FOA (06/12/01; 11:23:21MT - usagold.com msg#77)
A discussion

-----Cavan Man (6/10/01; 19:35:39MT - usagold.com msg#: 55822)---It's getting dark on the gold trail.----------

Hello Cavan Man, let's walk a bit!

I just looked outside my cabin, here on the trail, and everything looks very bright to me. (smile)But one has to allow me that view as I saw this"New Gold Market" a long,,, long,,,, time ago and began making adjustments. Adjustments in the kind of wealth I own that would carry me for the
whole trip. Not just these little side trails (trades) so many Gold Bugs are still trying to make pay off.

It is difficult for us to define, in explanation form, a new political perception as it evolves. Especially with old Gold players still presenting their gold views in a"has been context". Trying to explain the latest paper pricing moves as if it will fit into their past game plan. It doesn't and as time passes everyone is slowly seeing that something is changing. Michael Kosares has the best game for new
advocates and I think some of them are now going that way. Just buy gold from a dealer that sees thru the fog and forget the stories of"has been leverage". True, that leverage payoff may somehow show up for a while, but none of these players will get much of a check compared to what's
coming.

Yes, it is frustrating for anyone that cannot see the whole picture. Gold Bugs watch as their portfolios are further impaired as a result of investing habits that cannot evolve. Again, all based on old perceptions about today's gold. While I, too, enjoy watching TI (technical interpretations) and daily movements in the price functions of"gold substitutes",,,,,, none of this has any bearing on what
"real gold" values are today or will later be as this all plays out. You see, the drama is in the political game and that game is what will determine how soon and by how much the"real value" of gold is displayed. Non the trillions of paper gold trades made around the world today, on this failing dollar gold market, can define the real value of gold.

Onward

By now everyone should understand that for every dollar that can be bet on a rising price of"paper gold"; three dollars can be made available to create and sell them the other side of that bet. When the big political moves come later and change our currency game, therefore our gold pricing game,
this very same fiat contract creating ability will stand against your receiving the later value of physical gold. As expressed in a paper price.

Truly, the market is not manipulated so much as it has found a short term opposing balance. A timely political balance that has used this unlimited fiat creation as the gold price controller. A force being used to smooth a transition from one currency to another. Gold Bugs use this very same fiat
creation to buy long"fiat gold contracts" and then complain because the banking reserve system, we all use can do the same. These"Anti Gold Bug" traders can create and supply just as much fiat power to sell us gold as we can use it to buy gold. Then when our futures / paper price remains the
same and it's a cabal killing us. Actually, it's the modern Gold Bug's desire to shun physical gold ownership that's killing him as that desire was discovered and exploited for political means. It's free enterprise,,,,, Gold Bugs created a demand for something paper and a paper supply creation is
delivered.

I marvel at how advocates of paper investing spend their time trying to determine when someone is going to buy up and corner this kind of paper market. Forget it, it's not going to happen. No one can force a paper market that has unlimited creation potential. And only a fool would try to demand delivery of a good he doesn't have the assets to pay for,,,,,, and do it in a market he knows doesn't have the metal to deliver. I know this, you know this, the government knows this and the Giants know it. Far better to just keep buying gold that will one day be correctly valued when this
market's political use is done. So, have you somewhat positioned yourself for the great cornering of this"gold printing press",,,,, or are you more smartly playing the Kings game?

A few comments on your post items:

--- 1. Comex defaults.------

Yes, once again, here is an area that brings out the most impassioned analysis of most gold bugs. They all watch and wait for this big event so their paper gold substitutes can finally get them back to even. (smile) Still, everyone has their leveraged bets, in some form, waiting for the big one.

On a side note:

I smile at this because we read about the great percentage gains leveraged people are enjoying every time"paper prices" make a little move. Lost in the discussion is that this"New Gold Market" has removed such a tremendous percentage of their wealth already, that several 100% moves in these"gambles" would not make them close to whole. On a complete, long term Net / Net basis.

Someone points out their paper purchase at the lows of say, just a year or so ago, and they are now ahead and you could be too if only your ears could ignore Another. Ha! Ha! Or even buy the lesser metals, as that's where we will make it all up. Always lost in the logic is the fact that these
"Gold Bugs" don't or won't advertise their previous adventures. In Hawaii (where I had lived in a small place for some time) the locals have a name for this"thought process";"Ocean Money"! It floats in on the tide, rots a while, then floats out. (smile) They say:

"Look at that new guy, he's leaving town with a million! Must be a real successful Bro caus he only lost 9 mil to beach rot! Managed to keep some! Came here with ten million and now is on the airplane bragging to his friends. Talking about how they could leave the islands with a million too,,,
if all those listening would follow his lead ////// they be rich too!

