Trail Guide (08/21/00; 21:04:03MT - usagold.com msg#: 35283)
Hello SLF and Welcome!
I say welcome because I think you are new here. But then again, I haven't read back through all the discussion that happened while away. As you know many of the posters on this forum present exceptional perspective. The kind that demands a comment or answer before moving along. Often one must be careful not to read them or risk being trapped here. (smile) Yours is the first I saw today, no doubt there are many others in the archives for later. So let's stop a while.
Your post # 35259:
--- I have been following your post's for a couple a years. I am trying to get a grasp on your current thoughts. As time goes on I am trying to see how current events will effect Gold/Dollar. It is my impression that you believe the Euro will be the currency that dethrones the Dollar as the Dollar hyper inflates. What are your latest thoughts about the weak Euro strong Dollar? -----
SLF, I see this whole progression
of events as an international chess game. It's a game that has
been going on and evolving for many years. It's hard to discuss
it in an investment format because far too many "hard money"
traders continue to grasp each move on the board as a short term
isolated happening. From this view, they play these events for
quick profits. Mostly they lose big, because this particular game
is unlike anything in the past and continues to evolve away from
past historical precedent.
On the other hand, there is a whole world of people out there that are making a killing for reasons they profess to fully comprehend. Yet truly, their wealth making is little more than a mistake of historic human proportions and they will have it all taken away for reasons fully incomprehensible!
SO,,,, For us to see the whole board we must wade away from shore. Away from all the shallow water traders and into the deep blue. There we can feel the real current.
Our dollar has had a usage period that corresponds with the society that interacts with it. Yes, just like people, currencies travel through seasons of life. Even gold currencies, in both metal and paper form have their "time of use". Search the history books and we find that all "OFFICIAL" moneys have at one time come and gone with the human society that created them. Fortunately, raw gold has the ability to be melted so it may flow into the next nations accounts as "their new money".
This ebb and flow of all currencies can be described as their "timeline". We could argue and debate the finer points, but it seems that all currencies age mostly from their debt build up. In a very simple way of seeing it, once a currency must be forcefully manipulated to maintain it's value, it is entering the winter of it's years. At this stage the quality of manipulation and debt service become the foremost determinant of how markets value said money. Suddenly, the entire society values their currency wealth on the strength and power of the state's ability to control, not on the actual value of the money itself. Even today our dollar moves more on Mr. Greenspan's directions than from the horrendous value dilution it is receiving in the hands of the US treasury.
This is where the dollar has drifted into dangerous waters these last ten or twenty years. If you have read most of Another's and my posts, it comes apparent that preparation has been underway for some time to engineer a new currency system. A system that will evolve into the dollars slot once it dies.
Out here, in deep water, we can feel what the Euro makers are after. No one is looking for another gold standard, or even something that will match the long life and success of the dollar. We only know that the dollar's timeline is ending and a new young currency must replace it. No great ideals, nor can we save the world! But a reserve currency void is not acceptable.
Now look back to shore and watch the world traders kick ankle deep water in each other's faces over the daily movements of Euros. From here, up to our necks in blue water, you ask "What the hell are they doing?" I'll tell you. They are trying to make $.50 on a million dollar play! Mostly because they are seeing the chess game one move at a time. (smile) Truly, their real wealth is in long term jeopardy.
Our dollar has already entered a massive hyperinflation. It's timeline is ending and there will be no deflation to save it. The currency and all the multitude of derivative instruments that make up our money system have expanded rapidly over the last 20 years. Even at a super hyper rate for the last five years or so. We cannot read it because much of what we "Western" savers call paper wealth has really become money substitutes that's value is supported by the government. This paper wealth creation cannot reverse and is beginning to enter the "natural world" of real things. The best sign that the currency has entered it's last, final inflation is seen in the manipulated price gauges. Truly, this is only the beginning. Eventually we will see roaring price increases in everything, even as our government indicates level prices or perhaps a deflation in our price structure. This has to happen, because there is no saving a society's currency that has debted itself beyond any known example in man's past.
