gata's take on the fall in pog

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    10:58p ET Thursday, June 26, 2003

    Dear Friend of GATA and Gold:

    Sprott Asset Management's new president, John Embry,
    turned up again on ROB-TV in Canada on Tuesday
    night, and GATA's Mark Webber not only hung on
    every word but once again produced a transcript, which
    is appended. It is encouraging on account of Embry's
    telling a nationwide audience that the bashing of the
    gold price this week was obviously an attempt to
    protect the U.S. dollar on the eve of the Federal
    Reserve's cutting dollar interest rates down to almost

    Incidentally, it looks like Sprott will be helping to
    manage a new gold bullion fund in Canada. You can
    read about it at the link below, but the legalese
    attached to it suggests that anyone reading it
    outside Canada may be visited by the Royal Canadian
    Mounted Police. Well, better than a visit from
    Attorney General Ashcroft....

    CHRIS POWELL, Secretary/Treasurer
    Gold Anti-Trust Action Committee Inc.

    * * *

    with Howard Green
    Tuesday, June 24, 2003

    GREEN: Tomorrow is the Fed day many have been waiting
    for to see if Greenspan & Co. will in fact cut rates perhaps
    as much as 50 basis points. If that happens, no doubt there
    will be an impact on the U.S. dollar and possibly on gold.
    Joining us this evening on "Nightcap": gold expert John
    Embry of Sprott Asset Management. Good to have you
    back with us, John.

    EMBRY: Thanks, Howard. It's always nice to be here.

    GREEN: So tomorrow, if he does drop rates 50 basis points,
    what do you see for the U.S. dollar and then gold?

    EMBRY: I suspect he might, given the beating gold took
    today. They generally soften gold up when they're going to
    do something that might be gold-friendly. And it was
    amazing. It came in there very quietly into New York this
    morning. They just jumped it. And they took it down just
    about 6 or 7 bucks immediately. And at that point I thought
    to myself: Hmmm. ... Maybe it IS going to be 50 basis
    points. I think that sends the wrong message because he's
    trying to promote the idea that the U.S. economy is getting
    better, and the second half is going to be better. If that's
    in fact the case, 50 basis points looks like overkill. So
    we'll wait and see. I'm waiting with baited breath.

    GREEN: Often he surprises people. And if a lot of people are
    saying it's going to be 50, he might come in at 25 just to save
    himself an arrow there.

    EMBRY: That's an interesting observation because there was
    a lot of controversy over a couple of articles in the newspaper
    last week. The Washington Post ran an article saying it was
    going to be 50 basis points. The next day one of the New
    York papers -- The Wall Street Journal, I guess -- had a
    totally different slant on it. It was almost like he's
    managing the news.

    GREEN: Trying to confuse people maybe?

    EMBRY: Absolutely, absolutely.

    GREEN: Yeah, and so what would that mean for gold if it
    were say 25 basis points tomorrow?

    EMBRY: I don't think it makes much difference. We're in the
    accumulation phase for gold. These short-term machinations
    dancing around alleged news events are not that significant.
    As I said before, this an actively managed commodity. I think
    the reason it was soft today is they're getting ready to have
    a bigger rate-cut than anticipated. We'll wait and see.

    GREEN: What's going to be the catalyst for these gold
    stocks to start to move again?

    EMBRY: The gold stocks will move on a better gold price.
    It was interesting. The gold stocks were acting quite a bit
    better up until about three days ago. And I thought: Maybe
    we've got something going here. But then they beat gold
    up again and pushed it back into the box. But the early
    stages of bull markets are difficult. Nobody believes it.
    And you have these violent corrections and everybody loses
    confidence. And then we start building the base again. It
    gets ready to creep up. I'm not the least bit concerned. I
    think the fundamentals behind gold, when you look at
    what's going on in the United States, are as powerful as
    they have been in 30 years.

    GREEN: But there seems to be a lot of interest in a lot
    of other types of stocks these days.

    EMBRY: There is indeed. I mean what you've got is the
    entire U.S. system floating on a absolute sea of liquidity.
    Mr. Greenspan has been way over the top in the liquidity
    he's providing the system. My gut reaction is: Is there
    something we don't see that's bothering him, like Long
    Term Capital Management? When he's talking about
    deflation I look at Freddie Mac and this issue with
    derivatives. Long Term Capital Management came to the
    surface only five years ago. There had been a lot of work
    done before it was announced. I think the Freddie Mac
    thing could be much more serious than people think.
    This is a big, big part of the U.S. financial structure now.
    Very strange behavior when they fired the three executives.

    GREEN: A lot of people talk about gold being useful in
    inflationary times. What about in deflationary times?

    EMBRY: History would say that anything that basically
    puts financial assets at risk, and given the amount of
    debt in the system, if you had deflation -- and heaven help
    it if we ever do -- that would be the last thing I would ever
    want to see. You would have so much financial chaos people
    would run, I think, to an eternal store of value, which is
    gold. Gold does poorly when you have disinflation and
    financial assets do well. Financial assets will not do well
    in deflation.

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