Monday, August 15, 2011
The Long Road to Freegold
On this, the 40th anniversary of the Nixon Shock, you will probably see the video below of Nixon closing the gold window at some of your favorite sites. Most will call it a crime for the purpose of promoting their expectation of justice defined as turning back the clock to the old gold standard. But it may be more instructive to think about this momentous occasion, 40 years ago today, as one of the many necessary—yet painful—steps on the long road to Freegold. So I thought I'd present this same video in a more appropriate context.
Please take the time to understand FOFOA's dilemma if you'd like to grasp the importance and significance of the long-line Trail exhibited below:
FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma.
The Last Gasp of the Failed Scheme of Government Price-Controlled Bimetallism – 1896
The Last Gasp of the subsequent Gold Standard – 1933
FDR explains the Bank Holiday – 1933
FDR explains the new US gold scheme – 1933
Birth of the new Bretton Woods Gold Price-Fixing Scheme – 1944
Charles de Gaulle foretells a Bretton Woods gold price-fixing scheme crisis – 1965
Nixon closes the US Gold Window – August 15, 1971
The Euro-Freegold project launches after decades of planning – 1999-2002
Tuesday, January 1, 2002 - Launch of euro notes and coins
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600
Monday, August 8, 2011 - GOLD ABOVE $1700
Some of you will remember Lance Lewis' "GLD Puke Indicator" and its nearly flawless record at marking lows in gold. Please review my January post Who is Draining GLD? for a more complete explanation. When I wrote that post I emailed Lance for permission to use part of his newsletter.
Anyway, I just received the following email from Lance:
FYI... GLD Puke Indicator triggered another buy signal last Thursday ...
Last Thursday, the GLD gold ETF fell over 2 percent on the day, but the more important piece of information was the fact that its bullion holdings fell a whopping 24 tonnes (1.8 percent) to 1,273 tonnes.
That 2 percent 1-day decline in bullion holdings triggers our “GLD Puke Indicator” once again (see the chart below), in which one-day declines of over 1 percent in the GLD’s bullion holdings (or clusters of such declines as in 2008) tend to occur at or within days of important lows in the price of gold.
You can read my past discussions of this indicator to see “why” I believe it works the way it does, but the point is that it works. The last time we saw this indicator flash a bottom signal for gold was on January 25th. As you can see below in the chart of the “GLD Puke Indicator”, that signal occurred within 2 trading days of gold’s 2011 bottom on January 27th. Coincidence?
In short, there’s a high degree of probability that the pullback that began last Thursday in gold is going to be a short-lived one and has likely already seen its low with Friday’s low print of $1725.80 in the December contract.
Thanks to one of my readers and supporters, Warren James who posts at Screwtape Files, and his GLD bar-tracking investigation, we now know which bullion banks have custody of the 24 tonnes puked up by GLD. Here's the fax Warren stumbled upon accidentally:
Playing along with the title of my January post, Who is Draining GLD?, I'll add one coincidental observation:
24 tonnes of gold were redeemed from GLD (in London) exactly seven business days after South Korea announced it had purchased 25 tonnes (in London). I'm not suggesting a direct connection, merely making a "flow" observation.