In our time we will all see the Euro become very strong. You will read and hear this. But, Another and I have know for some time that it will be the dollar falling away that will make the illusion complete. I say this because all currencies are but an illusion of value.
Eventually, either before of after the dollars transition, the illusion that makes currencies real will also undergo a change. That illusion / vision is the current world paper gold market. Often known as the dollar gold market. This marketplace will fail with the dollar's timeline and so too will it's use to value gold. In this time gold will not soar in value, rather all currencies will seek their true relationship to a "FreeGold" market. The US dollar will some day see $30,000+ for an ounce of gold. So too will the Euro price gold much higher ($$3,000 to 6,000???).
It is here that our Euro has planed to play the game to the end. (more later)
In your post:
---- When Another talks about " slow oil" what does he mean? Is the current short term oil price increase the beginning of something larger and more sustaining?---------
Yes, SLF! The transition from
a world of dollars into something else is truly an evolution.
There is no definite point where political wills draw the line.
Once the Euro was born and "online" the dollar evolution
began to speed up. Oil, out of a seemingly impossible position,
suddenly began to rise in price. The paper gold markets were adjusted
in what was the first step of their destruction, the Washington
Agreement. Now, oil prices are set to evolve high enough to test
not only the dollar's strength, but to force the physical gold
market to separate from it's paper controlling world. Indeed,
our paper gold markets will very much simulate the same manipulation
of price gauges as the CPI. All in an official attempt to say
that our dollar is not dying. In many ways, it will be the paper
longs that abandon the gold markets (forcing prices ever lower)
even as the physical price soars. Yes, the shorts may make a killing
but the money they make will be worthless!!!!!!
--- In reading your last post on the trail, you say "one Gold is coming my friends, one Gold"-----
I think Another means that oil
flow will slow until we have one physical gold price. Perhaps
this is the end of Another's beginning odyssey of many years ago.
It could be that the REAL GAME HAS BEGUN!
My friend, the future of physical gold is to become a wealth holding of a lifetime. However, the world will not take lightly to such a recognition of private wealth gain. I hold physical gold in good proportion but am prepared to see it's current paper fictional value plunge to Another's very low dollar price. A paper price that will be a fictional as $1.00 gasoline during a dollar hyperinflation. This is the reason I hold a lifetime position in a few gold shares. Their value may plunge to zero before things change (an event the shallow water boys could not stand with). Even in the face of a soaring physical price, investors may chose to believe the paper markets over reality. Don't laugh, the believe the CPI today and continue to buy bonds????
--- I know you don't have a crystal ball to see the future, but I am under the impression you are a person that has high level information about what is going on with Gold/oil/currencies.--------
AS Another often put it, "I
am but a simple person". Events will make this knowledge
real, not the words of myself or Another. Indeed, only "time
will prove all things".
I hope to continue this, be back next day? , thanks
Trail Guide (8/25/2000; 6:04:33MT - usagold.com msg#: 35504)
Standing on the hillside of life and watching our "golden wars"
I can see your battle crest like a blazing sun!
