The Gold Trail by FOA - January 2001

All times are U.S. Mountain Time

(01/03/2001; 08:50:37 MDT - Msg ID: 50)
Euros: -- the breaking of dollar derivative gold! ---


Thank you for the comment yesterday on USAGOLD's main forum.

I have to say that everything is working out well as the new "Power Euro" begins it's displacement of our dollar. Right on que, the gold derivatives are taking a beating as that portion of the dollar market is dismantled. Hyperinflation, in most dollar economic zones will eventually gun gold much higher. But, not until gold has out-run everything on the planet so as to get to that inflation price starting gate!

It seems people will learn about "this new gold market" in two fashions; they buy gold and await the dollar / derivative failure or they buy substitute gold (mines and derivatives) and watch this entire dollar gold structure sector get destroyed. Either way understanding will be gained.

I know you have opted to own real gold while watching this all unfold. Truly, physical gold will explode in an unbelievable fashion once the Euro has supplanted derivative gold trading with physical gold trading. A process that allows us little time to buy more gold as derivatives descend. The wash out of trading in paper gold could take their paper values to depths unseen. While a virtual explosion in physical buying, happening at the same time, will make the physical run-up un-buy-able during the first several hundred percent.

If it unfolds more slowly than this and starts from these levels, "good for physical gold advocates". But, as I understand what is happening and the political preasures in force, physical gold is about to become the only portion of the gold sector that will perform,,,,, and perform as no other asset in history ever has!

Oil producers / backing Euro Zone development / backing super high physical gold / will change the trading dynamics and gold perception as never before. Between then and now, those gold substitute players, who are waiting for past historical paper performance to lead the way, will be forced into financial oblivion. All the while betting on a paper horse they thought was a Golden Arabian.

I'll have more as able, on this trail, our trail into the future.

Michael and Randy, today is a very good day! A very good day, indeed! (smile)


(01/05/2001; 14:20:40 MDT - Msg ID: 51)
Back to Trail Marker #1

Hello ALL

Before starting our hike, let's review an old trade.

A while back, I left a marker on the Gold Trail so we could one day return to examine some old footprints:
FOA(5/25/2000;2:54:39MD- msg#23)Trail Marker #1

For the record, as I posted several times, I'm not a trader. Nor am I a futures trader, even though I have traded almost everything there is and done so before many of you were born. With this perspective of me, not being a naive newcomer, lets recount the trade.

A one time poster here made a bet to show that paper gold was better than real gold:

BTD (5/23/2000; 16:01:57MT - msg#: 31098)
""I just sold my Krugerrands and bought futures contracts""

Well BTD,

Because so many of these "bets" are done and never openly followed up on, I thought I would copy his actions in real time with real money. I did, as reading my msg#23 above explains. I dumped a portion of gold in one quick sale. I must have got unlucky, because my offer of 300 Krands hit a down moment and sold at $270oz. that day. Some called me out on this and said I was building this example unfairly. But, you know, in real life, in real trading, often unfair things happen as many of you can understand. The rosey paper bets never do in real time what they do over an after dinner wine! (smile)

I used the sale proceeds and brought appx. $81,000 of t-bills as margin, then brought (went long) three (3) Dec. gold contracts at $283.30. (I mis typed this as 383 in my post, but most of you reading would have known this). I got around 6% on the bills while waiting.

About six months (Fri. Dec. 01) later I traded out (sold) my 3 contracts before being delivered against them (stopped, in broker jargon). They were "sold on close" at $268.60. I saw no point in buying 300 ozs. of warehouse receipts for $283.30oz when an order for 300 Krands could be had for around $271 at the time. Ironic that they were only around a dollar above what I had sold them for????

Anyway, the math (I hope I type this right?) works out roughly this way:

After liquidating my margin account, I had lost:
$14.70 oz on the futures (283.30 - $268.60 = $14.70)X 300oz = (loss of $4410.00).

Then my interest on the 81K amounted to $2,430. +/-

which made my loss appx. ($1,980.00) (less all commissions we can easily round it out to ($2,000)).

SO,,,,,,, I sold 300 krands for $270,,,, after a few months my $81,000 had become $79,000,,,,,

of that I couldn't buy back the 300 rands at the new price of $271.

Wait a min! I would be short some 8 ounces and all for what?//

Boy, the convienence of holding paper gold is sure expensive! I didn't want to roll this over again by buying another out month!

The truth of the deal is that if one must trade, it's often better to just trade physical with a good dealer (I know I saw one somewhere on this page?).

The commissions are in the physical prices already. At least you don't get hit with a paper blitz that amounts to nothing but added loses. All you newcomers remember that a lot of the bark about paper trading is just that ,,,,,, bark.

The guy telling you how to do it couldn't do it himself so he want's you to pay a commission so he can play a game (with your money) that beat him long ago.

Besides, as the evolution in gold moves on, just owning physical will do it all without any trading and the gains in wealth will be staggering.

Here a few quotes from BTD's post that can now be seen in a different light:

----Two weeks ago I sold 300 Krugerrands and transferred the funds into my commodity trading account and bought 3 gold futures contracts. This is my preferred way to hold gold. In my trading account, I invested the margin funds in 6-month treasuries (earning 6.05% interest), and used these treasuries as margin to buy 3 gold contracts (unleveraged).------

---In this way, I earn interest on my money, yet still retain full exposure to movement in the gold price (I have my cake and I'm eating it too).------------

(TrailGuide note: HA! HA!)

