Archive for June, 2012

GLD: Fully-Backed by and Redeemable for Gold Bullion (Buddy,can you spare a cool $17 million?)

June 23, 2012 Leave a comment

Part 1: Some Background

I can only tell you how the operations proceed. The rest is up to you.

For reasons of brevity and because The SPDR Gold Trust (GLD) is the largest ETF in the world, I shall in this article focus my attention specifically on GLD. UK readers, some of whom may be invested in the ETF Securities’ Physical Gold ETF (PHAU) should not feel left out for the issues raised here in relation to GLD apply equally to PHAU too. In fact, as far as I have been able to determine there is no facility available to investors whereby PHAU shares are redeemable for Physical Gold bullion. (But I will return to this later)

Perhaps unsurprisingly given the enormous number of investors who have sought exposure to gold via Physical Gold ETFs (in truth, no more than paper gold price trackers), many readers of my recent Oil-Physical-Gold-True-Value essay contacted me to express their deep concerns at the assertions I had made in my article. The force of their determination to validate the superficial (and deceptive) claims made by GLD somewhat startled me. In my naivety, I truly believed the scam had been well and truly exposed, even if -entirely true to form- the financial media continues unashamedly to support the deceit in GLD’s misleading sales patter.

I’d suggested that investors should read carefully the prospectus of the Physical Gold ETFs for they would find there is always a clause allowing settlement in cash. Foregoing my advice, many unleashed their anxiety and upset at my warning, claiming the veracity and validity of the GLD headline (‘100% physical gold backing’; ‘shares are redeemable for Physical Gold’) sales-pitch. “I can’t believe” was their rallying cry, opposing my simple advice…It seems there is no end to the degree of deceit and duplicity many GLD investors will not greedily swallow- and this despite the here-and-now MF Global eye-opening smack-in-the-face lesson that there is NO honour nor integrity in the financial world.

“I can’t believe regulators would permit this/that/and the other to take place in a publicly traded….” was the vehement protest. So, let me save you the heartache and wallet-ache of finding out in the same way MF Global investors did: those very agencies sold to you as having been set up to regulate, oversee and protect you and your trades, in reality (far too often) appear to turn a blind eye to even the most grave and blatant malpractice. I assumed most of you would have learnt the stark lesson. Why then this insistent resistance, this irrational response to defend GLD’s misleading claims?

It can be hard work explaining something which at its very core is duplicitous and immoral, for such a scheme/scam will have, inevitably, constructed the most reassuring narrative in order to conceal its fraudulent essence/nature. A complex, multi-layered, labyrinthine web of spin, half-truths, ‘true-sometimes-but-not-always’ terms and conditions obfuscate mislead and bar access to clear facts, and in this way endorse and perpetuate the deceit and powerful duplicity. But it is always a worthy goal to alert victims to the fraud being perpetrated, to guide them patiently through, above and beyond the entirely natural cognitive dissonance until it is finally dispelled. Some frauds are so artfully conceived, constructed, then disseminated that many simply can not contemplate that a fraud is at all possible. They resist a permanent uncovering, employing all subtle means at their disposal to distract. So it is that I have lost count of the number of times I have explained, at length, in the clearest detail, the full machinations of the GLD scam to the very same individual/hedge fund/Gold company. My own personal groundhog day/ mutiple déjà vu.

In what ranks among the most pathological cases of short term memory loss I have come across, the very instant the financial and business media rush to make public a ‘sale’ of GLD shares by the likes of Soros, Paulson, it seems everyone (including many Gold commentators who should know much better) quite happily misconstrues the true significance of the GLD shares ‘sale’, incorrectly interpreting it as a ‘dumping’, as a rejection of Gold. The media’s fallacious reporting and interpretation of the ‘sale’ as bearish never fails to take delight in these investment deities decision to ‘dump’ their GLD shares. As such the mainstream commentary buys into the very deceit at the heart of the GLD fraud. As if the financial and banking powers-that-be needed any more help in the maintenance of their artfully constructed Physical Gold ETFs fraud! With the media’s rigid adherence to the engineered conventional narrative, is it any wonder the fraud continues to thrive? Those at the heart of it, their access to Physical Gold guaranteed, are laughing all the way to their personal vaults, whilst the small and hoodwinked investor is left holding paper claims that can never be redeemed for Gold bullion.

