Snapshot Day

Yesterday was Snapshot Day at the ECB. It's the day that the ECB takes a snapshot of the current price of the four "foreign currencies" that populate the Eurosystem's reserves. They take this snapshot at the end of each quarter for the purpose of the quarterly revaluation of their reserve assets. Marked to market (or MTM) reserves was one of the founding principles of the euro.

The four snapshots are:

Gold
USD (US dollar)
JPY (Japanese yen)
SDR (Special drawing rights)

Each snapshot is recorded as the unit's price relative to the euro because the Eurosystem's reserves are all reported as denominated in euro. So even dollar reserves are reported as a euro-denominated value. And just for the record, gold is both the first line on their balance sheet and also the top snapshot reported. I don't know if this is intended to imply the order of importance… well, yes I do. ;D

If you'd like to read more about this, I recommend any of the following posts as a good place to start:

RPG Update #4
Euro Gold
Reference Point: Gold - Update #1

If there's any doubt as to the importance of gold on the Eurosystem's balance sheet, last quarter gold constituted more than 63% of the Eurosystem's reserves. That means that dollars, yen and SDRs combined made up less than 37% of the reserves.

We won't know yesterday's precise snapshot until next Wednesday when they release their quarterly ConFinStat (Consolidated financial statement of the Eurosystem). But we know it should be somewhere between €914.39 and €948.33. At some point during the day, someone at the ECB noted the current price of gold in euro and wrote it on a form. They don't use the London fix price, and the time at which they take it seems to vary. In April, they took the snapshot very close to the AM fix. But many other times I've noticed it's closer to the PM fix.

In any case, yesterday's AM fix was €921.889 and the PM fix was €914.391. Shortly after the PM fix yesterday, the euro price of gold rallied up, ending the week at €948.33. It would be a bit unusual for them to take a snapshot long after the PM fix, so I will guess it will be around €920.

I have made a simple chart of all of the quarterly snapshots since year end 2001, when the bull-run began and the ECB launched its new notes and coins. For the purpose of this chart, I'm using yesterday's high of €948.33 rather than what I think it will actually be, just so you can see how shocking even the least-shocking possible snapshot will be.



As you can see from the graph, the last time they had a gold snapshot lower than this was April 2, 2010, more than three years ago. Just for fun, let's compare the other snapshots from April 2010 with April 2013 to see if the USD, JPY and SDR fluctuate as wildly as gold.

2010:

Gold: EUR 823.132 per fine oz.

USD: 1.3479 per EUR

JPY: 125.93 per EUR

Special drawing rights: EUR 1.1265 per SDR

2013:

Gold: EUR 1,251.464 per fine oz.

USD: 1.2805 per EUR

JPY: 120.87 per EUR

Special drawing rights: EUR 1.1698 per SDR

For the US dollar, that's a 5% change. For the yen it's 4%. And for the SDR it's less than 4%. Yet gold, because traders think of it as just another commodity rather than a monetary reserve, changed price by 52% over the same three-year time frame! And now it's down 25% in just one quarter.

There's a point here, but I'm more inclined to let you figure it out for yourselves than to spell it out for you. Somehow, gold ended up in two different worlds at the same time. One which fluctuates wildly in concert with all other commodities, and another one of great monetary significance and relative stability most of the time. Just think about which of these worlds gold actually belongs in, and how it can possibly escape the other one, while you watch this short video presentation:

That video is from my post Fallacies – 1. Paper Gold is just like Paper Anything in case you would like to explore that question a little bit further. ;D

_______________

On December 8, 2010, at the bottom of my post Freegold in the Proper Perspective, just for fun I put up a poll for my readers to vote on two contenders for a Freegold theme song. The origin of that poll was an email from Aristotle who, if you don't know, was one of the main contributors while Another and FOA were posting, so he's been following this for as long as anyone.

Anyway, he had this song 'Firework' by Katy Perry come across his screen and he thought it made a great Freegold theme song. He emailed me on Dec. 2, and at that time almost no one had yet heard the song. It was just starting to get airplay and it had just been featured in Victoria's Secret video, which is how it happened to come across Ari's screen. ;D

He thought the imagery in the Victoria's Secret video was particularly "golden", but more importantly, he thought the lyrics were great for those who understand what Freegold means on all levels. Here, judge for yourself:



The reason I bring this up is because he followed that Katy Perry email up with another one that also made reference to the song, as well as to his favorite series of movies. Here's part of that second email:

For the past half-decade, many international policy stirrings gave every indication to me that 2010 was to be the targeted year for assertively rolling forth the freegold paradigm. But as I've said previously, I feel that the ongoing financial crisis that began with the subprime fiasco has caused instability of such magnitude that the central bankers have been forced to delay briefly and "play it safe" -- one does not dare rock the boat (if there remains any choice in deciding the matter) when the financial waters have become so turbulent and choppy. As for the new timeframe, I'd say that the reported EU plan "to make private bond holders shoulder some of the pain from any sovereign debt restructuring after mid-2013" is as good an indication of a benchmark as any I've seen. Plus, that timing nicely accommodates my additional view -- embracing a culturally significant standpoint -- that the December 2013 conclusion to The Hobbit will forever cement the desire for gold into the minds of all western moviegoers, resulting in a perfect storm of the golden variety. ;-)

On the point of the midyear "benchmark" mentioned above, it's almost spookily funny that the song lyrics mention "You just gotta ignite the light and let it shine; Just own the night like the Fourth of July". Indeed -- 2013. (Or sooner, if *necessity* precludes all freedom of choice in the matter!)

--Ari

Now obviously the specific timing of July 4, 2013 and the Hobbit reference were made in jest, but as I mentioned in my New Year's Day post, Ari has been closely following everything written by the central bankers in particular for more than a decade. And he's also one of the smartest people I've met in more than a decade, so I don't take anything he says lightly.

With that in mind, as the dawn of 2013 was approaching, I decided it would be fun to put the only timing prediction I'd ever seen him make to the test. I'm sure he was less enthused about this than I was, but I thought it would be fun! I suppose it's not really fair to call it a timing prediction, because it wasn't, and it was also made in private by email. So it was more like a working hypothesis that he shared with me way back in 2010. And this is actually a much better way to view it because, not only is it more fair to Ari, but also because I had an observable phenomenon that I could use to test the hypothesis once every three months. Snapshot Day!

About five months before the Katy Perry email, Ari sent another email that also inspired a post. That one was the very simple observation that the price action in gold behaved strangely around Snapshot day on 7/2/10. The implication I took from his email was that, perhaps, there might be some "official support" at play in the gold market.

Then, again, on 12/30/11, I took note of some more strange behavior around Snapshot Day. So in this post on 12/26/12, I proposed that we watch the upcoming 2013 year-end Snapshot Day for any sign of official support. The thing was, the price of gold in euro was already languishing at €1,255.94, down 9% or €121.48 from the October snapshot. So it was a prime opportunity to watch for any mysterious levitation surrounding Snapshot Day that might imply "official support" was still underway, even though 2013 had finally arrived.

In anticipation of no support, I went ahead and dubbed 2013 "Year of the Window" on New Year's Day, meaning "window of opportunity for Freegold transition." Snapshot Day was on January 4th, and while it did come in a little bit higher at €1,261, it ultimately proved inconclusive based on my criteria. So we watched… for any sign… which way would it go? Was the window open or not? Decisively up—window not open. Decisively down—window may be open. The rest, as they say, is history. ;D

So here's that shocking chart once again, this time using €920 which is my guess. Decisive? Window open? Window closed? You decide:



If you'd like to read more of my ramblings about the Year of the Window, I recommend these posts in this order:

1. Happy New Year!
2. The Two-Legged Dog
3. Legs
4. Checkmate

Happy Independence Day, everyone!

Sincerely,
FOFOA

Ohh nooo!!! Gold so low!

