Wednesday, April 10, 2013

Open (Window?) Forum

Hello, and sorry I've been gone so long. I've been taking a little time away from the blog to get a few things done around the house. You know, Spring cleaning and stuff like that! ;D

So let's see what's been going on… ah, yes… Cyprus! I consumed a lot of popcorn watching that blockbuster! It sure seems like something big changed in the Eurozone; almost like they're now willing to let the chips fall where they may. And, of course, we had another Snapshot day and MTM Party. Here's the result, and here are the last five snapshots to put it into context:

3/29/13 - €1,251.464
1/4/13 - €1,261.179
9/28/12 - €1,377.417
6/29/12 - €1,246.624
3/30/12 - €1,243.449

That's right, we're back where we were a year ago! In fact, we're currently at €1,213, well below a year ago, and we even dipped below €1,200 for a few hours on MTM Party day.

Meanwhile, GLD has been spilling its guts. Down to just 1,200.37 tonnes from its peak of 1,353.35 exactly four months ago. I wonder where those 153 tonnes went. Remember: for every seller there is also a buyer. And for every sale, there must be a purchase. So when you hear someone saying "sale", think "purchase", and if they're trying to say that the sale of physical from GLD explains (or is explained by) the price decline, just remember that there's much more paper being sold than physical. ;D

This is an open forum, but I'm going to give you a couple of recent discussions that I had in private to set the mood. These are topics that came up in the last thread of comments, which is why I decided to publish them here. The first one is my personal view of GLD, and the second one is about the GOR or the gold:oil ratio.

Do you remember this lead-in from FOA on 10/10/01?

"(pulling a cloth from my pocket and cleaning my glasses while talking)

On most parts of this Trail, I could walk with my eyes closed; while in other areas I would need six maps and two GPSs units just to know north! Right now, I can tell ya what's most likely out there, but in those strange areas; not really sure?"

That's kind of what this post is. While the two topics below will seem like they could each be their own post, there's a good reason why I dumped them here in an open forum. My blog is a tribute to the thoughts of Another and FOA, and these discussions fall a little bit outside the scope of the archives they left behind. So they are a little more speculative, more like my view, as opposed to theirs, but still my view as it has developed with a constant focus on their view. So take it for what it is, and that means with a grain of salt. ;D

In this first discussion, I attempted to explain my view of GLD to a friend. I am well aware of the consensus view or standard explanation of how GLD operates. I am also aware that it is considered indisputable and even fact by most industry professionals. The consensus view is basically that GLD buys and sells bullion based on an arb that the Authorized Participants (APs) take advantage of. If sellers beat GLD so hard that it trades below spot (i.e., below its Net Asset Value or NAV), the APs will buy GLD shares and redeem them for metal which they then sell and make the spread between the GLD price and the spot price. The same works in reverse when GLD trades above spot and the AP buys physical, puts it in GLD and sells the shares earning the spread. This is how GLD "tracks" the metal over time, or at least that's the consensus view assumed by most everyone to be indisputable fact.

My view is a little different. It is not a conspiracy theory, simply a different view. If you can entertain it, even without accepting it, then perhaps you can judge for yourself which of the two views does a better job explaining what we see happening in reality, what actually is indisputable fact.

GLD – The Coat-Check Room View

Hello Michael,

Re: "I currently have a gap in my understanding of how the BBs would acquire the shares of GLD necessary to drain the fund's inventory when they are in need of physical gold."

It looks like the pukes all fit comfortably inside their day's trading volume. So if the BBs need some physical fast, they should be able to just buy the shares as long as they are OK paying above the NAV to get it. But perhaps they don't even need to. Here's a paragraph taken right out of the GLD prospectus. Read it carefully and then tell me what you think. Seems to me that any AP can withdraw any amount of physical up to that which its own clients are holding in GLD shares:


Individual certificates will not be issued for the Shares. Instead, global certificates are deposited by the Trustee with DTC and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the Shares outstanding at any time. Under the Trust Indenture, Shareholders are limited to: (1) DTC Participants; (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant, or Indirect Participants; and (3) those banks, brokers, dealers, trust companies and others who hold interests in the Shares through DTC Participants or Indirect Participants. The Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their Shares through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through which their Shares are held) to transfer the Shares. Transfers are made in accordance with standard securities industry practice.

As far as the Trustee is concerned, all of the GLD shares are registered "in street name" which means "Cede & Co.", the nominee for DTC. And as far as DTC is concerned, the shares are shuffled around electronically on the DTC "books" between the banks and broker dealers, many of whom are also Authorized Participants in GLD.

Now please just think about this for a while. And then think about it in light of what Randy Strauss wrote, which I quoted in Who is Draining GLD:

"These are NOT actively managed funds whose gold inventory is tweaked to ebb and flow based on public sentiment in the shares. Instead, the ETFs are more like a central coat-check room in which the various bullion banks have temporarily hung out their own inventories (i.e., meaning, their unallocated stock which they hold loosely on behalf of their depositors). And whereas the claim tickets (ETF shares) may freely circulate on the open market, any significant outflow of physical inventory is simply and primarily indicative of a bullion bank reclaiming the original inventory based on a heightened need or desire for physical metal in a tightening market — for example, to meet the demands emerging from Asia."

That post was a popular one, but even to this day, more than two years later, I don't think that 99% of the people that read it understood my main point. It requires a slight shift in perspective, and I think that with this shift, a lot of what we've been discussing recently will come into focus. And after you've given this "coat check room perspective" some thought, consider these emails from Ari which I used in The View: A Classic Bank Run. I think they will help tie it all together in a comprehensive view of the BBs and their unique position at the center of the universe for all things forex, XAU, "gold", Gold and even GLD:

"A bank can be "populated" with unallocated gold accounts in two primary ways. It can either be done as a physical deposit by a silly person or by another corporate entity, or else it can occur completely in the non-physical realm as a cashflow event whereby a customer with a surplus account of forex calls up and requests to exchange some or all of it for gold units, whereupon the bank acts as a broker/dealer to cover the deal – occurring and residing on the books as an accounting event among counterparties rather than as any sort of physical purchase. No bread, no breadcrumbs, only a paper trail and metal of the mind. This is how the LBMA can report its mere subset of clearing volumes averaging in the neighborhood of 18 million ounces PER DAY. Just a whole lot of "unallocated gold" digital activity as an ongoing counterparty-squaring exercise.

It is here that I offer the eurodollar market as a very good parallel to the bullion sector of banking. While not a perfect parallel (for all the most obvious reasons) it provides a remarkably good bridge to help anyone who has a good footing on modern commercial banking to successfully cross over to that seemingly unfamiliar territory of "bullion banking". In fact, they need do little more to successfully cross over than to simply think of bullion banking ops as though they were eurodollar banking ops – the difference being that whereas eurodollar banking makes extra-sovereign use of the U.S. dollar as its accounting basis in international banking activities (thus outflanking New York's purview and restrictions), bullion banking engages in similar "extra-sovereign" use of gold ounces within its operational/accounting basis (thus outflanking and overrunning Mother Earth's domain and tangible restrictions).

And just to be sure we're on the same page, the eurodollar is not to be in any way confused with the euro, but rather stands to mean the artificial supply of "U.S. dollars" that "exist" as accounting units in off-shore banks, having originally been authentic deposits of New York's finest export, but which were then subsequently lent on – fractionalized and derivatized into a vast amorphous mass as only a network of cooperating banks can do best."

I'd like to draw your attention to two phrases Ari used in those emails I posted:

"…an ongoing counterparty-squaring exercise…

…a vast amorphous mass as only a network of cooperating banks can do best."

I think it's best to think of the banks' primary job as being that of a middleman, bringing buyers and sellers together, more so than to think of the banks as the direct counterparty their customers. And like banks do maturity transformation in traditional banking, these banks can also do "other kinds of" transformation in their "ongoing counterparty-squaring exercise" which, if you could see it all laid bare, would look like "a vast amorphous mass as only a network of cooperating banks can do best."


The APs are market makers. Your "ownership" of a GLD share is recorded in their books (or your broker's books and then your broker is listed in the AP's book). It is your credit and their liability. As far as the GLD Trust is concerned, the APs own the baskets which means they own the gold. Kind of like saying a bank "owns" its reserves. It's not a scam. It's not a conspiracy. It's just the way it is. If you can adjust your view, this will all start to make sense. I'll send you more as time allows, because this is one of those things that has been bugging me for two years… that no one seemed to understand the implication of that post.


Re: "They do need the shares to redeem the basket right?"

They already have the shares. The shares are already in their name at the DTC. So they can put in physical or take it out as needed. It is a choice they make. And it is not a choice based on the gold price, the discount or premium to the NAV or the popularity of GLD as is the common explanation for pukes and additions.

"These are NOT actively managed funds whose gold inventory is tweaked to ebb and flow based on public sentiment in the shares. Instead, the ETFs are more like a central coat-check room in which the various bullion banks have temporarily hung out their own inventories…"


Underneath this "amorphous mass" the BBs have a second job—managing the flow of physical gold. This flow has incoming and outgoing. Incoming includes supply from refineries, mints, mines and scrap supply as well as any physical gold deposits. Physical deposits are what Ari referred to as "a physical deposit by a silly person or by another corporate entity." ANOTHER put it like this: "In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion." So physical deposits are essentially someone giving up their allocated in exchange for unallocated (tradable) credits. That's the incoming.

The outgoing is the allocation and shipments of real physical gold. Here's how I clumsily explained it two years ago in The View: A Classic Bank Run:

"So, imagine two "gold windows" at the Bullion Bank. One is marked "incoming" and the other is marked "outgoing." At the "incoming window" you have "the West" lined up to turn in their physical gold for exchange-tradable paper liabilities. And right around the corner you have "oil" lined up taking delivery or allocation. It is this flow that allowed the oil for gold deal to go on as long as it did. But then something happened.

The thing was, the incoming flow from the mines was not exploding as hoped and expected. And the overall flow from the mines combined with the Western gold bugs puking up their private stashes was nothing compared to the sheer volume of the "oil" wealth in line around the corner. At the current price there was literally unlimited demand at the "outgoing" window and a limited supply coming in. This is what Another meant when he wrote that the oil states had already (almost inadvertently) cornered the gold market by 1997."

The BB's "second job" of managing this flow is not unlike a regular commercial bank in 1933 managing its gold coin reserves. If the reserves get too low, it needs to find more. Normally it does this by borrowing them from its central bank. But in a general bank run, even the central bank doesn't have enough reserves, which is when the people get a "bank holiday". At least that was the case before 1934.

The idea of central banking grew out of the need to pool excess reserves to avoid the unnecessary hassle of having to shop around for reserves when they are needed. A central bank is a kind of a gentleman's club or trade union in which the member banks are actually the owners and users. And in this way, GLD is very much like the central bank of the BBs in a pre-1934 sort of environment.

Unlike the physical gold that I like to buy which has a subjective value, GLD shares have a decidedly objective value. That objective value is the NAV (net asset value) ÷ the number of shares outstanding as reported (and revised) by the Trustee. The NAV is simple. It is the dollar price of an ounce of paper gold times the number of ounces held in the Trust. So if I, as a bullion bank, remove some physical from the Trust, this reduces both the number of ounces in there and the number of shares outstanding as reported by the Trustee. The market price or value of a share doesn't change. But the real value of a share changes because I have some inside information that the shareholders don't have.

Do I need to report any new short sales of these shares? Nope. No one has short sold any shares. And yet I now know that there are more shared on my books than I have in reserve. So the price isn't too high, just the number of shares believed to be held by my clients is too high. And those "shares" are actually my liabilities of GLD shares to my clients. In other words, my GLD share liabilities to my clients now exceed my GLD share reserves.

What I have to do now is buy back those excess liabilities and, as a market maker supplying a bid and offer spread to my clients, I might just be able to accomplish my goal entirely in-house simply by accommodating more sales than buys over a few days. In the meantime, I can offset my price exposure by incorporating it into my hedging operations for my much larger OTC (FOREX/XAU) side of the business.

Here's how I clumsily explained the objective value of GLD two years ago in Who is Draining GLD:

"GLD is designed to track the price of gold. It is not actively managed to track the price of gold. Instead, it does so through opportunities that arise whenever it doesn't. Imagine GLD as a big lump of gold just sitting there in Town Square. The price of gold is "discovered" elsewhere and shares in this big lump just trade based on that elsewhere-discovered price. If the share price is too high, then an opportunity exists to sell your share and buy "gold" elsewhere. Likewise, if it is too low, there is an opportunity to sell elsewhere and buy into this lump on display."

I find it useful to think of the flow of physical gold (i.e., the physical portion of the overall gold market) as separate from the paper gold market. Not that it's a separate market with a separate price—parity must be maintained—but that it's simply a flow that must be maintained and it is not an integral part of the price discovery mechanism that we call the overall gold market.

The reason price parity must be maintained is because without it the paper gold market won't function for its majority users, the "FDIC sticker" crowd. Here's where that reference comes from:

FOA: "What doesn't seem to be obvious is the "why for" the paper market grew so large. It grew to dominate because worldwide dollar expansion reached its "non-hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into sight.

In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work these items don't need to really perform "dollar price movements" in the holders favor as much as they are present in the portfolio to act as insurance stickers.

In that truth, these paper gold positions act like FDIC insurance at our banks. It can and will manage only a small determined portion of bank runs,,,,, not a full scale failure of the banking system. In a real full banking failure we would all get, perhaps, 80% of our covered $100,000 and 10% of the rest.

The same is true for these gold position's performance; real gold delivery along with true price performance, matching real bullion trading, would be only for the very few. For that matter, an actual functioning paper gold marketplace would be for the very few, too! But, in the same way a bank account owner understands the credibility of FDIC insurance when times are good; the international dollar asset owner will not grasp that modern paper gold hedges cannot be allowed to work until after a real serious price inflationary run begins."