Your thoughts are our true course
mighty words do shield these golden hearts
Advance mighty one and draw ever nearer truth
for the benifit of all
My friend, Isn't it interesting how people revert to debating and berating "the presentation" of a position when they are lost to discuss or question "the content". Your beautiful post drives home "the content"! One should read these passages first and settle into a thought frame. Then reread the whole post:
Aristotle (8/25/2000; 4:02:42MT - usagold.com msg#: 35502)
The evolution and confessions of an unrepentant Gold advocate
-----for myself despite the heavy influences of the Goldbug dogma I had eagerly absorbed with gusto. As I came to realize how many pieces of their puzzle didn't fit, I came to see that the explanation was owing to the well-intentioned reason that much of the "standard Goldbug rhetoric" was based on idealism.----------
------Happily for the buggiest Goldbugs, this same pragmatism also renders equally null and void the successful implementations of any notions of an idealistic paper-only world as seen in the wildest dreams of Keynesians, governments, and many bankers. As things are, Gold has a very important role squarely in the middle of a pragmatic world, yet too few people give much "theoretical thought" to this middle ground.------------
------I arrived at a position with a realistic eye on the middle ground giving me clearer monetary understanding as it works in the real world, and also how it COULD in fact (and should) be made to work immeasurably better.-------
------Such has been my evolution toward monetary "enlightenment," and such is my position here--as a pilgrim, not a teacher--at the very bottom and on the fringe of the admirable and idealistic gentlemen who gather here to share their thoughts and visions of a better world and a better monetary system.------
-----I certainly didn't come here as perhaps some of the traders have--after having gotten themselves into an investment hole, hoping to argue, defend, and justify their way out of it.----
-----Keynes didn't call Gold itself a "barbarous relic," but he rightly called the Gold STANDARD a "barbarous relic," which is also precisely what the system of Gold derivatives and bullion banking of today has become---------
-------a relic of a clever scheme originally to offer life-support to a failing dollar-based international system at a time when the world had no other option. -------
This patchwork scheme is no longer needed. On the other hand, freemarket physical Gold, as the pure and essential reserve/savings asset (unlent with no derivatives) is desperately needed in the modern world to indiscriminately bolster each of us along side modern currencies which are now a permanent feature in the financial landscape. Simply put, Freemarket Gold is the only way for a man to safely coexist with his currency.--------
Gold. Get you some. ---Aristotle -----------
Thanks Aristotle--- The future is before us!
Trail Guide (8/26/2000; 19:16:31MT - usagold.com msg#: 35569)
Couldn't post this on the Gold Trail? Something Wrong?
Hello Cavan Man!
In your post of ---- Cavan Man (08/21/00; 19:49:05MT - usagold.com msg#: 35278)---- you asked for more detail. Something like a grocery list to check off as events move along (smile). The exact question came as: ----"What are some of the impediments to moving ahead with your "freegold" scenario?"----
Well, Cavan Man, one of the toughest problems investors have with following the Gold Trail stems from their perception of how our modern dollar money values things in the market place. I, we, all of us have discussed this extensively. Often from a somewhat different view than mine.
From my interaction with people of various far reaching world backgrounds, one thing is clear: Investors and regular workers with a Western slant do not grasp what wealth is. Overwhelmingly they see their currency and paper investment portfolios on an equal footing in value with the same "real things" that raise our living standards. Yet, in real life, they cannot be equal because these paper assets are only an exercise able future claim on our "real things in life".
Take my debate "Against" Goldhunter as an explanation example. His perception is typical in that the ---"prices bid for futures contracts are the market value of gold"---- (see msg#: 35427). These future contracts serve no more purpose in setting pricing function than do all modern paper assets we today hold as wealth.
In this larger sense, after rereading my post to him,,,,, one can see where the entire dollar world itself has become a "futures pricing arena" that "undervalues" almost every real usable item we function with in daily life. The dollar asset system, as we know it today is used as a value setting tool even though it,,,, like gold futures,,,, does not entail the removal of real goods from circulation.
But wait, you say,,, of course it does,,,, we buy and sell for our life's needs every day using dollars! Yes, this is true, Cavan Man but in that process we as an economic society only use a tiny fraction of this paper asset wealth to do that physical trading. As an example:
Look at the daily trading of gold futures and gold future "look alikes" in London as they trade in a huge volume multiple of the actual physical market. As this lopsided trading is a comparison valuation that understates the value of gold,,,,, so too does the collective acceptance that dollar assets are held as equal to life's physical needs,,,,,, also understates the real value of all things in our lives.
You see, a futures system that functions as our currency or currency contracts, values physical assets without taking these assets into our lives and by extension taking the assets out of the market. This is the current money world we live in. The dollar in your pocket is part of a much larger paper wealth system that has evolved into today's money system. A reserve system that is not tested against real "supply and demand" values. With these money futures we may leverage our perceived wealth by thinking we actually control "real assets" just by holding contracts or dollar denominated paper assets. In reality we only own claims on each other's ability to produce,,,,, just as a futures contract holder only holds a claim on another to produce physical. Expand this function to a level where today's dollar world is and we can grasp what others see in the real value of gold.