Another day, in another time, gold had plunged to a 20-year low, plumbing the depths of $250 an ounce at the same time as the Dow was hitting a new all-time high of 11,300, even as astute followers, just like some that I have today, were then following Another and FOA. Some threw in the towel in disgust, some turned on the messenger, and everywhere you could cut the tension in the air with a knife.

I was following the thread of a particular (unrelated) discussion in the old USAGOLD forum archives (I do that occasionally) and I came across a few comments that reminded me of some of the recent comments here. So I picked out a few of them that I thought you might find interesting.

I want to note a couple of things. The first is that I don't think we are seeing quite this level of desperation yet. I think another $100 lower and we might start seeing more of this kind of towel throwing. Also, note that these few days below marked the last time that physical gold would ever be that cheap. So the very time at which some who had been following A/FOA in real time were throwing in the towel was perhaps the best buying opportunity in all of history. If you understand why I, personally, welcome the recent decline, then that's something to keep in mind if the falling price of gold ever starts playing tricks on your mind. If you don't understand, then please feel free to ask in the comments and I'm sure that someone will direct you to some of the posts that explain my view.

All of these comments came from this page, and they are just a few selections that I picked out especially for you today. :D

Skip
Overcoming discouragement
#11907
8/23/99; 22:59:27

I've avoided posting for some time because of discouragement. As of right now, I am regretting that I ever invested in gold or gold stocks. Something that is worse than losing hope and cutting your losses is losing hope and capital and then to have someone lift your hopes...only to have those hopes trashed, again and again and again and again and again and...endlessly trashed.

If I think of all the growth I could have had in the stock market rather than the losses in gold and gold stocks, it is almost sickening and totally depressing. Somehow I know that I'm not alone in feeling EXTREMELY depressed at this latest attack against the POG by the rich big boys. Somehow it seems very unholy to keep getting financially bled to death simply for making the right decisions at what SHOULD be the right time. Maybe I'm over-reacting, but I sure hope that GATA can help bring the POG back to at least its 20-year average. This current price level of gold and gold stocks is totally absurd and complete discouraging.

Long have many of us ardent goldbugs waited and waited and waited, witnessing almost every reason possible to trigger an upturn in the price of gold...only to see apparent collusion drive it down further.

I'm in too deep to sell, and too scared to buy anymore. Somehow I can't help but wonder whether I'll someday die in my old age with tens of thousands of worthless gold stocks and many ounces of worthless gold coins. Am I being somewhat paranoid? ...actually, I'm just plain TIRED of losing!!!

Can someone out there provide some GENIUNE hope for us disillusioned gold bugs? I'm so tired of the misinformation that prevails on both the internet and the news media that it's impossible to know WHO OR WHAT to believe anymore. Some of us would love to start overcoming discouragement, and I'm one of them.

--Skip

The Stranger
Skip
#11909
8/23/99; 23:09:10

Boy, are you going to get a whole wave of responses on this one. I, for one, would be happy to address your predicament in the morning if you like, but, right now, I have to go to bed. For starters, however, let me suggest this: tell us more about what you have been through. Just how bad has it been? What do you own, and how long have you owned it? Don't worry about giving yourself away. Nobody here knows who you are. When I get up tomorrow, I hope to hear more about what you have been through. You will get lots of help here, but first, you need to talk.

Aristotle
Response to FOA
#11917
8/24/99; 4:22:15

[…]

Some people prefer to disregard the fact that the Gold market has spent 20 years coming to this point in time and price--a price that could NEVER exist now except under the special circumstances that have been put forward in many carefully considered posts. Some of these same people might suffer a bruised ego because their own careful and astute choice of Gold as an investment has yet to pay off huge in a timely fashion. Or else they might feel that Gold should be performing for them with obvious gains each and every day. Don't these people ever go home from work and sleep, or must they always be on the job and getting paid? My point is that "productivity" need not be an around-the-clock affair. As ANOTHER has said, "Gold will be repriced once in life, and that will be much more than enough." The bottom line is that you will either HAVE Gold when events turn, or you won't. It's that simple. As Beesting recently reminded us (or was it Turbohawg or ET?), this isn't just a showdown between the dollar and Gold. There's a whole world of currencies that have been suffering at the hands of their national dollar-debts.

[…]

Gold. Get you some. ---Aristotle

PS. for Skip: I don't know if this will help you out. Maybe it'll make you smile if nothing else. I had a chat with a friend the other day who was second guessing his Gold bullion investments after watching the price fall while the DOW powered upward in half frustration. He asked "What if I die with a drawer full of coins before the price of Gold goes higher?" (He's under 50 years) I laughed and said, "Then, congratulations!" I suggested to him that anyone who checks out with Gold coins remaining in his drawers (at any price) obviously had adequate means with which to meet his life's needs. Only a deathbed ego would consider any distinction between the remaining Gold weight and the Gold price during one's last breath. He laughed loud and hard and said that was for sure.

Aristotle
Skip, another thought for some additional perspective
#11932
8/24/99; 8:43:41

You said, "If I think of all the growth I could have had in the stock market rather than the losses in gold and gold stocks, it is almost sickening and totally depressing."

I don't believe a particularly infamous trader who was actively IN the markets had a single Gold investment. His name was Mark Barton, he lost half a million, and killed a dozen people. Just because you see the DOW index climb is no guarantee that your particular choice of stocks will be gaining too (unless you bought into an index fund.) I can't even begin to recall the vast number of times that I've heard the financial reporters announce decliners outnumbering advancing issues despite a higher DOW on the day.

Further, try to recall your original rationale for choosing your current suite of Judy's. (As in "Punch and Judy" shows...taking a beating. A term-use I coined to lighten my own dismay over a mistaken purchase of a mining stock years ago that went south and now vies with postage stamps in value.) Chances are that whatever compelled you to make those decisions would constantly act to sway you to do so again, and are probably more compelling now than they were then. If you couldn't resist Gold or Gold stock purchases before, could you resist them now? Hopefully, as time has passed, you've come to see a distinction between owning a world class asset (Gold) versus stock in companies that try to earn a paper profit by mining for this world class asset. Don't get me wrong...I love mines (I have a professional attachment to them), but I'll never again make the mistake of investing in a paper generator when there is real money (Gold) to be claimed. As a productive person, I invest in myself and make (earn) my paper directly. Then I cash it in for Gold, month after month. It's a One Way Street for an enjoyable life. I never did enjoy fretting over whether IBM or AT&T would be the better performer. I AM the performer, and all that I ask of my money is that it really be money--payment-in-full.

Unlike some people that are fully invested in stocks, with Gold you actually have real savings. You are a sovereign individual, immune to the fiscal mismanagement of your nation's leaders. Also, think of the sector of the population that lives paycheck to paycheck, unable to dabble in the stock market, and unable to save either paper or Gold. Is their life for naught because they aren't "in" the stock market? Wouldn't they be thrilled to have an all-Gold savings? Travel to some other countries and your perspective will change in a hurry. Adopt the larger view, my friend.

Gold. Don't work for anything less. ---Aristotle

FOA
Reply
#11935
8/24/99; 8:57:04

[…]

From my standpoint, most of the gold paper market will revert to forced cash settlement at the last trade! That's for long investors only because it's the inability of the shorts to deliver that will precipitate this. They will be taken out and shot because the CBs will be clearing the deals. If it's dropped to $100 and established trading markets halted worldwide because of sudden delivery demands, everyone will settle at $100 cash and walk away! People that are waiting to sell their hedged gold into their counterparties (mines included ABX?? to the BBs) would have to sell their gold at the new settlement price. Remember, when big international bankers are in trouble on this grand of a scale, the rules are changed into the banks favor. Always has been, always will be.