Ha! Ha! Cavan Man, I think you (and others) get my point as this connects to our new traders at the forum. With good instincts, they will rot only a little also.
(huge, oversized smile)

Climbing now

So what are we looking for when I watch the paper gold prices and comex? What gets me excited when the market begins a little move? Well, it's not the fact that it's going up, rather we are looking to see if the impact of political change is working the gold derivative's credibility yet? I am looking for some wild spurt of trading that lasts for several days or weeks. Open interest rapidly surging hundreds of thousands of contracts, then just as fast plunging away. A paper gold market, containing tremendous price changes ($100++ or more per day, both up and down) that begin to call into question the ability of Comex to function. Not so much question it's function as an price setting exchange, rather question if it can later function at all in the metal settlement process.

Where the big positions on the opposite side of the longs (shorts) find themselves in a changing world market without physical supply,,,, at almost any price. Brought on by a currency transition. Where big physical bullion dealings (one tonne ++) between real buyers and sellers,,,, outside and away from the exchanges,,,,, begins to run at a huge premiums to our contract based paper trades. Perhaps hundreds of dollars or percent higher,,,,, even impacting the ebb and flow in the coins world as misguided investors quickly sell for profits only to find no market goods later at twice the price.

In this environment, the big shorts on all paper based exchanges will be selling these new"cash created contracts" to the very limits of their capital. And trust me, they will not reach those limits because an unlimited amount of credit will be made available to them. Remember,,,,, for them,,,,,
regardless of the supply,,,, the demand,,,, or the price of physical traded metal,,,, as long as the paper contract price doesn't close"up" too much,,,,, there is no risk or call on their capital. They can just keep on selling.

But, eventually (perhaps over only one day!) the outside the exchange demand for physical and it's escalating premium, will most likely see legal force from their physical buyers driving long players to demand delivery. Even if it cannot be delivered. Long,,,,,, longggggg,,,, before these delivery
demands ever fully surface, comex will state position limits, cash settlement and trade for liquidation
only. For you new people, this is exactly what they did during the Hunt silver fiasco. They have to do this because the articles these exchanges were created under manifest these trading places as price setting and price hedging establishments. Where the greatest majority of their trading is meant for cash contract settlement, not physical delivery settlement.

In this light, only Gold Advocates understand that default on Comex is really the forced non metal settlement of a contract at a contrived paper price. A price far below the physical traded price. Most likely a last day of trading price that settles out hundreds of percent below the world price for physical metal trading,,,,,, as it appears the very next day.

The big difference today (from the HUNT problem then) will be in the nature of this default. His was brought on by private investors buying a commodity. Today, gold market default and failure will be forced upon the dollar gold world by a sudden lack of"price setting" credibility. And that loss of credibility will stem from the stressed conversion of dollar contracts into Euro denominated
units that demand"market based performance" (physical priced valuations) or an escalated (higher) Euro based cash settlement. This all will manifest in a lack of credibility in paper dollar gold trading that can no longer be marked to the market at the same value of physical gold.

This failure of price matching,,,,, this failure of contract conversion into metal,,,,,, this failure in the world gold market to any longer be able to correctly price real bullion,,,,,, will lead to a wholesale dumping of all dollar contracts that have US based performance,,,,,,and start a fall away of all dealings based on present protocols dollar market gold exchange.

As a side note: This will not apply to the paper silver markets as silver will not have the Euro vs. Dollar political struggle. A struggle where the ECB members are trying to loosen their main asset (gold) as a reserve wealth backing to replace the massive loss of dollar reserves. Remember, further back on the trail we covered how these reserve dollars will be simply cast down. In this light, silver trading will bear the brunt of selling in an effort to balance loses from a gold exchange that no longer works. Because silver has no hope of an official free market, it's paper pricing system may run amuck until it's price plunges to??? This is the reason so many countries that are
contemplating a switch from dollar to Euro use are selling physical silver and buying gold (China, India, etc). It also explains to movement of gold between countries that planned outright Euro conversion.