-----In fact, in some ways, one can consider this as lower risk than holding physical gold: futures contracts require a low commission (with the right broker) while physical purchases and sales cost a high premium charged by the dealer;---------

----I earn interest on my treasuries, while the holder of physical "loses" the interest he could have earned.------

------The reason I'm telling you all this is to provide an alternative perspective to the bulk of the posters on this forum.--------- Well, I AM a trader, and I don't believe FOA/Trail Guide can foretell the future any more that the $5.00/minute psychics on late night TV. Trail Guide is a very articulate and thoughtful commentator, but his ideas are just theories like everyone else's.----

Well, all I can say to all the BTDs in the world, is that your big trades lost you (and anyone else that followed it,,,, me too) a few ounces of gold. I could have just kept my krands and not been any the worse off. In fact, I would have had a couple extra thousand of wealth in my pocket.

Like Another, my Thoughts are "free as the wind". In fact, $5 bucks a minute is cheap compared to the loses the BTD paper boys sell you.

OK,,, now it's time to head for the Gold Trail,,,,, the Physical Gold Trail,,,, that is (big smile)!

Either today or tomorrow, with comments on the last several days and the new currency directions of the Gulf States,,,,,,,

as able!


(01/06/2001; 09:49:51 MDT - Msg ID: 52)
The Perception Of Gold

Hello everyone!

It's been a while, so let's build a fire and plan the walk.


Long ago I was given a stay at the Paradise Lodge, up on Mt. Ranier. During the summer this volcano, outside Seattle, is a favorite for mountain climbers training for other big European and Asian mountains. Many other day hikers also take the high trail above 10,000, just to say they did it. Some go much higher!

On a clear day you can pick a nice spot close to the Lodge and watch the climbers work their way along the trail. Way ---- waaayyyy --- up there, they look just like ants. Often, clouds bellow in and envelop the troops for a while as they disappear from your lower view. It often becomes scary as we can see when they are disoriented and start off in the wrong direction. Sometimes only a few steps separate them from a chasm of disaster.


This is also the way I feel watching us walk the Gold Trail. Just like from Paradise Lodge, I have a different view than many of you. From where I stand, I understand much of what is ahead. Yes, a lot of us have been up this trail before, but this time, evolution is moving the mountain and bending our common path.

This time my friends, I tell you, the risks are ten times greater and the drop-off much more sudden. Indeed, we are but ants on the financial mound from where others can see us. Like the mountain walkers, thick fog also fills our thin air. So gather close to the fire as we check this worn map and mark the changes I know are ahead. But remember, before knowledge there must be understanding and before understanding there is perception.

Truly, as peoples, we can know nothing if perception cannot separate "real" from "illusion".


Hello PH in LA, I read your #45071. PH, nice construction of the way it works. However, roads do curve. Here are a few of your items so as to extend current perception:

----- However, last I heard, there still existed something called "delivery notice"; the day on which holders of contracts must declare their intention to stand for delivery. ----------

------ I declare my intention to accept delivery. At this juncture, (as the system is presently functioning) I would eventually receive my gold.-------

------Now, for a physical market to open up separately as FOA forecasts, the paper based futures market would have to vaporize instantly. Otherwise, anyone noticing that prices were higher on the physical market, would merely opt to stand for delivery and sell the delivered gold there. Far from causing the futures market to fall farther, it would merely explode higher as investors took delivery at Comex and sold it on the new Euro physical market.-------------


A financial structure, such as our old 20+ year paper gold market, is changed by the force of currency traders reevaluating their use habits. Such structures do not rearrange themselves on their own. People use a large economic backdrop to create their perceptions of the worth of paper contracts. At this point our current gold pricing structure is built on physical values constructed on our currency's viability as it functions in it's current economic structure. The inability of contract performance is not "priced" into this structure, yet. From gold mine sales to bullion bank dealings, paper gold is accepted as physical even if it changes hands a hundred times before it's zeroed out in paper exchange. All done without bullion conversion.

It will be our changing "economic backdrop" and "it's restructure" under an evolving reserve currency that shifts our and our institution's beliefs past the point of "contract viability". Dollar price inflation, while impacting gold prices later, will not be the initial trigger that guns gold into the thousands. Many are waiting for this new dollar drop to kick off the next gold bull market.

It will, but Another dynamic will happen first.

It will be the inability to reconstruct the present volume of paper gold into a new reserve currency, the Euro, that breaks the gold pricing system. It is at that point, where the inability of our dollar biased gold structure to perform a currency reprice or make delivery at all, prior to transition, that will cause us to discount the value of all "future gold" against "instance performance". In other words, "on sight spot purchase and possesion".

What all that means is that physical gold, "on sight", will start trading at a much higher price than any form of contract gold. From Comex to Hong Kong to London, workouts will be required prior to real delivery. Even the normal "contango" of interest, built into these contracts as higher prices for further out months, will not begin to overcome the new "price discount" on paper contracts. That pricing discount will at first be in perception only. But later, as the fear of non-performance builds, bids will reflect this perception. Once the massive OTC gold markets begin to demand various dollar to Euro workouts, prolonging delivery times by offering cash extenders, "perception discounts" will gain legitimacy and become "factual discounts" based on "understanding".