This is the reality of perception that Another speaks of when he said -----"your wealth, it not what your currency say it is"-----.
Truly, this statement was larger than life to anyone that could understand it's implications then and correctly act on it today! Unfortunately, most readers just went out and brought more paper denominated dollar gold assets. Many have lost a bundle thinking they were hedging when they were just playing the same dollar game.
This takes us back to your initial question:
Western society and Western influenced investors cannot grasp gold's value because they mentally must denominate it into currency first. To do this they turn to the "market place" as the undisputed tester of values. But, as shown above, our market place uses a currency system that is entering the end of it's timeline and therefore can no longer measure "things" on a simple supply and demand value basis.
Some of the things on our "grocery list" are being checked off as we walk this Golden Trail.
This currency systems and the evolving nature of our current society that created this system is in the process of radically changing it's paper wealth structure. The government, as an extension of that society begins to support and maintain the asset value of almost everything. This is the engine that drives an eventual hyperinflation. Not a typical business expansion inflation we are used to, rather an all consuming, ending inflation that does not stop. At this point the concept of sound money takes a back seat to maintaining majority asset holdings on a permanent plateau. By extension, the official stance is moved to promote all paper assets as "national money". Stocks, bonds, business function and even general welfare is elevated to an equal footing with the need for a good sound money in your pocket. The mood becomes one of "what good is a sound dollar if we are deflating"? Check that one off your list because we are well on that road.
The international value of major currencies become more a function of "who can manipulate them the best" rather than their soundness. Forget the trade deficits, asset price bubbles, debt overflows or interest rates,,,,, it's who is best at controlling currency derivative function. Traders buy using "official control" as their determining value fundamentals. Truly, at this stage the prospects of a price deflation and it's opposing currency hardness are a distant joke. The US has now moved to using measures once reserved for third world systems when it comes to playing the money game. Example: "our national debt is being paid off"! Or the CPI rising .01%! Check this one off your list,
it's happening now.
Those with power outside this game are seen making long term preparations for the day when the US dollar inflates away. They see where the dollar value is only a function of trade flow manipulations. Not real economic progress. They see where throwing ones entire economic system wide open to "bubble expansion" policy in a "come and get it while you can" experience,,,,, can only end one way. So they play the game while there is time and they play to win with gold! As USAGOLD poster Henri put it today in msg#: 35547:
---- " If one considers wealth to be the accumulation of unencumbered assets of enduring value, then the pursuit of fiat profit to be converted to real wealth makes sense.-----
(nice post Henri)
The unanswered question that "noone" could ever understand was "outside the other CBs, who has been buying all this gold over these years?" Check this one off your list my friend.
The Washington Agreement has placed us "on the road" to one of the most exciting changes for our current physical gold market in it's short 25 year history. This part of the world reserve currency system was about to radically evolve with respect to the world dollar gold values. To date, the ongoing dramatic fall off of LBMA trading from it's (also) short public life is leading to an eventual official evaporation of dollar based paper gold banking.
Someone in Another's group pointed to that spike in paper trading long before most had ever heard of LBMA,,,, and did so by saying that a drop below $360 would cause it. That ensuing round of massive paper playing was but a backstop to maintain the dollar reputation with low paper prices prior to Euro presentation.
I point this out because many new watchers of our gold wars have no knowledge of this important play on the political currency chess board.
This paper game got out of hand before the Euro was born and the BIS was ready to hold the gold line at $280 if needed. But, the Euro was born and is now a functioning currency. Today our paper gold game has come full circle and most of the players that know anything are shaking at the prospect of a pure physical market that will stand next to the Euro. Forget the gross volumes of derivatives on the books of majors, they don't mean a thing. They can keep writing contracts all they want but with trading volume falling away, eventually there will be no market to value these assets.
If this process is allowed to mature fully, major pain is coming to paper hard money investors worldwide. They have hitched their wagon to assets that require an operating paper system to sell into. Outside the private markets for existing and circulating bullion and coins, the entire industry will shutter to a halt as the mess is worked out. Investors will be kicking themselves as bullion soars
while an extended workout phase brings their asset values to almost zero. Sure, something will give,,,, maybe? Maybe we are at the paper price lows now?
