The Gold Trail by FOA - August 2000

All times are U.S. Mountain Time

(08/19/2000; 17:28:58 MDT - Msg ID: 28)
Up and running.

(08/19/2000; 20:40:49 MDT - Msg ID: 29)
Real Wealth?

I'm tired from traveling and having just placed my house in order am in need of quiet time. Instead of hiking lets sit out on the veranda for a while. It's was such a beautiful evening, even as night fast approaches.

At times like these I can almost feel the thoughts of hundreds of my friends, worldwide as they collectively think of how our future must be, will be. It's a common understanding, these thoughts, as they agree and extrapolate on several singular items. Such as: mankind's future is more often negatively impacted by "acting on knowledge we learned from each other". Especially if it is contrary to the natural world around us. Nowhere is this more evident than in the "Western Mind's" concept of wealth!

I, being of "Western Mind" am fully aware of how this thinking will shape our future that's directly before us. Indeed, from cradle to grave we learned from each other how to highly value things that have no real value. From stocks, bonds, CDs and currencies, we hold a good portion of all of these as our Estate. But this is expected to support our lifestyle in the future. Yet none of these count as wealth in our natural world. They have no value until exchanged for "Natural world" things.

These "paper world" values are little more than credits and IOUs that we "learned to value" "from association with our own friends" of "Western Thought"! Even as the end of this financial era fast approaches we continue to follow our learned "Western ways".

"Don't buy that which cannot burn, buy a paper share of ownership of something that cannot burn." "Then watch, with your estate protected, while all the rest goes up in flames!"

My friends, a stock trader is a stock trader no matter what company name appears on the shares. If they think the world needs more golf balls, golf stocks are the ticket. More computers or internet providers, then those shares are purchased. If gold is expected to rise, gold stocks are played.

If a paper game is in them, paper products are pursued because that is what these investors were taught to value. Is electricity is on the move, buy electric futures. Oil? Buy oil futures! Iron? Buy iron futures (smile)!

Yet, even taking all of this in view; none of these traders are acting out anything different than their learned "Western Concept" of wealth. When the future comes, and it will, they will own nothing of natural value that can represent lasting wealth for their needs.

As night has now arrived, and we must go in now; please consider this short talk on my veranda. Sometimes fresh air can free the spirit so it may prepare for the future. A financial future that will, like our current Western forest fires, consume all paper made from these same trees.

In a day or so we can carry this much further. Even into the direction of oil.


FOA/ Your Trail Guide

(08/20/2000; 23:23:02 MDT - Msg ID: 30)
Ready for the next hike?
Hello Everyone,

I have been wanting to talk about the palladium situation for some time. There is a lot more precedent here than most writers want to discuss. From my position, the discussion has so far been slanted towards the "long" paper traders view. Let me ramble on a bit as we drift towards palladium: (smile)

During our "Veranda" chat in my last short post, I made reference to how so many financial players work from a learned "Western View" of paper wealth. With this background perception always dictating that owing the price of something in contract form is the same as owning real wealth, their reasoning becomes distorted. Their use of a real item as currency in trade loses it's function and purpose and the mind begins to see "intent" (a contract) as a tradable or ownable wealth on equal footing with real wealth.

Narrowing down the scope of that view considerably, we come to the "paper futures" game most every trader is familiar with. Again, what strikes me as odd is the universally accepted position that holds these paper markets as equal to "the real thing". In both value and possession! Indeed, how many times have we seen council presented by seasoned professionals as to how the physical product can be delivered against paper if needed or wanted. Yet, in reality neither side of these future markets are prepared to "settle up" entirely, 100% in physical merchandise if push comes to shove. That's right, neither side!

These markets were never designed to represent the value of 100% physical settlement. That's why they haven't recently and don't today demonstrate the real price value of their contracted product! The closing price is but a settlement of opinion ABOUT "supply and demand". Not settlement of real supply and demand that has been sold to so many as "one-in-the-same". An opinion bet is never a "real value" that's equal to a 100% settlement in actual trade.

The only value represented in these markets is found in their ability to demonstrate the cash margin build up on each side of the total contracts outstanding. The closing prices of gold contracts have lately shown that there is a bottomless pit of margin cash available to create the short side contracts against any long position. This is the real reading an investor should take from closing paper prices. Not a real give and take of physical supply or demand.

But, these shorts are no more ready to supply real metal than are the longs ready to pay for real metal. Why? The "Western Concept" of wealth accepts that if the "cash margin opinion" of the value of gold is great enough to move the paper price upward or downward,,,,,, then that opinion is the true "supply and demand" value of physical gold.

Indeed, billions of dollars of physical gold is sold every day using this "cash opinion" to set the value of physical trades. With all world currencies in play by their governments, then gold's low pricing is truly a political gift for those not blinded by "Western values" and investing in gold paper wealth.