Understand, that the BIS clears all trade in CB gold. If that gold is tied up in private Bullion Bank deals, it will come under their rule. The BIS tells the Government what needs to be done and the Governments tell the mines. In perspective, this will be happening in every industry, worldwide, not just gold. Everyone will lose some skin…

FOA
Comment
#11943
8/24/99; 9:47:21

---CoBra(too) (8/24/99; 9:08:34MDT - Msg ID:11936)
Endgame among not so clearcut adversaries?!?---

CB2,
Good point. I have one view for what you write:

-----So why hold on to bad debt paper scrip if the endgame between $/IMF and Euro/Bis was so clear-cut policy as FOA feels, all along.---------

There is no possible way that the CBs could ever sell or unload all of those dollars. Presently they are held in the form of US treasury debt. It's owned by the CBs not their public / private interest. So, the CBs would not be looking to "spend" these reserves in the usual sense. They obtained these reserves as their local economy generated excess sales to the US (for them a trade surplus) and their private citizens wanted to hold local currency assets, not dollars. The Cbs printed Marks (example) and traded with their citizens for these excess dollars. Then they traded these dollars for US debt so as to earn interest.

Now, exactly what good are these debt holdings as long as their country continues to carry a trade dollar surplus? Not much, if the locals don't want to hold dollar assets. In the end, if the CBs were to sell these treasury holdings it would crater the US debt markets long before any value was received. And, to add further, that value could only come from using the dollars to buy something. Now what does a Cb use its reserves to buy, cars, TVs, other currencies??

No, the only avenue to balance currency value is through the age old asset of gold. Indeed, if you already hold enough gold, one just uses the dollars to bid for gold until the dollars become worthless (price of gold spikes to the sky). Usually only the intention to bid is enough?

Yes, No? FOA

FOA
Reply
#11947
8/24/99; 10:20:59

---- Al Fulchino (8/24/99; 9:12:26MDT - Msg ID:11939)----
------what I was grasping for is the connection with this analogy to the gold industry is how the industry wasn't wary like OPEC with their own product. This manipulation could have been prevented had they OPEC'ed themselves. Do you agree?------

Al, it's true that the mining industry could have done a better job of managing their product. But, would they have been allowed to? Just prior to OPEC and the 1971 gold window close, all the major nations were still trying to work out a common ground with respect to gold. The price was so low that few mines were making anything more than subsistence. The governments were finding that they could no longer use gold as money because they needed to cheat on the currency. The US wanted the price of gold to run up so as to spike the oil price and obtain more local production. Something they couldn't do competing against the nickel a barrel ME producers. As gold rose, the mines didn't need any production agreements so no one sought one. Throughout the 80s everyone was expecting gold to regain its trend, so again , no need for collusion. It's only been in the 90s, especially during and right after the gulf war that the industry began to smell a rat. Hell, even two years ago, Another's Thoughts about manipulation were dismissed as crazy. Now, the industry sees they are in a battle for their lives as their asset is at the center of a realignment of world currencies.

Truly, if gold is repriced high enough, as a competing currency, the falloff in jewelry demand will negate the need for any additional supply. At extreme prices, the CBs could supply the market for years to come without impairing their asset reserves. Production curbs on the mines could again restrict them to minimal profits even if gold was in the tens of thousands. A mess indeed.

FOA

Canuck
Sorry to all, I quit.
#11987
8/24/99; 18:40:45

Sorry to all, FOA, Aristotle, Aragorn, ET, Steve H., Gandalf, Peter A., The Scot, canamami. I'm done.

We talk of an upward swing that I don't think is going to happen. We endless surmise on the possibilities, Sachs is 'working' 15 mt. and BOE is selling 25 mt. in 4 weeks, yadda,yadda. The USA gas 7,500 mt., BOE still has 680 mt., the IMF, the Swiss, many other CB's. The 'overhang' is monstrous compared to this 15mt. and 25mt here and there. Who is really going to control gold?? I don't understand the 'paper' end of it but I will take your word for it that it will blow up, and then 'physical' will rule. So then, you controls the 'physical', the holders with thousands of onzes or the one with thousands of tons? Did the 59 page article not allude to the fact that CB's WILL sell down the price of physical. Gold has been dropping for 20 years, if I am a country in need of quality, value-oriented reserves, given that it is 1999, do I want gold or do I want the currency of choice. Fifty years ago, gold was a 'reserve currency', today it is not. With today's global infrastructure I can 'switch' my reserves very quickly. Investors are 'switching' investments into Japanese equities, and tomorrow it might be England or Germany. Tell me why a federal bank needs to hold gold? Why does a central bank hold gold? For a few years now CB's WANTED USD as reserves because it represented stability and wealth.
And it is as plain as day that CB's want out.

In regards to the message above, I have read it 10 times and two phrases stand out, "all that I ask of my money is that it really be money--payment-in-full." I'm investing in gold and I'm not getting paid in full, I feel brutally sorry for for the folks who have been investing in golds for years and years. I wish gold a turnaround for their sake. Secondly," Adopt the larger view, my friend" confuses me. I think the CB 'overhang' is the larger view.

Again, I apologize to all, I am throwing in the towel, I wish all gold investors multitudes of luck and fortunes, I won't be there; perhaps I am scared, short of time, impatient, 'fiat' hungry, I don't know. But again best of luck, sincerely.

Canuck

SteveH
Canuck
#12003
8/24/99; 20:58:06

You will be missed. We all feel your pain. I would offer that the pain is most always the greatest before change, but we all live our own lives to our own rythm.

Good luck. Keep in touch.

FOA
I'll be back later.
#12004
8/24/99; 21:06:47

----Cavan Man (08/24/99; 20:06:51MDT - Msg ID:11996)
FOA
I see there are a couple of posts here this evening that are not pro-gold and perhaps for good reason(s). Do you have a repartee?-----

CM,
Yes, it is sad when someone gets hit without a clear knowledge of why. Unfortunately there will be more of this because investors are unprepared for the times ahead. We could see gold go through tremendous swings as this is unwound.

Long term booms (20 years +??) always die with major losses inflicted on the most leveraged positions. Add to this a once in a century destruction in the most popular currency, and we produce an economic earthquake the likes of which no one has ever seen.

Most investors retain their life savings in a fully invested mode and would not get off these train tracks if they saw two engines coming. They will stay there because it's impossible for them to believe they occupy the wrong position! Who can lay blame or call them fools? These typical western savers have been educated to believe in a money system that serves no purpose, except a medium of exchange. Yet, they perceive that all of their assets are correctly valued by this system.

The gold market suffers the same fate. The same ideals that hold us in bank accounts, using credits to indicate what is on deposit, also drive us to invest in gold assets that must be sold to realize a profit. Modern gold bugs travel from bank accounts into paper gold and back into the same bank accounts. All the while pointing out the weakness of the system, yet needing the same system to keep score. Without the modern paper gold market, gold bugs, as we know them are lost to place a value on their holdings. That is why they gravitate into familiar gold holdings. Ones that still retain some connection to their paper currency. Mine stocks (and various option / futures) are a likely choice as they sit squarely upon the financial system we know most.

Great swings in asset preference always bring monumental profits. However, these profits will be shared by only a very few. And those few will have to endure gut wrenching blows to their assets when this storm hits. Gold will by no means be safe and it will not be secure. But in comparison to every other form of wealth, it will be the most well-known and sought after asset on the planet.

I think, many will be weeded out from this market as events unfold. Most of them never expected the fluctuations occurring now and they would be horrified at what may come. However, what they retreat into will be completely cleaned out. Completely! As for those that are sharp enough to buy when the proverbial blood is running in the streets? Time and events will prove that they were not as smart or quick as they thought.

Having said that, paper gold may rally, gold stocks could storm up and physical could just sit there. But that won't be the end of it and such an action would simply draw more into the fire. I remain steadfast to what Another once said:

"when a thousand hungry lions fight over one scrap of food small dogs should hide with what's in their belly"

This dog is well fed with gold and hidden deep in its history. Thanks FOA

The Stranger
The Post With No Name
#12005
8/24/99; 21:34:29

Last night, somebody calling himself Skip posted a sad commentary of his experience in the gold market and issued a plaintiff call for reassurance from this Forum. Tonight, Canuck, in an act hardly anybody could fault him for, suddenly jumped up and made a run for the exits. The last time we were at these price levels (and after years of pie-in-the-sky forecasts) ANOTHER and FOA suddenly reversed themselves and announced that the POG was very likely to collapse. And now, just to be sure we are all scared as hell, Farfel shows up tonight to remind us that the world economy is about to slip down a blackhole, taking gold with it, of course. (Needless to say, I think such pronouncements are as looney as they are facile.) But there must be something about $250/oz. that brings out the fear in even gold's most devoted enthusiasts.