Before I continue with the central thrust of this article, I want to take a brief diversion in order to, I hope, provide you with some of the backdrop to the origins of, steady growth in, and finally the explosion in the ‘supply’ of paper gold products. It is important that readers understand the route to the Bullion Banks addiction to the creation of paper gold ‘supply’, for -like all addictions- it did not take place in a vacuum, free from historical and social context.

Oil and Gold: a heady mix. Prior to Nixon’s 1971 de facto announcement of the USA stepping off the Gold Standard, it had already become abundantly clear to all but the most determinedly naïve observers that the USA had been printing dollars far in excess of their Gold reserves. The USA had in fact been printing dollars not against its Gold reserves but against the vast profits that cheap Oil had brought and which were projected to continue well into the future. This was the great contribution that technology had ushered in- all those advances meant that production capacities soared whilst Oil flowed and its price remained steady. Companies’ profits and P/E ratios had never looked rosier, and that would continue as long as Oil remained cheap relative to the enormous increases in productivity and profits.

The meaning of the USA’s public abandonment of the Gold Standard ‘discipline’ was not lost on anyone who knew the self-evident disadvantages such a move would bring. The strain on Oil and Gold prices was palpable, and on a couple of occasions tensions reached such a pitch that it looked like the whole global financial system was set to explode as Oil and Gold prices ran away from the control of the BIS and Central Banks. But an extremely neat solution was devised in a secret Oil for Gold deal. For the purposes of this blog, the most pertinent aspect of this deal was that Saudi Arabia agreed to continue to allow Oil to flow at a cheap USD price whilst behind-the-scenes receiving a Gold ‘kicker’ as part payment for their Oil. The tool employed to re-establish a cheap USD Oil price was the creation of a paper gold market to expand Gold ‘supply’ and in this way rein in the naturally spiking Oil and Gold price so that they were now back under BIS and Central Bank control and management. This Gold for Oil deal was conducted with Saudi alone, and it is difficult to argue that its primary goal was anything less than worthy. For it allowed Oil to be purchased cheaply and thus maintained the production boom and all the benefits that came with it. There were naturally enough those who benefitted most, but who can deny many of the gains were spread around? It’s true, this deal worked well, as paper gold ‘supply’ became a successful mechanism for maintaining a cheap Oil price, and society grew lazy feasting on the consumer goods served up by cheap manufacturing costs.

This whole scheme relied on the BBs creating paper gold products at an entirely reasonable and manageable volume. The whole system would continue to bring forth its many benefits provided the Bullion Banks kept the paper gold ‘supply’ at a volume that stayed within the fractional reserve parameters laid down and backstopped by Central Bank Gold bullion. And there you have it, the intrinsic flaw in this deal. Inevitably, banks and bankers being what they are and doing what they do, irresponsibility and short-term financial greed took the reins and the Bullion Banks began printing paper gold at a volume far exceeding any possible future redemption for Physical Gold.

There was no way the Central Banks and BIS were going to stand by and watch that happen, for (on paper at least) the Central Banks were the ultimate backstop of Bullion Banks’ paper gold selling. The CBs loaned the gold in paper transaction (no gold moved from CB vaults) and the BBs created paper gold backed by the CB loan. In truth, the CB lease was less a loan backed by Gold but rather backed by the CBs good name (there is no way any of those paper gold claims would remove Gold from CB vaults).

Once it became clear that the BBs had over-printed the ‘supply’ of paper gold, the Washington Agreement on Gold/Central Bank Gold Agreement (1999) was speedily initiated. It is remarkable that this Agreement was sold to the public as a restraint on Central Banks selling of ‘worthless’ gold in order to maintain a steady Gold price, which would -so the fabricated illusion and spin would have you believe- collapse if Central Banks gave free rein to selling all the Gold they would like to. This was not its goal or purpose at all!! The purpose was to issue the strongest warning to the BBs that they had overdone the paper gold selling, to rein themselves in, for the CBs would not lease in limitless amounts to match the limitless and -at that point- runaway excessive supply of paper gold being issued by the BBs. The CBs would no longer allow anyone to entertain the notion that their Physical Gold would in any way backstop the BBs over-printed paper gold.