The reason I view the physical portion of the gold market as something separate from the overall gold market is because demand for physical exerts the opposite effect on the overall market as demand for paper gold. Demand for paper gold supports the cohesion of the overall gold market and demand for physical stresses it, IMO.

What I picture in my mind is like a subterranean stream. This stream is the flow of physical gold from the mines and refiners (and all other physical gold inputs combined) into the BBs and then on to the East, "oil" and the old world Giants. With the BBs in the middle, there is always some flow coming in and some going out. And during whatever time the gold spends (or "eddies") in the possession of the BBs on its journey, it could be considered the BB's reserves (the slack in their rope). The rest of us trading paper gold look at that swirling "eddy" of BB gold and believe we have a valid bid ticket for our portion of it, even though 20 others believe the same thing. We think, "all I have to do is bid a little higher and take it! Insane, but that's what is going on! Somehow, the BIS and the major private gold holders know the total claims, as does Another. The Euro group is going to force those claims into real bids instead of just claims!" (FOA)

Over time (say, through the 80s and 90s), the size of the BBs' eddy of gold will stabilize, and then it will appear to just sit there. Everyone can look at it and say, "wow, look at all the gold those BBs have!" In fact, the very same pieces (bars) may lie very still in the same place for years and decades even, creating the illusion that they are no longer part of the subterranean flow. Once stabilized, the incoming gold is simply matched up with the outgoing and the eddy appears almost separate from the stream. But it is not.

Now picture this eddy bubbling up to a surface pool, visible to all. From the paper gold surface it appears to be a pool of still water (a hoard of physical gold lying still), but what is unseen is that the pool is actually connected to a subterranean stream deep below the surface. From time to time the level of the pool rises and falls, revealing that there's something going on under the surface, though few understand what is actually happening down there.

To most eyes, this is simply a large hoard of gold just sitting there. And there is a time value to such a hoard. Gold bars don't generate offspring, but dollars do. Enter the "coat check room idea" c.2004.

That gold "hoard" wasn't "sold to the public" as it wasn't actually owned by the BBs in the first place. It was simply their reserves, the slack in the flow, that portion of the flow of physical from one owner to its next owner that is in the temporary possession of the BBs at any given time. If enough of the global flow passes through the BBs, and if that flow is big enough, and if the portion in their possession can be stabilized, then it can appear to lie still and be "owned" by GLD investors even as it is really only an illusion of the management of the slack in the flow. This is the "coat check room" view.

I think the utility of a view or a perspective is in how it explains or clarifies what we see, and how it helps us understand events as they unfold. It is like a lens that we can look through, and it is possible to have multiple lenses in order to check the focus and field of view of one versus the other. Yet most people simply pick one lens, usually one that was handed to them or the one that everyone else seems to be using, and stick with it and it alone. It's like buying an SLR camera with an interchangeable lens and only ever using the lens that came in the box, never trying a wide angle or a really long lens.

FOA: "I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future, grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light."

I just love that quote because it explains this concept of the lens in a way that disarms the critics. It's like, "here's a lens, stick it in your bag, and then maybe someday when you can't make sense of what you are seeing you'll try it on again and everything will suddenly come into focus." He's not saying, "here's the right lens for all situations, so you might as well throw away yours and superglue this one onto your camera." But like I said, it's tough to get some people to even understand that the lens that came with the camera is even removable/interchangeable.


So back to our "coat check room" lens. When I put this lens on my camera, some funny-looking things come into focus. For example, if this view is correct, then one implication is that these pukes or redemptions could actually be happening in the exact opposite direction or chain of events than the standard explanation implies (e.g., physical delivery or allocation in excess of the incoming flow is promised to someone, then it is "removed" from the Trust through a technical basket redemption, then the BB's GLD share liabilities are bought back from the public). You see this. I can tell from your replies. And yet you are still looking for some arb mechanism or some link that maintains the parity between paper and physical. What I see is that none is necessary. What I see is all that is necessary to maintain parity on the surface is that the subterranean stream doesn't run dry.

Now there are two separate things here. There is what the view reveals, the picture I see, and then there are the unseen things going on behind the scene that I can only speculate about. For those things unseen, I try to come up with a plausible explanation that fits. That doesn't necessarily mean the unseen is happening exactly that way, but it lends its plausibility to the picture and to the lens. Above, I said that redemptions could be happening in the opposite direction. But that doesn't mean that ALL redemptions MUST be happening that way for the view to be correct. Some could be happening in the standard explanation direction as well. So with this view we could say that the lens that came with your camera is not necessarily lying to you, it just isn't showing you the whole picture [if the "coat check room" view is correct].

My blog is a tribute to A/FOA, so they are my primary lens for all things within their field of view. Unfortunately GLD didn't even exist when they were writing, so I can't claim that this "coat check room" lens is precisely the same lens. In fact, it would be a mistake to assume that I give the "coat check room" view equal weighting to the A/FOA view. I certainly try to avoid giving that impression. So if I seem a little hesitant to write more extensively about the GLD pukes, or if I seem to hold back a bit of my view when I do, that is why.

Ari is my closest proxy to A/FOA, and I know through email exchanges that he shares this view of GLD which gives me additional confidence in it. Plus, of all the competing GLD lenses (I can think of two or three others if I count the ones that say there's no actual physical in the ETF), I think this one fits best with the A/FOA view, and I think it explains what we are seeing better than the others.

Anyway, the point I'm trying to get to is that fitting this view with the A/FOA view and the big picture of what we see happening today leaves me with two primary mysteries. The first is why and how a trend developed such that Lance Lewis picked up on it and even gave it a name. And the second mystery is how and why the subterranean stream hasn't frozen up yet, seeing as it was essentially cornered by the East back in 1997.

The best, simplest and most fitting explanations that I have found for these two mysteries come from Ari and Another respectively. When I add them to the big picture, I have a full view (perspective) on what is happening today that suddenly makes more sense than anything else I've seen. Whether it is exactly what is happening today is uncertain, but I have yet to see another view that even comes close to explaining everything we see.

The first mystery is why and how the price of gold tends to rise for a period after large GLD redemptions. Lance labeled it as an indication of a "significant bottom" in gold. But I'm not sure that is correct. As you pointed out, we had some large redemptions (pukes) in August 2011 near the peak. So if it's not a bottom symptom, what is it? Could it be a stress symptom? Could it simply be the visible symptom that the outgoing flow of physical suddenly overwhelmed the incoming supply?

Now it generally happens after a drop in the price of gold, even though that's not what happened in 2011. So, with my view, that would indicate a lack of demand for paper gold. In Aug. 2011 there was plenty of demand for paper gold, and then it suddenly dropped off a cliff. One explanation for that could be that the tremendous build-up of XAU paper we saw in Q1 of 2011 on the survey had to be unwound when the demand suddenly fell. Perhaps too much paper was created in Q1, preventing the price from exploding during that quarter, then when paper demand suddenly fell, the price rise seen in July and August couldn't (and didn't need to be) maintained (levitated) artificially.

But, perhaps, when the price drops in the absence of a prior large paper expansion and a subsequent (almost parabolic) price run-up, a drop in XAU paper demand (like we saw in May 2012) is more threatening to the physical flow and some sort of official support is needed at that point to prevent it from spiraling out of control. I'm talking about the combination of overwhelming physical demand which stresses the cohesion of the overall gold market combined with low paper demand giving it no support. See my posts The Two-Legged Dog and Legs for more of my thoughts about "official support" for paper gold.

As I mentioned earlier, I think that the BBs can manage "too much paper demand" on their own. They can normally keep the price from rising too fast in the face of more buy orders than sell orders by simply expanding the paper supply and delta hedging their exposure in another part of the gold market or even in correlated markets. But I think they have less control when the bottom drops out of the demand for their paper (more sell orders and very few or no buy orders). When that happens, if "artificial support" is required (for whatever reason), I think it must come from an external source with a motivation other than profit from the trade, like a CB.

And this is where Ari's "Snapshot day" theory comes into play. If that view is correct, then why not on pukes too? Perhaps (and this is just a guess), ever since late 2008 there have been two main times when the CBs step in and buy up some paper XAU on the exchanges to fill in the lack of public demand: for Snapshot days (but only when needed) and for GLD Pukes (when needed). We could call this the "official support" explanation. And, if you can accept it as plausible, I think it explains the trend better, more simply and more completely than the other explanations.

Now back to that subterranean stream. Even with the pukes, there must be some explanation as to how and why it's still flowing. If the demand was as high as Another says it was in the late 90s, and now the mine supply is roughly the same while the mines are no longer hedging 10 years out and the CBs are no longer "primary suppliers" then where is all the gold coming from to keep it flowing? This is the second mystery, and I believe that Another gave us the answer. It may be just as hard to swallow as "official support", "coat check room" and "snapshot day" for mainstream analysts who can't afford to utilize these lens, but if you accept it as plausible then it becomes the final missing piece of the puzzle. And that answer is gold *IN SIZE* being traded at a huge premium to spot and a discount to the expected revaluation price.

When Another said that the flow of physical gold was cornered, the attribution of the corner went to the Giants, both Asian (Big Trader) and Middle Eastern oil (the Saudis). If you can just satisfy these two players then the flow from the mines must be enough, as evidenced by the fact that the LBMA continues functioning today.

Earlier I mentioned that I like to think of the banks as middlemen, pairing buyers with sellers (buyers and sellers who may never meet each other), rather than the banks being the direct counterparty to each of their clients. And this view extends to the BIS brokering these *IN SIZE* deals as far as I'm concerned.

So imagine that the CBs (aka the BIS), working through a "third party" who would be the broker, finds people with gold *IN SIZE* who would be willing to part with it at a HUGE premium to the LBMA price, and they match these sellers with the Giant buyers on the other side. Both sides are getting a deal in the present, but the Giant buy side would have to be given some assurance of an inevitable revaluation. That's the catch that I can see. There must be a credible promise given. The alternative is that the Eastern Giant simply buys paper gold, as much as he wants, but for a Giant that wants physical, there must be an assurance of some kind.

Or maybe they didn't need to find Giant sellers. Maybe the ~2,100 tonnes sold by the European CBs (including the BOE) since 1999 was enough at the right price. I don't know and I don't even pretend to know. But that only takes care of the supply side. The demand side, if Another was right about gold being cornered, must have received a credible promise of some kind. And this implies a plan which implies a target date for "assertively rolling forth the freegold paradigm" as Ari wrote in 2010.

When I put all of these pieces together, they fit together like a puzzle and present a clear picture even in the absence of A/FOA's guidance for the last 11 years. The fact that it all fits together while remaining logically consistent, as well as consistent with A/FOA and what we see happening, is the best evidence I have that it is the correct view. That, and also the fact that I have yet to see another lens that explains everything plausibly and comprehensively.

Everything fits, especially Ari's read of the central bank discussions around 2005 that seemed to be pointing to 2010 as the next window. And then pushing it back after the financial crisis in 2008. And assuming that no one wants to intentionally crash the current system, which I do assume, then they must be confident that the removal of support is all it will take. And they would know this because they would also know the level of support they had been providing. The more support necessary to prop something up, the more confidence you'd have that the mere removal of support would bring it down, enough confidence, perhaps, to make assurances that would be credible enough that they would actually work to prolong the system until your targeted window. Which brings us to today.

In addition to Ari's intuition and the January 4th snapshot day, we now also have a significant string of GLD redemptions without the timely (mysterious) levitation we've grown used to seeing in the past. As Victor has been pointing out, if this time was to follow the pattern of last time (March 2012), then we should have seen a $100 increase in the $PoG by March 4. That would have been at least $1,675, instead it went nowhere. I'm not making a prediction here, just pointing out the obvious signs.

Michael, you wrote:

"My gut feeling is that 60 tonnes/week is stressful but not at the limit, and that the limit would be more like 150 tonnes in a week, and that would about hold whether it occurs in a day or evenly distributed through 5 days. But another sign of stress would be if GLD gets drained at a slow but steady and continuous rate such that its inventory drops below the 1200-1300 range. Below 1070 would be my first level to watch, and below 700 would be trouble."

I view the pukes as a visible symptom of stress under the surface. I doubt that we can accurately judge the level of stress by what we see. I think we can only know that there is stress.

Unlike a well-made, good quality glass lens, a crystal ball provides only a highly distorted, bubbly-looking image. When I look through my crystal ball right now, what I see is that we won't get to see GLD whittled down even to those ranges you mentioned. As I said above, these redemptions could be happening in a chain of events that is the reverse of what you'd normally expect. First the gold is promised to someone, then it is taken out. And if this is the case, then I'd expect at some point it all gets "promised" at once and then the music stops, the "price" is frozen and the shareholders cashed out. From my old post, The Waterfall Effect:

"The Waterfall Effect describes the "overnight" collapse of a complex system, without even the forewarning of a run up (like gold in 1980 or the dot com run up). The following two graphs demonstrate this effect as seen in the collapse of Roman money in the 3rd century AD…"

"…Entropy is the amount of chaos, disorder or unknowable elements in any system. A system has low entropy when it is highly organized, ordered, controlled, contained, and all the elements are known. A system has high entropy when it is disordered, chaotic, out of control, and many elements cannot be known. Science teaches us that everything in the universe ultimately ends in absolute entropy (chaos) through the passage of time. In other words, ashes to ashes and dust to dust.

One thing that can affect the natural progression of entropy along the way is adding energy into a system. In certain closed systems with a high degree of order and control, adding energy can actually reduce entropy, increasing organization and order. This can be seen in the wonders of life and reproduction. In the closed system of a baby, we add energy (food) and watch it grow. Ultimately, though, entropy wins out and we return to dust.

