FOA (6/9/01; 19:32:22MT - usagold.com msg#76)
Onward!
Hello everyone!
Keep an eye on any lose rocks and boulders, an earthshaking event could come at any time. While our walks follow historically proven paths, the destruction of many of today's fake trails may hinder our progress of understanding for a while. Big loses by people, both large and small, who don't own what they thought they own, usually cause them to panic down the hill sides. Right into our little physical world! (smile)
I know there are some hikers here that understand the flow of water and how it expands over a"flood plain". But, many do not or cannot perceive how physical gold will rise to seek it's own level. A level equal only to other gold, in the hand and very physical. Or at the very least, gold owned, deeded and individually partitioned in a secure account vault.
Onward:
I am taken by the mind that processes logic for it's own financial advancement. Usually, it (the traders mind) does a good job of gathering the facts, then inevitably it sees said illusion where reality appears. Even to the point of selling this same illusion to others that know it isn't there (smile). Our present gold market is just such a cloud on the wind.
All over this mountain there are guides that promote the huge overhang of contract gold. An overhang that has no real metal supply to settle it, if push came to shove. Even if a large portion of official gold was brought into play, the world paper gold market just could not be traded for real
metal. On this most agree. Still, these same traders that understand and sell this concept, spend their days trying to know the exact time the default will occur so they can buy a bunch of paper contracts and profit. In their mind, they see that a major default will bring in an unlimited number of
buyers. Both to get new contracts and to close out short positions.
In a very broad way, this view extends well into the rest of the not so visible gold market. The problem is that today, a timeline change in the currency markets is about to completely undo the end result of this strategy. The end result of this colossal change will break the gold markets into valuations of different amounts. Just like water, gold wealth of different properties cannot attain the same level. In the event of a large enough default, the entire world of paper gold trading will be forced into full cash settlement. The question will be presented:"if there isn't enough gold around to settle these commitments, then there isn't any point in letting the price rise further to effect still no
metal settlement",,,,,,," This was a contract trading market anyway, not a gold market"! Further, the international banking industry, in accords with their governments, will enforce a kind of"position limit" on the amount of gold liability they or their customers can carry. Both long and short. It will have nothing to do with the exchanges, rather it will be a bookkeeping problem being addressed by the banks. Still, it will impact the illusion price we use for gold,,,, downward. The net effect of this
will be just the opposite of what paper gold players expect as positions are"force liquidated" prior to even a"cash settlement". This sudden dumping of major contract commitments onto the markets will drive the cash settlement price of gold,,,,,?.
This is the reality of the political banking world we live in. Neither the EuroZone or DollarZone banking world is going to let the destruction of the Anglo/Dollar gold market shut down their financial system. Take some loses? Sure! But this portion of the pie is nothing compared to the troubles to be managed by the US (our Fed) as the dollar's roll as reserve is removed. Granted, once the game is underway a true Free Gold market, trading noncolateral gold, will come about. It will be endorsed as governments settle a small portion of their political scores using physical gold
reevaluated up into the"low oxygen zone". Mostly it will be US gold being moved.
Further
These goldbug guides (mentioned above) are mostly playing for a currency profit, not gold. The same is true of"in the ground" gold advocates. While their profits and loses grow and fall in line with most gamblers, slowly, these players are losing credibility as the paper markets out play these
goldbug's net worth. As events they expect to repeat are rebuffed by massive"cash backed" selling of paper gold, the expected"big" profits always fail to arrive. It's been this way for as long as Another said it would! Yes, something could change and send paper gold through the roof before
anyone can stop it. If it does,,,,, good! Physical gold will do very well! But, I doubt these profits will ever be sent out as checks in the mail. Believe it!
Witness the recent long blowout of paper players on the comex? The so called"big traders" these guides thought were about to demand delivery. They were not the real"Big Traders" (I know) were they? If they were they would have demanded delivery even if the short side sold 500,000
contracts short. Even it they (sellers) drove the paper price down with empty sales! The reason these real gold advocates (Giants) buy physical gold is because they are waiting for this dollar casino of a gold currency market to shut down. This reality will end in a locked, no delivery
market! Once again, Believe it!
Truly, this recent move was long"little traders" wanting to make currency profits without the real assets to back it up. Nothing more. We will see more of this as it all comes to it's end. When the real gold run Another points to comes,,,,, no one will profit anything near the amounts physical gold advocates will.
Keep climbing:
As I have said so often, the numbers we look at for today's gold price are an illusion. Because there is no real physical market large enough in scope to balance the paper trading settlement price. The price for physical gold unknown. To our advantage, gold is sold by past and present owners and this supply helps lend credibility to the market. Without it, we could not buy any gold, only cash settled contracts. A type of settled market that, if you read Another's letter, is not far away.
We all have trouble understand how there is no value known for physical gold. Yet, if we look at another market we could grasp this issue. Take American real estate:
We all have an idea what that house down the street sells for. But consider that that price does not reflect the true value of the physical house. Just watching the 30 year loan rate tells us where most home prices are going. I think (as an unreal example) almost every person would agree that is the fed went into the market to buy any and all 30 year house loans until the rates fell to 1%,,,,,, home prices would explode! Conversely, if all credit for houses was shut off,,,,,,,,, cash deals only,,,,,, home prices would crash!
How does this reflect on our gold market? We can see where a cash house is worth one price while a credit house is at a different level. The physical is the same even though means of trading and owning it generate an illusion value. You don't truly own a house brought on credit, in this light
we can see that you live in something actually owned by the bank. But, you benefit by trading it if the price rises. Actually, currency profits from ownership illusion.