Forgive me for being presumptuous, but I think times like these are apt to be hardest on those who have the least confidence in their own research. I doubt anybody here has a higher proportion of his own assets in gold or gold-related investments than I do. Yet, I have absolute confidence in my position. There is a worldwide reinflation taking place. It is quantifiable here in the U.S. It is, in fact, quantifiable in many countries around the globe. It is the very reason, in fact, the FOMC raised rates today (despite having committed three coupon passes in the last month). One doesn't need to be a PhD. in economics to understand the meaning of these things. But, because it takes time for the masses to come around, one needs to have patience.

I think it was Ben Franklin who advised never putting all of one's eggs in the same basket. But somebody else must have said, if you ever want to get rich, putting most of your eggs in one basket is just about what you're going to have to do. The trick is to watch the basket. I don't know who might have said that, but, whoever he was, he convinced me. Apparently, he also convinced Bill Gates, Aristotle Onassis, Michael Dell, J. Paul Getty, etc., etc. etc... None of those guys ever gave a darn about classic portfolio theory, and, frankly, neither do I.

I have always been a "plunger". When I find the right thing to do, I just can't bring myself to do much of anything else. But, over the years, my efforts have paid off handsomely. That's why, as much empathy as I feel for someone like Skip, I also feel respect. No, I don't know what he owns or when he bought it. I also don't know how much homework he did before he risked his money. But I know this: Skip had a dream once that I can relate to. He wanted to be rich and he had the courage it takes to get there. Now, that's my kind of guy.

Skip, if you are still out there, remember these simple words: If at first you don't succeed, try, try again. You may be having a low moment, buddy, but the future belongs to people like you. You will learn from this and go on to do great things with your investments. Believe me.

And as for you, Canuck, get a good night's sleep, my friend. Tomorrow is another day!

Skip
The Stranger
(08/24/99; 21:34:29MDT - Msg ID:12005)
#12020
8/24/99; 23:26:52

I'm still out here, and have frequently lurked on this forum although I rarely post.

True, gold approaching the low $250 range struck fear in my heart, as I've been bleeding financially all the way from the high $300 range down to the present pits of despair. Nonetheless, my concern is how much lower gold will go before it finally turns, and whether or not I can hang onto what stocks and coins I currently own before the POG returns to at least normal levels. I'm building a cash account through working two jobs and very long hours in case such a slush fund is needed to get me through the next few months without having to liquidate at great loss.

I'm sorry for Canuck that he threw in the towel. Also, I do appreciate your praise of my courage... and I once heard that the TRUE test of courage is having the ability to do the right thing during a time of fear. Right now, I believe that keeping my gold and gold stocks IS THE RIGHT THING TO DO.

My thanks to all who have responded to my posting from last night.

Sincerely, Skip

FOA
Comment
#12064
8/25/99; 11:29:26

---------The Stranger (08/24/99; 21:34:29MDT - Msg ID:12005)
The Post With No Name
Last night, somebody calling himself Skip posted a sad commentary of his experience in the gold market and issued a plaintiff call for reassurance from this Forum. Tonight, Canuck, in an act hardly anybody could fault him for, suddenly jumped up and made a run for the exits. The last time we were at these price levels (and after years of pie-in-the-sky forecasts) ANOTHER and FOA suddenly reversed themselves and announced that the POG was very likely to collapse. And now, just to be sure we are all scared as hell, Farfel shows up tonight to remind us that the world economy is about to slip down a black hole, taking gold with it, of course. (Needless to say, I think such pronouncements are as looney as they are facile.) -------------
(to see the rest, read his post)


What do we conclude from the above post? Stranger, I appreciate your presenting your thoughts and perceptions. They validate my own perceptions of how westerners feel about gold. I also used to read Another's Thoughts as an observer when they were presented by someone else. The one common thread in all of them was his council to buy only gold, physical gold. Yet, it never failed to impress me that every time those considerations were given, all discussion immediately turned to buying gold options, futures and mine stocks. It was like an automatic response that was ingrained in investor psychology from years of indoctrination. Your conclusions fit the same pattern.

Why is it that professional brokers and investment councilors in this country lead the public to this end? Is it because they have no depth of history to draw from or is it that they have "no fear" of losing others' money? Mention that gold may rise and could become a bedrock for your life savings and not one paper pusher tells his clients to buy real gold. Yet, we let the facts speak for themselves. The gold price having fallen from manipulation has literally destroyed a large percentage of portfolios invested primarily in gold stocks. Some of these mine stocks have gone to zero and are in bankruptcy, never to return.

All the way down Another (and later myself from association) said to buy gold for the long haul because in the long term it may go very high. Then in typical like form, traders said buy gold stocks for the long term also. Don't listen to Another, it will never go that high and with these paper items you will get rich if it only goes up $100 bucks! Indeed, leverage ruled the day all the way down with little regard to the fact that the "little guy" could lose it all with no hope to run for the final payoff. Now, here at $250 gold, Another presents a case for the destruction of the pricing market mechanism and still says, buy gold for the long haul. A concept, I might add that fundamentally offers the most bullish case for physical gold, while posing a worst case scenario for mine stocks. Yet, intelligent thinkers and admitted white collar investment professionals, such as yourself, lay the blame of loses to mine stock investors at the doorstep of physical gold advocates.

The whole philosophical reasoning for buying physical gold was always to negate the possible total loses to ones assets from a breakdown of the world's modern derivatives pricing system. A system that spans our entire financial structure, not just gold. Even with this risk in mind, I submit that it is still the current system advocates that present a "pie in the sky" council to new, unseasoned savers. Just as you use Bill Gates and other "risk takers" to portray an "American Spirit" of "plunging in", it hides the hideous failure rate inherent such accomplishments. Had Skip not listened to the sirens song of great wealth, he would still have had a chance today to benefit from a centuries old investment, real gold. So consider this, the next time you drum the march for the average person's savings to the tune of "paint your wagon and come along". For myself and many others, long term playback and asset safety are more important to our family than the bragging rights of day traders.

Please continue. (frown) FOA

The Stranger
Sorry, FOA
#12068
8/25/99; 13:46:23

I didn't make the point to offend you. My intent was merely to share my confidence in the gold market at a time when people were obviously getting nervous.

As to your comments about white collar professionals and "westerners", I suppose you mean well. I would emphasize, however, that, out of respect for our host, I have specifically avoided discussing the merits of stocks vs. coins. I intend to keep it that way.

Finally, as to who is misleading whom, all of our (your's and mine) posts are a matter of record. I hope I need say no more.

Farfel
Five Lessons I Have Learned Late in Life as a FORMER Goldbug
#12069
8/25/99; 13:47:35

1) With the exception of Barrick Gold, ALL gold mining companies are run today by maleducated, sub-moronic, good ol'boys from Hicksville. After all, just take a look at all the formerly unhedged gold producers who finally decided to hedge today some $200 an ounce below Barrick's hedges. True idiots! Talk about shooting yourself in the golden foot! Oh, well, what the hell, might as well tank the gold price another 100 bucks or so.

[…]

2) Unlike other commodity producers (like OPEC), there is ZERO co-operation amongst gold producers... and so they are doomed to die their own individual respective, deaths (except for Barrick Gold).

These guys couldn't get together to throw a birthday party, let alone figure out how to coordinate a de facto cartel designed to curtail gold production and enhance the gold price...