Back to gold's paper pricing breakdown:

It will not lead to the collapse of world banking so much as it will lead to a reallocation of value between assets vs reserves. Which are and which are not. Further, a loss of paper exchange trading will drive gold to it's true physically traded price. Gold in the tens of thousands per ounce will represent:

First
,,,, it's real currency value in today's expanded fiat world,,,,,,, then later it will advance further on the price inflation coming to the USA. This is where so many thinkers cannot see super priced gold. They are seeing the present illusion of gold value as it's base. Later, a gold move from say, $10,000 to $20,000++ will only represent a 50% rise. Liken to an oh so understandable $300 to $600 today.

Second
,,,,, the total rejection of owning gold in any form except the real thing,,,, no amount of gold supply will come close to equalizing this current ownership imbalance built up over many decades. If anything, sellers will be confounded as nothing keeps pace with the gold rise. Once sold, it only
costs double to rebuy.

Third
,,,,, a return of old world values in that gold is worth owning as a lifetime wealth asset beside your cash and other investments,,,,,, While the US will experience a massive retrenchment of it's wealth perceptions, our move into gold will be chaotic and traumatic. Other parts of the globe will
fare well. Life will go on. Remember, people talk about how the US makes a quarter of the worlds products and services and say the rest of the world cannot do without our operating as usual. But, they forget that we consume all of it (that 25%) and then import more. Our production fall away
will mostly be at the mercy of our own slow down. As the dollar tumbles on exchange markets, so too will our cost rise to produce anything (massive hyper price inflation). Rendering a net / net non gain in world trade advantage. In other words, our goods may very well rise in price faster than our dollar falls. If anything, we become even less competitive with Euro based production.

Further Onward

This new realigned price of gold will offer no threat to the Euro as it does to our Dollar. The open gold value calculations by the ECB proclaim their intention to allow gold to rise as a Euro enhancement. Not a Euro replacement item. Remember, old world values dictated that gold was
not a competing money any more than Microsoft shares are against the dollar today.

Gold, from times past was a wealth asset more so than it was in the form of money. Granted, it became the fastest moving form of wealth, but as it traveled on the road it was still simply seen as a tradable wealth. It has been American and Western ideals that made gold a lend able money and forced it's competition against failed currency systems. We set currencies in fixed gold amounts and then inflated the currency. No wonder gold competed against currencies. The ECB will allow gold to go to the moon and everyone will love them for it. People will use the Euro whether gold is at 1
Euro or a trillion.

Arguments against this new logic (by failing Gold Bugs) are little more than a throw back to their outmoded Western money logic. ET (a USAGOLD poster) even thinks that by freeing gold to rise to whatever level it wants,,,,, we are somehow governing it??? That direction of thinking is caused
by"promoted investing". The logic is to somehow invest in gold (the industry or it's paper leverage) more so than owning the metal. Leaving the agenda of physical gold storage to be something the official governments or private enterprise should do for us. They base their concepts on a return of gold recognition as a somewhat official government money after price inflation discredits the local
currency (Dollars).

Such logic suggests we buy into the various SEC sanctioned (government) paper gold substitutes while governments somewhat allow a devaluation of their money against gold. Say to $800? In this way the dollar is saved a little while the gold exchanges continue life as before. This, my friend was a failure in the past and the future will provide a very different rendering.

Higher we go

We have named our big fish and it is Allan himself! The old Gold Advocate, from way back, that knows how to use gold as a system saving tool when backed into a corner. They have reclassified some of the American gold for use later. It is still ours now, to be sure and has not been swapped
or sold. It was renamed with the full intentions of our ESF buying dollar reserves from Euro CBs (and others) as the Euro later gains usage (and value) independent of the dollar. In light of the Blair vote, I would rate their move as very smart. This was done (and will be done more so later) to provide backing and settlement against US paper gold commitments owed to and already delivered into oil ownership. This paper is mostly in Euro banks.

This was"part" of the price we paid for oil to flow in dollars this last decade as the Euro was born. This was the price we paid for an extension of dollar use in oil settlement. It will be moved when gold trades at a much,,,,, much higher price. It backs Another's point of long ago that oil was traded for gold in the thousands at that time,,,, we just had to wait for the real price to be shown. It will!

This is the decades long game we are playing for, my friend. This is the big one we own gold for. This will be the defining moment in our time that changes perceptions about the value, reserve currencies and the wealth of ages. Watch with me now, as events prove all things!

Thanks, Cavan Man
TrailGuide



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