Foundational Gold Trail Commentary

The Inside Story on the Gold-for-Oil Deal that could Rock the World's Financial Centers

(Thu Jan 08 1998 09:24 - ID#60253)

Much is happening now. Governments, IMF, BIS, LBMA and many others, are very much in the middle of this fire. Very large buy orders have stopped the CBs from lending now. The BIS has been asked/told "lower gold no more"! The US$ price has stopped. I will offer many thoughts on the 10th.

(Sat Jan 10 1998 21:03 - ID#60253)

 Someone once said, "noone wants gold, that's why the US$ price keeps falling". Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because "too many people are buying it"! Think now, if you are a person of "great worth" is it not better for you to acquire gold over years, at better prices? If you are one of "small worth", can you not follow in the footsteps of giants? I tell you, it is an easy path to follow! An experienced guide is not needed for this trail, look around you and see. The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is loosing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing? The CBs are no longer lending! They will not anymore! We have reached production costs. Oil will have nothing of "gold paper" if gold must stay in the ground! And a CB values the wishes of oil far above it's return of leased gold! Hear me now, "if gold tries to go lower than US$ $280 the BIS will buy it OUTRIGHT in the OPEN for all to see"! They must! They will! I know. For no currency system could stand if "Oil" were to bid for gold!

Oil has kept "the deal" as the CBs sold paper to lower golds price! All is fair. Asia will bid for gold not as in the past. They now know that the free flow of oil has more value than the Pacific economy. But the price that was paid may be more than the world currency system can endure.

To close:

The US$ has risen on a flight of fear. That will now end as the LBMA shorts are given to wolves. If this fire burns too hot, gold will turn and it's trading halted. The price of oil will explode as gold becomes the "world oil currency"! Even now oil has locked the IMFs gold, Asia will bid against them no more. We come to extreame times.

Risk not your wealth in paper, we enter a period of truth.

(Sat Jan 10 1998 23:49 - ID#60253)

You are exactly correct! Follow your thoughts. good luck

What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis?

From 1991, appx. 20m/oz./yr., now it is more.

How much paper GOLD is out there ready to be squeezed?

Over 14,000 tons.

Do you think OIL will be able to collect what is owed to them?

It will come outright or thru the increase in value of metal owned after an oil for gold bid.

(Sun Jan 11 1998 00:39 - ID#60253)

Mr. A. Goose:
The BIS is not a broker or trading house. They do not move with chart patterns or wall street directives. If gold drifts under 280 for any period of time, they must act to forstall a much worse outcome. That being; Oil will not allow Lbma to drive gold so low as to make the CBs the only suppliers. Oil will bid for gold and in doing so create an "oil currency" out of it. That outcome would make the current "currency debts" ( bonds ) next to worthless and turn the financial system upside down.

(Sun Jan 11 1998 01:16 - ID#60253)

I can not oppose your long term view. But, I can change the contents. Oil went from appx. 1.50/bbl./+/- to $20.00/+/- and the world changed. Many 3rd world countries ( mexico, exp. ) have been using the same currencies for many years, even as they were destroyed. The people only adjusted by adding the US$ as a value/mix. The same will happen when/if oil bids for gold. All nations will use the same digital currencies for all trade, but will also add gold to the value. The world will not end, it will change! As some say "not enough gold to use as a currency", I say "gold not valued high enough to use as currency". At a high enough value ( price ) it is an excellent currency! Oil now backs the US$ as a "digital world reserve trading currency". When oil backs gold as an "additional value to digital currencies" your view will be different.

(Sun Jan 11 1998 01:33 - ID#60253)
Thank You.

I must use another to express my knowledge, as position will not allow.

"Life takes us as winds on a storm, to what end we may never know".

(Sun Jan 11 1998 01:52 - ID#60253)

Nothing is assured! Life is a risk and subject to many changes.