The BBs were addicted to the free money and huge profits made selling limitless non-existent paper gold. Since the CBs had made it clear they were no longer going to lend their Gold/’Good Name’ to excessive additional paper gold supply, the BBs needed a new means then to create the illusion in the public’s mind that all that paper gold that the Bullion Banks sell into the market is fully-100%-backed by real Physical Gold.

They found it in the creation and expansion of the Physical Gold ETFs- PHAU, GLD, GBS, etc. Where the Central Banks had stood before now stood Physical Gold ETFs, and the latter were not going to get sniffy and tell the BBs to cool down any excessive paper gold selling.

What will it take to open investors’ eyes to the true meaning of ‘sales’ of 100,000 and above GLD shares?

Let’s put it in the most unambiguous terms, let’s tell it like it is: buyers of GLD paper gold shares are being treated as MUGS by the Bullion Banks and very-wealthy who control that scam. Buyers of GLD shares are feeding those who have so artfully led them to believe that they are investing in a convenient, fully-Gold backed, redeemable-for-Gold-bullion at any time investment tool. BUT, THE TRUTH IS: YOU ARE NOT!

That privilege is not for you, those benefits exist only for those who have a minimum of 100,000 shares (a Basket) and who can persuade one of the Trusts’ ‘Authorized Participants’ (you’ll never guess who the Authorized Participants are… the Bullion Banks!) to REDEEM that Basket of 100,000 GLD shares for Physical Gold from the GLD’s vaults. If you don’t have the money (currently $17million-ish) to purchase those 100,000 GLD shares, then none of the GLD-vaulted-Gold can ever be yours. And 100,000 GLD shares is the MINIMUM requirement to access the Trust’s Physical Gold. Does Joe Public GLD shareholder know that?

Now let me be absolutely clear. My firm conviction is that those who perpetrate this deception rely on a sophisticated web of misrepresentation in order to mislead the public. One of the mechanisms employed to carry out this duping is the tried and tested manipulation of media coverage in order to create a firmly embedded paradigm in investors’ heads. Thus any notable GLD shares activity is always represented in deliberately misleading terms: redemptions of GLD shares by the likes of Soros and Paulson are always described as ‘dumping gold’. Nothing could be further from the truth, for they are the very opposite! They are the exchange of paper gold GLD shares for Physical Gold, straight out of the GLD vault and into the safety of their personal vaults. Rather than those GLD shares ‘sales’ being bearish, the truth is they could not be more bullish. For, perhaps most importantly of all, they indicate that the wealthy are getting twitchy about the ever-more-rapidly-depleting amount of GLD-vaulted Gold bullion available for redemption.

When two of the largest GLD shareholders, who undoubtedly have access to ‘helpful’ information about the number of claims on unallocated and allocated Gold bullion in the GLD vault, start ‘selling’/exchanging their GLD paper shares for Physical Bullion, it is because they know fully well that this particular Physical Gold well is running dangerously dry. When Soros and Paulson feel the need to start taking possession of that Gold, it indicates that the Physical Gold bank run endgame is ever closer. They know the vault is emptying, and they want their hands on some of that Gold bullion whilst there is still some available. After all, the very purpose of the GLD paper gold scam is that the wealthy with 100,000 shares worth $17million-ish get the Gold bullion, whilst anyone with fewer shares gets left holding paper. For fear not, the wealthy will get the Gold bullion, they will, as ever, not be left holding burning paper.

That outcome is reserved for those holding anything less than 100,000 shares.

Part 2 explores the mechanics of the scam in closer detail.