But most "regular" hard money people that read these Thoughts are in the game for asset preservation during a world currency crisis and or inflation. Ten ounces of French gold coins and $60,000 in mining stocks and derivatives will make them sick during such a paper work out. Other proud hard paper asset holders proclaim they have millions in the industry and are not the least worried. They also said the Euro would never happen, oil will never see $30 without $600 gold and $280 gold would mean a major US depression! Well,,,, Don't check this one off yet. It's still playing out.
Then there is oil. I will repost my recent and now "edited" post to oldgold:
Trail Guide (8/25/2000; 8:55:32MT - usagold.com msg#: 35512) Comment
oldgold (8/25/2000; 8:12:54MT - usagold.com msg#: 35510) Energy and Gold
I know you have held a forceful opinion for sometime that the US can and is still controlling oil producers. Your thinking was no doubt rightfully influenced by our last ten to twenty years of experience with the political world of oil.
What has been changing for the last number of years was our realization that a new currency would be available to the world. True, this Euro is nothing to write home about now but we as a Western thinking group tend to underweight it's strategic importance as an "available alternative" to the dollar if needed. This subtle fact has shifted the playing field considerably when viewing the US ability to control oil flow.
Edited note: this next item is where we should watch for the dollar to be impacted by an increase in oil prices. For oil prices to be this high after all the political favors we are owed,,,, something must be countering that leverage. The US must be endorsing the move?
---------- Today, oil flow has moved from playing a fundamental game of pricing "use value" with supply and demand to pricing it's "monetary value" in supporting any major currency block. Concessions are now there for the taking by oil producers. Dollar prices for oil can rise considerably higher with the US giving behind the scene support for this action. In addition, the world paper gold markets can and are being dismantled as a further concession to retain dollar settlement of oil. -------------
Strangely, the coming surge in physical prices are now a 180 degree shift from keeping them low in support of oil flow.
Edited note: This next was the purpose for the short history of the LBMA high volume. It's use is now behind us.
In the future, rising physical bullion stores (and dollar prices) will play an important roll in playing a failing inflationary dollar against an ever likely increasing shift towards Euro oil settlement. No matter how this eventually plays, our dollar paper gold markets will dissolve as free priced bullion supports the EBS / Euro system.
Oldgold, Your posted article goes a long way to seeing the mental shift some Western thinkers are only just now grasping. It's seems even Goldman has printed a paper calling for 50 oil! It will be very interesting to see how their stock price is valued as they try to ride the middle ground between a short gold position vs long oil. In the end their much vaulted paper gold game should make them a ton of money, but without a market available to realize those gains? The more GATA talks, the more the paper world sweats. Not from a short squeeze, but from their market being officially evaporated. I know you, oldgold must also (smile) as I do at that thought!
Cavan Man, check off rising oil prices.
We are on the road to "Freegold"!