3) All Gold mining company managements operate on automatic pilot, following a pre-determined path to oblivion (excepting Barrick Gold)…

4) There is NO notable difference between South African golds or North American golds or Antarctica golds, for that matter. They all share one thing in common: a plunging gold price below 200 will ultimately bankrupt the entire lot of them (except for Barrick Gold)…

5) There are NO gurus in the gold market (except Peter Munk). It is impossible for any single technician, chartist, fundamental analyst, astrologer, etc. to predict the arbitrary path of gold in the short-term with any scintilla of success, although it is a usually a pretty safe bet to say "It's going down!"

Gold's arbitrary behavior stems from its oligopolistic control by the Central Banks. Upon any given day, there is at least a 50% chance that some Central Bank will pre-announce its decision to dump its entire gold reserves in order to MINIMIZE its profits on the sale.

FOA
Comment
#12083
8/25/99; 16:45:26

------The Stranger (8/25/99; 13:46:23MDT - Msg ID:12068)
Sorry, FOA I didn't make the point to offend you. My intent was merely to share my confidence in the gold market at a time when people were obviously getting nervous.------

Sir Stranger,
no need to be sorry and your post did not offend me. I felt the offense was directed towards intelligent physical gold advocates. When you publicly interpret my posts as a reversal of thinking, you are wrong and send a false signal. To say that I expect the (physical) price of gold to tumble, is a misleading statement that subordinates my reasoning by talking out of context.

I understand how our gold market presently trades as a paper derivative and in physical form. Every day, new evidence comes out to confirm this concept. TownC offered the excellent work of John Hathaway to further explain this evolution. When Another pointed out that the derivative side could fail and be discounted in price from the effects of that failure, you obviously did not grasp it. Others did. If you had then you would have noted that I expect the physical gold price in the dealer community to explode as its supply falls. A process of rejecting the current price setting methods.

--------As to your comments about white collar professionals and "westerners", I suppose you mean well. I would emphasize, however, that, out of respect for our host, I have specifically avoided discussing the merits of stocks vs. coins. I intend to keep it that way.-----

Again, I present a balanced observation that helps to account for the much larger percentage losses to investors that have followed the "established paper rout". Nervous people have a more pressing need to learn why their strategy has failed. Without balanced input, we often repeat our mistakes. I learn from my mistakes also.

As for merits of stocks vs. coins? There is no valid comparison. Apples and oranges have never had the same taste. The percentage of loss for one or the other is but a function of the risk one takes when placing savings into that vehicle. Coins will never be as risky as stocks of any kind. Nor will gold bullion in one's hand. The very simple laws of nature dictate that gold cannot fall to zero as stocks have and often do.

-------Finally, as to who is misleading whom, all of our (your's and mine) posts are a matter of record. I hope I need say no more. ------

I believe we come to this forum to offer our Thoughts for everyone to view and discuss. No one is right, wrong or misleading as only events can and do prove all things. To date, cash invested in gold bullion has lost value much less than if it was placed in mine stocks. All of us can grasp that fact. Indeed, no more need be said.
Thanks FOA

AEL
ha ha ha
#12085
8/25/99; 17:07:52

did anyone catch the unintended double entendre in FOAs latest? --- "... the much larger percentage losses to investors that have followed the "established paper rout"

i.e. rout, or route?

:)

FOA
Come what may?
#12506
8/31/99; 16:15:01

ALL:
I do thank everyone that have voiced support for the continued sharing of my insights. Anyone of you that have been alive for a while must also understand the frustration of explaining a difficult topic. Truly, I (like all of you) am not a machine and the process of walking a fine line between two worlds of thought is a major energy drain. This unique forum gives all readers an opportunity to expand their viewpoints by observing the "real world of money" through different eyes. As such, I deplore any direction that takes us into the ego world of "traders calling the market". It is an accepted fact that many aspire to make that role their life's work as there are plenty of other net sites and forums to confirm it. As popular as this may be, it offers little in the way of gaining insights to the perspectives that drive world investments. As a group, the trading society often loses the concept that feelings and viewpoints are the driving forces that shape those little chart patterns so many follow. Because many give up in trying to decipher the meaning of these forces they degrade themselves to a level of "follow the leader investing". True, it works sometimes, but one's spirit of understanding develops little from the process. As a result, when a major change does impact world thought, people are lost to grasp why the trend reversed, and more importantly, cannot change their strategy with it. Perhaps, something we have seen in the gold market these last many years? So, "let the world have its way, come what may", I will try to present my insights as seen through others. I hope many will join us on this journey.

Further:

I completely understand (as do you) that many people become upset when someone attacks the validity and purpose of their favourite investment strategy. Indeed, if most of your savings are installed in said discussed vehicle, the urge to find a flaw in the reasoning becomes overwhelming. Often one does not have a factual explanation, but we do have the ability to "think out loud" in the form of a rambling discussion. Perhaps, this is how many view my posts? I offer that this form of "rebuttal" is preferable to just stating "he/she is faceless and doesn't have the facts"??? If I do this, I apologize and will try to change. I think Mr. "PH in LA" had it very right when he observed how some internet writers, "come wading in with both barrels blazing" as they present their thoughts! I add that this could be an offshoot of our modern society. Hope we can get past this, soon! Thanks PH.

Onward:

Most investors that have assets in this broad arena called the gold market, have also come to appreciate just how large an "impact area" gold has had. Not only throughout history, but right up to today. The ongoing battle over the "gold concept" has won and lost fortunes, built and destroyed empires and in general has warped the human senses about what money and savings should be. This conflict continues today, even onto the pages of this forum. As the stress builds on our world financial system, the lines of thought concerning gold are becoming more clear. Let's examine some of what I perceive to be some of those lines.

Of course there are those that do not even consider gold as a viable contender on the world money / investment scene. The have lately been a major vocal class that have prospered in the realm of the current financial system. Myself nor anyone else should blame them, as they follow their reality in a world that presently benefits their ideals. I think few of them have given themselves a full study of how world currencies have come and gone throughout the years. If they had, the fact that they "have lived in a period of little change" should hold for them that things can reverse without notice. History is full of recounts that describe the rise and fall of entire social groups at the hands of a sudden rethinking of what has economic value and what doesn't. In any event, ingrain monetary ideals usually do not change during one's lifetime, so the past lessons may be worthless for some. As a result, a large mass of society must always return a great portion of their wealth into the hands of some "historical event".

Also included in the "gold perspective" are the true "physical gold advocates". They have seen through history how the destruction of various "money systems" always leads to the destruction of the "economic system" built upon the fiat concept. The efficient money system present in those fiat times, help to create the need (and therefore increase the value) for many real assets. The ensuing breakdown of the money always destroys the "efficiency" factor that society used to up-value the assets. Usually, any enterprise built upon the current functioning money contract system is impacted as it cannot change quickly enough to the evolving money system. It's hard to grasp that even real assets like houses, land, equipment, vital necessities and even food, can lose value as their trading pipeline is disrupted because no medium exists to fairly create "market value"! We have seen, time and time again, that real gold can gain value against "everything" during true money destruction. During these times, the human spirit need for using a familiar process is all consuming. The exchange of goods and services continues, with or without a valid medium of exchange to express it. Still, values become so conflicted and lost during this process that the marketplace reaches out for the most tradable of things that can act as a medium. In that need to replace "efficiency", lost with the medium value of paper money, it upvalues any store of value thing as the new "medium of exchange". Yes, within a large marketplace, the human need for trade gives any "efficiently" attribute more valuable than food.

This is why I smile when someone says, "how will anyone be able to know if the gold is real and what will they value it as"? I say, that the marketplace dynamic will ram this education home very quickly. The above question is asked by someone that accepts and uses paper dollars every day. Yet, these dollars are paper (how do you know they are real? as often they are counterfeit) and hold value only because the marketplace is using them. During a money breakdown, you will observe trading in the marketplace and quickly come to accept anything, ANYTHING, that even could be gold. Believe it!