Paper Apocalypse

June 22, 2012 Leave a comment

“The horror…the horr… Horror has a face.. it’s a paper face…a paper version of Gold…a paper version with numbers and words but no Gold, just paper, no actual holdable touchable Gold…..a paper damned trick, a paper crime, a paper deceit, a paper lie….a paper empty promise, a meaningless valueless piece of paper..worth nothing…nothing…my Gold, they kept my Gold…”  bony fingers tearing at invisible pieces of paper, face contorted in a maniacal tortured twisted scream of agony.

The Gold Market De- and Re-Constructed: How Oil is Set to Reveal the True Value of Physical Gold.

June 21, 2012 Leave a comment

The paper/electronic USD, the world’s (shortly-to-be-displaced) reserve currency represents a transient, all-too-fleeting ‘thought of value’. It functions as the grease for trade; nothing more. It has no more substance than that, and the moment it has served its role to complete trade, it is gone. It contains no value in itself; value continues to reside solely in the assets which are forced to use this unnecessary intermediary to complete trade.

Oil and Gold are priced in those same electronic USD, and for the past 40 years the world has been forced to buy this paper/electronic currency in order to purchase Oil and Gold. Kissinger played a ‘blinder’ and it was the world who was most severely blinded! When Kissinger received Saudi agreement to price Oil in USD alone, he had in effect secured an Oil-backed paper/electronic USD. In this way, the USD was awarded honorary value. From such ignoble origins was born the steady creation of an ever-growing mountain of paper derivatives, paper masquerading as the real thing. Mountains have a peak, and the global financial world has for several years precariously balanced tip-toe on that lofty peak of paper debt. At such an unstable and giddy height, a fragile hold can all too easily slip. The USA may just have set that fall in motion.

In its latest attempt to sustain its exclusive privilege to print frenziedly, in ever more copious amounts, the USA has excluded Iran from the gratuitously-produced electronic USD international monetary system. The USA would have us believe that this exclusion is a most grave chastisement, that its destructive impact seriously disadvantages Iran. Oh really?

Just how much of a ‘punishment’ does this constitute? It might be better evaluated as a ‘gift’! Political theatre is risky business. Powerful effects and consequences can follow. Many who understand only too well that the mountain of derivatives very peak has been reached, ask daily how much longer we can delay the inevitable fall. Some say the fall has started, others claim that paper-derivatives-games can(by their very nature are designed to) continue interminably. In opting for excluded-from-USD-trade sanctions against Iran, the USA has elected to play the riskiest hand in a do-or-die effort to sustain the electronic USD’s status as global reserve currency. How so?

No longer will Iran and its very important, very large trading partners be forced to earn electronic USD in order to complete trades which do not require -and now can not take place in- needless 3rd party/electronic USD payment methods. In one cut-off-YOUR-nose-and-smitten-MY-face move the US has freed Iran and her trading partners. Freed them to conduct a pure, barter-type trade for Oil and Gold without the electronic USD poking its nose into others’ business in order to steal some of the value of the trade.

Far-reaching, world-changing repercussions and consequences will inevitably follow. Hope and pray that Iran and her none-small-fish trading partners will allow the Golden trade opportunity the USA has handed them to unfold at a pace that will benefit the world. For what practical consequences ensue from Iran being ‘sent outside’, banished from the electronic USD international monetary system?

India and China (and Russia, Venezuela, et al) can, have and will now pay for Iran’s Oil with Gold, PHYSICAL Gold, in a direct barter trade. Hope and pray that as Iran and its trading partners discuss trade terms, Iran asks for no LESS than 1gram Physical Gold per barrel. (Such a deal would value Physical Gold at $3,100 oz; it offers 31 barrels per oz Gold). Hope and pray hard!

For if Iran asks for 0.1gram Physical Gold per barrel (and thus values Physical Gold at $31,100; 311 barrels per oz Gold), the world is in for a mind-blowing, hair-scorching ride, as the deceit, counterfeit and fraud is violently shaken out of this electronic/paper-USD-monetary-system to be replaced with true valuations and asset-price integrity, as markets revalue worthless paper contracts to (almost) zero and real assets to their true worth.