Our gold market has been in this same illusion fog for decades. The gold so many in the industry think they own and trade is truly just a commitment of another entity to supply you with said gold. By far, we buy, sell, lend and borrow something of an illusion. Paper trading dwarfs physical by an incredible amount. Mostly because the majority of us investors do not want to actually possess, and therefore use the physical gold. This price illusion is exactly the opposite of my above example. The credit gold price is driven far below the real gold price because supply is easily expanded to extend to anyone wishing to trade an illusion. You have just seen such an event on the US comex recently.
Other guides all point out that this cannot go on forever as eventually"Real demand usage" catches up with available"real supply". I agree. However, society has a way of changing the rules when the economic wealth that their savings are based on comes into risk. Our fiat banks will not be allowed to fail. Just as in 1971, when that real gold demand suddenly expands it's boundaries to include ordinary gold investors, the supply rules will be changed again. Fortunately for us Physical Gold Advocates, the next rule change will evolve from a reserve system that has no threat from a rising dollar gold price. Even if the contract markets crash and physical gold traded in Europe goes into
the thousands, the Euro will find strength from such an occurrence. The ECB will embrase it and promote the same.
Dollar gold in the thousands,,,,,, USA inflation going hyper,,,,, The EuroZone dealing with the changes as the BIS settles all our gold dealings,,,,,,,,, And cheap Euro oil making sure Europe doesn't fail too.
Do I wish for this? Only a fool would comment to ask such a question. Am I preparing for this transition? Another would be happy to see that I am! (smile)
Thank you all for walking
I'm here for a while and will be adding more over the days
TrailGuide
FOA (6/9/01; 16:36:42MT - usagold.com msg#75)
A letter from Another to me.
My friend, I must now walk your trail in closer step. Events are closing that bring the changes we have long seen and prepared for. The time grows short as these conclusions prepare to make appearance. The last of these Euro price ranges are in sight and even the Duisenberg hints his work
is done for this new currency. A hard task was completed by him, his acknowledge to the French in May 98 was with a timeframe few could understand. Now his containment is done. With introduction of notes and coins, this money will become it's own director and his work will be well received. A good day, indeed!
All were present at the meeting. I think contractual conversion became topic of some urgency. This BIS must now consider the values these forms will hold in ours and their new futures. Values that will no longer be dictated in dollars, rather realigned in conversion and gold market failure. Truly, this failure of current gold will be reflected as anguish in these western goldbugs, both bankers and investors. All done as the saving wealth for your gold advocates and new reserve bankers finds it's new mark in our time. Your work, good man, has been as trying to reconcile the religions of this world. Telling both they are just while only one can be right in the end. So it is in this day of gold.
Some knew what was coming from the beginning. With the Hague Conference of Heads of State in 1969 sprang Copenhagen Report of 23rd July 1973. We pointed and all continued to turn away to follow where power was, not where it was going. With the Solemn Declaration in Stuttgart (1983) closely followed by the Single European Act (1987) even the BIS then understood the final goal. Margaret (Thatcher) soon expressed that signing that proposition (the Solemn Act) was her greatest mistake in office. While I do agree with her on a strategic political basis, such reflections by British leader only exposes the ignored, nearing failure of their shared singular currency dominance (both USA and England). Little is expressed of the wealth lost of our peoples and that of most Western economies as these government's efforts to preserve this failing system drains real wealth
from our world.
Now these leaders full attention must focus on this money transition itself as Blair's next initiative (the Euro) will lead to a realignment of contract values of all kinds. Before the fact! The Maastricht Treaty allows that by Jan. 2002, all contracts will be converted into euros and new contracts must be denominated in euros. Because Blair has overseen the signing of both Amsterdam and Nice Treaties, his closest people understand the full impact Britons intentions will have on this world's paper gold market. As it be contractually expressed in dollars. The credibility of these to not only represent gold but to maintain loan collateral on books will lead to several high level agreements to address this loss. Indeed, how does one transition a metal contract without moving the metal once
again? Especially if the Euro suddenly, without explanation, rises in value. A rise that leaves only the door of metal fulfillment? All eyes must now search for a way to transition this beast as it's use and function will fall away as the Euro further expands. Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract
liabilities from metal into Euros unless some real US gold is given up. Something your Bush will endorse but not without a price! As contract gold falls in price while expanding the physical price. I suspect it (official US gold) will be given up at the exchange rate of many thousands and even that will be the little drop of water that allows dollars to remain in this game. Our time arrives, my friend. Even as fools make effort to gain wealth in a gold market that will soon exist no more.
Tested now are the economies of both EuroZone and DollarZone with high crude values. The response of both is known. The ways of dollar wealth hasten their demise, even in the face of ECB restraint. Open and outright are they (FED) to discredit their position. This test is done and the verdict arrives soon. As with gold and oil, Dollars and Euros will neither any longer flow in the same direction.
Another
FOA (06/04/01; 09:36:54MT - usagold.com msg#74)
Back On The Trail!
Hello everyone!
Well, it was some trip,,,,, and yes I did catch some fish. Person has to eat you know (smile).
Now,,,,, fishing is a slow sport at times and leaves time for conversation with others on deck. And because this little boat had room for more than two,,,,, there were a lot of Thoughts to talk about,,,,,, even during the dinners of our catch.
So, I be reading some of your recent conversation on the USAGOLD FORUM, and return to deliver some promised letters, thoughts and hikes. Good to be back (smile).
Thanks
FOA / Your TrailGuide
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