Finally, we also have the "in-between gold advocates" in the "gold perspective". Usually, their view of the market is such that it is an industry built within the confines of the present monetary system. They do not hold an extreme view about paper money, and believe that today is different and our currency will only fail "somewhat"! So far, in concept they have been right for many years. Yet, in investment practice, their "gold perspective strategy" is failing. I say this in contrast, in that by holding physical gold, the "physical in your hand money insurance factor" is never lost, even as the quoted gold price falls. Especially, in today's new market dynamics we require the question:

"does the paper security in your hand give you an absolute claim to physical gold, or does it more so give you a "right" to receive dollars that match the increased value of gold?"

This "in between gold perspective" strategy, calls for placing money in various forms of paper gold. All based on the convenient factor of holding paper that gains in price as the demand for gold increases during a controlled slow burn of the world money systems. These paper investments are expected to all gain because their value is "derived" from the quoted price of gold on established major exchanged, London, Comex, etc. Whether you hold "gold certificates" , mining stocks, gold options or gold loans, an observer can readily correlate their increase and decrease in value to the world quoted gold price. They are derivatives by nature, because their very worth requires the observation of another price setting market.

It is here, in this "in-between market" that I believe most gold investors will first see the breakdown in the world money system. Yet, for them, this breakdown will bring the loss of performance to their paper holdings, because, from necessity, our financial structure cannot allow the established quoted price of gold to rise. To honour the present contracts, would require the supply of millions upon millions of ounces of gold that simply does not exist. In as much as these players expect a huge payoff on their holdings as the gold market must run skyward to balance delivery, the opposite action will most likely be delivered. Because all of their holdings are valued upon a marketplace that establishes a price with even more derivative trading, the expected failure of those contracts will crush the quoted price. Just as most men will not hang themselves with a rope, the shorts that actually create the quoted price of gold today, will not trade it higher. In fact, I believe they are trying to gather physical gold (taking delivery everywhere) while it still trades in relation to the low derivatives price. Unless you are a major entity in world affairs, holding something the world must have, I doubt any form of gold paper securities will escape the burn. Indeed, over time, in a up and down fashion, most of the paper gold holdings will be destroyed first, then the physical gold price will zoom in a matter of days if not hours!

How will mining shares respond to this "POSSIBLE" event?
More (sometime?) later. FOA

______________

I included portions of Farfel's comment above because I thought it was funny. In fact, gold mining stocks were sucking so horribly on 8/25/99 that I thought it would be interesting to take a look at how some of them are doing today after having almost 14 years to recover alongside a gold price that has risen 550%. Barrick (ABX) appears to be the worst of the bunch (at least of the ones that I looked up). It is one of the largest gold mining companies in the world, yet its share price is the same today as it was at gold's lowest bottom in 34 years. Barrick was $18.52 on the day that Farfel wrote that comment, and today it's $18.90. Why's that, you ask? Well, for one thing, in 2009 Barrick diluted its shares in order to essentially spend $5B of its shareholders' money to buy back those hedges that Farfel was raving about. ;D

Sincerely,
FOFOA

Black Gold? Massive hoards hidden for ages? Not!

This is a repost that was originally published on 2/25/11:

A few thoughts on "Black Gold." I hate to draw attention to ridiculous notions with no basis in history or logic. But apparently this notion of massive secret storerooms of gold is still providing some with the comfort they seek in their aversion to taking action to protect their own wealth. So I suppose it is worth a brief comment.

I have noticed that the most cynical among us tend to view the world as an ant might view the giant humans that massacre hard-working legions of his own kind whenever passing by. And while I can, and often do, entertain such perspectives without accepting them, for the purpose of exploring probability, I can find no logical train of thought that leads to the existence of massive stockpiles of gold as the source of power for our evil overlords.

In fact, massive stockpiles of easily printed cash make a lot more logical sense!

The history of gold mining is well documented, as is the amount of gold in existence during various eras in which it was openly used as currency. So the existence of hidden quantities of the stuff has a tremendous logic threshold to clear before Occam's razor can even be considered against the supposed "evidence" rebutting massive quantities of known history.

And because of the non-clearance of this threshold combined with the relative scarcity of time, I find it extremely wasteful to explore the voluminous fiction that exists on this topic. And I am comforted to share this perspective with ANOTHER, FOA and Randy Strauss (see below).

This topic seems to pop up periodically, each time some poor soul stumbles across one conspiracy-oriented site or another. Each time it is presented, again, with the same zest as the last. And each time, logic, history, reality and fine minds stand firmly in the way.

Remember this Foundation X story from last November where a mysterious organization claiming massive secret gold offered to bail out the UK? I wonder why that story just kind of disappeared. You see, when stories are false, there is a lack of "infinite resolution" to be mined. Perhaps this story went nowhere because scam artist Ray C. Dam of the mysterious OITC that claims to have control of millions of TONNES [see pg. 195 in linked pdf] of secret gold was arrested in Cambodia on December 18, 2010.

This is the kind of resolution you find when you dig into fantastical stories like this. What a waste of time! You can learn a lot about the credibility of the Seagraves who wrote "Gold Warriors" by simply reading the negative reviews on Amazon.com, a big time-saver! Here's one:

Many of the earlier reviewers of "Gold Warriors" have admired the voluminous references presented by the Seagraves to support their incredible assertions. However, I'd like to point out that my personal investigations into a sample of their sources have exposed the Seagraves' quite cynical "research" methods. They are prepared to use sources that are laughably insubstantial, and then present these sources as if they are highly credible. The Seagraves also deliberately misrepresent the words of a source to make it fit the story that they wish to convey.

The whole of page 62 of "Gold Warriors" is given over to the Seagraves' theorising that nearly 400 Allied Prisoners of War were massacred after stowing gold bullion in a mine on Sado Island, Japan. This is outrageous. The source that they use, "Betrayal in High Places", is a book that looks extremely unreliable when first picked up, and its claims fail to be confirmed by any other historical source. In any case, "Betrayal in High Places" does not actually claim that any stolen gold was stored by the POWs!
I am one of the authors of a recent historical paper, published in the Journal of Military History, which has proven the Sado Island Massacre story to be pure fiction. The Seagraves are smart enough to have worked this out for themselves, but they have chosen to legitimise this fantasy in order to sell their books and CDs.

The Seagraves further illustrate their manipulative ways when they cite an innocent travel book as the source of their further assertion,
"more than a thousand Korean slave laborers ... on Sado Island also vanished without a trace" (bottom of p62).

This is just another dishonest misquote. The travel book (Waycott: "Sado: Japan's Island of Exile") actually says, "...During these years, forced labor was certainly used: of the tens of thousands of Koreans imported to work for Imperial Japan, more than 1,000 are known to have been sent to Sado. Of these, 145 are said to have 'escaped' (but where to?) and a dozen or so - surely a low estimate - were killed. Their existence became public knowledge in 1991, after records were released of Mitsubishi's distribution of cigarette rations to its workers."

Westcott's travel book is actually quite pleasant and informative, and there is nothing dishonest about his speculation - but it's only a travel book! Historically, it's clear from post-war Korean records that many "escapes" were indeed successful (often into the local community, or by fishing boat back to nearby Korea). It's also true that a relatively small number of Koreans were killed in mining accidents, and that no "massacre" occurred. Waycott doesn't allege a massacre in any case - but the Seagraves do!
(Page 62 of "Gold Warriors" can be previewed online here on Amazon, for those who would care to check for themselves...)

The Seagraves are obviously misusing these sources quite deliberately. I think it's very reprehensible for modern authors to push this type of mean deception masquerading as history. This is not a victimless crime. (My mum's brother died as a prisoner of the Japanese in WW2, and it is upsetting to see authors such as the Seagraves take these liberties with the emotions of dead POWs' families.)