I ask you, if the USA could not remove the Iraq leader when they were in full battle dress, then??? No, the US tanks are not a factor in this. The risk is to each person and how they hold their wealth. The concept of what wealth is, is going to change. Concept is but a thought and a thought of what value is, changes thru life. Time will prove all things.

(Sun Jan 11 1998 01:57 - ID#60253)

I must be away for a time. good luck

(Sat Jan 17 1998 16:44 - ID#60253)

We will talk today. Have your coffee or tea and bring a clear mind, as we will think of oil and gold. Yes, we will think thoughts not spoken for simple persons.

Later I will post, then we will truly consider.

Today, I stood in the sand and looked for life in the heavens. But even the stars offer no life as a strong body and a full mind. It is a fine night for a man of small thought, for he can consider GOLD.

(Sat Jan 17 1998 20:45 - ID#60253)

For those of simple thought, such as I, gold is good to own. But, for those of need for reason, read from one who speaks to me:

The Cornering of Gold!

The final outcome of "Too Much Oil", "Too little Gold" and "Worldwide Digital Currencies".

For years the governments could create currency out of nothing. But, during the last eight years, the modern currency systems have taken the final step. As digital charges in a computer, they have become but "emotional thoughts" of trading value. This is to say, "a currency unit exists only during the moment of trade". During this time, when real things are in transit, paper currency has value as an expected "trade completion". It exists as a human thought. Complete the transaction and the thought is gone, the currency unit dies.

Think about it? If for a time the world commerce stopped. All would live from what they had for, say a week. During this week, all currencies and the debts that back them would not exist! Without trade, modern currencies have no use, no value, no purpose.

During our modern age, a currency can be anything. Corn, lamps, cars, tables, anything could be used as a concept for a digital currency. You see, it exists in concept only. Even gold could be used as modern money. The real item is not used, only the concept of "how it would be used during the transaction of commerce". "Real value is not needed for modern money, as it is only used as a trading unit"!

What does all of this have to do with oil and gold? For most people, nothing. But for some people, everything! You see, some persons do not want to hold an "operating business" and the present value that represents, as their wealth. Nor do they want to hold encumbered assets or debts of others. Wealth, to these people, is not represented by a "digital trading unit of commerce".

History has shown how many persons, or groups of persons, have tried and failed while trying to corner a commodity. Greed was always the factor, as acquiring real wealth to pass on to family or country was never the aim. Using paper currencies ( or debts of the same ) to purchase these commodities, always brought on the undoing of the scam. During some years, even gold was used as a purchasing unit, as gold was the currency of that time.

But, today we come to a different period, with a different factor and circumstance. For during no period of history has an entity used a commodity to corner another commodity! The intent is not to "corner", but the result will be the same. This action is coming about because of a gross, huge mismatch of the value of gold and oil! We are not talking about the price of these items ( in any currency ) . We speak of the total amount of physical gold, worldwide and the total amount of oil worldwide. During the last twenty years, the world has made oil an absolute necessity for life as we know it. During the same time, gold has been degraded to a "kind of commodity that we may need sometime but, I'm not sure". With the public, government and the business community holding these thoughts, it is easy to understand which item is needed first and which would be dumped. In this day, people would sell gold for oil, no contest!

Consider the amount of oil that is used daily. Consider the future value that this consumption places on reserves in the ground. Compare this to the amount of gold consumed daily. Notice I said "consumed daily", not "traded daily". Clearly, the consumption of oil compared to the consumption of gold places a much higher value on oil reserves than gold reserves. With no replacement for the use of oil ( at present to lower prices ) and no "needed" use for gold in today's thought, we have the ingredients for a mismatch in value of epic proportions!

The supply of oil was a problem in the 70s. Several nations actually cut off the supply to make a political point. Many thought that the "embargo" was an attempt at "cornering" the oil market. We may never know the true reasons for the large increase in the price of oil, but one thing is clear. The value of oil in today's economy is of far greater importance to maintaining present "asset values" than at any time in the past. Today, the future value of all commerce is "well bid" into every asset value! Without oil in good supply , at a currency price that allows a reasonable lifestyle, all assets would lose much relative value.

