact - all at its discretion.

The Manipulation Has Been Unchecked

39. On January 31, 1996 the international press reported that the world’s most
profitable gold-mining company, Barrick Gold Corporation, had announced changes in its
hedging policies (short positions) which could mean higher prices for gold. Barrick said
that, in the future, it would hedge (make forward sales) in an amount equal to only two
years’ production - down from the standard three-year amount. That would cut the
amount of Barrick’s short position from 8.9 million ounces to 5.9 million ounces, the
biggest adjustment Barrick had ever made. Barrick’s Founder and CEO and other Barrick
officials said there would be less forward selling, which should push world prices
upward.

---

Gold -- Sharefin, 23:36:41 03/10/03 Mon

40. In February 1996, the press reported that the gold market surged above
$410, establishing a 5 ½ year high, and said that the catalyst for the price rise was the
announcement by Canada’s Barrick Gold that it was reducing its hedging position by 100
tonnes (a little over three million ounces). In an interview with Barrick’s CEO, he
acknowledged that hedging by gold producers had a profound impact on the gold market.

41. By the 4th quarter of 1998, Barrick had increased its short positions to 13.2
million ounces, or more than four times its annual production, and the price fell to a low
of $286.65. By the 3 rd quarter of 1999, Barrick had increased its short position to 18
million ounces, or approximately five times its annual production and the price of gold
fell to a low of $252.90.

42. In February, 2000, Barrick issued a press release announcing its hedging
(its short position) had been reduced from 18.8 million ounces to 9.8 million ounces;
announced that it would not increase its short position from the 9.8 million ounce level;
referred to that statement as a "commitment" made by the company’s Chief Executive
Officer; and said in a press release it issued on February 8, 2000, that, "“We are going
forward with a reduced level of hedging and plan to fully participate in rising gold
prices."

43. Barrick underscored the magnitude of its commitment: "The significant 9-
million-ounce reduction in the committed forward-sale position reflects Barrick’s
confidence in the gold price. It is approximately two-thirds of the entire amount of gold
supply from producer hedging in the world last year, or two-thirds of all the gold sold by
the Bank of England." Within the space of a few days, the price of gold jumped to $319
and remained above $300 for most of the rest of the month. Barrick’s announcement had
much to do with the market’s strength.

44. One of the most respected gold analysts in the industry said that the
announcement by Barrick and another gold company in February 2000 was "eerily
similar," to the announcement made four years before by Barrick, when it said that it had
cut its hedge book by a third, or 90 tonnes, prompting gold prices to rise above $410.

45. Despite its "commitment," Barrick increased its short position to 24.1
million ounces by the end of 2001, an increase of 14.3 million ounces or approximately
150%. The average annual price of gold fell to $271 an ounce in 2001.

46. Barrick’s senior executives have represented that they are careful to
manage their huge short positions in gold so as not to disrupt the gold price, and that they
can be discriminating as to the timing of each new sale to ensure that it does not hurt
prices. The very practice that Barrick claims to follow - that of gold price stabilization -fits
clearly within the definition of market manipulation; intentional conduct designed to
produce a price that does not reflect basic forces of supply and demand. Under the
Sherman Act, a combination formed for the purpose of pegging or stabilizing the price of
a commodity in interstate or foreign commerce is illegal per se.

47. While the existence of the "Premium Gold Sales Program" has never been
hidden, this unique program has taken place "off balance sheet" and primarily behind the
scenes, with even industry specialists confused about the program’s impact on spot
market prices. Many people, upon hearing the term "hedging," improperly assume that
Barrick’s conduct involves mere paper transactions that do not add physical supply to the
market. Indeed, the highly regarded CPM Group, which produces an annual Gold
Survey, came to that very conclusion in its 2002 report:
Hedges, and the hedges that the bullion banks put on to protect themselves
from adverse price moves, almost exclusively are paper transactions.
These transactions do not increase current supply when they are initiated.
Nor do they reduce new physical supply when they are unwound. Thus
they should not be considered a source of physical supply in market supply
and demand analysis.

With regard to Barrick’s "Premium Gold Sales Program," such analysis is completely
wrong.

48. Even Merrill Lynch research analysts seem confused by Barrick’s conduct.
In a report dated February 18, 2002, they wrote: "This is the first time in over ten years
that Barrick does not have its current year’s output fully hedged, reflecting a more
optimistic view on gold prices." In fact, Barrick at that time had approximately 18
million ounces in spot deferred contracts, totaling 22% of its reserves, which is more than
three times its projected 2002 output of 5.7 million ounces. What Barrick did announce
was that it intended to sell half of year 2002 production in the spot market, rather than
send the entire year’s production to the bullion banks pursuant to spot deferred contracts.
The distinction is significant, because it underscores Barrick’s vast spot deferred position,
and its unparalleled flexibility vis-à-vis the spot price market.

49. Listening to Barrick’s leaders only further confuses the issue of what
Barrick is really doing to the price of gold. In 1997, sounding quite bullish on the price of
gold, Barrick’s founder and Chairman of the Board of Directors, Peter Munk, said that
demand was 20% greater than new supply. By the fourth quarter of 1999, Barrick had
increased its spot deferred position from 6.7 million to 18.8 million ounces, effectively
eliminating the purported 20% shortfall. The average annual price of gold fell more than
$100.

50. Also in 1997, Peter Munk said that Barrick "adds to its hedge position on a
regular, disciplined basis." At the start of 1997, its hedge position stood at 6.7 million
ounces. By the fourth quarter of 1999, the position had skyrocketed to 18.8 million
ounces, but before the end of that year, the hedge position rushed back to 9.8 million
ounces. Barrick then announced this reduction to the public in February 2000, and stated
as a "commitment" that it would not increase hedging from the 9.8 million ounce level.
Barrick represented that the company was "going forward with a reduced level of hedging
and plan[ned] to fully participate in rising gold prices." The week of this announcement,
gold closed at $316 per ounce. Barrick then increased its hedge position to 24.1 million
ounces - an increase of 14.3 million ounces - by the end of 2001. The average annual
price of gold fell to $272 per ounce.

51. As of late 2001, Barrick’s hedge position of 24.1 million ounces
approached one-third of its vast reserves. If Barrick had hedged by shorting 24.1 million
ounces of gold via futures contracts, it would have exceeded the speculative limits set by
the United States Commodities Futures Trading Commission ("CFTC") by over 8000%.
Instead, Barrick’s spot deferred contracts apparently do not fall under the authority of the
CFTC, and the unregulated transactions are kept off of Barrick’s balance sheet.

52. Paragraph 52 is intentionally deleted in its entirety, and is replaced with
the following section heading.

J.P. Morgan’s profits from Barrick’s price manipulation occur in regulated and unregulated markets.

53. Why is J.P. Morgan willing to give Barrick such astonishingly favorable
terms on its spot-deferred sales contracts? In its 1997 Annual Report, Barrick said that
the advantageous terms that it received were "because of the unequaled size and quality
of its reserves and balance sheet." If that is the case, then how can it explain what
happened in the late 1980's? Why would J.P. Morgan be willing to lend quantities of
gold, at 1.5% interest, for 10 years, with no margin calls, to a company that describes
itself as follows: "Back in 1987, Barrick was a smaller, higher cost producer with a weak
balance sheet..." (Presentation by Barrick’s CEO to the Nesbitt Burns 2002 Global
Natural Resource Conference, dated February 26, 2002). Part of the answer lies in the
fact that Barrick has reserves in the ground that, theoretically, it can eventually produce in
repayment of its borrowed gold. However the principal reason is that, whenever the price
of gold goes up, Barrick can be counted on to provide a supply shock to the market which
will depress the price, protecting and enhancing the value of J.P. Morgan’s own short
positions. The weapon that J.P. Morgan gave Barrick - the spot-deferred sales contract -protects
and enhances J.P. Morgan’s far greater short positions that have been so lucrative
over the years.

54. The benefit of the relationship to J.P. Morgan lies in the enormous
derivative positions ($40 + billion) held by J.P. Morgan over the past 15 years, the vast
majority of which are reputed to have been on the short side of gold.

55. A derivative is a bilateral contract whose value is derived from the value
of an underlying asset or underlying reference rate or index. With gold, the definition of
a derivative is often expanded to include any predominantly paper product whose value is
directly or indirectly dependant upon the price of physical gold. In other words, the gold
price is ultimately the basic point of reference from which the success or failure of any
bullion derivative is judged.

56. The price of a gold derivative depends on the current price of the
underlying commodity (gold) and a number of other variables including, possibly, the
future or strike price, the time until the contract expires, the volatility of the price of the
underlying asset, and the level of interest rates at which one can borrow or lend the
underlying asset. The price of gold and the profit or loss realized from the gold derivative
are both determined by the physical supply and demand for gold. Given the fact that the
derivative market is as much as 100 times the size of the physical market, it is easy to
understand why Barrick’s ability to influence the price of physical gold can produce
phenomenal profits for J.P. Morgan.

57. J.P. Morgan, by acting as counterparty to Barrick in spot-deferred gold
derivative contracts with long and variable durations until expiration, provides Barrick
with a powerful incentive for the addition of physical supplies to the spot market in
amounts that depress spot prices. A firm engaging in such large scale transactions can, in
effect, lock in a profit on such contracts from the resulting fall in gold prices.

Barrick’s Intimidation of Competitors and Critics

58. Defendant Barrick has a continuous and systematic history of utilizing
scare tactics to curtail or restrict discussion and disclosure of its business activities.

59. Defendant Barrick has long engaged in a policy employing litigation, or
the threat thereof, in order to bully, censor and silence competitors or critics of
Defendant’s previously described unfair trade practices, market manipulation and other
illegal acts.

60. Barrick has sued, under United States, United Kingdom and Canadian libel
and slander statutes, several companies and individuals who publically criticized
Barrick’s unfair trade practices and other illegal acts, including Chilean mine owner Jorge
Lopehandia, the British Broadcasting Corporation, and The Guardian journalist, Greg
Palast.

61. Barrick has now served a Libel Notice for the Superior Court of Justice of
the Province of Ontario, Canada, on Plaintiff Blanchard and Blanchard employees Donald
W. Doyle, Jr. and Neal R. Ryan, stating that, commencing on December 18, 2002, the
date Blanchard sued Barrick in this Court, the named respondents have made statements
"... that have no basis in fact and are totally irresponsible and defamatory." Barrick’s
Notice is an obvious attempt to intimidate Blanchard into abandoning this action, and to
force Blanchard to retract the allegations made herein. Along with its Notice of Libel,
Barrick issued a Press Release making false and defamatory statements regarding
Blanchard and its representatives.

Effects on Plaintiffs

62. As more fully set forth below, Davies is an investor in physical gold and
Blanchard is a retailer of precious metals. The unlawful practices complained of herein
have caused and will continue to cause both Davies and Blanchard irreparable harm by
artificially depressing the price of gold.

63. As more fully set forth below, Blanchard competes with J.P. Morgan in
the sale and marketing of gold investments to retail clients. The unlawful practices
complained of herein have caused and will continue to cause Blanchard to suffer
irreparable harm.

64. As more fully set forth herein, Holmes is a partner in a gold mining
enterprise. The unlawful practices of Barrick complained of herein have caused and will
continue to cause Holmes irreparable harm.

IV. CAUSES OF ACTION
FIRST CAUSE OF ACTION

Defendants have Caused Antitrust Injury to Davies as an Investor and
Blanchard as a Retailer of Precious Metals

65. Plaintiffs adopt by reference and incorporate all previous allegations in all
preceding paragraphs as if fully set forth herein.

66. Barrick and J.P. Morgan, through their unlawful manipulation of the price
of gold, have violated of 15 U.S.C. §§ 1, 12.

67. Barrick and J.P. Morgan, through the anticompetitive conduct described
herein, have obtained and maintained that power to effectively manipulate the price of
gold, to the financial detriment of Davies as an investor, Blanchard as retailer of precious
metals and others similarly situated which constitutes a violation of the Commodities
Exchange Act, 7 U.S.C. §§ 22, 25.

68. Barrick and J.P. Morgan’s anticompetitive acts unless restrained by the
Court, will allow them to continue in those anticompetitive acts causing irreparable and
continuing harm to Davies and Blanchard.

69. Barrick and J.P. Morgan have acted with specific intent to obtain and
maintain the ability to manipulate the price of gold and their unlawful practice has
enabled them to do so.

70. As a direct, foreseeable and proximate result of Barrick and J.P. Morgan’s
unlawful practices, Plaintiffs Davies and Blanchard have and will continue to be damaged
by an inability for fair trading in a market manipulated by Defendants. Plaintiffs’ injuries
are of the type the antitrust laws are intended to prohibit and thus constitute antitrust
injury. Unless the activities complained of are enjoined, Plaintiffs will continue to suffer
immediate and irreparable injury for which Plaintiffs are without adequate remedy at law.

SECOND CAUSE OF ACTION

Defendants have Caused Antitrust Injury to Plaintiff Blanchard as a
Competitor in the Gold Market

71. Plaintiffs adopt by reference and incorporates all previous allegations in all
preceding paragraphs as if fully set forth herein.

72. Blanchard and J.P. Morgan buy and sell physical gold and gold depository
receipts for retail clients.

73. Blanchard and J.P. Morgan provide clients with information about gold
and its investment attributes.

74. J.P. Morgan controls large amounts of customer funds over which it
exercises discretionary control and occasionally uses to buy, sell or otherwise trade in
gold . To the extent that these funds are invested in a manner that takes advantage of the
anticompetitive practices complained of herein, J.P. Morgan directly damages Blanchard
and profits from its own unlawful activities.

75. J.P. Morgan, through its unlawful dealings and manipulations of the gold
market, does business in such a manner as is detrimental to the spirit of fair competition
and as such does irreparable and continuing harm to Blanchard, and Blanchard is entitled
to injunctive relief under 15 U.S.C. § 26.

76. As a direct, foreseeable and proximate result of J.P. Morgan’s unlawful and
anticompetitive conduct and its unlawful combination with Barrick, Blanchard has and
will continue to be damaged by an inability to fairly compete in a market manipulated by
the Defendants. Unless the activities complained of are enjoined, Blanchard will continue
to suffer immediate and irreparable injury for which Blanchard is without adequate
remedy at law.

THIRD CAUSE OF ACTION

Defendants Have Caused Antitrust Injury to Plaintiff Holmes

77. Plaintiffs adopt by reference and incorporate all previous allegations in all
preceding paragraphs as if fully set forth herein.

78. Barrick’s short selling arrangement with J.P. Morgan has depressed the
price of gold damaging Holmes’ as a partner in a gold mining enterprise while Barrick’s
profits are increased through short sales.

79. Barrick, through its unlawful dealings and manipulations in the gold
market does business in such a manner as is detrimental to the spirit of fair competition
and as such does irreparable and continuing harm to Holmes, and Holmes is entitled to
injunctive relief under 15 U.S.C. § 26.

80. As a direct, foreseeable and proximate result of Barrick’s illegal and
anticompetitive conduct and its unlawful combination with J.P. Morgan, Holmes has and
will continue to be damaged by a market manipulated by the Defendants. Unless the
activities complained of are enjoined, Holmes will continue to suffer immediate and
irreparable injury for which Holmes is without adequate remedy at law.

FOURTH CAUSE OF ACTION

Defendants Engage In Unfair Trade Practices

81. Plaintiffs adopt by reference and incorporate each of the above paragraphs
as if fully set forth herein.

82. The Louisiana Unfair Trade Practices and Consumer Protection Law,
L.S.A.-R.S. 51:1401, et seq., prohibits unfair or deceptive methods, acts or practices in
trade or commerce.

83. Barrick and J.P. Morgan and other bullion banks with which Barrick has
contracted pursuant to the "Premium Gold Sales Program" have engaged in unfair and
deceptive trade practices for the purpose and with the effect of manipulating the price of
gold in interstate and foreign commerce. As a direct consequence of such unlawful trade
practices by Barrick and J.P. Morgan, Blanchard and Davies have been and continue to be
damaged, including the loss of tremendous amounts of business from current and
potential customers and/or the loss of investment income. Defendants’ unfair trade
practices have devastated the market for investment gold, with a resultant reduction in
profits for Blanchard and Davies. Moreover, Blanchard’s ability to grow and develop
business opportunities has been impaired by Defendants’ unlawful trade practices, and
Davies has been impaired in his ability to earn investment income from his purchases of
gold.

84. Barrick, through intimidation tactics, including defamatory statements and
litigation and/or the threat thereof, has engaged in unfair trade practices in an attempt to
disrupt and impair the business dealings of Plaintiffs and others similarly situated.

85. An injunction prohibiting Barrick, J.P. Morgan, and the ABC Company
Defendants from engaging in further unfair and unlawful trade practices is appropriate
under the circumstances.

FIFTH CAUSE OF ACTION

Barrick Has Libeled, Slandered, and Defamed Blanchard

86. Plaintiffs adopt by reference and incorporate all previous allegations in all
preceding paragraphs as if fully set forth herein.

87. A cause of action for defamation arises out of violations of Louisiana law,
including Louisiana Civil Code Article 2315.

88. Barrick has, through the allegations made in its Libel Notice and Press
Release, both of late January, 2003, made false and defamatory statements concerning
Blanchard and its representatives that were distributed through mail wire, and
telecommuications.

89. It has done so through its own fault, with malice, and by means of
unprivileged publication, in an attempt to intimidate and injure the good name and
reputation of Plaintiff Blanchard.

90. Barrick, conspiring and acting in concert with others, has engaged in a
long-standing pattern and practice of threats, intimidation, and defamation of its critics
employing mail, wire, and telecommunications, and has employed litigation and the
threat of litigation in United States and foreign courts to silence its critics.

91. The false statements made by Barrick, the world’s largest gold producer,
were intended to undermine the credibility, reputation and sales of Blanchard, the largest
retailer of gold bullion and rare coins in the United States.

92. As a direct, foreseeable and proximate result of Barrick’s conduct,
Plaintiff Blanchard’s good name and reputation has and will continue to be damaged and
Plaintiff will continue to suffer immediate and irreparable injury.

SIXTH CAUSE OF ACTION

Barrick’s Actions Constitute Malicious Prosecution and Abuse of Process

93. Plaintiffs adopt by reference and incorporate all previous allegations in all
preceding paragraphs as if fully set forth herein.

94. Causes of action for malicious prosecution and abuse of process arise out
violations of Louisiana law, including Louisiana Civil Code Article 2315.

95. Barrick has filed a Libel Notice in Canadian court and intends to
commence a civil action against Plaintiff Blanchard, as well as two of its employees, with
no other purpose or intent but to inflict harm on the Plaintiffs in order to intimidate them,
pervert the course of the litigation before this Court, and deprive them of their rights, and
has done so in the absence of probable cause for such proceedings and with malice
therein, resulting in injury to Blanchard.

96. Barrick, conspiring and acting in concert with others, has engaged in a
long-standing practice of threats, intimidation, and defamation of its critics employing
mail, wire, and telecommunications, and has employed litigation and the threat of
litigation in United States and foreign courts to silence its critics.

97. As a direct, foreseeable and proximate result of Barrick’s conduct,
Plaintiff Blanchard has been and will continue to be injured and suffer immediate and
irreparable injury.

PRAYER FOR RELIEF

98. WHEREFORE, Plaintiffs respectfully request that Defendants be cited to
answer and appear herein and that upon final hearing, the Court grant Plaintiffs the
following relief:
(a) An injunction terminating all Master Trading Agreements, spot deferred
contracts and all other contracts through which Defendants manipulate the market for
gold as alleged herein, and enjoining Barrick, J.P. Morgan and ABC Companies from
entering into such contracts in the future;
(b) For an award of damages compensating Blanchard for Barrick’s
dissemination of defamatory, slanderous or libelous communications;
( c) For an award of damages compensating Blanchard for Barrick’s threatened
and actual malicious prosecution and abuse of process;
(d) That Plaintiffs recover the costs of this suit, including their attorneys’ fees,
as provided by law; and
(e) That the Court grant any such other relief as the Court deems just and
proper.

Respectfully submitted,

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Gold -- Sharefin, 22:35:33 03/10/03 Mon

Kondratieff theory for gold in a deflationary "winter"

As a subscriber to Prechter's (elliotwave.com) Financial Forecast
Services, I decided to pose the question directly to them about their
forecast for "below $200/oz" gold. Specifically, I asked them why they
are so sure the late 90's low of $250/oz wasn't the bottom. Below are
both my question and their response.

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Gold -- Sharefin, 22:20:30 03/10/03 Mon

Renminbi can take gold to $500/oz

The 2003 Prospectors & Developers Conference now underway in this unusually frigid city got off to a cracking start with a presentation from Donald Coxe of Harris Investment Management in Chicago who predicts that China’s currency has a significant future role to play in determining the gold price.

Coxe’s message was heart-warming for miners and their investors - the industry outlook is the best it has been in decades, especially for gold.

~~~
Coxe’s predicted heavyweight alternative that will further underpin gold? China’s renminbi, which is presently excluded from the US dollar index.

“China is spending unbelievable amounts of money to suppress its own currency. We know how this story ends because we have the example of the yen.”

That example was an attempt by Japan to maintain its competitiveness by buying Treasuries and Deutschmarks to keep the yen cheap. Eventually the West grew tired of this game at its expense and threatened Japan with trade barriers if it did not float its currency.

China doesn’t have that option under World Trade Organization rules where competitive currency devaluations are treated as subsidies that demand penalties.

“At some point the renminbi will float and it is undervalued by some 40-50%. When you move that into the US dollar index it will be currency number three or four and that will be enough itself to get gold to $450 or $500 per ounce,” said a confident Coxe.

He predicts that gold will hold its value and disparages those who hold “mystical views” about gold being worth thousands of dollars an ounce.

“We are in the early stages of a major bull market in gold, meanwhile institutional investors still haven’t cottoned on to it. What we do not have are any of those signs of a market top. When gold ran up to $389 an ounce, there were small-scale speculators taking big positions on Comex; they set a record.”

“Gold stocks as a per cent of global indices are very near their all time lows so there is enormous upside room. For institutional investors, currency is a huge component of what they do. Gold stocks give you a form of portfolio insurance against the declining dollar. That is their fundamental driver.”

Coxe was contemptuous of any claim that the price of gold is manipulated as suggested by the Gold Anti-Trust Action Committee. “Gold is doing exactly what it should according to 68 years of history and one year of recent history. The people that are giving us this kind of story are bereft of a knowledge of history and overwhelmed by a sense of conspiracy.”

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Gold -- Sharefin, 22:13:08 03/10/03 Mon

Gold reserves face depletion in 10 years - Barrick

Barrick vice president for exploration, Alex Davidson, warned in a presentation at the PDAC here that the gold mining industry has invested so little in exploration that current reserves could be depleted in ten years.
The situation affects non-South African producers most acutely since they cannot rely on deep reserves being activated by higher gold prices.

”Given that most mining projects require 5-8 years from discovery to production, [the industry] is not currently funding exploration at a level to replace reserves,” cautioned Davidson. “We also need to attract more speculative capital back into the industry to fund junior exploration which has historically provided a pipeline of new projects.”
~~~
Davidson believes a gold price of $350 per ounce over at least five years is required to “put the economics in place to sustain exploration that will bring us the best discoveries - low cost, long life properties - that sustain the industry.”

“Some companies have doubled production through consolidation, which has doubled the ounces required to replace production, not to mention trying to grow reserves,” Davidson said.

The implication is that the industry faces a scramble to rebuild its reserve life profile, without which it will lose serious investment attention. Davidson foresees increasing investor focus on organic growth, especially as doubt grows about the value delivered through mergers and acquisitions.

Davidson said: “One thing is for certain, the current state of affairs in exploration spending is untenable for the health of our industry. Big companies need to spend more on exploration or at current production rates reserves will be depleted in ten years.”

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War -- Sharefin, 21:28:47 03/10/03 Mon

War and the Economy

The National Bureau of Economic Research dates the peak of the last business cycle at March 2001, and has yet to call a trough, which is to say it hasn't yet observed an end to the contraction or the beginnings of an economic recovery.



The number of months we have traveled from the end of the last peak to the current day is 24. The NBER has used its method for dating business cycle pronouncements on peaks and troughs since the 1850s. The average period of contraction runs 8 months. The current downturn is the longest on record since the Great Depression, and next month it will become the second longest since 1882.



This is another way of saying: folks, this is getting serious. Yet what is Washington talking about? Not the decline in employment, savings, the dollar, nor the increase in debt, deficits, government spending, and prices. No, Washington wants war with Iraq. It plans to spend at least $100 billion to bring it about, in a year in which the deficit will balloon to $400 billion plus and American incomes and payrolls are under serious strain.

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Fiat vs Gold -- Sharefin, 05:40:58 03/10/03 Mon

Buffett intrigue: Is he buying gold?

Just hours after Warren Buffett took his annual bash at stocks and derivatives, bullion investors Tuesday speculated the famed financier was buying gold.

"This could be the gold story of the decade," said James Turk, a veteran of the gold-trading world. Turk, owner of transaction service GoldMoney.com, stated in mid-February that he had heard Buffett, one of the world's richest people, was buying gold. Join the discussion.