But adding energy to a system usually has the opposite effect. It speeds up the journey to absolute entropy. This can be seen in an explosion. A bomb can take an entire building from low entropy to high entropy in a fraction of a second…"

The point of mentioning this concept from an old post is that I imagine the graph of GLD inventory will ultimately look more like a waterfall than a gently-sloping stream.

You also wrote:

"FOFOA, if I understand you correctly, you are saying that GLD will always track the XAU price, and only the XAU price. Thus, GLD would be entirely drained of gold before the gold-XAU parity is broken."

A few things here… First, why is there any discussion about GLD tracking the price of gold? It tracks the price of gold because it has an objective value that includes the price of gold in its calculation formula. It tracks the price of gold because an arbitrage opportunity arises when it doesn't. An arbitrage opportunity arises because arbitrageurs believe an arbitrage opportunity arises, simple as that. It is either an actively managed fund or it is not. I think it is not. And I think the arb that keeps it close to the Comex POG is an all-paper arb simply because people (arbitrageurs) believe the opportunity is real and therefore make it real.

Second, yes, I think GLD would be de facto drained and trading stopped before parity is broken. And I expect that would all happen while you are asleep. From Unambiguous Wealth 2:

"And this is a key difference between the average guy and the big money. Big money isn't used to being kept waiting. Big money owns the "bus company". They know the buses aren't going to run before the little guy. They panic early. There was an electronic bank run around the time of the Lehman collapse. That was one of the reasons why governments around the world stepped in with fresh deposit guarantees. But there were no lines outside the banks to alert the average guy to what the Giants were up to…

There's only one way to beat the Giants to the gold, and that is to run in front of them."

Lastly, keep in mind that the price you see is a derivative (the product) of sales that already happened in the past. To us shrimps it appears to be the price of the immediate future, that is, it is the price we'll pay right now if we choose to execute our purchase. But this is only a shrimp illusion. In reality the quoted price (bid and offer—it's actually a spread and not one price) is the result of sales that already transpired.

Imagine you are a hypothetical Giant with a few billion in your briefcase and you want a lot of gold. So you fly to London and somehow get yourself in to observe the daily fix. You are waiting, calculator in hand, to hear them quote you the price you will pay for your gold, since the fix is supposedly the cash price of physical. So they call out the AM fix and you immediately step up with your cash to take advantage of this awesome deal. What do you think happens next?

Or let's say you don't care to fly to London, so you just phone up the bullion desk at JP Morgan where you've got $5B cash sitting in your account after you just liquidated your APPL shares and BTC. Let's assume you get the bullion desk on the phone just based on your name without the guy actually looking at what's in your cash account. You ask him to quote you a price for gold. He asks, "are you buying or selling." You're a clever guy so you ask, "what does it matter?" He says, "OK" and proceeds to quote you two prices, one for buying and one for selling. You immediately say, "I'll take 100 tonnes, allocated." What do you think happens next?

Let's say you're really clever and figure out how to get a lot of physical all at a good price, rather than buying over time as most Giants do. You're a little late to the big game and you need to play catch-up! Let's say you read FOFOA, you understand Freegold, and you believe my bellwether who says the technicals suggest the $PoG is heading to somewhere between $1,050 and $1,250 by the end of 2013 (he actually predicted that). Just to be safe, you figure that a price of $1,450 for all of it will make you happy!! So how would you do it?

Well, the way to do it is to lock in your price on the FOREX. If you can buy paper gold at $1,450, then you can take your time buying physical wherever you can get it, at any price, and then sell off your XAUUSD position in bits and pieces concurrent with your physical acquisitions. Even if the price skyrockets to $2K you'll still be getting it for $1,450 because the paper you'll sell will be $2K at the time you sell it. You've locked in your price!

The first problem you will encounter is that your "footprint" is too large, even for the FOREX. Your limit order of 100 tonnes at $1,450 will only be partially filled and then the price will skyrocket. You see, as the price hits $1,450 it is only a reflection of past sales. Sure, it is an offer price, but all you will get is whatever has already been offered by sellers on that exchange at $1,450. And that's just paper!

Anyway, enough hypotheticals. But I will note that it seems paper gold is used in this way to accumulate some physical. Once you own paper gold, even XAUUSD, you can either ask to have it allocated by the bullion bank and find out what they say, or you can simply use it as a locked-in price and sell it off as you buy your physical closer to home, on a slower timeline, without worrying about price changes.

I guess my point is that the price we see is always the price of the past, it is never the price of the future. And also that there are many ways the physical flow can be stressed even if the BIS has the biggest Giants in check. If enough "clever" small giants were doing this, I could imagine it would tug on the LBMA through the dealers' network. Then again, I'm sure that none of these "small giants" read FOFOA or understand Freegold, so it's probably just something else that's stressing the subterranean flow right now. Perhaps official support has been withdrawn.

Alright, I think that's enough of "my view" for today. ;D


GOR – The Gold Oil Ratio

Two years ago I started thinking about the GOR (gold oil ratio) and how it has been relatively constant ever since an American oil company first struck oil in Saudi Arabia. (Read more here. See also US Mints ‘Gold Disks’ for Oil Payments to Saudi Arabia.) Then about a year ago, while I was working on Peak Exorbitant Privilege, I noticed a correlation between the GOR and "the privilege". (Important: Always keep in mind that correlation does not necessarily imply causation.)

I don't pretend to know if the USG "wants" oil prices higher or lower. There's an argument that high oil prices support the strong dollar and the perpetual US(G) deficit, but it's a double-edged sword. What I do know is that the dollar reserve system needs oil and gold to remain correlated commodities as they have been for the last 67 years. So I think the $PoG is kind of stuck where it is right now. If gold rises, oil needs to rise in tandem or else it's curtains for the dollar reserve system. But if oil rises too much, then it's probably curtains for the dollar anyway. And if paper gold falls, well, you know what I think about that. It's what I call a Catch-22. A no-win situation for the dollar at present. It can't afford a big movement of either in either direction, IMO.

The GOR ranged from 9 up to 29 for the last 67 years. What I noticed while writing Peak Exorbitant Privilege was that the extremes of that GOR range correlated with times when the US exorbitant privilege apparently retreated quite a bit. It seems that somewhere around 15 in the GOR is the sweet spot for the $IMFS, and dropping below 9 or up to almost 30 was somehow stressful on the $IMFS (or at least indicative of stress) and something had to give. Of course, if you understand ANOTHER (which I think I do), the GOR will gap up or phase shift from this range to around 1,000 when gold is revalued in real terms. But maybe we should call that the FGOR since comparing it to the GOR is like comparing apples to oranges. Anyway, I guess I am expecting the GOR to plunge from 16 down to around 9 in the final moments before revaluation. That could either be the paper gold price falling below $900 or the oil price rising to $200. Either way, I think it will portend imminent transition to the new Freegold paradigm.

Here's the GOR data going back to 1946, the very time the world's largest oil refinery first went into production as a joint operation between the Saudis and the American oil companies (Saudi Aramco):

Annual Average

Gold and Crude Price

# of bbl Oil 1 OZ Gold will buy
Year Average $/bbl Average $/oz Ave bbl / oz
1946 $1.63 $34.71 21.294
1947 $2.16 $34.71 16.069
1948 $2.77 $34.71 12.531
1949 $2.77 $31.69 11.440
1950 $2.77 $34.72 12.534
1951 $2.77 $34.72 12.534
1952 $2.77 $34.60 12.491
1953 $2.92 $34.84 11.932
1954 $2.99 $35.04 11.719
1955 $2.93 $35.03 11.956
1956 $2.94 $34.99 11.901
1957 $3.00 $34.95 11.650
1958 $3.01 $35.10 11.661
1959 $3.00 $35.10 11.700
1960 $2.91 $35.27 12.120
1961 $2.85 $35.25 12.368
1962 $2.85 $35.23 12.361
1963 $3.00 $35.09 11.697
1964 $2.88 $35.10 12.188
1965 $3.01 $35.12 11.668
1966 $3.10 $35.13 11.332
1967 $3.12 $34.95 11.202
1968 $3.18 $39.31 12.362
1969 $3.32 $41.28 12.434
1970 $3.39 $36.02 10.625
1971 $3.60 $40.62 11.283
1972 $3.60 $58.42 16.228
1973 $4.75 $97.39 20.503
1974 $9.35 $154.00 16.471
1975 $7.67 $160.86 20.973
1976 $13.10 $124.74 9.522
1977 $14.40 $147.84 10.267
1978 $14.95 $193.40 12.936
1979 $25.10 $306.00 12.191
1980 $37.42 $615.00 16.435
1981 $35.75 $460.00 12.867
1982 $31.83 $376.00 11.813
1983 $29.08 $424.00 14.580
1984 $28.75 $361.00 12.557
1985 $26.92 $317.00 11.776
1986 $14.64 $368.00 25.137
1987 $17.50 $447.00 25.543
1988 $14.87 $437.00 29.388
1989 $18.33 $381.00 20.786
1990 $23.19 $383.51 16.538
1991 $20.19 $362.11 17.935
1992 $19.25 $343.82 17.861
1993 $16.74 $359.77 21.492
1994 $15.66 $384.00 24.521
1995 $16.75 $383.79 22.913
1996 $20.46 $387.81 18.955
1997 $18.97 $331.02 17.450
1998 $11.91 $294.24 24.705
1999 $16.55 $278.98 16.857
2000 $27.40 $279.11 10.186
2001 $23.00 $271.04 11.784
2002 $22.81 $309.73 13.579
2003 $27.69 $363.38 13.123
2004 $37.41 $409.72 10.952
2005 $50.04 $444.74 8.888
2006 $58.30 $603.46 10.351
2007 $64.20 $695.39 10.832
2008 $91.48 $871.96 9.532
2009 $53.48 $972.35 18.180
2010 $71.21 $1,224.53 17.196
2011 $87.04 $1,571.52 18.055
Average 14.771

Consider that the GOR peaked at 29.388 in 1988. That peak correlates with a dramatic drop-off in the US trade deficit from more than 30% of total trade in 1987 down to only 5% by 1991:

Here's the data from that exorbitant privilege chart which was explained in Peak Exorbitant Privilege as the percentage of US imports paid for with paper promises rather than actual exports:

1970 -4.14%
1975 -10.32%



What drew this correlation to my attention was that there is also a dramatic drop-off in the US trade deficit that corresponds with the two times the GOR hit the bottom of its range as well. So I’m considering whether both extremes might be somehow tough on the $IMFS (or at least indicative of stress—an effect or a cause of the stress?). In 1976 the GOR hit 9.522, its lowest point in 30 years, and the US trade deficit subsequently fell from 15% in 1977 down to 5% in 1981. And then in 2005 the GOR hit its lowest point ever at 8.888 which preceded a drop in the trade deficit from 35% in 2005 to 19% in 2009:

Is it possible that the correlation may have something to do with the ability of our trading partners to save their surplus production revenue? If you think about the oil price as, in general, a representation of or proxy for the general price level of goods flowing to the West, and the (paper) gold price as the determinant of the eastward flow of physical relative to the westward flow of gold, it starts to make a little sense.

With a low GOR, general prices are relatively high providing a high income to the producers, but with a low paper price for gold, the underlying physical flow might be relatively tight. So while the net-producer can get more gold by weight with his relatively higher surpluses, the Superproducer finds it difficult to get the larger quantities of physical his currency profits are telling him that he should be able to get. Notice I'm not talking just about oil Superproducers. With a low GOR everyone will have higher profits in real (gold) terms.

Look at the prices of oil and gold in 1976 and 2005 above. Oil was very high relative to gold, so oil currency profits should have brought in massive amounts of gold (by weight). But if that massive tonnage of physical gold was not readily available, this would stress the system and something might have to give, like, say, the US exorbitant privilege.

With a high GOR, on the other hand, the general price level is relatively low and, presumably, paper profits are also relatively smaller (at least relative to gold by weight). So while the Superproducers face no problem getting all the physical their paper profits say they should be able to get, they are also concerned that they are getting relatively less gold (by weight) and that, *once the (paper) GOR reverts back down to its mean*, their foregone purchasing power during that high GOR period will have been cut in half. So, perhaps, they spend more of those overseas dollars in the present which then make their way back to the US, raising the general price level and decreasing the US trade deficit.

The bottom line is that our international monetary system has needed a revaluation in the real price of gold (not just the nominal price) ever since WWI (see Once Upon a Time for more on what happened in the 1920s). That’s a monetary revaluation of gold and a monetary devaluation of the dollar (as opposed to devaluing the dollar against everything else). In 1971 they opted instead to raise the price of oil and everything else for reasons we now know (thanks to ANOTHER). But today the problem is a bit more complicated. Today they really need a gold revaluation (only physical gold revalues and nothing else).

As I have said in the past, every ounce of physical gold in the world is owned by somebody. Even the gold in the ground is ultimately owned by the sovereign of that land (in extremis). So, in essence, every last bit of physical gold in the world represents a counterpartyless asset. What this means is that a revaluation of physical does not increase anyone's liabilities. Paper gold is another story.

If paper gold were to be revalued along with physical, the increase in the nominal (meaning in terms of dollars) liabilities of the bullion banks would break the system. But what about a gradual rise in paper gold to, say, $3,500 per ounce? At a GOR of 15 that means an oil price of $233 per barrel. At a GOR of 30, oil would still be almost $20 higher than it is today and then something would have to give.

This view fits with everything else that I expect to ultimately unfold. So it seems like today's (quote-unquote) "gold" can't go much higher or lower without ushering in the new financial architecture. Sometimes I wonder if that's why we've been stuck here at $1,600 for a year and a half now. If I was supporting the current system, that's where I'd want it to stay, since any big move in either direction will be very stressful.