As I said before, in other posts, this whole act will be presented in the media in different lights. The first priority in dollar land, will be to promote the legitimacy of the dollar paper pricing dynamic, no matter if gold is delivered or not. It will be labeled as; "dealers are making huge profits on physical gold by trading it with premiums far above the london markets". Long after most of the paper rules have been modified to shift the majority of contract gold into cash settlement, the paper prices will still be reported as the "real prices". Not the other way around.


PH, when you say: --- anyone noticing that prices were higher on the physical market, would merely opt to stand for delivery and sell the delivered gold there-----:

No, in our real life currency evolution, it's the other way around. When the perception builds that all gold trading and contract structure is shifting to another reserve currency, all of us know the derivatives will not / cannot be converted at par. Mostly because the extended dollar is debted and expanded far beyond it's current usage. The real world dollar assets dwarf andy comparison to a new currency system. The only way to "par" your exposure is by doing the well known impossible, taking delivery. That is a dynamic all of us have been positioning for for years. The only paper owners that are not worried are the ones with an economic good that demands satisfaction, in gold if needed. Oil! The rest of us must bolt towards the closest "par" conversion first. Real gold.

Indeed, "Big gold Traders" don't stand for delivery when there is a possibility (certainty) of cash settlement. Especially in the near future, when the big big bullion banks and exchanges must set in motion a "trade for liquidation only" rule. A rule that basic physics will demand and the courts will back as long as the settlement currency is "legal tender". They will and it is!

To get physical gold in such an enviornment, you must sell for cash and do your buying on the physical markets. But, as we all know, noone will "par" their transfer when even cash settlement is at a 1,000% discount to physical trading. Welcome to the real world of a currency crisis no government can control.

Note: PH, did you think we were playing for peanuts (smile).

My friend, truly, this is but one portion of a huge international dynamic, in place, that will change our perception and understanding of gold. Even change it into knowledge. Truly, gold will once again become "The Wealth Of Ages".

The aftermath of this will leave us in a physical gold trading world for the rest of out time. It will, by default be mostly done in Euros. Mr. G. (one of USAGOLD's good posters) noted that his perception was that we could all just buy Euros. Well, I have, and the Euro will be the next digital transactional currency holding reserve status ,,,,,, and it will eventually be much higher than the dollar ($10.00 = E1.00??).

But most of that exchange rate will be a function of both an inflating reserve Euro against a hyper inflating dollar removed from reserve status. Prices will rise in all currency systems around the world as the Euro eventually expands it's coverage everywhere. There simply is no way to undo 50+ years of dollar inflation without unwinding some of that into our real economic price structure. The price of folly does not go away. This is where gold was planned to return and to be part of a wealth structure without being a currency,

This big difference from our present dollar /non gold recognition reserve, is that nation states and individuals can / will contain their lost wealth in an official free market in gold. Gold production, everywhere will eventually be extremely controlled with citizens reporting unofficial mining in much the same way as people report each other to the IRS. But, make no mistake, miners and citizens will all benifit. All mines, both big and tiny will make huge profits on the limited production allowed because the price will be so high. ($30,000+ in dollars (big smile) But, the road between here and there will more than likely price mine owners close to zero, first.

You see, gold will be a major wealth / saving asset to just about everyone. Not a currency. Make no mistake, $30,000 dollar gold divided by ($10,00 to E1.00) Euros = E10,000 in Euro gold. Gold moving to this level over the next number of years will allow the Euro reserves to cover it's issuance in a duel asset world. We will all save both Euros for interest and spending and gold as permanent wealth.

"Noone", not even our oil producers will control gold wealth, it will be sold and lent as a wealth medium, no different than Real Estate or Factories. Just not lent and spent by bankers as currency. Gold will never again be able to act as a trading currency in our modern digital world. We have tried that on various gold standards and even presently using this failing paper gold market. After the default that's comming, no nation or people will not accept such a deceit again.

Yes, corrupt governments will still have their way with fiat money. But, for our immediate future we will go this rout first. Truly, even the dollar took 50+ years to kill itself. So too will the Euro.

Remember PH, yesterday you could live a good life in Spain (smile) even considering all their money troubles, using their currency and saving dollars. Tomorrow we will also live a good life here in the USA. From Florida to Oregon, we will use a declining dollar and, just like in other nations today, own gold and Euros. Why, I bet life will be better than in our youth. At least for those who know a good gold dealer (big smile).

The perception that you can not "afford" gold at higher prices will give way to the understanding that we "earn" the "wealth of ages" at any value. Trading excess dollars for gold at, say $5,000 will meet no more concern than paying $25,000 for a car. Just wealth in a different form.

Now, see what you have done? I am out of time and must finish these other comments later.

PH, Michael, Randy, Everyone,,,,,,,,
Yes, Jan 04 was a good day!

Fires out, Zip up, while the stars are still bright

(smile to all)


(01/10/2001; 17:50:30 MDT - Msg ID: 53)
24 hour hike.

OK,,,, everyone is here!

Light packs this trip, because we are moving fast. It's finally time to take the curve and see that "unseen view"!

Let's go,,,,, keep close because I'll be talking as we hike,,,, commenting on a number of views others have mentioned. Then we will stop and have a grand look.


Silver, you ask?

Same old song for a brand new generation, all ready to hear those wore out verses being sung once again. It seems it doesn't make any difference that silver has failed every MODERN human attempt to include it in hard money use and thought. Yes, just like the various failed gold standards, we keep trying to convince people that silver is better than fiat money, even as good as gold. Perhaps, a poor man's gold, no?

Ha! Ha! The last thing a poor man (or woman) needs is silver. Actually, any metal could be a poor man's gold, even iron! One ounce of iron is more affordable than silver and has just as good a chance at outrunning gold,,, percentage wise of course. Isn't that right Randy? I saw your face back there in the group (smile).

The only real argument all the silver pushers have is based on it someday outperforming gold and holding that gain for good,,, again percentage wise. This is the same old worn out logic all the various paper gold substitute players also use. Throw it into the same waste basket with options, futures, leveraged gold contracts, delta hedging both long and short paper positions,,,,, even gold mines, silver mines and the like. All of it is pushed because of the same thought; "why own physical gold when these items will go up faster in the next move"!

Yea,,,, somebody forgot to mention that the next move in gold may be of a nature like "noone" has ever seen before. Oh, you didn't hear that this time the entire paper gold marketplace may crash and burn,,,, taking all those above leverage vehicles down with them? Exposing silver for the play it always truly was,,,,, just another leveraged metal being pushed to poor people standing next to gamblers?? Yea, poor people shouldn't use gold,,,, that's only reserved for rich people hedging their big wealth. Ha! I ever there was a way to increase the gap between have and have nots,,,,, just sell the nots silver while the haves keep gold.

Try this "Thought" on for size:

--- In the beginning, the earth and Western style gold trading was created (smile). All we had were these big 5,000 ounce gold bars moving around. At say, $5 an ounce one of those bars cost $25,000. But one day, as the years went by and use / need pushed it's price ever higher, $100 an ounce became the norm. Oh my, what will we do, who could possibly afford a bar that cost $$1,000,000? I have an idea, said a smart woman (us guys didn't get it), let's melt the bar down into one ounce units and everyone can afford (use) them. Especially now with an ounce being $100. We can call it "poor man's gold money" or "poor man's gold wealth"!

-----Then the price went to $800 an ounce and once again, the poor man couldn't effectively use gold as money. Once again someone had an idea, let's melt the ounces down into 1/10 ounce coins so they will be $80 each. Once again it will be "poor man's money". Boy, we can even build on this logic and add alloys to the gold! Making one gram coins that are the same size and feel as a full ounce. Great day, now gold will always be the "every persons gold";

-----because it can always take the place of paper fiat,,, no matter how much any currency inflation drives up the conversion value of paper money into gold!-----

The point made here is that gold has no set currency price and never has. In fact, we don't even need any more gold produced! All the gold in the world could easily convert all the currency, bank accounts and wealth in existence into gold value,,,,,,, at some currency price. As pointed out above, it will always be available for wealth replacement even if we have to put just one atom of gold in a one ounce coin. Don't laugh, it may happen (big logical smile)!


All the commodity players, gamblers, mine operators and silver pushers try to sell the public this story; that gold can't rise too high because it's just a industrial use commodity. Therefore, it will never go too high and thus the need for other vehicles to compensate for currency inflation.

Boy, what reasoning about gold's future, resulting in a conclusion that a need exists for leveraged products. But, imagine if gold went up so high no one would buy it and the mines would all go broke???? Ha! This reasoning flies in the face of the fact that gold always eventually rises to match fiat inflation and it doesn't get to such a price because """NOONE""" is buying it!!!!

The proposition is:

-----Hey, nobody is going to buy any jewelry if gold rises too much?---

No wonder so many miners are in such a fix with brain power like that at the helm.

When the next real price inflation begins, silver and every other hard asset will indeed, rise in price. But, for it to become the "poor man's gold" that bridges the wealth gap, silver buyers will have to reconcile a major value rise in gold first. The result of the breakup of paper gold leverage. Only then will gold at the gate of the great inflation race,,, a race that, at best, silver follows gold!

---Gold my friends, not a story of riches to come,,,, real wealth for all modern people today----

The USA may have robbed local and foreign dollar holders of gold in the 30s, but it could not rob the poor of the world of their physical gold ,,,, not then,,,, not tomorrow,, not ever.

As the song goes "ohhh nooooo,,,,, they can't take that away from meee"! (smile)


A drink of water and,,,,,,Onward:

Black Gold?
If I understand the reasoning, some people think there is a mass of physical gold out there and it's being used as underground money. This is what explains the low price of gold today, as all that black market gold surfaces?

Well, that may not be the proposition, but if any of you want to know; none of our evil outlaws are so stupid as to use gold for trading when there is literally "TONNES" of cash circulating around the world. Please, give all of us a "logic break" for a minute? Why would I, as a crook, carry even one ounce of gold when three crisp $100 bills can take it's place? Even ten $100 bills are easier than gold priced at, say $1000. And there is no shortage of that cash stuff around! Hell, I bet there really is more tonnage of "Black Market Cash" in the world than all the gold still in the ground. Cash for ounce,,,,, gold still priced in the thousands! Believe it!