Many will doubtless assert that this is a spurious argument, that it would be extraordinarily self-defeating for Iran to ask for 0.1gram Gold per barrel, when the market tells us Oil values Gold today at the equivalent of 2.0 grams per barrel! It would be the act of an incompetent fool to sell Oil at 5% of it’s full value; Iran would be shooting itself in the foot; Iran will price their Oil to receive the maximum quantity of Gold.

A lifetime’s experience and knowledge of the intricate machinations of the financial system provides no immunity from important lessons that have yet to be learned empirically. The past forty years have not prepared us for the simple but inescapable truths that must and will emerge. For there can be no doubt that the following lessons are about to be most forcefully delivered: i)paper is not a reliable guide to TRUE value and worth; ii) paper markets, free from normal supply characteristics and dynamics, do not serve a price-discovery function, they serve instead to mask true value; iii)the paper wealth you believe you have accumulated may be worth no more than the sheet of paper it’s written on.

How confident currently are you that the paper you hold reliably represents your wealth? Consider how you would react to information that Iran was asking for a paltry 0.1gram Physical Gold per barrel/ 311 barrels per ounce Gold? Is there one among you who would not rub their hands in greedy glee at the untold riches to be made in this glorious arbitrage opportunity? How many of you would sell everything, beg-steal-borrow, to lay your hands on every penny you can in order to purchase as much Gold as possible at the electronic USD market spot-price (currently circa $1750)? Who among us would not be hastily making the following calculation: 31.1grams per oz; 0.1gram Gold pb =311 barrels of Oil for $1,750. And who would not conclude that s/he was set to make countless millions on the back of this startling arbitrage opportunity?

Good luck! Your billionaire-dream will endure only a little longer than it takes a piece of paper to burn. Hurry off excitedly to check Gold’s spot price, as you pray that you’re ahead of the pack in identifying this arbitrage opportunity of a lifetime, as you pray that Gold’s price hasn’t risen too far yet, hasn’t eaten too far into the billions that await you. Then watch in stupefied amazement as you see before your eyes the spot price of Gold fall flat on it’s backside. FALL?!

What happened? Has there ever been a more counter-intuitive movement in the Gold price? You don’t know it yet, but you just witnessed the Physical Gold bank run. And you just witnessed the uncovering of the ‘value’ of Comex and LBMA and ETF paper gold. But stay with me as we pursue this process to it’s inescapable denouement. You are about to witness the reassignment of Physical Gold to its fully-priced TRUE value.

What is the explanation for Gold’s price fall, when news of its ability to purchase such large amounts of Oil imply that its price should be heading in only one direction -UP- and at speed?

You were not alone in spotting this glorious arbitrage opportunity. Many saw it. Many, just like you, had safe-haven positioned a very small portion of their investments in paper gold. (A few mavericks had, contrary to the best/most expensive financial advice available, even boldly invested more than the no-more than-10% recommended by the greatest financial advisors). Now these investors intend, just like you, to take delivery of their Gold and buy 311 barrels of Oil per oz. Fantastic!…Except for one small detail.

Paper gold contracts are counterfeit/illusory/pretend Gold, they are derivatives of Gold, they are most assuredly not (and 99% never will be) Physical Gold! The source of your paper gold investment, whether you own LBMA paper, ETF paper, Comex paper, Bullion Bank paper is immaterial. There are 100+ ounces of paper gold products sold for every 1 ounce of Physical Gold that exists. (Can you say ‘ambiguously owned Gold’?) And, be in NO doubt, that Iran 0.1gram Gold per barrel of Oil deal will NOT be settled in paper gold, it is NOT for ambiguously owned gold. It is EXCLUSIVELY for the real, hold-in-your-hand Gold McCoy.

Go ahead and try to redeem your paper gold for Physical Gold! Waste time -if you want- reading the deceptive prospectus, the salesmen brochures, guaranteeing your right to physical redemption. Save yourself too much wasted time and effort- go straight to the ‘small-print’. It’s there, be assured, it always is: that clause which allows settlement of your paper claim, NOT in Physical Gold, but in cash. A heart-wrenching read, in that day, to be sure.