This "need" for supply is not lost to governments or their Central Banks. No single asset class or segment of the economy, by itself is more valuable than the supply of oil. This brings us back full circle, to the problem of "digital currencies" and the "mind set" of much of the simple ( and rich ) third world persons. To many of these people, wealth is the surplus of life's work that you pass on after death. Currency is something you, spend, trade or hold for a few years. It isn't wealth. Gold ( and silver ) is "on the list", so to speak.

This same mindset creates a worry in the back of many a mind in the oil states. It is clear to most, that even a small amount of gold in the asset mix, makes one appear "less western" and therefore "less foolish" when the concept of value and currency are discussed. But, the problem has always been that oil is "so large" in relation to gold that any attempt to convert, even a portion of ones assets creates a distortion in the markets. Of further concern is that; everyone knows that western minds don't like or want gold, but if they think you like it they will trade it up in price for the sake of "sticking it to you".

Enter the world of "paper gold".

Yes, gold just like currencies has been "digitized". If you brought gasoline, made from oil sold under $20/bl, you are part of this system! For just as the "digital currencies" are created for trading only, paper gold was created for the trade of oil. In a very broad sense, it was created as an "extra" or "kicker" to allow the purchase of small amounts of cheap gold in return for a full supply of oil. In reality, this gold paper represents the future production of gold ( from the ground ) to balance the reserves of oil ( also in the ground ) . The huge amount of "paper gold" traded and outstanding today is now in excess of all the gold in existence above ground! In essence, it is of the same value as the currencies, "the thoughts of nations, blowing in the wind". The Central Banks gave value to this paper by selling and lending some of their gold stocks. But, as economies became hooked on cheap oil, and demanded more of the same, these same CBs had no choice but to use fractional reserve gold lending" to pump the gold market.

Now we approach the final act.

There is one oil state that no one will play for a fool. The CBs will sell all of their gold or the nations will nationalize all mines and operate them at a loss. One way or another, most of the paper gold market will be honored. Why? Because oil will bid for gold if they do not! We are not talking about an oil embargo or rising oil prices. Indeed, oil will become very cheap for those that can supply physical gold. This deal will not require the agreement of all oil states. Only one can start this, the others will gladly follow.

A large oil producer, with plenty of reserves and unused capacity, can say: We now value gold at $10, $20 or $30,000/oz.. That is the rate we will use to sell oil. We will go to "full" production and offer at $10.00us/bl.. Pay us in physical gold and USD ( or EUROs ) as a 50% mix to the above rate to equal $10/bl..

It would be a deal like none other! Oil, worldwide, would drop to $10.00/bl and every economy would do very well, IF they had gold. All gold would immediately be arbitraged to the above prices thereby creating a "world oil currency" large enough to handle oil. This creating of a new "specialized currency" will be the result of the first "commodity corner" that ever succeeded!

But what of the current currency/debt structure? We will cover that in a later article.

(Sat Jan 17 1998 22:07 - ID#60253)


Date: Sat Jan 17 1998 21:35
Tyler Rose ( ANOTHER ) ID#373164:
If, as you say, a major oil producer were to say that they value oil at $x per barrel, and we will take payment 1/2 in dollars or eurodollars and 1/2 in gold, then it would be to the benefit of that oil producer to "value" gold aslow as possible, in order that they would receive more gold for the 1/2 of the payment in gold.

Tyler Rose:
At this point of time the drive would be to make a usable currency. This would require a high value for gold. For gold to trade with oil on a physical basis would also require perhaps a small fraction of gold/bl.

All would gain from this. The intent is not to destroy the oil market.