But before you cry foul, understand that it's been this way for many, many years now! The vast majority of "Western" paper trades are cash settled with no metal moved in a way that largely impacts the "supply and demand" context traders so often discuss and follow. Again, the "Western View" takes the position that these contracts and their closing values are a paper value that represents real supply and demand values. My friends, it doesn't and never again in our lifetimes will it! Today, these paper price values only represent "margin deposit opinion" about where the physical trading price "should be" not where a "Freegold 100% settled price "would be".

A fraud? To say that the shorts have sold a metal contract that they cannot deliver against,,,,,, holds no more meaning than the fact that the longs cannot pay for metal they have contracted to take! As proof, watch as both sides always scramble to close out the majority of contracts for cash before they must settle. Betting on the price movements of something is not buying real wealth and running from a contract should prove it in the open to changing "Western Thinkers". Waiting for the shorts to be had, in order for your paper investments to gain value may be a long wait indeed. If this continues further, and now with the blessing of Europe, it's the paper longs that may be had as the shorts are let off the hook as the market is destroyed!

Once again:

This very paper trading process was the birthplace of a larger world market that controls gold values for the benefit of those who will buy physical well under true currency market value. A wealth building benefit that is available to anyone. Below market physical gold, in dollars, is a deal available around the world to anyone outside the "Western Perception of Wealth".

In this perception mindset, most Western investors have purchased into the controlled paper side of the gold equation. They are lost in an outdated paper wealth dream that can never again be a value substitute for real gold. International politics and world currency realities are today pulling what little value is left from the paper gold wealth that so many thought they had.

In a way, one may say that the flow of oil was purchased over many years using this same cheap physical gold currency created by withdrawing wealth from these paper gold substitutes.

The fact that,,,,, for many years,,,,, around the world,,,,, so many investors adopted the "Western View" of paper wealth,,,, it changed the real supply and demand function of physical gold. Because the majority of "American Style" investors had decided they would do just as well by betting on the price of gold as by owning gold,,,,,,, physical gold was free up to flow where it was needed.

This paper market was born, not created and found that it could be "CONTROLLED" by the flow of official "margin cash". Truly, in a larger view it was our collective "Style" of investing that trapped many as "long paper gold bulls", not as much the flow of "opinion margin" that has been used against them.

So what about palladium:

The massive margin increase announced is demonstrating exactly what these paper markets always have been. They understate the real world value of the physical product by valuing it using margin opinion, not real physical supply and demand. If the markets get out of whack because too many players move away from holding "American Style" paper wealth and want the real thing,,,,,,, then the paper markets adjust by reverting to cash settlement using the "understated opinion price".

None of the recent commentary touches on the fact that the shorts also face the same huge margin increases. In reality, the move is a precursor to forcing cash settlement if needed. Once a crisis threatens to shut down paper trading, cash settlement liquidation is enforced. This is why the shorts need to carry 150%++ MARGIN to make sure of cash settlement (not physical settlement). The fact that the longs must also have the same margin does make the weaker players fold their hand. But still, many longs will stay for the end.

This is very much what is coming for our gold market, worldwide. Yes, just as in palladium (if it fails), long paper gold traders will smile at their big cash gains (if they can get them). But their smiles will fade as they notice how their $1,000 / ounce settlement only represented the "margin opinion" of real physical value. In the aftermath of a paper gold market shutdown they will buy a 1/10 ounce for that $1,000, if lucky!

In today's world, it's the physical traders that hold all the cards and will gain the most wealth for their future. The value is there today for anyone that want's it. The paper markets we know and love will die before they can ever equal the real value that's coming for gold.

To close:

The true physical gold demand in our world today is poorly understood and poorly calculated. While physical trades are documented as well as possible, little weight is given to the countless investors that own gold using the international margin/deposit paper markets. Yes, most of these players don't have the "here - with - all" to make good on their gold purchases by taking delivery 100%. Mostly they play the "gold price" in a paper game rigged against their ever seeing full value.

But if even 10% of this ---"I own real gold in paper form but haven't paid for it yet and have the cash to do it "--- demand was to surface outside the futures related arena? This demand would take all the supply available in an "adjusted" post paper gold world. Only then will the real demand equation be understood. Only then will physical gold trade for it's fair value as a world currency outside official paper gold control. That day is coming for the owners of real gold.

You see,,,,,, any excess supply would mostly flow to filling those that have contracted for it and have something the world cannot live without! OIL!

In time the real value of gold will be represented by real demand not subject to currency supply. Not the unlimited paper supply that values gold for political ends.

To reword Another's strange post: One gold is coming my friends, one gold!

Thank you all

FOA/Your Trail Guide

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