It may be that through the haze of your disappointment, you are able to spot what you perceive to be the solution, for you can, of course, still sell your paper gold contract and use the funds to buy real Physical Gold. A huge sigh of relief.

Your next step, of course, is the online Gold bullion sites. No matter that until this moment you have resolutely ignored the ubiquitous adverts, and condemned buyers of investment Gold coins and bars as needlessly paying well over the odds. Your broker had sensibly, you concluded, pointed out the additional costs and risks inherent in Gold bullion investment. Owning paper gold contracts, you agreed, was such a God’s-send, providing ease, safety from theft, and free of those Bullion dealers’ minimum 4-5% premiums. But this glorious opportunity requires that you put aside your prejudices and take a look at the price of a 1 ounce Gold Eagle even with that annoying 5% premium added.

What?! What happened? The inventory is disappearing off your computer screen faster than you can say ‘only Mexican Gold pesos coins left’. Too late. Every Gold bullion website you look at, you find the same story. Ebay, too, is filled with page after page of ‘seller has ended auction’ notices. And in the event you happen upon a 1 oz Krugerrand still up for sale, do not forget to breathe as you watch it being bid up before your disbelieving eyes: $28,000..$29,500..$31,000.. Given your firmly engrained understanding of the world and how it has always operated, would you feel able to shell out $31,000 on a 1 ounce Gold coin, even if you could afford to do so? Don’t linger in contemplation too long, for there are many who will have understood the full implications and will happily part with $31,000 (and more) for each and every ounce of Gold available.

What will you be left with? Your billionaire dreams mere ashes, now unable to get your hands on, let alone afford, even the tiniest amount of Physical Gold. You might console yourself with the thought that you can sell your paper gold contract for cash, so at least you haven’t lost anything.

Sit down. Comex spot gold is trading at $325!..$290!..$250!. How can that be? Everyone has followed your every reaction, except they’ve moved faster. You have to be quick when paper burns. Everyone has, just like you, seen the need to sell their paper gold in a mad rush to buy Physical Gold. The Comex paper gold spot price collapses under the weight of selling and the price hurtles downwards at ever increasing speed. Brutal truths are forced into the light, as the paper gold market gives up the facade that it is any more than 1% physically backed. There are no Comex, LBMA, ETF paper gold buyers.

Meanwhile, in perfect tandem, the cash settling these paper gold market claims has had the very same goal as you had. All that cash is heading in one place, with one goal, to buy and UNAMBIGUOUSLY own Physical Gold.

The reasons to own Physical Gold did not just go up in smoke with the paper gold price. On the contrary. So now what is left for you? Let me spare you the self-deluding hope of a revival in the Comex spot-price and the salvaging of some more of the cash you had invested in those paper gold contracts. Take my advice, don’t delay, sell now at $220, for that price is heading to zero. Forever.

Rub your eyes. Check outside that the sky is still there. Funny how at such times we grab for something physical and tangible to hold and reassure. It’s a lesson we will kick ourselves for failing to have learnt sooner.

So, to recap, where have we come? Where are we now? The paper gold market is dead. Forever. Physical Gold is re-valued to it’s true worth, to the price which will enable it to flow and trade, to a price indeed which will be sustained. Forgive me for stretching your incredulity to such untested parameters. I am fully aware that few, if any, of you who have been kind enough to thus far indulge my colourful scenario will be prepared to accept that a $31,100+ oz Gold-price is sustainable?

However, in that day to come, you may! In the final analysis, we will be left with no choice but to accept Oil’s valuation of Gold, and the valuations which permit real Oil and real Gold to flow freely, continuously. It would serve no-one’s interests if attempts to engineer a lower Gold-price sent Gold into hiding. It would serve no-one’s interests to await Oil’s halted flow as it sought a new payment method as solidly reliable as Gold.

And so, at last, we have arrived at our destination: a place where paper is recognized for what it truly is, possessing no intrinsic value, representing instead an unrealistic promise that it will honour a commitment to provide, some time in the future, the real thing. Tell me, though, when we reach such paper saturation that 100 ounces of Gold are promised for future delivery, all on the back of a single ounce of Physical Gold, is it not abundantly clear that it is an empty and fraudulent promise/commitment?! The whole paper derivatives market has stood for a long time with its toe perched on the peak of a mountain of worthless paper claims, and once that toe trips we are going to be hurtling down that mountain at super-speed.