(Sat Jan 17 1998 22:22 - ID#60253)


Date: Sat Jan 17 1998 22:06
Schultz ( ANOTHER ) ID#288349:

Your view is a good one. The perception of the US is one of your view from where you stand. Many do not hold America as a "taker without cause". At a low ratio of gold per barrel, with gold priced high enough, the USA would no doubt receive oil, relative to today at perhaps $8.00. The Us gold reserve and in ground reserve would last a great while. Also, the US gold reserve value would increase a great deal!

That, your Washington would understand, VERY WELL!

(Sat Jan 17 1998 23:00 - ID#60253)


Date: Sat Jan 17 1998 21:44
Mikey ( TO ANOTHER ) ID#347332:
What do you think of this new technology to convert gas to oil.

What about the vast reservoirs of natural gas in the US or anywhere else?

If the oil/gold trading brings on a worldwide currency crisis before oil can change the rules, the price of oil in all currencies would spike and destroy most economies and the oil market. This outcome is not wanted but may happen. In this scenario your natural gas would be of use, but your econemy would be gone. Gold would never trade again on a free market. If the oil priced in gold comes to pass, oil would be a much cheaper use than gas. Your reserves would have to wait for another day.

(Sat Jan 17 1998 23:19 - ID#60253)


Date: Sat Jan 17 1998 22:40
A.Goose ( Gold for oil... ) ID#20137:

There are many who would take your gold. Read my long post of tonight and place your life in that time. You will feel the threat against your holdings. If it is taken it will be for the good of all. Perhaps it is not bad. In all things, good life is more important.

(Fri Jan 23 1998 15:44 - ID#60253)


Date: Sun Jan 18 1998 09:46
sharefin ( Worth a re- read???? ) ID#284255:
ANOTHER updated plus a couple of old ones I found.

Mr. Sharefin,
Thank you for saving these. There is much more to this.


Date: Sun Jan 18 1998 09:37
A.Goose ( ) ID#20137:
Date: Sun Jan 18 1998 06:17
Junior ( @ ANOTHER ) ID#248180:
" The baseline I see from ANOTHER's comments set the final stage for fiat currency, as we know it today. I believe that ANOTHER's thoughts spell the death of the U.S. dollar as we know it today."

Mr. A.Goose,
Thank you for all your thinking ( only part of post is above ) . It has long been a worry that the US$ and it's oil backing would some day come undone. I will post tonight between your 6:00 & 7:00 US /EST. More thoughts and replies.


Date: Sat Jan 17 1998 23:55
JTF ( Areas of General Agreement ) ID#57232:
ANOTHER: I think there is much that we can agree on. I don't just mean myself, but fellow Kitcoites.
Here's to the future!

Mr. JTF,
There is much more to your post. You always consider all things. We look to the future for change, to change is to live!


Date: Sat Jan 17 1998 18:14
JTF ( I look forward to your comments! ) ID#57232:
ANOTHER: I would be very interested in your response to my comments regarding why "paper gold" trading cannot distort the price of physical gold significantly - - although price swings might be increased or decreased somewhat depending on the trading - - but not enough to shut down the gold trading market. My sources were D.A., a commodity trader who posts

I will discuss tonight! Thank you.


Date: Sat Jan 17 1998 13:53
Lurker 777 ( Another what? ) ID#317247:

Mr. Lurker 777,
You honor me sir. I only ask that you consider my thoughts. " a truth spoken is for the benefit of many and never a gain for only the one"

"Many outcomes can grow from earth, as nations cultivate the soil differently. To understand the climate, is to make ready for storm."


Date: Thu Jan 22 1998 18:51
Cmax ( ANOTHER/GOLD/OIL ) ID#339320:
For all you "doubting Thomas':

Sir, Some think my thoughts are as "hogwash"? Several CBs use "agents" to buy gold. Some agents, small, some large, some "BIG". They buy much from $365 down, all last year. Even today, it does not show. This world, it is strange, yes? I would say "Big Trader" has little time for "washing the hog"! But you sir have a large shovel and dig very deep!

It is written, "all holes in earth lead to china"!

(Fri Jan 23 1998 19:01 - ID#60253)

I feel this way also:
Do you really hold dollars?