OK, now we are coming to the grand curve. But first a few more comments. I'll rest a bit here and present the rest around 8:00 or 9:00 mountain time (if my time conversions are correct)

Thanks for reading

(01/25/2001; 10:00:13 MDT - Msg ID: 55)
A Comment, then The Gold Of Troy
Hello Randy!
I thought this would be a good time to take a break from the trail. Here, at my place on the Trail Head, we can consume the luxury of a more relaxed, liberal conversation. Some day, I hope Michael, yourself or others may physically join (actual posting) in talks. I know MK is very busy (talking to friends / clients and counting his / their gold (smile)) so his being here, in spirit only, is enough for today.

For you, Randy, I'm afraid that the times ahead may make yourself one of only a few that will talk to me. You see, attitudes in this gold market are going to become very hard, almost stone like. Some of this will be reflected in a widening "valley between paper gold owners and physical gold owners",,,,, that is a subjuec I have, in the past, referred to. Unless one has the reasoning powers to see the future in physical gold, as I know you do, the possibilities of overcoming and / or regaining ongoing and future losses of wealth will congeal many a person's feelings . So, for now, engage your free spirit and have a glass of my best wine. I hope you enjoy this red, there were only 500 cases of it made in the whole world and I got the last one (smile). All the best, my friend.


(after a sip and a moment to reflect)

You know, in a little bit, in the next post, I'm going into a whole discussion about ancient gold,,,,,, carrying the thought right to the present. But before doing that:

I think it's a real shame, the way our Western / American investment culture has changed the private persons perceptions of gold,,,,, indeed, a change in their perceptions of all wealth. It seems that almost every form of asset holding must be in some form of leveraged and / or non real ownership. Paper this,,,,,, paper that,,,,, ten to one gains,,,,odds are on your side,,,, and so on and so on. And, the problem is not just gold,,,, it's visible in everything.

I guess this is what happens when decades of currency inflation leads to almost free money flow for any imaginable use,,,, and that unlimited ability to borrow and spend comes on top of little or no price inflation! The dollar's reserve function and the lack of significant price rises such a world financial structure creates,,,,,, has developed a frozen value perception in our currency's image. A frozen value image that our society absolutely knows is their net worth's purchasing power for real things. Collectively, it isn't and never has been.

We have a whole generation,,,, even several generations,,, perhaps, yourself included,,,,, that do not perceive their standings as being high up upon the hill. Many, if not most, of the voting public see their economic location at the bottom or only partially up said economic mountain,,,,, and they see that any fallback in the economy will drive them into negative territory. In reality, we are, and have been on easy street. With such a conflict, is it any wonder that Alan Greenspan must inflate further? No different from the past,,,,,, but still inflate, regardless of the world's new currency environment? In addition, following such a public political directive, our fed's inflation can casually respond to the changed nature of our derivative economy and not seem out of place while doing it.

With this almost national perception of a false "net worth purchasing power" and with our ability to borrow more into said net worth, our perception's impact,,,,,,, as a whole,,, on society's money culture cannot be resisted. Yet, all this proceeds as our fiat values, in reality, are transitory and always have been. It's just not understood as a natural process. We see it in all our conversations, at home, at work, at play and on the internet. With such a well grounded belief:

----People are reduced to playing a game with their wealth, instead of employing it to create a better standard of life. A better standard based more upon the security of ownership, now, than upon some quantity of purchasing power who's future value conversion is unknown.------


(another pause and a sip)

You know -------- some readers think I'm being disingenuous when I write,(and I am using that word with Samuel Johnson's 1755 definition) but it takes that much and more to impact the diverse minds that come here. When saying diverse, I mean intentions as well as educational and cultural backgrounds.

I know there are "real asset" people, like yourself, here. Physical gold advocates that are, in no rime or reason, gloom and doom gold bugs. Like you, Randy, they applied their mental faculties using a lot of hard work and grew to understand the real world and where it's going. Not just following the Western investment crowd.

But, we also engage no less than a small hoard of "western style" paper gold bugs on this venue,,, as over the years they have become and represent the majority of hard money thought regarding gold. Using the thoughts and perceptions I just outlined earlier (above),,,,,, these people,,,,,, mostly Americans and foreign natives using American trends as a guide,,,,,,, are employing their assets into this hard money arena,,,,, and doing it using historic realities, not future realities. That's fine if we relive the past! However, today, the evolution of our currencies lifeline trend has deformed these investment methods into little more than gambling. And it's the exact same gambling dynamic they vocally deplore and are trying to escape from in other areas. In case any readers are drifting off, here, I'm directly referring to paper hard money investments in today's world. Not only are these perceived hard money vehicles "not the same as before",,,,,,,,,,, like the currency, too ,,,,, their station in life is moving on. Out away from what their past precidents.

(another pause)

When gold is discussed on public forums and at investment conferences, many true physical gold advocated don't perceive the motivation behind the oratory from today's paper gold bugs. Their interest in physical gold is real, but their actual intent is to gain "a" security by profiting from a gold dynamic created by other's buying actions. Never to gain "the" actual security by entering into the gold dynamic themselves. Many of them don't have a clue of what all that means. Yet, such an understanding would delinenate the huge difference within this concept. Especially today,,,,, and in the future as said difference may make or break the financial worth of many. Here is an example of such thinking:

----- Two guys are talking about shoes:
"Hey, did you notice how few people have shoes today? I know we have them and their use is obvious. It balances our overall physical appearance and gives a long-lasting foundation for our feet and for our human structure. In turn, shoes support all the other investment clothes we own and use during our life."

While these fellas are talking several other "Americans" overhear the conversation and join in:
"Shoes,,,,, shoes,,,, what's this about shoes? You say there is a demand for them,,,, a deficit in supply? Oh yes, we completely understand the concept and fully embrace it. Without shoes, none of us could economically stand up straight. The whole world is woefully shy of them and will someday be forced,,,,, if not by foresight, by need, to own them. There is no way any of us could transverse a hard rocky economic road without gold,,,, weeeee mean shoes! Man alive,,,,, I'm going to buy a shoe factory and make some money from all this new demand."

But, the first two guys observed and asked:
"But, wait a minute,,,,,, aren't you going to follow your own keen concept and buy some shoes for yourself and your family first? You know, that public shoe company does not and will not,,,, by government tax laws and regulations,,,,,, sell it's product directly to it's owners. They can only give paper profits to their owners. During all the big rush, you will be in with all the other "shoeless buyers"

Oh yeah,,,,,, we will later buy them,,, said the traders,,,,, besides, I got a 1/4 shoe now,,,, that's a start. And, by holding these tiny shoe laces, we can stand here and fit in with all you well heeled players (grinning like Texas Westerner on an oil well ). Look, I'm in this to make money,,,,, it's just a concept like all the others I follow. I do the same thing when I'm with other "conceptors" of the same ilk,,,,,, I talk their talk to understand their concept. But, I really don't need your gold as long as I got my paper profits.

OK, said the two guys with shoes. We don't mind your talking with us, so long as your perceptions don't distort our end purpose of having good shoes,,,,,,, and just don't complain when your company's value can't equal the worth of good shoes on the hard road before us.


Further to consider,
I think many players degrade our reasoning because it just suites their confrontational nature. Their constant replay of the same past failed positions clouds the view, even as it does make everyone think harder. Some may have to drop more wealth before they learn, I don't know? In addition, some paper players, caught up in the paper game our currency inflation creates, mentally cannot let go. To do so places them outside their social strata even if it saves them much heart ache and money. They feel that only the leverage is in the leverage of some gold substitute, never gold itself as the means to an end. Own silver, mine stocks, erivatives, etc.,,,,,, and that position will restore their already considerable loses, they hope.

It's a: "there just has to be a way I can play this game using some paper system",,,,,," even another more leveraged metal if need be". I, myself, know the feeling and over a lifetime have evolved through it. Problem is I doubt others will have that same luxury of so much time.

So, Randy, let's go back in time and space to build a gold perception the physical gold advocates have understood from the beginning.

I'll post in a few hours (if the power stays on at the Trail Head) (smile)



(01/25/2001; 16:28:50 MDT - Msg ID: 56)
The Gold Of Troy!

Hello again Randy,
Let me read something to you that will set the tone of this ongoing discussion:

---- Was There a Real Trojan War? ----

Until the 19th century it was widely believed that Troy and the Trojan war were imaginary. Then, in 1871, an American named Heinrich Schliemann began excavating an ancient city in Turkey. To the amazement of many, this retired businessman had discovered the lost city of Troy.

Nine cities have been found at the site, one on top of the other. The seventh city was destroyed around 1250 BC and appears to be the Troy of legend. You can still see the ruins of its towers and its walls, which were sixteen feet thick.

Schliemann identified Troy's location through clues he found in the Iliad, the epic attributed to the Greek poet Homer. Little is known about Homer except that he was blind. In ancient times it was believed that he had lived during the Trojan War, but most modern scholars think that he lived in the 8th or 9th century B.C. His poems weren't written down when they were first composed, but were transmitted orally for many years. Some people suspect that the poems were actually the work of successive generations of poets, and that Homer didn't exist. Of course, the same thing was once said about Troy.

All thanks to the work of Heinrich Schilemann. Without him we might still regard the Trojan War as nothing more than myth. What started the Trojan War? It has been suggested that the Greeks may have been fighting to gain control of the Dardanelles, a water passage between the Mediterranean and Black seas, near Troy. Or perhaps the war truly was fought over a woman named Helen. The truth is lost in the past.---------------------------------

Well, Randy, that Mr. Schilemann (1822 - 1890) was quite an explorer. His work helped uncover a mountain of knowledge about ancient life. Not to mention it helped us conceive how these people viewed their "wealth of Ages". Thank goodness for California gold. too! Yes, I said that right, as that is what financed his work if you can believe it?. Here is more, then I'll begin:


Heinrich Schliemann was a bold dreamer and a prolific liar. Despite those credentials, it wasn't politics that brought him to Gold Rush Sacramento in 1851. Instead, it was the death of his brother Ludwig, from typhus. Schliemann, a German-born merchant had been living in St. Petersburg, Russia.

He planned to make sure his brother was properly buried, claim what he believed to be a sizable estate, and get back to Europe. What he found, however, was that his brother had been buried without a tombstone, and his brother's business partner had made off with the loot. So Schliemann paid $50 for a marble headstone, and set himself up in business as a gold broker. In addition to making up outrageous stories in his diary, Schliemann was more than a little paranoid. Afraid of fire, his office was located in Sacramento's only brick-and-stone building, at Front and J streets. He wrote that he often slept on top of the gold, with pistols across his chest.