Buffett, in prepared comments Tuesday ahead of his Berkshire Hathaway annual report to shareholders, made no mention of owning gold. In 1998, however, he told the world he and his partner, Charles Munger, had bought 4,000 tons of silver, a revelation resulting in a brief frenzy for that metal.

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Fiat -- Sharefin, 05:38:37 03/10/03 Mon

Market's an inferno, and then you ...

Inflation, the falling market and a Buffett bombshell

Investors, instead of curling up inside their highly mortgaged cocoons, are registering alarm at the incessant declines of their holdings. They appear to be heeding, albeit slowly, the warnings of solid researchers such as Barry B. Bannister at Legg Mason Wood Walker. Bannister, embarking on a series of reports on the outlook for inflation the next 12 years, says simply, "We do not see a sustained change in direction that consistently favors equities until around 2015."
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At the heart of sensible researchers such as Bannister is the belief that an accelerated pace of inflation, and America's $30-plus trillion of debt floating around the globe, will sink stocks and most bonds and other paper assets. Not the coming war in Iraq. Not terrorism, politics or sightings of hostile globs from outer space.

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Fiat -- Sharefin, 22:44:47 03/09/03 Sun

Investor Communications Urges Public Companies to Make Comment to SEC Regarding Proposed Rule Change Issued by the DTC to Prevent Companies From Exiting DTC's Electronic Clearing and Book Entry System

The growing group of OTC Bulletin Board companies that began exiting the DTC's electronic clearing and book entry system in 2002 in favor of Certificate Only holdings include GeneMax Corp, Ten Stix Inc, Midas Trade, Hadro Resources, and Vega Atlantic Corporation, among others. Other companies, including Intergold Corporation have applied for or expressed their intent to withdraw from the DTC's electronic clearing and book entry system. These companies are opting out of the DTC system to combat the Naked Short Selling abuses made possible by the electronic transfer system, which is flawed and allows US $ billions in trading abuses to occur. In the absence of regulations preventing stock manipulation through naked short selling, companies must forge their own solutions that include exiting the DTC's electronic clearing and book entry system.
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Naked Short Selling: Under a naked short sale of stock, short positions are not declared, shares are not borrowed to cover the short sale, and shares are sold without delivering the stock to the purchaser. Naked short selling results in the undermining of real shareholder ownership by naked short sales of stock and resulting failed deliveries of real certificates that artificially inflate share ownership and devalue the trading prices of shares in the marketplace. Unscrupulous brokers and market makers may conspire to manipulate and devalue the price of securities in this way. ICI has started the National Association Against Naked Short Selling. For information regarding naked short selling, and further updates on the activities of the organization, please register to receive news releases at www.nakedshortselling.com

Why Exit the DTC?: The basis for moving to a certificate only share transfer system has nothing to do with short selling but instead with "naked short selling" where shares sold are never borrowed, never delivered by the seller, but where the seller collects money for the stock they never delivered in three days. The 3-day settlement system run by the National Securities Clearing Corporation ("NSCC") does not ensure that shares that are sold in a transaction are ever delivered. This takes place routinely in the U.S. Securities industry.

Advantages of Certificated Share Transfers to Curb Naked Short Selling: In a "certificated" or "custody only" issue, the purchasing broker demands the certificate representing the customer purchase on settlement day. When the short seller refuses, the buy-in process commences. This process is more difficult and expensive for the naked short seller, since one short position is typically owed to many different firms. The exit from the electronic clearing and book entry system of DTC alone will not prevent naked short selling, but is one of many elements required to help combat naked short selling.

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Periodic Ponzi Update PPU -- $hifty, 20:56:15 03/09/03 Sun

Ponzi Chart

Periodic Ponzi Update PPU

Nasdaq 1,305.29 + Dow 7,740.03 = 9,045.32 divide by 2 = 4,522.66 Ponzi

Down 91.64 from last week.

Thanks for the link RossL !

One more month and the Ponzi Chart is 3 years old!

Go GATA

Go GOLD

$hifty

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Gold -- Sharefin, 20:34:45 03/09/03 Sun

Is gold tactic illegal or astute?

In a David and Goliath antitrust battle that is drawing intense interest among gold investors, a retail dealer is going toe-to-toe in an increasingly bitter legal fight with one of Wall Street's most prestigious investment banks and a Canadian mining giant.

The allegation: The bank and the mining company have colluded to drive down the price of gold to the detriment of individual investors.