It is important to understand that few persons or governments hold US dollars! Look at any investment portfolio and what you will find "are assets denominated in US$". This sounds simple, but it is not. You have heard the phrase, "money is moving into real estate, land, oil, stocks or bonds". It is a bad meaning, as it does not what it says.

All modern digital currencies do not go into an investment, they move THRU it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No CB holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even thou a debt is marked as DM, USA, YEN, they are in "real time" / "marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather "all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!

There is an alternative. Gold! It is the only medium that currencies do not "move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies". Gold can be used to revalue any asset, and not be destroyed in the process!

Mr. JTF has asked: " I would be very interested in your response to my comments regarding why "paper gold" trading cannot distort the price of physical gold significantly - "


In times of plenty, people say one thing about physical gold, but in time of change they do the opposite. History has shown that when paper assets start to be revalued downward by gold ( gold rises ) , it's physical supply dries up! People and governments "HOLD" the real physical and trade the paper, even gold paper. Never before in history have we had a gold market such as today's! It has cross currents from every direction.

You have CBs that highly value gold, but need it's price in currencies to fall as a means of pricing oil.

You have merchant banks creating a huge "digitized paper gold" market for trading only.

You have other CBs holding gold in the form of "paper commitments" and calling it physical.

You have some CBs having nothing to do with any of this and buying in the off market.

And finally, we have the threat of gold becoming an "oil currency" with the risk of total nationalization by any country that is short of both oil and gold!

The Paper Gold Market today could completely destroy the physical market by shutting down all possible trading as the currencies are devalued by gold in a massive upheaval!

(Fri Jan 23 1998 19:26 - ID#60253)


Date: Fri Jan 23 1998 18:03
oris ( ANOTHER ) ID#238422:
Would you please explain today's action when gold went up $9.00 and oil dropped $0.30.

According to your scenario gold and oil should move in one direction.

Mr. Oris,
Oil is by far a much larger market than gold. Many times over. Oil may be taken to $12/US, but this is not a trading move. Only business. $12 oil did not require gold to drop below $320 or so, as gold must stay above perceived production cost. The drive to $280 was by the paper market outside. The intent is for long term asset balance not destruction! However, the currency market is close to taking extreme moves. That will over ride intended results.

(Fri Jan 23 1998 19:46 - ID#60253)


Date: Fri Jan 23 1998 19:19
aurator ( & c. ) ID#255284:

Mr. Aurator,
Silver will always be part of "gold money". But, is far too small a market for large, modern economies. Silver will do far better than any paper asset, only it will serve better as a "personal holding" than as a major money. If it is of your way to balance wealth, then silver will show value.

Metals have not shown their true worth for many years as the world has done very well. This is very good. But, all things do change! As it is our time and place to live this change, our thoughts must view the future as it must be. Who can know the minds of men and countries as paper burns?

(Fri Jan 23 1998 20:16 - ID#60253)


Date: Fri Jan 23 1998 19:35
A.Goose ( ) ID#20137:
Date: Fri Jan 23 1998 19:26

Mr. A.Goose,
In our present system, all currencies are backed by the US$. As long as the US$ is on an "oil standard" of backing, no other country can change. The BIS would destroy their economy in a second of storm. Many think that a country may sell or cut it's CB/US debt backing at will! They cannot, they will not! Oil will not accept another system as long as the oil/gold bond works and the world currency system is somewhat in order. If a crisis erupts and gold breaks the bond with oil, then a change must take place!

We will no doubt see a mass run of CBs into gold at ANY price! This I know! As for now, each person must protect worth, as the nation/state is locked from change.

(Fri Jan 23 1998 20:38 - ID#60253)


Date: Fri Jan 23 1998 20:17
oris ( ANOTHER ) ID#238422:
Thank you for your reply.

The world oil market is very, very hard to understand.

If I could speak in a future time on this? I must be gone now for some time. