Note the amount of gold ounces that are currently sold short is said to be 13.5 million ounces. If (IMHO, When) gold follows oil, the shorts will have to cover or loose their mines.

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Editor's Note: HSL is written by the world's highest-paid investment consultant, Chevalier Harry Schultz (Guinness Book of Records- International Editions: 1981-1997). The HSL was the leading gold advocate in the early 1970s, when it called the Great Gold Bull market. Interestingly, HSL is again bullish on gold. The International Harry Schultz Letter

Gold GERMANY DECLARES WAR on the gold bullion price manipulators. The Germans were not amused when Bank of England did their sneaky surprise gold sale last year, which pulled the rug out from under the price. Germany was behind the 15-nation accord to limit gold sales & curtail gold lending. After that the price shot up $80, whereupon the manipulators marshaled their forces (including NY Fed) to add supply to orchestrate the price down again. Germany was unamused again, so they announced last wk the Bundesbank will mint 1 million gold coins to commemorate the 50th anniversary of the D-Mark.

That's a shot across the bow of the Bank of England fobs, UK Labour party & NY bullion dealers. Is it also a sign Germany is having 2nd thoughts about fat-head Kohl's euro currency, which sank since birth? Many Germans want the DM to remain. The new coin will rekindle gold demand. (Kohl is being investigated for fraud; but his greater crimes were his euro promotion & the 1-for-1 east/west DM-rate upon reunification).

GATA (Gold Anti-Trust Action Comm) has an ally in US Senator Joe Lieberman (CT) who has put 11 hard questions to Greenspan & US Treasury Sec. Summers. They ask about US govt intervention in gold mkts. An earlier set of questions from GATA got "Who me?" replies. This time the questions are framed to avoid wiggle room. GATA has given hope to gold believers that the monopolists won't win. GATA is a volunteer force, being supported by contributions by U & me & gradually by gold miners who are realizing they shouldn't be selling production forward (a la Barrick) & should aid the battle to get an open, free-mkt for gold--something certain govts don't want, & which hasn't existed in 20 yrs.

Monitor the gold websites of Gold-Eagle.com & LeMetropoleCafi.com. Sadly, U will find little honest gold news in the insider-controlled mass media. Only newsletters & the net are free from mega-bank & govt controllers.

Famed author Arthur Hailey joined the war against gold price-fixers & stupid gold mine sellers. He sold his Barrick shares & triggered a surge of selling by funds & the public, who don't invest in a gold mine to see how clever they are in derivative manipulation. They want a pure gold play, & Barrick ain't it! Barrick has underperformed the field ever since GATA & Hailey & HSL exposed their gold price-killing tactics. Anyone still holding Barrick is probably a sadist.

Barrick's VP Borg had the effrontery to attack gold investors who don't like hedging, as "irrational gold bugs who see conspiracies." Can U imagine, a gold mine exec disparaging its natural shareholders? Barrick richly deserves blackballing. It's more a derivatives trader than a gold stock.

Disbelieve the garbage churned out by Gold Fields Mineral Svc, a front firm for anti-gold forces. Proof: they refuse to debate Frank Venerosa, to get the real facts out about the shortage of gold, ie, net supply-demand deficit. Huge burst of gold-bar buying in Beijing dept store limited time sale.

Suspicion is voiced again that US Fort Knox gold supply is not up to its quantity & quality claims. Inventory being demanded. Agnico Eagle chart is a buy. Their Laronde deposit continues to get bigger. Physical gold demand (not paper gold; options/futures) is at record levels. Goldman Sachs & klan keep selling it to cap the price. Free mkt? Bah, humbug. Bill Murphy says (in LeMetropoleCafe.com: "Oil has doubled, copper went from 65c to 86c, meat rose big, base metals like aluminum soared, etc. But gold in same period is unchanged. Why? Price-rigging! If athletes were fixing a game like the NY Fed & others are doing with the gold price, it would be a big scandal. It soon will be. Pandora's box has been opened. We're exposing all the players in turn." And he does! A year ago GATA was a flea attacking an elephant. Now the flea has grown into a tiger & the elephant has shrunken to a water buffalo; still a formidable foe, but I'd not bet against the tiger.