FOA (08/09/01; 10:27:19MT - msg#93)
"everything to do with a gold bull market"

This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this.


The first time I used this song was more than three years ago, and I still feel it, more now than ever! ;)


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Anonymous said...

I was so looking for another post... and I had the feeling it's gonna be today. ;)

Totara said...

The idea of GLD as a pool of water above a subterranean stream is an intriguing one.

For those familiar with Critical Chain Project Management, perhaps a similar conceptual way of thinking about GLD might be as a buffer to ensure the process of flow remains undisrupted.

Dante_Eu said...

Comments still on moderate? What's up with that?

Have to admit I really miss AdvocatusDiaboli, Gary (the bad one) and, one and the only: Ashes to ashes dust to dust. :-)

ein anderer said...

Don’t know what I love more, FOFOA: your constancy, your unagitatedness, your humor, your diligence or your sound standing knowledge! Looking forward for some reading hours tomorrow during four hours train! Thanks. And enjoy your garden. Summer is back (at least in Germany). Donation comes again.

John said...

There seems to be a "comments strike" here....not to mention a gaping hole left behind by this thread's most erudite posters now departed for parts unknown.A genuine pity.

njsfx said...

The idea of physical being drained from the system makes sense to me. Seems like the smart thing to do if you were a Giant who started to lose faith in the system. I just saw this report yesterday: Perhaps the dip in inventory is a one time thing. Or maybe it's not. Any thoughts?

Unknown said...

It is interesting to speculate upon what is "hidden from us" below the surface, but in the end, we may only guess at what is hidden, and why.

Lately I have been asking myself about what is revealed ... and why. For example, it is well known and for all to see that "central banks have been accumulating physical gold at record levels." (or so it seems?).

In the secretive world of central banking it is easy enough to hide such things, so why "reveal" that which the gold bugs seize upon as their rallying cry for the true value and conspiratorial suppression of the perceived "price" of gold.

One may say that because opposing global forces are at play, there is no suppressing the fact that Russia and China for example are openly and rapidly accelerating their physical gold holdings as well (or so it seems) because they WANT the world to know their intentions, and such intentions cannot be suppressed for long. But here again we see that things are revealed with a purpose.

It's just one of many questions I ponder over in a world where information is only pushed outward when a motive, often ulterior, is in play.

But it may be another "lens" through which to view the world ... to understand that all information revealed to the masses has a purpose and that NONE of us here are truly "insiders" even though the closest we might have ever become to it, is through the Thoughts of Another.

But even THOSE thoughts were spoken with a purpose - not completely self-serving, but not without purpose.

Many are the mysteries ... some unfolding only through the flower of understanding.

Meanwhile, back at the island, the game's afoot indeed:

Edwardo said...

This may be interesting.

Edwardo said...

Approximately 17 tons of gold was removed from GLD today.

Victory said...

Well speak of the devil, 16.84 tonne puke today - 1.4%


Aquilus said...


Definitely some sort of strike. Maybe they got tired of getting drowned out? Who knows?

Jeff said...

And Bitcoin? You will never know its price as it slices through 100..

Not only a GLD puke, but eurogold closed under 1200. I wonder if there are large physical buy orders around 1550 usd.

byiamBYoung said...

Looks like May 5, 2010 was the last time GLD was this low.

Sure feels like we have a change in the works...

Hold onto your butts...


Lisa said...


The "moderated" comments seem to have really slowed down spontaneous discussion. I miss the old discussions, but I don't miss the trolls.

Lisa said...


Thanks for the additional explanation on GLD.

I thought I understood Who Is Draining Gold, but now know I was part of the 99%. That is disappointing after 3 years of FOFOAddiction.

This additional explanation really clarified things for me- especially the information on how the AP's already have all the shares they need to redeem a basket.

The constant decrease in GLD inventory this calendar year seems significant - definitely different than in the past when the inventory went up after pukes.

And Euro gold under 1200 today again.

I am grateful for the little rocks on the path and the alternate lens. As always, thank you.

Edwardo said...


It may be a "one time thing", but the steady, and verging on precipitous departure of physical from GLD began well before the Comex news was announced. So, while we'll just have to wait and see, the idea of it being a one off doesn't strike me as a particularly compelling notion right about now.

Midnight Gardener said...

Worth repeating from last comment on last post,
"Hoarding gold can mean 3 things:You either have an Obsessive Compulsive Disorder or you expect a windfall(or profit) or you distrust the currency.
Saving doesn't need an incentive:it's natural act."

How true is that? I guess it could be said that I expect a windfall, but there is no doubt that I distrust the currency. Hmm, maybe a failure of the currency could lead to a windfall; therefore, someday I may get a just reward for picking that cotton and throwing that hay to the top of the barn on a 100 plus degree summer day. Or maybe not.

Michael dV said...

There appear to be 2 explanations for recent price movements in gold:
The first is the explanation of every other gold writer on the planet...that gold may be down but the bull market will resume shortly (and with a vengeance !) (as soon as X happens).
The other view is the one you get here. It is one suggested way before the gold price dropped. It is the one that years ago discussed 'gold going into hiding.' It is the one that explains how gold remains a most valuable asset in spite of price fluctuations. It is one that allow you to sleep sell at night as the POG goes lower and lower, just waiting to wake one morning to find it both 'worthless' and unobtainable.
thanks fofoa.

Unknown said...

I think it's substantial that Cyprus "had to sell" 70% of it's gold reserves to help "finance its bailout".

Talk about a template.

Jeff said...

Wil, that Cyprus story appears to be false.

YTD GLD withdrawal 166.39 tonnes, more than Mexico has, twice as much as Australia. An amount that would make the 25th largest holding in the world.

byiamBYoung said...

"It is one that allow you to sleep sell at night as the POG goes lower and lower, just waiting to wake one morning to find it both 'worthless' and unobtainable."

Sure rings true from where I stand...


Hill C said...

@ Wil

I agree with you on Cyprus. The article claims gold and the "winding down" of an insolvent bank, etc. would raise $10.6 billion. Is it possible Cypriot gold was used at its freegold value to extinguish debt? At today's market price of gold, this would bring in less than $400 million Euro. At $30,000, this would bring in just under $10 billion!

Notice how high their gold reserves were as a percentage of the total? If you go down the list of other problem countries in Europe (Italy, Portugal, etc), they all have very high gold reserves as a percentage of total reserves. Very interesting.

MatrixSentry said...


I thought I understood Who Is Draining Gold, but now know I was part of the 99%. That is disappointing after 3 years of FOFOAddiction.

Welcome to the club. I have read that post at least 3 times and yet today I find my understanding was not as complete as I thought. This is why I RTFB, then RRTFB. This blog is unique in that it constantly challenges me where others simply fail. With each post, each month, each year, my understanding evolves and I learn something new.

There is a message here for the newbies.

Learning to fish comes to mind. FOFOA has helped me become the fisherman I am. I do not know if we are watching the demise of GLD or not, time will reveal that. But, if this is it, FOFOA will go down in history as making a call no other could or would. I am absolutely enthralled.

MatrixSentry said...

There seems to be a "comments strike" here....not to mention a gaping hole left behind by this thread's most erudite posters now departed for parts unknown.A genuine pity.


Oh I think they are still around, just not interested in where the comments section was going. Every blog must deal with Trolls, and this one is no different. The trolls took over, enabled by more than a few commenters here.


It appears the blog is now no longer on comment moderation. That means the trolls will be coming back and it will be up to those here to decide whether they will feed them or not. Feed them and the old timers will not come back. Feed them and the blog will go back to moderation, or worse. Another and FOA moved on, FOFOA may elect to do the same at some point. I learned something today as I read FOFOA's latest. I for one want to see this blog endure and grow.

As always, I ask others to do as I do and donate if you feel like this post has brought you a new perspective, or has enlightened you in some way.

Biju said...

matrixsentry said:
Learning to fish comes to mind. FOFOA has helped me become the fisherman I am. I do not know if we are watching the demise of GLD or not, time will reveal that. But, if this is it, FOFOA will go down in history as making a call no other could or would. I am absolutely enthralled.

That is one call whose occurrence frightens me more than ever, especially if it becomes drawn out.

- Who know how we may react ?
- who knows how the poor Indian hoarders will
react when price in local currency crashes ? will they buy more as historically they have done or will they sell ?

That $POG/RupeesPOG crash will be surely heart stopping. I for one am not eagerly waiting for that experience.

S P said...

If gold goes into hiding, then it is worthless. As you say, the gold must flow.

But if gold is flowing without proper accounting, this too is worthless, isn't it? Thereby the endless speculation by this blog and those who came before it.

Gold must flow and in an open, transparent manner. But for this to happen, the world has to agree to it happening. Can we get there? Sure, but that's like saying we can have the United Nations without WW2.

This is the chief problem with freegold theory. You are not going to get from A to B without serious political and economic dislocations. It is NOT going to be the case that you buy pieces of gold, hide them in your closet, wake up one day and an ounce is worth $30,000 and all other prices are the same and we have world peace and stability and prosperity for all. That is absurd on it's face.

As such, freegold is in the end a specific variation of the same old goldbug thesis. It's one that I think has alot of promise, by the way, but if you guys think you are separated from the goldbug herd, you are wrong.

Lisa said...


Here is a comment Turd Ferguson made on his website earlier today (Yes I admit I read Turd comments for entertainment when FOFOA's blog is slow)

"And Holy Crap!! Thank you "watchman" for reminding me to check the GLD. Today, investors allegedly sold enough GLD that the "fund" removed from its "inventory" another 17 freaking tonnes! Let me state that again: 17 FREAKING METRIC TONNES!!!!!"

What is really awesome is that those of us here, can read that comment and understand what is wrong with it - and that is pretty cool.

Polly Metallic said...

The serious political and economic dislocations have ALREADY ocurred as a result of the present monetary system.

MatrixSentry said...

S P,

After reading this entire blog numerous times, I do not come to your conclusion. In fact I see the Freegold thesis as being totally unique and at odds with goldbuggery. Additionally, I do not see a smooth transition to Freegold. I see extreme dislocation, both economic and political.

What blog have you been reading? Certainly not this one.


Anonymous said...

@S P

This is the chief problem with freegold theory. You are not going to get from A to B without serious political and economic dislocations. It is NOT going to be the case that you buy pieces of gold, hide them in your closet, wake up one day and an ounce is worth $30,000 and all other prices are the same and we have world peace and stability and prosperity for all. That is absurd on it's face.

How is this a "problem" with freegold theory? Of course going from A to B will not be a cakewalk; this has been acknowledged numerous times - see FOFOA's many articles on hyperinflation.

Also, please familiarize yourself with the appeal to consequences fallacy. This is your logic: If (freegold == true) then (OMG! bad things will happen). Therefore, freegold theory is not true!

The severity of its consequences has nothing to do with the truth value of freegold theory! Sorry, but life is not always a game of candy land, and unicorns do not, in fact, shit skittles. =/

MatrixSentry said...


Very cool indeed! I related the post to a goldbug today who was in a real way regarding the "GLD and gold smackdown suppression play". I said that if he would give me 10 minutes I could relate to him a different perception. He was impressed. Instead of being pissed about suppression he is now pissed about paper gold support and wants to see the gold price collapse! LOL!

Archer said...

S P,

Congratulations! With this expostulation

This is the chief problem with freegold theory. You are not going to get from A to B without serious political and economic dislocations. It is NOT going to be the case that you buy pieces of gold, hide them in your closet, wake up one day and an ounce is worth $30,000 and all other prices are the same and we have world peace and stability and prosperity for all. That is absurd on it's face.

You've succeeded in erecting a straw man argument that you have summarily knocked down. Now that you have, hopefully, gotten that out of your system, please be so kind as to keep your unhelpful comments to a minimum until such time as you RTFB.

MatrixSentry said...


While I am enthralled, I would like some more time to acquire gold on discount. I would also like to see more time for the followers of this blog to "allocate to the level of their understanding."

Nonetheless, we are at ground level and history is being made. These are very exciting times. Change is in the air. I choose curiosity and reject fear. We are all in this together. Lets just follow the trail.

Nickelsaver said...


Current paradigm> transistion <New Paradigm

Current paradigm = systemically suppressed dirty floating gold and debt based dollar reserves

Transisiton = paper gold collapse; low or unknown official gold price; physical gold goes into hiding ; dollar hyperinflates and $IMFS system comes to an end

New Paradigm = Gold serves as the focal point reserve asset for the new monetary system; price discovery unobscured by futures market fractionalization; ECB a/o other CB's set buy/sell bid price for gold in order to obtain the mark for there currency and away we go.

*some room for variation in order based on the moves of the players.

*Trust in paper will come with a stable yet modulating price of gold which will be the reserve of the new system (no more currency reserves).

*ECB set up to lead the way based on its design and mandate to maintain 2% inflationary target using marked to market gold on the asset side of their balance sheet floating against the liability side which is the currency side. They will be able to maintian a targeted inflation range by either printing or destroying base money or by buying or selling gold reserves.

* private gold will flow within a currency zone and across zones via an isolated circuit used by savers who hoard and dishoard as they take advantage of golds utility. Debt based savings *IN SIZE* will be a thing of the past.

Now...RTFB please

Dante_Eu said...

I do not think there is a "comments strike". Nor do I think it's trolls.

Simply, there is not so much to discuss any more. Events in front of us will make Freegold selfexplanatory. In fact, people will try to explain it to you! Now, that is going to be some weird stuff... :-)

Am I right oldtimers?

Anonymous said...