Not content with pocketing their customers' money for this book, the Seagraves also use their book to continually push their privately-sold CDs, which they claim contain the "evidence" to back up their assertions. In fact, most of the documents on the CDs are just correspondence between "treasure hunters" - who also make their money by selling their Treasure Maps to the gullible... These are hardly independent or authoritative people! Many of the "certificates", which have been laboriously translated (possibly to tire out the reader) can easily be seen to be fakes once you look at images of the "originals". They have cut-and-pasted values for the gold on deposit!

The CDs even torpedo the Seagraves' own assertions in some places. On CD#1 (Jones.PDF file, page 65), a 1997 letter from "R. A. Medland, Senior Manager, Commonwealth Bank Group Investigations/Security Dept." [Melbourne, Australia] says that the gold deposit certificates are, "utter rubbish"! There's also a scary-looking photo of a sleazy Indonesian "lawyer" displaying the "certificates", and a hilarious document very reminiscent of a "Nigerian Letter", purportedly from President Suharto of Indonesia, on the same CD.

Gee, it's a pity these Certificates are rubbish - they were for 420 tonnes and 120 tonnes of Gold !
(US total annual production in 1940 was 155 tonnes, just to show how incredibly unrealistic these numbers are.)

With the kind of resolution one finds when only scratching the surface of these fantasies, I have to wonder that the appeal of such stories must come from their ability to assist in the smoothing of the rough edges of some other square peg these cynics are trying to jam into the round hole of reality. But again, it is a big waste of time to go any further than this when even the simple threshold of logic hasn't been cleared.

Before getting to the archived arguments, I would be remiss not to mention Costata's comment from the end of the last thread:

costata said...
Bron,

I have read the book [Gold Warriors] that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.

The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.

My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.

A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emperor (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.

Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".

Cheers

And now I take you back a decade to early 2001, when FOA and Randy "@ The Tower" Strauss took on the reality-challenged cynics of the day with the sharp razor of raw logic and known history. Dismiss these great Freegold minds at your own peril. The comments are presented here in the order they were posted. And as is usually the case, the discussion evolved to the point of depositing the strongest arguments at the very end. My favorite line of the bunch comes from Randy: "…it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them."

FOA (01/10/01; 17:50:30MD - usagold.com msg#53)
24 hour hike.

Black Gold?
If I understand the reasoning, some people think there is a mass of physical gold out there and it's being used as underground money. This is what explains the low price of gold today, as all that black market gold surfaces?

Well, that may not be the proposition, but if any of you want to know; none of our evil outlaws are so stupid as to use gold for trading when there is literally "TONNES" of cash circulating around the world. Please, give all of us a "logic break" for a minute? Why would I, as a crook, carry even one ounce of gold when three crisp $100 bills can take its place? Even ten $100 bills are easier than gold priced at, say $1000. And there is no shortage of that cash stuff around! Hell, I bet there really is more tonnage of "Black Market Cash" in the world than all the gold still in the ground. Cash for ounce,,,,, gold still priced in the thousands! Believe it!

FOA (1/11/2001; 11:35:06MD - usagold.com msg#54)
The Curve!

OK,,, I had my coffee and morning walk in the woods to see the wildlife,,,,, packs on,,, let's go.
It's always great to spend time out here,,,, away from the city,,,, out on the Gold Trail.

-----------------------

One more point on Black Gold as we walk:

All that gold, more than triple what we think is out there, would have been in existence for some time prior to our life spans,,,,,, given the timeline required to produce the stuff. Remember, Black Market production could not have existed prior to, say 1971, as even public mines were not making cash profits. Also, it takes real cash and investment to produce both White Gold as well as Black gold.

Indeed, simple extension of physics concludes that nowhere near that much "EXCESS" gold could have been dug over the last 25 years. It didn't happen, even with slave labor. Because, as in above, even lawbreakers have to sell most of the gold in the open just to cover the illegal "Cash" they invested in digging the ore in the first place. These guys don't do such a "wash" business when their cash works just as well in the first place?? Get my point?

Also, the gold would have been moved into the open as the majority of goods and services bought with illegal money, to create their evil lifestyle, must involve the White Market Economy too. Black market wealth is mostly in cash, it's just too easy to move and spend. So, there is no reason to go through gold first, just to buy in the real marketplace.

Further;
With all that gold out there, the Dollar powers would not need to create paper gold debits to placate strong dollar backers. In fact, I suspect they would have created channels to flush all that gold into the market. Illegal or not, this action would have suited their end result.

No, the natural trend of easy money humans, both good and bad would be to spend said gold for other consumable wealth and keep cash in the background. Indeed, this is truly what has been happening as regular investors trade physical for non-physical substitute gold. The small amount of physical supply vs the monstrous paper trading denotes how such existing gold has bridged the industrial use gap. It didn't take a vast new unaccounted supply to make paper seem real, just moving the existing into new hands did the trick. OK, we finished burning that story in the fire.

Randy (@ The Tower) (1/16/2001; 4:07:45MT - usagold.com msg#: 45719)
ORO: some of my thoughts on being "not ants"

In your post you make many worthy comments, and certainly the essence of human motivations driven individually by self-interest has not likely changed substantially through time or by geography. This issue of black gold, however, requires an additional depth of understanding suggested earlier this weekend--that we are not ants.

Loosely, I suggest that from the perspective of "antkind" in its struggle for survival, the world is the same as it ever has been...particularly with respect to the "rules of the jungle". And further, seen from the perspective of "the world" itself, the essence of antkind behavior and its impact is also the same as it ever has been (for most practical applications).

In stark contrast to antkind's "same-as-it-ever-was" interaction with Mother Earth, any meaningful assessment of mankind as a whole reveals a performance more akin to the evolving development of a single entity (such as a butterfly) throughout a single lifespan of that entity.

More fully said, as evolving civilization establishes new "rules of the jungle" (laws of the land), men -- like butterflies -- do behave differently depending on the specific "rules" for the stage of the game faced at the given time in life, even while their self-interested motivations remain. Such self-interest may require a body to crawl hidden and eat leaves under one set of rules while exposure to another following set of rules (i.e., opportunity) enables that body to fly forth in a display of nectar-sipping "birth" into the seeing world. And yet, even as the caterpillar's nature is inclined to a hidden existence during a particular stage, a premature and unintended flight into the open can occur even under the old rules of the jungle through discovery/conquest by superior forces (e.g., a bird in this extended metaphor).

Concerning gold and mankind, a rich history of conquest (generally by "official sectors") and of rule changes through time and geography have given ample opportunity for significant gold exposure--by force or by choice. It must certainly be acknowledged that once our civilization's "lifespan" developed to such a point where incentives arose for some gold to be kept hidden at the time of its discovery, clearly the stronger precedent of experience was that such gold was useful when "revealed" (spent) as a suitable alternative to its owners starving in the dark...and this would hold true for any point in this would-be black gold's post-discovery coexistence with mankind.

"Black markets"... "white markets"... go back far enough and you find there were simply "markets". Looking back to one full century after Europe limped through the economically plagued 1300's, estimates from historical evidence suggest there to be found at the time less than 150 tonnes in total gold. Over the next 350 years, and prior to the productive gold rushes of the mid-late 1800's on the several continents, the free and open coinage of precious metals brought to mints for ease of circulation (use as currency) in this more highly sophisticated stage of mankind's existence provided reasonable records and estimates that gold in known use in the civilized world increased by only 3,000 tonnes. Then, the "easy pickins" of the gold rush years prior to the cyanide leaching process instituted from 1890 onward yielded barely a tenth of today's highly scrutinized corporate production totals of roughly 2,500 tonnes per year. (By 1908, the new gold discoveries and extraction techniques had helped companies boost global gold production such that above-ground gold supplies swelled to nearly 18,000 tonnes.)

We must ask, when considering the political backdrop of this turn of the previous century, where was the incentive for significant quantities of that newly unearthed gold (or previous hoards) to be kept hidden ("black") from free coinage or other wealth-utilization? Arguably, only with the cyanidation process of the single past century do we get gold production volumes remotely capable of feeding black supplies on a level suggested recently by some posters here.