Next HSL: the fundamental right price for gold.

Uncle's Notes We're not doing our annual predictions this year as mkts have become so volatile & time-compressed. What used to take a year, now is often seen in a month. We might resume them next yr if the planet returns to a more measured pace. But for the record, here's how our 1999 forecasts turned out in major stk mkts: DJIA minimum forecast: 11,364. It rose to 11,365 on 8/24 intraday! One point above our target! Then fell 1,390 pts in 8.5wks to bottom at 9976 on 10/18. Then rallied to 11,497. That's better than anyone in the investment field did! Our S&P prediction was even more remarkable. Jan 99 tgt forecast: 1464. It finished 1999 at 1469, 5 pts over our target. No one equaled our prediction performance. U can be proud to be an Hslm. PS: we did well in other mkts too: UK: forecast 6900. Made 6930. No one can touch us on this one either. German forecast: "6000 in 1st half." Made 5686. Said "6517 by end year". Made 6958. Not perfect but beat the crowd. (See US mkts pg 10 for current outlook)

A Swiss bank friend says most of his EU clients own US tech stks. Now that everyone on the planet is convinced that: 1. Hi-tech is the future & thus 2. tech stocks must be the best way to benefit, it may prove wrong to conclude #2 follows on from #1. For a number of hard-think, real-world reasons I'll talk about in next HSL, it's likely Nasdaq (not DJIA) will lead us down, sharply, as their equivalents did in past identical situations, for the same reasons, which few seem aware of today. Charts will tell us the timing, so we can continue to swim in tech-stk-waters, but only if we have life preserver stops around our fiscal waist. Watch our website weekly for any sudden chart messages.

FLASH: Y2K striking oil patch. Venezuela halts gasoline exports from 3 refineries. Another to be restarted after a shutdown. 1 of biggest catalyst-crackers in western hemisphere shut (system failure) at Amuay refinery; hope to restart in 30 days. It supplies US east coast. The 1972 oil crisis was from 4% reduction over 4 wks. Motiva's Norco,LA oil refinery shutdown; power outage. Nigeria oil plant down. Coastal Eagle Point, NJ refinery down; generator power loss. Coastal Corpus Christi refinery FCC problem. Equilon Wood River, IL refinery down. PDVSA/Hess divert oil cargo back to Europe, was US-bound. BP Amoco Yorktown down, mechanical failure. Big media silence, like the 3 monkeys: see/hear/say nothing. U know why!

FLASH: Barrick Gold is rethinking its hedging policy; will cover 500,000 oz's this qtr, lowering forwards to 13.5mil oz! They're starting to get the message. FLASH: Mitsui reported a gold producer buyback of shorts out of London on 1/18. We're winning gold battles at last. J As Churchill said: "This is not the end or the beginning of the end, but it is the end of the beginning."

SOS members: stay put with cash til Mar 1. Then, if all is well, gradually reduce to 20%. Council of Europe may expel Russia for its human rights abuses in Grozny. Hope they have guts to do that! Reds doing what Milosevic did & we bombed him. By same logic we should bomb Moscow. Mr. Kramer: Many of my end-99 forecasts have merely been delayed. Eg, re oil, gold, stocks. Things don't usually happen in neatly packaged 12-mo boxes. Typically the NYT labeled Seattle protests as "Woodstock for opponents of Free Trade." Baloney! WTO doesn't want free trade; it wants a Free Ride for multi-national corps. Tennis champ Agassi bravely says all tennis players are overpaid. True, but so are all ball hitters, ball catchers, putters, kickers, throwers, bouncers, pitchers. Bread & circuses for the masses. J

Harry Schultz http://www.HSLetter.com hsl.mentor@skynet.be Tel +32 (for Belgium) 16 533 684 -- Fax +32 16 535 777 Postal address: HSL, PO Box 622, CH-1001 Lausanne, Switzerland

26 January 2000