If it is the case that the CB (Euro Faction) structural support has been removed for the paper gold price then we could expect to see the POG fall based on technical western trading (as we have been observing). This will result in an increasing flow of physical to the east as they drain the system at ever lower prices. If this were to continue then we would be looking at Bullion Bank failure, system crash and inevitably $IMF to freegold transition.

Now lets look at the US in this. I have understood here, that most readers agree that the Fed/US Govt. are not stumbling around with no idea of what is at stake. Those in power that matter understand gold, oil and dollar relations. Uncle Benny understands very well the $ predicament and is trying to make the best of the situation and keep the dance going for as long as possible. Poor him.

Which leads me to my point. If a falling POG is going to crash the system and the $ then why would the FED/PPT not step in to support the paper price. Not too much, just enough to keep the system in balance and the price high enough to limit the physical draw down.

So from a chess perspective. The Euro faction may be trying to go from check to checkmate. Whilst the reality is that they have gifted the US the opportunity of being very impolite and stretching the game out a lot further. The price of the gold to the downside is now in the hands of the FED and the price to the upside is constrained. Seems like the US should be happy campers here.

Jeff said...

an ANT,

Stretching the game out means managing not just paper, but physical gold flow. It gets more costly over time.

[FOFOA]Yes, this is possible. It would require a cost/benefit analysis at the highest level of international central banking as to how much physical gold to "spend" in order to buy a little more time. And we are talking about supplying physical during a run, not certificates, so this would be a new and different undertaking. And as I have speculated in previous posts, there comes a time when the cost of "more time" rises exponentially.

Robert said...

If FOFOA is thinking about doing something other than (or in additon to) this blog, perhaps a position in Basel might be a good idea. The BIS is hiring:

Dante_Eu said...

New President of the BIS Mr. FOFOA meets the Bernank, Olli Rhen and Ms. Lagard. would make nice sitcom.

(*Picturing in my mind new BIS president starting the meeting with some classic Another quote.) :-)

Anonymous said...

I agree that there is no "strike." I think pretty much everything FOFOA has needed to say to lay it out has been said, and is there for those willing to undertake the education. Nevertheless, I hope he continues to post from time to time with his unique perspective on the unfolding events. His posts are always illuminating.

For those of you who, like me, have an unhealthy fascination with just what the hell kind of game is Jim Rickards and/or George Soros playing, or if you are just interested in finding out reading others who believe that a major structural revaluation of gold is going to occur (rather than a "bull market" in the metal), the blog, Trade With Dave, has an article, "Hall Pass or Poster Child" in which Dave argues that the so-called "currency war" is not so much a war of currencies but a war on fiat conducted under the guise of a war of currencies, with the goal of imploding the system and resulting in a revaluation of gold.

"Jim’s theory [expressed in a twitter war with Nouriel Roubini, which is the subject of Dave's article] is that it is always 5 o’clock somewhere while Dave would argue that a broken clock displaying wine-thirty is correct twice a day. My thesis is that Soros is assisting the owners of the central banks in their planned demolition. How is he doing that exactly? It would be by increasing their investment in the shorting of precious metal prices through their unlimited funding of paper short efforts such as those signed off on by a 90 year old judge ( By helping to boost the threat (ala Cyprus, etc.) Soros requires the TBTF banks (funded by the central banks) to invest even more in their efforts at containing the price of gold. By doing this the banks increase their short exposure through the issuance of ever increasing amounts of paper in the form of ETFs, GLD, etc. Imagine it as truckload after truckload of theoretical thermite being strapped to the supporting columns of the building that is the fiat paper portion of the global monetary system.

Once LCH Clearnet is fully in place and once transactions can be fully suspended at the clearing house level, then the demolition can begin. This will be in the form of an overnight resetting of the price of gold as measured in US Dollars, the imposition of a bank holiday along the lines of what we say in Cyprus and the detonation of the baked in metaphorical explosives as expressed in the bank’s derivative and paper precious metals short exposure. The key to this initiative being successful is in the size and scope of the virtual demolition of systemically important confidence. It must be complete. It must catastrophic and it must be irrecoverable."

Sounds like Dave just said that all paper will burn. Full article here:

onedayfly said...

Wikileaks freegold

onedayfly said...

Full text..



PAGE 02 THE HA 02042 240951Z







tristramboris said...

I've been working my way through these cables. A real Gold mine so far


onedayfly said...

How about this one...


tristramboris said...

Sorry for link batterings so here is a list of all cables covered under "Gold Transactions"

And a few more interesting cables form the first few results: - spot potential idea for GLD in this one!


Reality Show said...

Thank you Fofoa for another illuminating post.

For those interested, I have been charting the divergence between the PM Fix and GLD inventory. In the histogram pink days represent Fix up and Inventory down, on brown days both are down, black days the inventory is unchanged and the very rare orange days are when both are up. Black marks on the GLD line represent pukes. I like colours, patterns become clearer.

I will post an update from time to time unless I'm asked not to. Chart

milamber said...

If possible, please make sure you let Mortymer know about any cables that you find that are interesting. he is keeping an updated list at

so that way you can see what has already been sleuthed out.

It makes for great reading while munching popcorn!


p.s. Great post FOFOA. Love the Subterranean stream thought!

milamber said...


Nice chart.

Would it be possible to extend the data series back to say 2005 and publish?


tristramboris said...

Ah good for Mortymer. He's a proper sleuth. I've been moonlighting.


Unknown said...

Wow good stuff. Ground zero indeed :)

Unknown said...

I more or less stopped commenting a while ago, and FWIW it was pretty much the trolls that shut me up. I'm no wilting flower, but there's only so much "If you're praising this post, you're a brainwashed loser" I was willing to put up with after a while.

That said, I agree with Sir Tagio that so much has been written it's hard to come up with something new to say. I do admire FOFOA for his ongoing ability to do just that!

MatrixSentry said...

I don't usually read Turd Ferguson's site, but the the title of a post today set the hook.

Enencumbered Gold

That sure is a lot of gold that left GLD. He wonders why SLV is adding silver why GLD is losing gold, perhaps smelling a rat? He suggests what we already know here, namely that gold leaving GLD is needed elsewhere to satisfy physical delivery. What does that say about silver in SLV? That's right, plenty of silver available for delivery demand. So much so that physical silver reserves can be exchanged for baskets of SLV shares.

Where do we go from here? Turd is now catching on and Sinclair is flirting with Freegold. Are we moving into the acceptance phase where everyone will claim how self-evident the events that are unfolding are and how they of course saw it all along? LOL!

milamber said...



Unknown said...

Hi, I'm new to this site so I apoligize if this has been asked before. Have you all talked about the impact of US shale oil and how it may change the paradigm? Oil production in the US is now back to mid-90s levels and rising. I don't buy energy independence, but it certainly changes things for the US.

According to, in 2012 the US consumed 18.55 million barrels of oil a year and produces 11.1 million, a deficit of 7.45 million barrels. In 2011 that deficit was 8.8 million due mostly to rising production (small fall in demand).

Now, Canada, Mexico and the rest of LatAm have a 3.67 million barrel a year net surplus of oil production, meaning if it was all sold to the US, America needs to source 3.78 million barrels of oil elsewhere, down from 5 million in 2011, a 30% reduction.

There is a clear trend of rising production and falling demand. The demand side:

Curious everyone's thoughts, thank you!

Anonymous said...


*ECB set up to lead the way based on its design and mandate to maintain 2% inflationary target using marked to market gold on the asset side of their balance sheet floating against the liability side which is the currency side. They will be able to maintian a targeted inflation range by either printing or destroying base money or by buying or selling gold reserves.

I don't think this is right. The ECB will never use gold open market operations in order to target the consumer price level. This is unstable for the same reason for which the old gold exchange standard was unstable. They would have to target consumer prices by controlling the credit volume in the banking system and the amount of base money that is created by monetizing bonds.

The only reason for using gold would be settlement of international balances arising both from trade and from capital flows.


Michael dV said...

there has been discussion on the shale oil impact. Sorry I can't quote chapter and verse. One opinion was that it was really not much of a boom as the production seems to fall off early in the life of the well. Production may never get to be truly impacting.
I would suppose if it ever does get to meaningful levels that the OPEC would get less gold and things could slow down as far as demand from those producers. I guess that could also be said if China stops exporting.
Overall I think that those factors are a ways down the road however and may well be too late.
The USA could start to behave too and become net producers and tax Americans 100% of income to correct debt problems (of course they won't).
I believe that the situation is beyond repair in spite of the fact that there are actions which could modify the outcome. I think that things will continue to deteriorate and that zee old crack up boom in one form or another will come well before any of these game saving events or actions unfold. The political will to do anything but passively watch as the train wrecks just is not there.

DP said...

Consumer prices are a function of the demand for the current supply of currency in the market. High demand to hold currency means price deflation. Low demand to hold currency means price inflation.

Since the ECB very much target price stability, the supply of currency in the market can and will be adjusted by injecting/withdrawing euros via gold open market operations, if that option makes the most sense at the time to the ECB.

There is more to consider than simply the volume of money in the system, base or broad. (IMO.)

Anonymous said...


please go back to "Once upon a time" and see what happened when the Fed tried to fight inflation with gold open market operations (buying gold, selling bonds).

The ECB will not use gold in order to target consumer prices, because this would neutralize the international function of gold. Thanks again to Blondie for raising this issue. If you think about 1920-22 in "Once upon time", everyone should have been able to figure this out.


tintin said...

Hi Fofoa,

Another point regarding oil price: they need a relatively high oil price to keep the shale game going which is part of the confidence game.

Anonymous said...

You score... I clicked on that YouTube link only too late...

Btw, no, I don't think that increasing velocity will be the main issue. The most serious difficulty the ECB will face is an uncontrolled inflow of capital, much worse than what the SNB experienced in 2011. This is simply what will happen when the problems with the dollar surface.

Some time ago, I wrote that the ECB might eventually, once everything is over, sell some gold in order to mop up their excessive monetary base. This may happen as a one-off event. I am no longer that convinced this will be necessary. If the hot dollar money wants a temporary parking lot on the balance sheet of the Eurosystem, they might already be happy to take the surplus base money, and gold revaluation might suffice to compensate for the financial assets that die on the balance sheet of the Eurosystem.

Where do bonds go to die?


Michael H said...

Hmmmm ... replace 'bitcoin' with 'gold' and this might be a view to the near future?

Nickelsaver said...


I've been doing a lot of thinking about this whole discussion, promotion even, of the idea that in the new paradigm that currency will be the SOV of choice due the stability given to it by consequently allowing gold to be much less purchasing power stable. I find the argument assumes one thing and lacks understanding of another.

For those of you that don't know, I make my living as an engineer. I'm not a design engineer. I am a building engineer. I work with large scale HVAC and other automated systems. To make a long story short, one of my functions is working with control systems (PLC's). So I have an idea or two about controls, just not as applied towards money.

Now the general thesis that Blondie and Victor are promoting is that, based on how we see the ECB operating (controlling) the Euro, in the here and now, we should see (in the new paradigm) gold allowed to (or we will see it) fluctuate wildly, in order to maintain tight control of the Euro's purchasing power. I see 2 errors in this. The first one is that we should assume that the ECB would limit their actions to merely maintaining local price stability, at the expense of international trade stability. The fact that they are able to do so now may have more to do with the fact that they have little contol over $IMFS reserves saturating the current system. But in a gold reserve system, their actions to control currency purchasing power will most certainly have an impact on the price of gold and in turn trade balances. And because they will, they will not ignore it. So the assumption that they will use the lever that they use now, in the same way as they will then, is a naïve one.

Now I'd like to talk about control.

Let's look at a (more or less) simple system. FOFOA uses spur and brake (as in a horse) instead of accelerator and brake (as in your car) I think because he wants you to know that the horse has the ability to act on its own (to a certain degree), whereas your car does not. A car is under more direct control than a horse. But I like the car analogy because it gives us a little more to chew on. And i'm also going to use accelerator and brake a little differently.

Now on a car dash we have speedometer (measuring how fast we are going), tachometer (meaasuring how hard the engine is working to maintain that speed in RPM), oil pressure gauge, cooling temp gauge, battery power guage, and fuel guage. For this analogy I'm only going to use 4 things; the accelerator, the brake, the speedometer, and the tachometer. Lets say that the brake and the accelerator are analogous to the ability to create/destroy base money and buy/sell gold. Additionally, that the speedometer indicates currency purchasing power, and the tach indicates real gold price. We can redefine what is what exactly, it doesn't matter, its just an analogy.

Now, lets go for a drive. Lets say that we are driving in the current paradigm. And lets say that we are going downhill, and only downhill. I used to live in Arizona, so that would be like going from Flagstaff down to Phoenix. One thing you will notice is that we don't really have to use the accelerator very much. Gravity is providing that function. The other thing is, we dont need to be concerned about the tachometer, because we aren't accelerating. We are basically using the brake and watching the speedometer.

Now, lets change roads and switch to the new paradigm. The new paradigm goes up and down. Now we become very aware of having to use both the brake and the accelerator. Also, we become very aware of the tachometer, espescially when we hit a steep hill. Fact is, we might have had the goal to maintain 55mph, but to do so would require for us to hit the accelerator too hard going uphill and hit the brake too hard going downhill in order to do so. So what we actually find ourselves doing is allowing the car to vary in speed in order to prevent having to stress the engine too much. So we control our car to allow both the tach and speedometer to fluctuate.


Nickelsaver said...


This is what I think will happen in freegold. I think the 2% inflation mandate is the same as trying to maintain a certain speed in the car. It is the goal, but it is not the only factor to consider. Now a Cop catching you on radar, he has no idea what your tachometer is doing, but he sures knows how fast you are going.