Despite two bouts of yellow fever, Schliemann persevered, and in nine months he made more than $400,000, some of it legitimately. He returned to St. Petersburg in1852, using his Gold Rush fortune to make an even greater fortune in the Crimean War. And his money allowed Schliemann to indulge his real passion in rchaeology -- and preserve himself a place in history.

In 1871, Schliemann, using Homer's "Iliad" as a guide, began digging in what is now Turkey, and found the lost city of Troy. A German merchant with a penchant for prevarication spurred the growth of modern archaeology and found the gold of an ancient era -- using the gold of California.


Oh boy, what a life, what a story?

Yes, on that small mound, about 5 miles from the coast, they found layer after layer of ancient cities. One of them was indeed, Troy. The treasures were many and quite a few made of gold. Hair - rings and small fluted beakers, vessel covers and sauceboats, even a spectacular large diadem (head dress) with pendants. These treasures are, in fact housed in some 50 museums around the world. Later, around our time (1994) it's been certified that a lower level of excavations did, indeed belong in the Bronze age, 2600 - 2300 BC. This places these golden remains around the same periods and datebacks as in the Thebes works.

-------The studies in Egypt.

One current project called The Theban Mapping Project, is giving us a better and better idea of how life was during these early civilizations, and this is but one of several "modern" evaluation of ancient life.

In that area of the world, researchers are probing a lot of ancient lifestyles. From around 3000 BC, through the Old Kingdom (2700 - 2100 BC), during the Middle Kingdom (1700 - 1200 BC), passing the New Kingdom (1500 - 1000), into the Graeco - Roman Period (300BC to 400 AD),,, this is truly some record of life. It, along with many others, uncovers and exposes so much history it's astounding.


Our reasons for following these old lifestyles is, for us of course, to gain a better perception of how humans understood and used their wealth, back then. What is coming to light, for for gold advocates, is an ongoing evaluation of how we, as a modern people, have lost so much of our connection and understanding to what wealth is, how much it's worth and how to use it. This is, of course, in contrast to the ways wealth, including gold was seen and valued then.


Concerning "gold as money", One of the first things we established about the Troy collection was that there were very few, if any coins found. At least allowing for the size of the find. Nine + levels were dug, representing a hugh section of antiquity and no coins remained with the find. Here was a mass of civilization leaving treasure after treasure of fantastic gold artwork, yet, no coins to speak of. We cannot conclude that the coins were taken and melted down, because the art was just as valuable, yet it didn't get taken. And these treasures were laid down in several cities and generations, over time.

Researching further, many of the other great finds from the BC and early AD period were from tombs and lesser burial sights. Places where people of "excessive worth" took their excesses with them. But regular cities with regular people had relatively few coins. So what is the point? Let's go further.


Some of the earliest coins were stamped with a detailed press, struck with a blow that indented the heated metal. The Alyattes from Lydia (610-561 BC) was one of the earliest. It and a whole host of later coins were marked this way. We know that some of the most rare were natural forming in stream beds, because they were electrum (natural combination of gold and silver). They would not have been man made that way, at that time. Mostly because the silver gold combinations, in natural forming metal, were never equal in amounts. Giving the coins different values. Were they this particular about content and weight? You bet. The first coins were called staters, meaning "weighters" and were used as the norm for weights in other coins.

So, with the Athens, Macedon, Tarentum and Antiochus to name a few, began the worlds first coins. Gold coins? Yes they were, but money as we know it? Our view of how these people viewed and used this gold money is, we believe, far different from what gold scholars teach. And it's impact on estimates of existing modern gold supply and use is enormous.


walk up to any citizen living during 335BC, in the latest town where Troy once was, show them a "Head of Zeus" (Saracuse 3 stater) coin. Then show him a vessel of oil and ask which he would take in equal trade for anything? Odd are, even though your two items were of equal value, he would take the vessel. Why?

All throughout these early times, prior to BC and into some AD, people didn't see these gold coins as we think of money today. These various gold coins had tremendous value, but they were just gold pieces. They were wealth for trade like everything else was.. That's simple logic, I know, but the vessel of oil, for instance was just as tradable as a gold coin. In fact, within most of the medium sizes city states of that era, barter of like goods was just as good or better than gold coin. One's life was better if he owned wealth he used.

Humans of that period didn't live all that long a time span. Even though some accounts prove otherwise, the majority of life went by rather quickly. If you were a regular part of society in general, your wealth was what you had and consumed during those short days. There were no banks or investment houses and the average person's return on a wealth unit was his length of use and it's quality of life enhancement. More to the point, this logic made these guys spenders of gold, rather than savers! If you had gained gold in trade, for your services or goods supplied, you had no reason to save it. There was no other money that needed to be hedged against value loss.

It's becoming more and more apparent that average people of that time quickly traded (spent) their gold for something useful of value, for both them and their family. They didn't have the excess we know today. In modern nomenclature; this logic dictates that a much smaller amount of gold money circulated and circulated faster than many supposed. All forms of jewlery and art objects were in the same situation.