I am convinced that we need have no fear as to where we are going, that we have cause to be grateful, even optimistic, for this fall is wholly necessary. We’re heading back to the true solid base of the mountain where real things are bought and sold at their true value, unburdened from the weight of being wrapped in countless paper claims. The derivatives pass-the-parcel game is playing out, and once all that paper is torn away, there sits the real thing.

Destruction of the fraudulent, destructive, robbing paper markets is the only path out of this dire situation. That destruction is inescapable and on its way. To imbue an intrinsically worthless paper/electronic trading unit with the backing of true wealth, Oil, is too great a responsibility for human nature. There was only ever going to be one outcome. A thoroughly broken system.

In the ultimate ironic twist -given the Kissinger/Saudi deal setting us on the path to value paper far more highly than it merits- history may well record that we can thank the USA’s exclusion of Iran from the electronic USD monetary system as the great catalyst. How else, indeed, could this paper game at the core of our current broken financial and monetary system ever come to its long-awaited and inevitable collapse? For the can-kicking to end requires that those made powerful by illegitimate, unearned, paper wealth discover that such illegitimacy can end in the blink of an eye.

What nation needs uranium-enriched nuclear warheads when it possesses Gold, Oil, and friends in sufficient quantity to be able to price its Oil at 0.1gram Gold per barrel? Who needs to launch earth-destroying attacks against other nations when one can price its Oil in a small quantity of Gold and, in a flash, bring the current financial fraud (and those who derive their power from such) to its certain, long-overdue demise.

It would be too easy to object to the scenario I paint, to condemn it as fanciful and meaningless conjecture. It would likewise be too easy to soothe any anxieties that may have been elicited with self-deluding reassurances that safeguards exist to prevent this ever happening in reality. Have you read or heard about the MF Global outrage? If not, then you must! And, please, check out the paper gold brochures, the small-print, the conditions of redemption. If not for me, then for you.

Remember, time does, indeed, prove all things. Sometimes, that proof comes sooner than we ever thought possible- before we’ve had a chance to act, before we can outrun the herd.

PS. Reflect a little more on some of the other consequences which would follow this re-pricing of Gold to the shock value of 311 barrels per oz Gold. Reflect a little on Central Bank balance sheets: the ECB in particular has recognized the value of Gold as a means of defending currency, and Gold currently composes some 60% of the total value of the ECB’s reserves. Reflect on all Gold-holding Central Banks and their balance sheets.

Only days ago, Venezuela repatriated the final shipment of 160 tonnes previously held abroad and the world’s Central Banks have been buying and accumulating Gold at unprecedented levels. Russia, India, China, Iran, Korea, Vietnam, even Greece adds monthly to its Gold reserves. Interesting! No-one says too much about it; these increases are announced without fanfare. Almost as if no-one wants to disturb the public paper gold price.

But consider this: how much healthier suddenly are the ECB, and all those other Central Bank balance sheets with Gold revalued to its true worth by this simple, deeply generous, selfless offering of Oil at 0.1 gram Gold per barrel? Let all paper burn, for the revaluation of Gold can off-set the evaporation of worthless paper from Central Bank balance sheets.

Can it really be that simple? Can this credit/debt paper fraud, deceit, misery-making horror be brought to its knees by so sweet an Oil-Gold deal? Would the USA be the only losers, as their electronic USD free- ride was ended? Of course not! For the USA claims to hold within its Fort Knox and FRBNY vaults by far the largest amount of Gold bullion in the world, far outstripping anyone else’s. There, deep in those vaults, we are assured, sit more than 8,100 tonnes of the stuff. Iran’s move, far from seeking to disadvantage the USA, would necessarily recognize that 8,100+ tonnes buys a great deal of 0.1g gold-priced Oil.