So in freegold we will have reserves made of gold, not currency. But gold and currency are both moving, both floating just like your speedometer and your tachometer. If you commit to a constant rate of speed, your tach is going to go from extreme to extreme. And not so good for the engine, or for your MPG. So it would be to attempt to maintain tight 2% inflation without regard to gold price. Conversely, if you tried to run on constant RPM, you would find that your speed would fluctuate wildy too. This would be like fixing the gold price. You can do it, but don't expect to maintain anything close to a 2% inflation rate.

So basically what I am saying Victor is, you can't assume that given a change in the road conditions, the ECB is going to drive the same way.


Victory said...

The Ominous Warning In Foreigners' U.S. Bond Positions

I think the plan is for Japan to print yen to fill this projected Gap but will the market take the printing press away first....if so....then what....Benny get's high on his own supply

Michael dV said...

I finally got the CIGA thing with Sinclair. I think I'll refer to my fellows here as BCM (your name here). for reference see the bottom of the page.
BCM Michael dV

Sam said...

nicklesaver I like the analogy. To add to it I would say that silver coins would represent the spare change in your cup holder.

Nickelsaver said...


Very nice, or perhaps silver represents your chrome or mag wheels. They look nice, but add no extra functionality to the car.



You can choose your car, or to not drive at all, but the roads you have no control over. There is no road to utopia. But luckily, the roads all lead to each other.

db said...

NS, loved it!

DP said...

What db said!

Medium-term orientation — FTW!!!

DP said...

And I totally agree with your assessment, that FOFOA deliberately picked an analogy that includes animal spirits.

Jeff said...

Nice price drop. Reminds me of a submarine heading toward crush depth. Dive, dive.

Anonymous said...

A good interview in its entirety to hear the US-centric viewpoint on central banking. Euro and Freegold relevant portion begins at 29:00. Debtors and Savers at 34:00.

The right questions were asked, but the trail was not followed.

In other news, I hear from my dealer that delivery times for eagles and buffalos are up to +2 weeks.

Pat said...

I have to say, I would be freaking out watching the "price" of gold without the insights provided here ( and nowhere else ). It is still unnerving, kind of like the fear/rush heading down the steepest part of the worlds largest roller coaster. Intellectually you know its safe, but...

Edgar said...

The behavior of gold over the last 2 years reminds me a bit of the period 1975-1977.

Nickelsaver said...

Thanks db

DP, I bow to the king of clips


Pat said...

It has been noted Sinclair seemed to have an Another/FOA epiphany, and yet he continues to call for a bottom time and again. Anyone following his every word for the last 2-3 months, which comes off as ever intensifying screeching, must be very very concerned as he has been very very wrong of late.
He needs to RTFB.

Biju said...

Wow , Gold just crashed $55/oz to $1505/oz.

Crashing in Rupee terms also, since Dollar/Rupee parity is not changing much.

2013 : is the year for change in Gold market. I never believed it when FOFOA/ARI hinted, but I think I am slowly becoming a believer.

Polly Metallic said...

It should be interesting to see if there is another substantial GLD puke today. With prices plunging as they are now, the existing supply being put on sale should result in a hasty end to the "gold" market. Can we limp along to the end of the quarter? I'm beginning to think it's unlikely.

Edgar said...

With gold trading below the production cost of mines (~ $1500), it's game over for paper gold.

Anonymous said...


I think the system that is being set up is for gold to be 15% of reserves. That number appears to have the most stability under stress tests.

Also, most don't realize that inflation for a central banker doesn't refer to price levels, but credit growth. When Ben says he is shooting for 2%, he's looking at debt growth, not consumer staples.

Pat said...

If this truly is it ( 2013- The year of Fahrenheit 451 ) then somehow some way the whole story of this tiny little blog has to be made mainstream news. A book should be written. Yes, this blog is dedicated to Another/FOA but FOFOA kept the word alive and added tremendously. And FOFOA ( with aid from Ari's comments ) while not loudly calling his shot, has subtlely told us it sure looked like the window had been opened.
Of course DP gets credit also, he shot the remaining two legs off that unfortunate dog.

Dante_Eu said...

This is NOT it. 60$ is nothing.

When it drops 400$+ in 1 day, it will be:

Free Fallin'

KnallGold said...

This is the the point in FreeGold where Gold goes into hiding, got the feeling when I left the other week.


Now you'll get the drift I gues.

Best Regards,

Michael dV said...

yep and yep

Michael dV said...

sorry that should have been
yep and yep

DP said...

Shoulda called for 2013 - year of we need a yen (we'll get as many as we want, which we'll want more than "gold").

Well, I say "we"…

Polly Metallic said...

I think i heard CNBC say that trading curbs already kicked in today. I am not sure what the maximum drop is before trading is temporarily halted but I doubt a one day drop of $400 is possible.

JC said...

Strange things going on in central banking?

“The decision is going to be taken by the central bank,” Draghi said after a meeting of euro-area finance officials in Dublin. “What’s important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA.”

Asked about a letter he wrote to Cyprus President Nicos Anastasiades, Draghi said the letter is “very, very clear.” He said the government must abide by the central bank’s handling of the gold stock, since it is independent from political control under European rules.

“The independence of central banks in the euro area is enshrined in the treaty,” Draghi said. “The ECB will look at developments in Cyprus from this angle.”

Draghi Says Any Cyprus Gold Sale Must Cover Emergency-Loan Loss


As a reminder, Panicos holds the now obsolete position of head of the Cyprus Central Bank.

Unknown said...

It's not a takedown, it's a BREAKDOWN.

And I quote the commenter at ZH:
"At apmex: how is it the price of gold is falling, but the price of the coins I'm watching are going up? Try it and keep hitting refresh".

The only fly in the ointment is that physical dip demand tugs at the illusion that paper has value.

Japan had to do what it did, it's all interconnected, but Hell, it's also and likewise ALL INTERCONNECTED.

Counterintuitive? Your intuition is based on a HOAX.

Draghi wants the gold, no they don't, yes they do, no they don't. Shit we told you 2 years ago we's "accept it" as collateral.

We don't really want the yellow junk so consider it a BIG FAVOR that we're accepting it to cover your bad bets. HAHAHAHAHAHAHAHAHAHAHAHAAAAAHHH

April showers bring MAY FLOWERS *

PA said...

When gold was near its high I posted that most people should get out and anticipate buying back when the GLD broke below 150. For that guidance, I was shouted down, called names, and later banned from posting. I hope you know-it-all jerks who tried to kill the messenger are choking on your two years of losses. For those who kept an open mind, or took the advice, I will tell you I am covering most of my shorts and am actually thinking there is a chance gold can make new highs eventually. But of course it has a number of hurdles to get through first.

byiamBYoung said...

Another article that is fascinating when viewed through A/FOA/FOFOA's different lens:

Bears stalk fading gold market

Polly Metallic said...


If you are seriously discussing hurdles for gold you don't understand this blog or the Gold market at all.

Tony said...


Two years of losses? One piece of advice in return to you: RTFB

Sam said...


Though I didn't read it myself, if that was in fact your message, I do hope nobody shouted you down or called you names. It's also odd to be banned from the comment section unless you were also name calling yourself right? You seem bitter towards “know-it-all jerks” when it seems you were the one that knew the future. Why have animosity towards people that obviously didn’t share the same level of understanding that you did? It is more human to have envy and hate directed at those that have more than us, not less. For the wretches that didn’t share your insight you should only feel sorry for them.

If I were as smart as you I would day trade paper gold all the way up until the day before the revaluation. I’d use the profits to increase my holdings but still never miss out on the day gold goes to the moon. Unfortunately I lack such insight. My limited understanding keeps me from looking for short term buying and selling opportunities of paper gold. Instead I look to slowly acquire physical gold at what I perceive to be a temporary bargain at anywhere near current prices. I’ve made this decision because people much smarter than I am are using the same strategy. Because good analysis can turn bad when 80 years of constants suddenly become variables.

Like Gross said, “Much like the laws of physics change from the world of Newtonian large objects to the world of quantum Einsteinian dynamics”

Indenture said...

Two years of peace of mind. The price we watch is a shadow dance on the cave wall.

Nickelsaver said...


A song in your honor

Nickelsaver said...


"If I were as smart as you I would day trade paper gold all the way up until the day before the revaluation.

Be thankful you're not that smart.

Buy and hold physical gold only. Then stand back as you watch all the day traders lose their ass chasing paper dreams.

PA said...

I never cease to be amazed by people's ability to ignore reality. If you have been happy sitting on losses this long, I congratulate you on your ability to maintain piece of mind. I also notice that people here like to postulate false premises. And they dont READ what is posted, certainly not what I post. Most here are too quick to attack any opinion outside the herd. Perhaps that requires abandoning one's prejudices and actually having to engage in thought? That reflex is what made me so sure I was right that gold was going lower first, all those many months ago. Back then, the attackers here made my day, I'm not bitter, I'm glad because when the herd cant see the cliff one knows it is imminent. I will say again what I said almost two years ago - it would serve you all well to research what "money" is. Because I'm feeling charitable I will even point you in the right direction. Look up the UCC research in the Cornell Law Library. Those of you pushing for gold backing of the currency have no clue. Until you do you will continue to get it wrong.

Paul said...

I'm with PA.

Who's keeping the score ?

sean said...

For those who missed it the post linked to by Victory (via ZH) was very interesting. Here is the original.

It answers the question "who's stepped in from China to buy US government bonds" and concludes its unsustainable.

Edwardo said...


RTFB. Until then, zip it.

sean said...

PA, no-one cares how much you made - trading is not relevant to the subjects discussed on this blog.

Nickelsaver said...


My car analogy really meant only to be understood by those who have read the f'n blog and have a working understanding of Freegold.

Anonymous said...

Lots of wanker traders claiming victory as of late... this must be a sign the end is nigh.

Tommy2Tone said...

You are on the wrong you thought this was Turd's blog didn't you?
No one here is sitting on losses (not counting silverstackers), we instead sit on physical gold.
Also, no one is talking about backing the currency with gold.

Paul said...

The largest short in history is to be found in the dollar. It is right in front of you. Just have to open your eyes ...

Trade is not relevant ?
Without trade no civilizaton.

just sayin

milamber said...


Wow. I have never realized that Freegolders were big enough to be considered a herd. I bet you sure are glad that you were smart enough to figure out Another was a fraud back when you were buying gold in 2000 (that you were never going to sell, right?). You have impeccable timing sir.

Also, I heard that Saudi Arabia just converted all of their phyzz into shares of the Winkelvii investment fund:

You may want to get a piece of that action as your next safe haven investment. Or to use the parlance of our times, your next trade.

To the moon, Alice!
To the moon!


Nickelsaver said...

[Ahem]clears throat[/Ahem]

From the post above....

"This not only has
"everything to do with a
gold bull market", it has
everything to do with a
changing world financial
architecture. And I have to
admit: if you hated our last
one, you will no doubt hate
this new one, too. However,
everyone that is positioned
in physical gold will carry
this storm in fantastic
shape. This is because the
ECB has no intentions of
backing their currency with
gold and every intention of
using gold as a "free
trading" financial reserve.
None of the other metals
will play a part in this."

burningfiat said...

PA said:

Those of you pushing for gold backing of the currency have no clue. Until you do you will continue to get it wrong.

Rui, this must be for you! Well said PA!


PS. FOFOA, Wow! Seminal post on important subjects just beyond the A/FOA core teachings. I imagine some silent original FG-gangsters being proud while reading this somewhere in anonymity!

Tommy2Tone said...

Ditto what Edwardo said

Pat said...

Didn't we have a number of posts above from erstwhile long-time, now long ago contributors, that said they quit posting comments due to enabling the trolls by blasting back at them? How hard is it really to ignore someone, an anonymous internet someone at that? It's not like a loud blowhard at a cocktail party, sheesh, just ignore.
I count like 10 posts just above wasted on a troll. Noise 10, signal zero.

byiamBYoung said...


Spot on. Now moving forward...

I for one am extremely interested in the GLD numbers after today's drubbing of goldish paper.


milamber said...

@ Pat,

I don't put PA in the troll category, thus the reply.

But to each his own.


milamber said...

and in case everyone has not read it, Mortymer's latest cable is a must read!



Anonymous said...

How does the BRIC Development Bank fit in the FG model?

It appears that the East will use the revaluation to kickoff a new credit cycle. They won't hold savings captive in an isolated circuit. They've got things to do and people to meet.

Anonymous said...

Jojo said:

"No one here is sitting on losses (not counting silverstackers), we instead sit on physical gold."

I don't know what kind of fairytale accounting you use to track your finances, but anyone owning physical Gold since September 2011 and using mark-to-market on their holdings is sitting on a -15% unrealized loss (with premiums more like -20%). This, over a time frame where the US stock market has risen by 37%.

Maybe it will go up later, but today isn't later and the drop in value is not imaginary.

M said...

Athrone and PA

"sitting on a -15% unrealized loss (with premiums more like -20%)"

Premuims ?

Lets have a look at some premiums jackasses.

American Gold Eagle 1 Oz eBay 1,700.00 +14.7%

So physical gold is priced at $1700 today. 14.7% PREMIUM over paper.

ampmfix said...

My ounces are worth around 20,000€ each, I'll just keep them a while longer.

Anonymous said...

APMEX, today:
2013 1 oz Gold Austrian Philharmonic
$1554 (spot as this writing: $1485)
Premium 4.64%

Again, not sure what kind of fairytale you guys are living in, but physical premiums are not 15% right now. 3-5% is pretty typical.

Anonymous said...


You might not be willing to sell until 20,000€/oz, but that doesn't change the fact that as of today, they are worth $1485/oz and dropping.

If you only have a few coins it doesn't matter, but if you are talking any amount of real money, you would be using more professional accounting techniques than some fantasy future value.

In September 2011 if you took two people with $500,000 and had one of them invest in physical Gold and the other invest in Total Stock market, the former would be worth $425,000 while the latter would be worth $685,000.

Maybe that $260,000 isn't real money though?

Unknown said...

GLD loses 23mt or 1.9% to 1158.

Hill C said...

I contend the Cyprus gold sale, if true, is a HUGE deal. If Cyprus verifiably sells its gold at today's market, I might even be a tad scared. If, on the other hand, Cyprus does sell its gold at a much higher price, it may very well be game on! I can't wait to find out.

And, I also noticed the physical gold barfs.

Nickelsaver said...

This is probably one of only a handful (if that) where both gold bears and bulls come to gloat on a big swing in $PoG.

Funny thing is, no movement in the price would come as surprise to anyone that understands this blog.

In fact, the only surprise would be if no one commented at all.

ein anderer said...


The equation to be solved is:

- paper
= ?

The solution is hidden in this blog.

Those who payed 500.000 in Sept. 11 bought something whose price WAS (is) NOT (yet) KNOWN.

Someone bought unknowingly a Rembrandt on a bric-a-brac market at the price of 80 bucks and sold it later at the price 60 bucks (he didn’t liked the dark colours). All the actors did not realize what they sold and bought. May be the last one did.

Do you really believe that the last seller "lost 20 bucks"?
Do you really believe that "the" price of the Rembrandt dropped 25%? Only because some ignorant people came into play?

Dante_Eu said...

Oh boy, gotta love Scandinavian biggest online dealer. While POG plummets their BUY offer goes down while SELL goes up!

Example: 100g gold bar
Sell: 33.220 SEK
Buy: 30.821 SEK

Difference of only 2.399 SEK or 376 US$

10g gold bar:
Sell: 3.494
Buy: 3.088

Difference of minuscule 406 SEK or 63 US$

How can you fail in this business? :-)

Unknown said...

It is odd to have people here gloating who do not understand what is going on. They finally "have their say" and they speak in a language we here have all abandoned long ago.

No one here is playing nickel and dime poker for paper gains this week, this month, this year, only to be wiped out when the house folds. We are all here playing the big poker hand.

If a paper trader earned himself a spiffy new riding lawn mower with his "short the paper" gains, whoo hoo, shred away your front lawn dump until the cows come home.

Otherwise, NO ONE HERE is "frightened" or "disheartened" or blacked out" over the "fallingf price" of "gold".

It is expected, it is welcomed, and like most of the rest of your world, it is an illusion, crashing before your eyes and you celebrate it as if it is real thing that is somehow "falling" in "price".

We have patience, though at this rate, we won't need much more ...

Anonymous said...

Will said:
"Otherwise, NO ONE HERE is 'frightened' or 'disheartened' or blacked out "over the "falling price" of 'gold'."

No one, really? No one could possibly care about their portfolio under-performing the general market by 50%? $500,000 in a $1M portfolio? All that matters is the possible future value at some unspecified point in time?

It's nutter comments like this that remove any air of credibility on this Blog.

If you want to have confidence in the long-term position, fine, but what is the need to pretend that the present valuation does not matter?

Archer said...


Obviously you care, athorne, or should I just call you itty bitty crustacean, because all your indignant, insult laden spluttering sounds for all the world like someone who has the mentality of a shrimp. Now, please put a lid on it until you RRTFB.

S P said...

"All that matters is the possible future value at some unspecified point in time?"

This is the giveaway. Nobody here is willing to give good estimates on a number or timing. Plenty of standard goldbugs are, which means they are more willing, right or wrong, to put themselves on the line.

This is my challenge to the people here: you've been following this for years, right? You've ruminated and ruminated over the thoughts of Another/FOA/FOFOA? You've educated yourselves more than anybody else on on gold?

If this is true, prove it. Come out of the closet and show me your knowledge and skills in daylight. Give a dollar estimate for the freegold price and the month/year that freegold comes about. See if you guys can come to some sort of consensus.

If you can't, well, keep on stacking and waiting, I guess. Waiting for Godot.

whatever-fits said...

for those of us that have been in since 2001 this is just another hiccup. Had we left in the other retreats that earlier were seen as a drastic collapse we would not have made it this far. No the only issues here are the fundamentals which have not changed for the better. So sit tight you free-golders you will do just fine. Remember we are just now moving through the bear trap, the next phase will be the amnia phase.

ampmfix said...

Athrone, you chose a window that shows a decreasing price, another window was Sept 2010 to Sept 2011, that was an increasing price, not to mention 2000-2010.
That is data for a trader, not for a long range saver. Saving in gold is time-independent, at least for me, I buy when I have a fiat surplus and do not care much about the price. The real purchasing power of gold was much higher before (see the example of the 20$/1oz gold coin that bought you 7 luxury days in NY in 1907, today that week costs around 6,000$-9,000$) and will again be much higher than now (FG). Good luck with your numbers.

Archer said...
This comment has been removed by the author.
Archer said...

S P,

"Nobody here is willing to give good estimates."

With every post you betray that you haven't RTFB. I can think of a number of instances where estimates were given. Not by the blog's host-he's too sensible for that- but certainly by some erstwhile regulars. Were they "good" estimates? I don't know. We won't know how good they were except in hindsight. Now, again, for the second time, why don't you RTFB, and the comments, and when you've done that, and found those "good estimates" perhaps we'll talk.

byiamBYoung said...

For us visual learners, here's GLD's drain charted from its peak.

GLD Drop from peak

Kind of gets your attention, doesn't it?


ampmfix said...

SP, just for fun, let me be a foolish predictor, divide the LBMA daily flow of paper gold by physical gold, then take 15-20% of that. I don't know those numbers with certainty. Could be: 2100t/15t x 0.2 = 28. So 1,600$/oz x 28 = 45,000$/oz. Say between 30k$-60k$.
When: now to 2016? Looking back at the events from 2010, it seems to me that the next 3 years will be much denser in sistemic risk, it is an exponential curve for sure.

Pat said...

Can't you all think like Sheldon Cooper, puh-leze?
( they are watching the movie "Trolls", not "Gremlins"
Sheldon: "This movie baffles me every time we watch it"
Leonard: "What do you mean?"
Sheldon: "Well, the instructions are very clear. Don't feed the gremlins after midnight, don't get the gremlins wet. How hard is that?!"

Unknown said...

I hope your portfolio outperforms the market forever and ever if that's what you want. And you don't have to believe in my religion, or have the same taste in cars, music, or women as me.

In short, you can be or do anything you want, and if you want to start a blog about it, I promise I won't come there and call you a nutter for not being "like me".

You see, I do not have the pent up anguish of a paper trader, waiting for the day I'm "proven right" so I can spit forth, "I told you so, I told you so".

Freegold, allows me that peace of mind at least.

Tommy2Tone said...

At my coin shop today I found my guy on the phone with another bullion dealer. He was trying a long shot to see if he had bullion for him (he didn't). When he got off he told me no one has any gold or silver. Several times (heard in his conversation as well) he said along the lines of "the price is falling but demand keeps coming!?!"
He couldn't believe he couldn't find more bullion.
I said Silver is hard to find?? No, he can get all he wants, but the premium went up 50 cents per ounce. Gold though, nada.
He said his phone was ringing all day and most calls and people stopping by wanted gold- about 3-1 for gold he said.
He mentioned an Indian guy that called him wanting 5 ounces. He told him he didn't have it but even if he did, he'd have to sell for 1600. He said the guy didn't even flinch and said he'd pay whatever.Gold's funny that way ;)
He was a bit frazzled. He then showed me an article he'd printed about all the Japanese lining up to SELL physical cause their price had gone up so much lately- LDO :D that happens when you print. I guess they are smart, selling high and all ;)
Anyway, my guy had only a little over 2 ounces in gold left. An eagle, some small roosters and a few quarter ounce coins.Now he's even lighter.

Oh yeah, his explanation for all this? The bullion dealers are holding it back because the price plunged too fast too far and so they will hold it back waiting for the price to come back... yea, I have different thoughts.

Tommy2Tone said...

Wil- +1 6:51 and +1 4:40 :)


You guys should have listened to me yesterday when I said the Lakers were a stone cold lock. If you had listened to me you would be up 100%, instead you held your gold and you are down 6%. Is this not real money??

byiamBYoung said...


Are those physical Lakers, or paper Lakers?

MatrixSentry said...

Forget the dip-shits. Lets focus on what is important. We are heading towards Freegold instead of away from it. The Year of the Window took a giant and credible step forward today. Pallets of unallocated paper gold are being converted into pallets of allocated physical gold and are heading out the doors of our bullion banks. Take a look at those pallets here.

GLD bullion loss is accelerating. Sinclair is losing it. Armstrong is all over the place, somehow bullish on paper gold while he insists that governments will kill the global system of money. Turd, GATA, and King World News are losing credibility daily. Yet here we are, on this silly little blog, calmly watching what we have been only anticipating up till now.

No surprises here.

No bullshit rationalizations.


Opinions on buying bullion at an online dealer(i.e. Gainesville Coins)? Don't want to pay the premiums at my local coin shop if I don't have to, but I don't want a revaluation to hit before my coins are in the mail.

Anonymous said...

Today was a stop-hunting/margin call operation exacerbated with a hamstrung physical market.

It wasn't the rapture of paper gold burning.

Robert Mix said...

Today at my LCS I bought the last 1 oz Eagle they had. They had some other bullion coins, but would not sell them because it was after 4:00 PM (US ET) and could not get Monday pricing...

Of interest to me was a lady came in and SOLD a Krugerrand, she did not know that paper gold at that moment was down $74..., poor thing.

Zero Hedge has a comment this evening from a small central bank about buying gold. :)

Nick said...


You should have no problems. Provided you don't mind the paper trail.



Motley Fool said...


Why are you gloating about the power of hindsight, being 20/20?

For example, we know that California is due a major earthquake at some point.

Your present ramblings would be equivalent to ridiculing people for expecting a big earthquake to come at some point, because it didn't happen today.

So sure, if you had a time machine and could go back, invest in the stock market then, and reinvest in gold now, you would have argument there.

But that is only possible in hindsight. The problem is that that such commentary ignores the risk factor, in that it could have happened at any time in the last few years. Because we are not stupid enough to think we can time it, we accept our entry point may not be perfect, but at least we negate the risk.


Naughty Slumdog said...

IMHO, we have a nice little oil war over there. They cypriot have to surrender almost everything (including a nice piece of own national territory) if they do not play right with their off shore oil. EU just made a first step into the oil arena, and is not the only one. Watch Black Sea either shoring countries either!

Indeed, this is a step when a big consumer tries to take over the producer. Somehow this is the story of South China Sea tensions as well. And remember Lybia prior year!

Not only that the oil price should on average drop due to the unavoidable economical depression, but as we can see there are political moves to secure access to oil bypassing the current wisdom. Oil de-facto priced in euro, inevitably, don't it ?

IMHO, we should expect to see lower oil prices in the future, with the wealth stored nicely in some other assets, gold being a incredibly good candidate. Now about FG, is somehow beyond my modest canine brainware, but as my grandmother used to say: " So, does he/she has some gold ?"

Remember, the times are similar to what our grandfathers saw, and not to what we used to see..

Naughty Slumdog said...

And if you have some time and passion, here is a french explorer and geologist that had discovered the oil in Lybia and set some ground for desert oil exploration. His charts&notes were very interesting for guys that were splitting the protectorates after the WWII. Eh, and he died in mysterious conditions...

eh, excuse my french ....

JR said...

There seems to be a "comments strike" here....not to mention a gaping hole left behind by this thread's most erudite posters now departed for parts unknown.A genuine pity.

Where do you think they are drinking, and will they let us come hang out?

Nickelsaver said...

Hello JR,

Good to see you. Your presence has been missed.

Hope your here to do more than just peak through that open window. The animals all need washing, some ropes need to be untangled, and the show simply must go on.

Welcome back!!

M said...
This comment has been removed by the author.
M said...

Days like this are sure compelling specifically because the majority thinks they are right. The majority thinks they are vindicated. This doesn't happen very often.

Guys like athrone think they are right.

Dante_Eu said...


Amen to that. I wanted to write that long ago, Sinclair have completely lost it. Poor guy, new trics for old paper traders are hard to standing on 1 leg. :-)

Long time no see, no hear...Welcome back buddy!

Suggestion for new topic: FreeBitCoin

Dante_Eu said...

Ups I forgot.

Sentiment of gold and silver traders, Anno 2013:

I am clueless on the silver market

This ain't gonna end well... :-)

Robert said...

Robert Mix, I am in Vienna today, and I just returned from the Numismata coin show. There is plenty of bullion available at the retail level, and the premiums are no higher than they were before. The fact that some local dealers might be sold out in some locations is meaningless IMO.

Given Another's observation that "The Western public will not hold an asset that going nowhere, at least in currency terms" I expect that bullion will continue to make its way to the retail market in the foreseeable future.

MatrixSentry said...


I am of the opinion that the retail market will function right up until the end when it will fail all at once, for the very reason you cite. Weak hands in gold that do not understand what they hold will feed us ants our gold. Gold in size died some time ago at the price level the ant retail market enjoys.

A trickle of flow at $1477. Pallets at $_____?

Edwardo said...

Welcome back, JR.


I've used Gainesville twice. They were a bit of a nightmare the first time out, but they did ultimately deliver the merchandise about two weeks late. The second time, the order was smaller and there were no complications or delays.

I prefer APMEX all in all.

Me three on Matrix Sentry's comments on Sinclair. Martin Armstrong is a semi-literate autodidact who asserts all manner of postulates that, more often than not, he manages to contradict within the same post.

Then there is his penchant for self regard and grandiosity-"We submitted our plan to Cyprus, but, alas, they didn't accept it. Had they done so..."

Yes, yes, if only they had listened to you. I guess it never dawns on Marty that if "they" were listening to him, and actually putting his ideas to work, that would signify that his vaunted cycles were invalid. Oh the damnable paradox of it all.

Woland said...

Hi JR: That was a looooooooooooooooooooooong ski trip!! Welcome back!!
(I thought you might have met the same fate as George and Marion Kirby -
glad I was wrong)

MatrixSentry said...


Gainesville coins is an excellent outfit with a spotless reputation. Terrific customer service. I would say the same for Colorado Gold, a small family operation. Why mess around with a psychopaths like Tulving and his fucked up secretary in order to save a few dollars. Will those handful of dollars mean anything when your physical achieves Freegold valuation?

Anand Srivastava said...

I have been thinking about bitcoin lately. Rather have been forced by a friend :-).

Cyprus gave a clue that bitcoin might be a very important currency during the crisis. This is why bitcoins suddenly surged to very high values. Even after the crash they are at a very high valuation.

During the crisis, several banks will have failed in real terms. This might cause issues in doing international transactions. In this case Bitcoins might provide a lot of value. And may become highly valued.

But there is no point in trying to buy bitcoins. Instead why not mine them. This would be useful for people who have some background in computer science.

Currently we have reasonably priced machines that can mine BTC blocks in under 7 days. Each BTC block contains 25 BTC. This means that at the current price of 110$, you make 3000$ every 7 days. This is very lucrative.

sean said...

The recent bitcoin crash revealed several flaws in the design - not of the currency per se, but in the network supporting them. ie: Mt Gox was inaccessible - a "victim of their own success", and trading can be stopped arbitrarily by someone running the exchange.
Guess it makes sense for an exchange that developed out of trading "Magic, the gathering" cards.

Indenture said...

Greetings JR, I had to do a double take when I saw your name.

Regarding Bitcoin and Freegolders, let's see how the two groups reacted to yesterday's action. Bitcoiners were frozen in the dark as Mt. Gox went down and they had no obtainable net worth. At the same time the price of gold fell but even if it fell to zero where Freegolders would have no net worth, because we adhere to a thesis of a two tired gold system we don't care if the false tier disintegrates. In fact, it is what we expect.

Oh no!! The horror!!

Polly Metallic said...


Other bullion dealers you might check are Provident Metals and SilverTowne.

Tommy2Tone said...

Yes, I've used Provident several times and they were very nice and quick to deal with. I've also used APMEX several times and they too were good to deal with.

Great to see you JR!

Knotty Pine said...


I third the motion on Gainesville Coins. I have made several purchases from other dealers and have settled on Gainesville as my go to coin and bullion dealer.

I also agree with Pat. The trolls really suck these days so why feed them!

Lisa said...

Provident can be slow.

They allow you to pay by check, rather than a wire, but this slows down the process. They hold your check for 5 or 6 business days after receipt, then put you in the shipping queue.

Normal time from order to receipt is about 3 weeks. Phone calls asking "where's the order" do seem to speed up delivery - "Oh, we are shipping that today".

Robert said...

For dealers in the U.S., I will recommend Harlan Berk in Chicago. They are extremely well known for numismatics, but they also sell bullion. They do not advertise this on their web page, but they are extremely reliable and in my experience very affordable.

Franco said...

I am not an advocate of bitcoin. I have never owned a bitcoin (although I have been intrigued by the "mining" concept). Having said that, it bothers me that the whole bitcoin concept is being summarily dismissed because "Mt Gox closed down on the whim of its owner". That's a straw man fallacy to me. First of all, these exchanges are a layer outside of the world of the bitcoin currency. They are an accessory, not the thing itself. If I go to a bank and try to buy 10,000 euros, and the bank tells me that they don't have that on hand, that they would have to order it, and it would take several days and the buy/sell spread would be quite large, does that mean that the euro is crap? No. Second, this "incident" with Mt Gox, it's not...what's the word...unsolvable, and it's not monopolized. You can open your own exchange if you want to. You just have to build a platform to accept bitcoins for dollars, and vice-versa. In fact, it seems that there already are many exchanges aside from Mt Gox. Again, not promoting bitcoin, just stating the facts.

tEON said...

I see Tulving is still down. I'd hate to have a pending order with them.
In Canada,
I know the Stigma of Kitco - but I have never had an issue with them - very fast delivery.
I have never had a problem with APMex.
SilverGoldBull takes PayPal (a well as Wires) but are too slow for my liking.
Borders (BC) - I had 2 bad experiences (wrong order and shorted me a coin)
but the worst I have ever used is 'Midas' - it took almost 3 months for delivery (no joke!)
Luckily there is an excellent, and large, coin store within driving distance.
As this things progress I am more willing to pay higher premiums if it insures I get it in a reasonable time. Because one time, I'm sure, I may not receive it at all...

Indenture said...

Franco: Could you please show me the price of Bitcoins listed on another exchange during the Mt. Gox black out? Honest question. I admit to a superficial knowledge.

Tony said...

I first started buying gold a few years back (after Kid Dynamite helped shake me of my silver prejudices). Since then, I discovered this blog and I've purchased gold in all price ranges...even as high as $1800 per oz. Because my circumstances are meager and I embody "shrimp" in every essence of the word, I suppose it's only human nature to think and wonder what could've been. How many more ounces I may have, had I waited. However, I must say that MF said exactly what I feel. While it would be easy for me to lament purchases made above these current levels, how foolhardy would I have been to take the chance of waiting for a hopeful dip?? I can't say I have a completely sound understanding of freegold, but I have read FOFOA's posts for two years now and my understanding is adequate enough to know I need to accumulate gold as I am able. In other words, time is of the essence for me...but not trying to time a bottom.

Even knowing what's coming, I admittedly struggle welcoming this type of price action. It's unsettling, but I believe I know what lies at the end of the rainbow.

Pat said...

Interesting take....

Anonymous said...

Pat, I wonder what this guy has been smoking. Want some of that stuff, too...


Anonymous said...


Don't forget to puff, puff, pass:)

Sweet Leaf

Franco said...


Go to and pull up the 5-day chart from Mt Gox and also from BTCE. You can see that trading was halted on Mt Gox during the second half of 4/11, but they kept trading on BTCE.

Again, I'm not trying to promote bitcoin. Only making the case that just because an exchange (and the largest one at that) halts trading during a period of extreme volatility, that in and of itself is not proof of a cataclysmic flaw in the bitcoin system.

Edwardo said...

I am posting this chart because the pitchfork was drawn from the beginning of the "bull market" and caught the low of the biggest counter trend move so far. Some simple, and, perhaps, simplistic logic might argue that if the pitchfork can't hold the present down move that the game has, indeed, changed.

MatrixSentry said...

Here's my chart. A violation of 1450 suggests a Fibonacci 38.2% retrace down to 1293. If a new paper gold bear is in the offing, RSI still has plenty of downside potential.

Fasten your seat belts.

Edwardo said...

Interesting, Matrix. I come up with 1284 as the .382 retrace. It's all from were one measures.

The following is something of a geek alert.

June of this year happens to be a fibonacci 21 months from the September '11 high and June is traditionally strong seasonally for gold. June was, as you may recall, the month of the infamous Brown's Bottom.

2014 is 34 years from the '80 high. Fibonacci connections to the momentous gold events of '33 and '71 put things out into the next decade, though the Lucas series number 47 shows up in relation to '71 in 2017. 2017 is also a Lucas 18 years from '99.

And even though 100 years is not a part of either number series, 1913 is, of course, the centennial of the creation of The Federal Reserve.

RJPadavona said...

Hey SV,

Although I love him to death, I have to part ways with the OzMan on this one:

When I first met you, didn't realize
I can't forget you, for your surprise
you introduced me, to my mind
And left me wanting, you and your kind

I think this implies that the sweet leaf is a gateway drug (especially considering Ozzy's habits).

FOFOA explains how our monetary problems aren't caused by what the CBs are doing to our money, but how the original dilemma is due to the fact that we save in the same medium we exchange in.

The same logic applies to gateway drugs:

What got you doing heroin? Coke

What got you doing coke? Marijuana

What got you smoking marijuana? Alcohol

What got you drinking alcohol? Cigarettes

What got you smoking cigarettes? Coffee

What got you drinking coffee? Chocolate cake

So, can we all agree that chocolate cake is the real gateway drug?

BTW, if you see your mom this weekend, would you be sure and tell her "SATAN!!!!" \m/


Lisa said...

This is a fascinating little video on fibonacci numbers.

It kind of reminds me of the fractal geometry videos FOFOA posted a few years back

Anonymous said...


I'm very with you on that one, I'll explain it to you over some chocolate cake one day. Don't blame poor Ozzy! you're gonna have to take it up with Geezer;) The man with the words. Ozzy's just the guy that bit the bat with the voice.


I'd probably lick a bat's ass if I could lay my hands on that Bulbous Creation album - mint, original pressing.

Anonymous said...

Someone said it didn't exist...

Let's Go to the Sea

Nickelsaver said...

"FOFOA explains how our monetary problems aren't caused by what the CBs are doing to our money, but how the original dilemma is due to the fact that we save in the same medium we exchange in."

Yes he did! But it seems like a couple of smart guys think they got the work around this via uberhard currency. Gee, they must think they are smarter than FOFOA - A/FOA even.

Beer Holiday said...

Thanks for the link, Lisa.

And it's appropriate to the blog because the limit of the ratio of consecutive fibonacci numbers is the golden ratio :-)

Beer Holiday said...

...which is the first thing they explain in the part 2 video on fib numbers. Doh!

Lisa said...

BH. Thanks for part 2. I posted part one since Matrix and Edwardo both mentioned Fibonacci retracements in their comments.

John said...

Who needs fundamental analysis or even thinking when you've got a ruler and Mr Fibonacci on your side....funny how I've never come across any Fibonacci Billionaires in my 40 years in the investment business.

John said...

News Flash: If gold made sense to own at $ makes even more sense at $1475....and what has Fibonacci have to do with the demise of the purchasing power dollar as a transactional currency? That's what should be measured....and the distance on the time line of the "y" axis....and by any measure we are by definition much closer. Make this easy on yourselves folks, sometimes things just "are because they are" not because it makes sense....and markets are products of human behavior which often don't make sense until you knock some sense into those very same humans, usually the hard way :)

Edwardo said...


Who suggested, other than you, that applying fibonacci analysis was, by necessity, a stand alone approach to understanding markets? In the meantime, I'm happy for you that you've got it all sorted.

Bjorn said...

Are none of you yankee gun nut types (yes MdV I´m looking at you ;-)) buying your shiny from Eric ´n Joe at in Phoenix? I used to listen to their radio show all the time a couple of years ago. They seem to be running a good business as well as a sometimes hilarious radio show...

Bjorn said...

Rickards getting down with physical:


Physical Gold Trust, GTU, is currently trading at a 4.6% discount to NAV, which is quite rare.

Dante_Eu said...


That was amazing videos and amazing channel! Thanks!


You may appreciate this one:

Vi Hart's Guide to Comments

Michael dV said...

Las Vegas is a 6 hour drive from Phoenix.
I buy gold from where ever it is cheapest in the kind/quantity I need at the moment.
Guns I buy online and locally. btw I heard some nut case on Fox (shock of all places) say guns were bought online..they can be but at present they must be shipped to a licensed FFL holder. One then must go to the FLL and get Brady checked before you can take them. NO ONE can get a gun from a dealer without the Brady unless they have a CCW which entitles them to skip the check and the $25 fee.
At issue now is the the Feds want all gun sales to go through the FFL process. This would require registration of all guns which most gun owners will resist. The federal government knowing where all the guns are is the step before confiscation and everyone knows this. Expect some problems if Congress passes legislation requiring a Brady for all gun sales.
Back to gold...I doubt I'll be able to add a single ounce before reset as I still have to ransom my coins from my profit sharing plan and pay 35% tax. The very best thing for me is to have gold go to 300....I get my coins out with minimal tax and my DGLD (x3 inverse GLD) ETF provides the cash to pay the tax.
This is how one does it if they follow fofoa. Anticipating the plunge in POG has meant that for 2 years I have been planning for this. I guess if gold soars I'll get my butt kicked a bit but if A/FOA/FOFOA are correct I'll be doing it right and doing well.


Are we on the edge?? Gold is down another $50 around $1430.

Herb said...

They are, as they say in poker, chasing out the ribbon clerks. I ain't levereged and I ain't gonna fold.

CharlieBravo said...

I would assume that if this is not the end game than a bottom would need to be attained at some point. Prices at this level increase the flow of physical. If the game is to be extended than someone needs to step in and start buying up this paper gold. Is this thinking correct?

Michael dV said...

We here are wondering if the support (which we think has been provided over the years to support the paper gold market is being /has been withdrawn.
If that is the case the stressors are physical demand and to some extent paper short sales and the support would be suppling physical to the market.
We foresee a market in which the paper price falls to the point at which either there is a dramatic split in the paper vs physical price of 'gold'....or the market just closes. In the latter case we hope it re-opens in a few months as a physical only market at a (much, much) higher price.
THAT is what has made reading all this 'wooly' freehold stuff so worthwhile.
It might just not be time wasted.
There are hundred of physical gold advocates but only one who made this call (well one who patiently unlocked the mystery and obtuse verbiage of Another and further studied the wisdom of FOA) and you found him here.

Biju said...

I am not liking this slow draw down in gold price. Hope it gets quicker as A/FOA predicted instead of ny drawn out downward price movement

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