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Kaplan says Barrick has done nothing worse than fulfill its responsibility to shareholders by effectively managing risk.

"What Blanchard is accusing is that Barrick was smart, was savvy, and made billions of dollars from it," Kaplan says. "Well gee, I never knew that being smart, that being savvy, was illegal."

Ryan agrees that Barrick has been smart.

"But just because something seems intelligent or smart or savvy from the outside doesn't make it the right thing to do," he says.

"Five years ago everyone was saying the same thing about Enron."

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Gold -- Sharefin, 20:29:20 03/09/03 Sun

Amid Gloom, Gold Glitters

Grab your bullion. Gold is about to bounce back, according to top advisers. Fresh off hitting multiyear highs a month ago, gold is now down about 10%, to $350 per ounce. It seems that foreigners--who continue to soak up our music and movies--are increasingly avoiding our currency. The current geopolitical instability isn't helping matters, and most of the close watchers of the shiny yellow metal say it all translates into a bright future for gold.
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Tom O'Brien, editor of The Gold Report, points out that the recent pullback in gold and gold-stock prices has been on much lighter volume than the huge run that took the metal to a $385-per-ounce close last month. "Markets don't top on high volume," says O'Brien, who likens the bull market under way now in gold to that in technology stocks in the late 1990s. "This is just like Microsoft, Dell or Cisco was in 1999--up on huge volume and then a consolidation on lighter volume, only to come roaring back with a vengeance."
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One of the most intellectually entertaining and passionate editors in weekly publication is Richard Daughty of The Mogambu Guru. Daughty calls himself the "angriest man in economics" and devotes a large portion of his weekly letter to verbally mutilating the Fed for rampant inflation of the money supply. He sees this as more fuel for the gold fire. "There is no way, as in no freaking way in hell, that gold cannot rise in price eventually, and with enough rise to completely offset the roaring inflation in the money supply that we have been seeing for years now," says Daughty. "If you are not buying gold at these prices, then you are not competent to manage money or make economic commentary."

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Gold -- Sharefin, 20:20:42 03/09/03 Sun

Gold to Average 8% Higher, Drop in 2004, Bureau Says

Gold may average 8 percent higher this year because of concern about a war with Iraq, before falling as an improving global economy boosts demands for other investments, Australia's government commodity forecaster said.

``The outbreak of the conflict is likely to result in an immediate upward spike in the gold price - possibly to levels above $400 an ounce for a short period of time,'' the government forecaster said. Still, ``a war with Iraq will be short lived and the war premium component of the gold price is likely to quickly erode.''

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Global demand for gold from jewelers is expected to increase by 296 metric tons to 3,600 tons in 2003, and to rise by a further 301 tons next year to 3,901 tons, the bureau said.

``This increase in fabrication consumption is expected to come primarily from growth in demand in two key consuming countries: India and China,'' the government forecaster said.

Demand from jewelers is expected to exceed combined mine and scrap supply by 370 tons in 2003 and 696 tons in 2004, the bureau said.

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Gold -- Sharefin, 20:18:20 03/09/03 Sun

Newmont's hedge book bites back

After months of wondering what nasty surprises might be lurking in the hedge books of the world's major gold miners, the market is now getting a look at the industry's first bonafide hedging disaster.

The situation now unfolding at Newmont Mining Corp.'s Yandal project in Australia is enough to send a chill through any investor who's ever wondered what might happen if a heavily hedged producer lost control of its derivatives exposure. In the case of Yandal, Newmont might be forced to walk away from an otherwise profitable mine that produces about 650,000 ounces of gold each year.

Standard & Poor's cut its credit rating on Newmont's Yandal operations by three notches to junk status yesterday, after reviewing the project's hedging exposure, released by Newmont last week. The project's credit rating now sits three levels below investment grade, and its outlook has been lowered to 'negative' from 'stable.'
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Newmont has said it plans to slash its hedge book, and cutting Yandal loose may be just the way to do it. Abandoning the three Australian mines that make up Yandal would cut the size of Newmont's hedge book by more than half, Mr. Cooper said.

For now, the management at Yandal can only hope the price of gold crashes, or the Australian dollar surges against the U.S. greenback. Failing that, they can hope that their counterparties agree to restructure their hedging contracts rather than force the company into bankruptcy. But at the moment, none of that seems particularly likely.

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G