Equally important, only with our very modern era of fiat currencies and tax policies do we face "rules of the jungle" in this collective lifespan of mankind whereby self-interested motivations would favor a degree of unreported/hidden new production. Certainly too little, too late to provide the levels of black gold cited to exist beyond that which is commonly acknowledged as historically produced totals.

To wrap up this commentary, one other element warrants brief discussion. You said in your #45689:
"The supply of actual gold, not only paper gold, relative to dollar denominated debt had to be substantially greater than "officially" stated, else the system would have collapsed long ago as a result of over-leverage."

Could it be that you are overlooking an important phenomenon--growth of the (bullion) banks’ operating sophistication through global integration, and with it the growth of the participants’ confidence which counts for everything? For possible validation of this thought, look no further than the similar absence of U.S. bank collapses against the backdrop of meager "physical" vault cash which has been bolstered by sophistication of operation throughout the latter two-thirds of the Twentieth Century. To be sure, now that the banking structure has gone global beyond the safety of any deep-pocketed lender-of-last-resort, only additional time has been bought by the over leverage, and the eventual failure will be all the more spectacular when it occurs. My friends and myself in The Tower hold physical gold in anticipation of that day. The latest shifts in the "rules of the jungle" indicate the day is near at hand.

Randy (@ The Tower) (1/19/2001; 15:55:58MT - usagold.com msg#: 45942)
A simple notion for barnacle bill

Inspired by your comment:
"...until there is a clearer picture on the Marcos Gold situation. If those million tons of gold are really there; and they are in the camp of the enemy, then this manipulation can go on indefinitely."

As can be gleaned from my last post, the most powerful nation on Earth -- blessed with a large and technologically clever populace, abundant natural resources, and a vast network of supportive infrastructure -- is only able to produce 355 tonnes of gold per year through the highly scrutinized efforts of its publically owned mining corporations. Fanciful notions notwithstanding, where in space and time did mankind EVER find either the human inclination or capability to gather a million tonnes of gold from the firm embrace of Mother Earth?

Certainly, do not trust the precision of the conventionally accepted numbers of 130,000 tonnes as sum total of all past accumulations, but they come nearer the mark than the output numbers that could only be achieved through the efforts of Paul Bunyan and Babe, his blue ox. (I have it on good authority that Mr. Bunyan spent his days lumberjacking, not secretly mining or panning.) Let your common sense as born and raised unto the physical world be your guide in this and all things... Numbers are, after all, just numbers.

Randy (@ The Tower) (1/19/2001; 18:18:52MT - usagold.com msg#: 45952)
RossL...fun thoughts

"Randy. 200 tons a year for 5000 years. I don't know how the pyramids were built either. They look impossible to me also."

Sure, any combination of production values over years will provide the fanciful number, but will not provide for the sustained secrecy that must accompany it...otherwise this would not be "black gold" above and beyond the recognized yet still impressive (impossible?) historical production. One would think the history books and archeological evidence would be rich with tales and displays such overwhelming pre-Columbian bounty, no?

What say we ask YGM, our most favorite miner, if such numbers are viable without the aid of modern infrastructure and technology?

Otherwise, we are left only to ponder the grandeur of the black pyramids which as assuredly were built above and beyond those that have been accounted for, and the accomplishments of many moon landings that did not survive the oral traditions of our cave dwelling ancestors reaching back into antiquity...leaving us only with imaginations to fill in the gaps of astronautical marvels of what surely occurred prior to 1969.

Randy (@ The Tower) (01/28/01; 15:38:58MT - usagold.com msg#: 46755)
auspec...another read-through may prove more luminescent

You said:
"Trail Guide has several times mentioned he was going to weigh in on the Black Gold issue, but I have yet to see anything of substance."

Have another look at FOA's latest (msg#56 "The Gold of Troy!") at the Gold trail. While he does not explicitly state that this commentary is to address the "Black Gold" issue among other things, it clearly forms the foundation of thought that more thoroughly builds the necessary historic context that I myself so failed to impress anyone with in several commentaries during recent weeks.

His skill of presentation in this effort greatly exceeded my own attempts, and I was quick to call attention to this fact in my early morning post Friday the 26th. Again, (but perhaps to my rooftop eye only(?)) this post serves to prepare the reader for engaging in critical analysis as to whether such magnificent tales of great storerooms of "black gold" can stand upon their own firm legs in a real world historically shaped by human motivation. For reasons I have previously expressed (however poorly), it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them.

Randy (@ The Tower) (02/01/01; 16:36:19MT - usagold.com msg#: 47141)

Hello Trail Guide. Thanks once again for providing a well-lit walking tour through the past
In days past, when I finally chose to weigh in on the fanciful debate over the (un)likelihood of copious amounts of stockpiled "black gold" in existence in bunkers somewhere, I tried to put forth a focus on two elements that would satisfy any farmer regarding the veracity of such claims. (Why farmers? It has been my experience that a majority of farmers are endowed with common sense, and more importantly, they do not hesitate to use it!). I talked against the presence of massive black gold stockpiles due to 1) the many technical/logistical obstacles which do not support such levels of production in human history, and 2) the socio-political-economic realities of our ancestors which would not be conducive to the permanent suppression of any such easily and secretly mined wealth against exposure to the light of day--implying that the ancient chain of owners ALL denied themselves the improved life that would have come from spending what it was they held..."money". Not likely.

In conjunction with your #56, I hope that readers of your latest message come away with a clearer sense of the realities of point #2....that gold would not sit idle or hidden in those days if it could (and it COULD!) be used to purchase a better lifestyle. Truly, while human motivations remain similar through time, the socio-economic environment that we shape for ourselves has evolved, and with it, so too has evolved changes in our behaviors as guided by our unchanged human-creature motivations.

I am certain you have opened a door to greater understanding when you explained how the item selected to be spent for other goods was that item which would bring the best trade. For travellers on the road, the necessary convenience of gold dictated its superior performance and hence, its use, whereas in town, one would likely see a flourishing free-for-all "bartering" economy where gold needed not pass from hand to hand for each transaction.

The small parallel we might find helpful to draw is that modern times and commercial banking has given us all the "town" mentality whereby we set our gold aside as the function of our modern currencies allow us to bargain for the best trade for an improved lifestyle. But importantly, we must all recognize that there are distant towns that offer goods to improve our lifestyle, and also recognize that specialization/division of labor has helped to make us each "towns unto ourselves". It is in this sense, therefore, that it remains in our best interest today to hold these golden "hunks of metal" because as travellers in this modern-life environment we are ALWAYS "on the road" figuratively speaking.

But clearly, the problem many people seem to have with this concept is recognizing the necessary transitionary period we are in regarding a shift in popular western thought.

Thanks again for your sharing your considerable talents for elucidation.

It is quite common for unstable, overly cynical persons to seek out extraordinary explanations for ordinary events and conditions that seem to them like giant humans must seem to simple ants. But even so, it is extremely arrogant to believe that such enormous secret stockpiles of, to date, foregone wealth will be deployed in our time, in our "crisis," when it somehow remained hidden through so many generations faced with much more existential challenges than we face. It borders, in my honest opinion, on lunacy.

I highly recommend reading Gold Trail Three - The Scenic Overview which, as Randy noted above, was written by FOA partly in response to all this "Black Gold" talk in the forum. There you may gain a much wider view that actually does have infinite resolution, founded on both logic and history.

Finally, I will close with one last Thought for you. The actual quantity of the gold stock in the world doesn't matter nearly as much as its flow, or velocity, when it comes to storing value. In fact, the greater the stock relative to the same flow, the greater the price stability and therefore the greater the potential value. Again, the greater the stock:flow, the better the store of value. (See: How Can We Possibly Calculate the Future Value of Gold?) So imagine, if you will, a single individual who controls an amount of gold equal to, but separate from, the known stockpile. Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?

Sincerely,
FOFOA