It turns out you see, that the USA would be the greatest beneficiary of this Oil and Gold revaluation/re-pricing. There is NO loser in this scenario. Gold has made winners of us each and everyone. It has burnt paper, revalued real assets, crushed debt, freed nations and peoples from future-generations of extreme debt slavery/repayment. Unless, of course……


Buffett Blunders into Misrepresenting the Logic of Gold Investment

June 20, 2012 Leave a comment

Warren Buffett has kindly taken time out from his exhaustive schedule to offer the investing community his wise pronouncements on Gold. We are, as ever, deeply grateful to the great investment guru of our times for any advice he feels ought to be imparted to the investing public.

We are especially indebted to the avuncular sage when his great wisdoms are not limited exclusively to the pages of his private investment letters and brochures, but are graciously shared in public space, in such esteemed publications as Fortune Magazine.

REFERENCE: Warren Buffett: gold has no value

Buffett gives us a privileged glimpse into his anti-Gold thesis. No-one can accuse the great man of not getting his hands dirty and engaging in the essential scientific research. We get a clear mathematical underpinning of his 68 feet cubed stock of Gold calculation, which with Gold priced at $1750 per ounce would value that cube at $9.6 trillion. You see, this is scientific; this is indisputable fact. And it leads Buffett to the self-assured logical conclusion:

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators -must continually absorb this additional supply to merely maintain equilibrium at present prices.

And in these few brief words, Buffett reveals his stunning lack of understanding of both Gold and the Gold markets. For all the seductive quality of his scientific and mathematical calculations, Buffett neglects one critical piece of information.

The public price of Gold which Buffett cites, $1750 per ounce, does NOT represent either the true value or true price of Physical Gold. That $1750 per ounce public price represents the ‘value’ of LBMA and Comex PAPER gold. For the clearly documented and openly admitted truth is that 100+ ounces of paper gold contracts are sold for every ONE ounce of Physical Gold that exists. The $1750 per ounce figure used by Buffett in his calculations is, at best, a promise to deliver sometime in the future 100 ounces of Physical Gold for every existing ounce of Physical Gold. Put another way, that public price of $1750 is NOT the price of Physical Gold in a 68 ft all-sides cube of Gold; it IS the price of the foundation cube of 68 ft all-sides Physical Gold with another 100 additional same-sized cubes of PAPER sat on top of it. Those additional 100 paper storeys of the edifice may have the words Gold written all over them, but when that inevitable, ever more imminent tower-tipping event comes, watch that paper seek to be redeemed for Physical Gold, only to be told: “Get real! That Physical Gold has NEVER existed.’

Buffett’s ill-conceived and wholly misrepresentative cube thesis, and his ‘absorption of annual production required just to maintain equilibrium’ concept collapses, torn to shreds, in the face of these facts.

It is difficult to imagine that Buffett lacks knowledge of such essential, widely available, ever more widely-disseminated truths about the LBMA and Comex paper markets, and the volume of paper gold sold against each ounce of real, tangible, Physical Gold. It is, after all, an operation run by Central Banks and their agent Bullion Banks, and it seems reasonable to suspect Buffett can include some of these people in his close circle of friends.

When one takes the time to acquaint oneself with the facts about the operation of the gold markets, and the two very different beasts, paper gold and Physical Gold, it becomes an exercise in stifling the most enormous laughter to read Buffett’s assertion:

“Gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production.”

Never mind the somewhat abusively excessive supply of paper gold generated by Bullion Banks to meet the investing public’s complete disinterest in Gold. The time is close when people will look back and kick themselves for failing to see the ramifications, for failing to understand the implications of a Gold market saturated with 100 ounces of paper gold supply per single ounce of Physical Gold in existence.

Warren Buffett has his Funds to sell. Shareholder newsletter time approaches. Buffet can NOT talk up, nor recommend an investment in Gold. It would be to shoot his Funds full-on in the face. I think it is quite reasonable that we view his misinformative comments about Gold against this background.

Buffett is a business-man. Who can blame him for seeking to maximise his Funds’ shareholder profits? What I didn’t realise quite so clearly until now is the degree of resentment he feels that he is unable to invest in Gold. But I’m grateful for his showing me.

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