Trail Guide (8/26/2000; 21:44:27MT - usagold.com msg#: 35584)
Your post (Henri (08/26/00; 07:59:19MT - usagold.com msg#: 35549)----
-----------1) If $12 oil is incompatible with $320 gold, then $10 oil must have been extremely incompatible with $250 gold. To what extent was the recent explosion upward in oil prices a retaliation for continued downward manipulation of gold prices?----------------
Henri, most of this maneuvering
took place prior to the Euro being secure. There was a lot at
stake if the Euro fell apart at that time. Politically it went
something like this:
a.(late 80s early to early 90s)
US and Europe worked together to bring gold prices down:
to make the dollar good in gold for oil and others
to allow some cheap physical purchases
to allow some long term contracts to be established
to allow the continued flow of oil at reasonable, economy supporting rates
paper gold had not inflated to anywhere near these current levels
so contracts were seen as supportable
so contracts and physical were seen on almost equal footing
b. (early 90s to mid 90s)
the supply of freegold on the
official level was beginning to run short
so CBs sold openly mostly to each other to create gold selling impression
so mine forward selling was encouraged originally engaging mostly CB gold
major gold buyers were ready buyers with cash or lend able natural resources
so naked paper selling began to imitate CB supplied gold
so same naked paper selling supplied some mines forward sales contracts
so falling paper gold prices drew out old line/ non oil physical bullion in exchange for paper
so falling paper prices brought in cheap financiers to sell into this paper demand
market is flooded with new paper and begins to override it's original purpose
by now US knows the Euro will succeed and benefit from a rising physical gold price
c. (mid 90s to date)
US and Europe split,,,, BIS
takes Euro side
US encourages London to join it in dollar support,,,, print more paper
Europe and BIS stand to enter the world physical markets if gold falls below $280 before Euro is born
Euro comes online
Oil gold buyers don't like paper gold inflation
Oil stands to raise dollar oil prices if gold markets stay below $280
Europe stands aside and watches knowing what rising oil will eventually do to US dollar / economy
Europe adopts policy of "Freegold" by quarterly marking to the market bullion prices
Europe and BIS stand aside and endorse a flood of paper gold
Eventual demise of dollar contract gold markets draws oil to Euro support
Oil and Europe force Washington Agreement
Oil begins to raise dollar oil prices in effort to crush paper gold markets with inflation induced physical gold demand
-------2) How high is OPEC prepared to take oil, to force the gold price freeing agreement to a
level they are comfortable with ($30,000/oz)? I am assuming that OPEC is voice of this group. Am
$75 to $100
Europe / BIS are and always have been at least the political architects
------3) when gold is freed, will $10 oil reappear?------
10 dollars? Never.
10 Euros? Absolutely
----4) Can we look to the breakup of operations at the London Bullion exchange as the next
signpost along the trail? -------
Look for paper trading to slow further, physical becomes rare
or paper prices surge in a super run then quickly shut down as physical prices run away
or paper open interest surges as shorts try to cover before more players come to know about the condition of the markets.
or paper prices plunge to less than $100 as all physical trading stops. Then markets shut as physical prices leap
---5) Goldman Sachs is I believe as much involved in forward sales of oil and futures as they are in gold futures sales. I think this only because the oil index is also known as the Goldmans Sachs index. I may be wrong.----
These guys are smart! Who knows, this could all pass and nothing happens at all! (big smile)
-----How much of the "glut" of oil that drove prices down to $10/barrel existed only on paper? I am thinking that the same group that is driving gold down with paper supply learned this by doing the same with oil earlier. Will the breakup of the London operations signal it is past time to go long gold and short oil?-----
Henri, it's my bet that the
oil markets learned from the gold market. For myself, in these
uncertain days, I would never short oil or anything that a hyperinflation
could drive thru the roof. If I must trade gold trading physical
with a dealer is the ticket.
Sorry for the short format, I have to go.
Trail Guide (08/28/00; 20:35:52MT - usagold.com msg#: 35674)
The big trade!
I would like to start this as an offshoot from my post earlier today to Peter Aster (msg#: 35638). It seems we have run into a roadblock of thought. Perhaps a traffic jam would be a better analogy.
In it's most basic form, this presentation has been that;
----in the worldwide modern paper markets, contract trading has taken over the roll of setting gold prices at a tremendously understated level.----
Years ago hard physical trading once did that job and did it at a correct level relative the physical product that was changing hands.
For us to follow and grasp this concept change correctly, we must start at the very beginning of simple economic principal.
When someone buys a product and takes possession of that product he impacts the value of that item as it relates to the next person in line waiting to buy. Like this:
When Joe buys one of five apple from the table of a vendor, he leaves only four apples left on the table to be bid on by the next buyer. This ages old act of "hard trading" demonstrates the whole human interaction with supply, demand, need and emotions. When the next buyer sees that only four apples are left, where there were once five, whether he likes it or not his mind will consider the above supply and demand possibilities. All the while personal need and emotions mix in his brain.
The result may or may not be a different bid from the first buyer of an apple. But it will be a true value assessment based on actual, hard, real time circumstances known at that moment.
When Joe brought that apple, he impacted real supply and forced the market,,,,,,, that's everyone trading behind him,,,,,, to form "hard opinions" about "real demand" and "real supply". In this dynamic, the next trade is not priced by "soft opinions" based on conjecture of "will Joe really take delivery".
You see,,,,,, in real life,,,,,,, in real trading,,,,, Joe taking delivery now, hard down, undisputed,,,, and this forms a different "mind set to bid" by the next in line. This mind set is what creates a "real value bid" instead of a "possible value bid". These "hard bids" based on "hard opinions" overshadow and usually bid higher for product than "soft opinions". In times of "Hard Trading",,,,"Soft opinion" bids even fail to materialize mostly because "Joe has shown that he does take delivery"! ========
I had today, asked 10,000 Kansas investors to line up along their border with Colorado. This nice straight border is very long and allows room for everyone to have some space. I asked half of then (that's 5,000 (smile)) to stand on the Western side of the border (Colorado for you non Americans) and the other half of them to stand directly opposite on the Eastern side (Kansas). All of these people did this in a hurry and they remembered to bring the very last $50,000 in cash they had to their name along with a pen and paper.
This was quite a mess to organize, so I hope everyone will appreciate this effort! (smile)
Today, while the Comex was still open and trading,,,, and the US dealer markets were open,,,,, I instructed all 10,000 of these people to enter into a REAL LEGAL PRIVATE OFF MARKET CONTRACT with each other for "1,000 ounces of gold". In effect, I asked that 5,000 of these investors contract to buy from the other 5,000 the equivalent of "ten 100 ounce gold contracts" that would expire in one hour. That's one hour before the gold markets closed today.
Yes, that's 50,000 contracts for five million ounces of gold that existed during trading today.
Further, not only did the sellers not have any physical gold, their last $50,000 in margin cash could not possibly buy the 1,000 ounces to deliver. Nor could the 5,000 long traders hope to use the last $50,000 the had to their name to buy that same 1,000 ounces. But their margin deposits did seem to make the deal real.
While this trade took place and the contracts were in force (they were legal and binding),,,, I called several bullion dealers to ask if the gold market was being impacted. I also watched the computer screen intently to see if anything would happen.
Surely, with five million extra ounces of gold being traded, it would have changed the price of gold.
"Just think, five thousand rich Americans contracting for five million ounces of gold should have done something!"
Well, it didn't. So all 10,000 Kansas investors canceled their contracts by buying each others commitments and went home a little smarter.==========
The reason this little trade didn't impact the "real value" of physical gold was because they didn't trade any real gold. As big as the numbers seem, the real physical supply of gold was never touched. All they traded with each other was their "soft opinion" about the future price of gold. Again, I say soft because they only traded bluffs that were for far more metal than their real financial assets could cover.
Their trading, like so much paper trading today creates and expands a soft paper market that not only overstates demand, but more importantly allows sellers to "vastly overstate supply without DRAWING FROM THE APPLE TRAY.
Further, the worldwide paper markets our margin money has helped sustain, continues to trade an outstanding interest that is far in excess of real available bullion. ------"""" Yet this outstanding interest is the supply gauge that so understates what physical gold would trade at as it's used to price the much smaller dealer gold demand""" ----.
Oh,,,, I'm sure 5% or 10% of my Kansas traders actually did make and receive delivery while I wasn't looking. They most likely had some gold and extra cash to make the deal. But with the size of the world gold market it didn't really notice.
By far, the majority of these investors were playing out my observed typical "Western Style". They trade the price of gold while waiting for someone else to buy enough physical gold to impact supply. All the while helping support a system that dealers use to price bullion at an understated price. Again, a price that's not created by taking real bullion off the market in a volume equal to contracts traded.
My reply to one investor heard saying, "why does anyone have to take delivery at all?".
My good man, then you would end up just like my Kansas traders as they wade in our modern mess. Always settling up and trading nothing, and doing it at a lower price. Because the paper price of bullion will continue to fall from a continued increase in paper supply. No different than the way our governments lower the value of money by supplying more of it. The correlation between the two concepts is indeed staggering.
This logic is almost like our early currency thinkers asking, "you know, we really don't need gold as a currency. Let's just trade dollars!"!===========
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