For longer savings, even for those of above average means that had all they wanted, people tended to spend their most valuable gold coins first, while saving the least valuable (bronze, silver, iron) for emergencies and later use. To us, today this sounds strange, but place yourself in that time. It was better to build your most useful and needed store of things while times were good.

Therefore, you traded the gold, which brought the most equal trade, first. If things got so bad that one had to dig up the stash, you were trading for last ditch things anyway. Kind of like wrapping up and burying beef jerky to get you thru a pinch. This use of lower metal is suported. Remember, lots of things served as money objects them. Even much later, AD, it was common in Roam to trad big iron bricks that were forged as a bull. It's use was in trade for "one bull" or something of that animal's value.

This tends to explain why so many hordes of lesser quality, non gold coins are always being found today. Roman silver, bronze, iron, copper coins are very common. The classic belief is that all the gold was found, melted down and recast. But that action just didn't fit the whole profile of life's need back then. The majority of gold in average and even upper hands was always on the move, in trade or payment for service. Each succession of ruler, simply reused the old coins or melted them down and restruck with a new image. And new gold was minted only if it was easy to find. Especially stolen jewlery. Mined gold was a very last resort.

Remember, real useful goods crowded a rich ruler's house, too and these were just as valuable and tradable as gold. Besides, far too many finds have come up with jewelry and no coins to suggest some robbery by thieves sold the coins to new rulers with melting pots. The gold would have been taken whether coin or art.

Taxes were paid in goods, service or coin (preferably gold) and regular people knew it. Far better to trade your gold and save your wealth in a bulky form so the tax man's take at least has a chance of taking less than enough. To store your wealth in gold and risk him finding and taking it all was just not acceptable.

The great gold stores we have found almost always point to their being the reserves of a rich ruling class. Just like modern billionaires, after too much comes excess and gold was the only alternative for someone with guards and regular army.

On the Road

More and more evidence is mounting that the largest portion of gold, during this early period was, "On The Road"! The perception that every person had some portion of gold as savings is blunted by their lack of need for such wealth. Gold was needed and used to spend "On The Road" more so than in local domains. Whether for armies or traveling merchants, gold moved more than it was saved. Even gold in the form of art was "fair game" for the regular people to use as a tradable medium. In fact it was just as likely used as money "on The Road" as coins. This further explains the findings of small amounts of jewelry in most of the locations where small towns were located. In the reasoning of Troy, the lack of coinage supports the movement of gold more than the saving of it.

We find gold more in the "upper status" burial places of great cities than in the areas where common man traded, lived and kept his personal worth. We further conclude that gold was much harder to find and utilize, back then than many supposed. Yes, great amounts were around, but the reality was that these amounts were perhaps 1/2 or less than many others conclude. Simply because finding or producing gold meant displacing labor that could be making barter able goods of equal value. Besides, gold that was in trade, was valuable enough that what existed mostly covered it's need in long distance commerce. This further points to a much greater value for a much lesser amount of gold while it was used during this period.

When evaluating lifestyle wealth, back them, many often find themselves comparing things in a relative mode with today's perspective. In this position we think the mark has been far missed for gold worth. It's possible that gold payment, in these early times amounted to a hugh premium compared to today. The various goods and lifestyle conditions in existence, indicate a much higher relative worth for their goods of daily life. Thereby giving gold a much greater relative worth within one's life also. If a one stater Darius of gold, from Cyrus of Persia was worth a very valuable vessel of oil, why utilize the effort to find gold just to trade for some oil. Better to skip the gold production and make the oil. This was the norm for thinking by people not trading on the road, living "within local" city states. Indeed, outside the need to pay armies, a much smaller amount of gold did the job much better than us modern thinkers thought was necessary. Further, the use of oversea warefare and trade perhaps lost more gold into the ocean than we will ever know.

Consider these possibilities well. In that gold today is in a much lesser existence, compared to modern goods supply and lifestyle enhancements, when comparing it to it's value in life in the past. It's true worth as a wealth medium could be a 1,000 times higher! For it to return to it's ancient position of true asset wealth, for trade outside the modern currency relm, we can see where it's European benefactors have once again placed it "On The Road" to much higher fiat currency prices.

Next: Gold from the Roman era forward.

Thanks Randy and ALL



(01/29/2001; 14:39:33 MDT - Msg ID: 57)
Getting some fresh air.

I put on my boots, backpack, gloves, binoculars and went out walking the trail today. A fella came up and asked, "after yesterday, how ya doing"? I said follow me.

We went down to a stream and filled my bucket of water. I took off one glove and stuck a finger into the pail of water.

The water quickly started steaming and my friend jumped back with an expression like he couldn't believe what he just saw.

I said, "it's ok,,,,, this is a good sign because the water isn't boiling,,,,,, it means I'm cooling off!
(partial smile)

I asked him to thank everyone for me and excuse my human nature, until I do the same in person. But, just the same, I'll stay over here a while longer and send letters for all to read from the Trail.



USAGOLD - Centennial Precious Metals does not endorse, assert or stand behind the accuracy or reliability of opinions, advice or statements made by any of the participants of this forum. These postings do not purport to give legal, accounting or investment advice. For that the services of a competent professional aware of your specific situation must be sought. USAGOLD / Centennial Precious Metals disclaims any personal liability, loss or risk incurred as a consequence of the use and application, either directly or indirectly, of any advice or information presented herein.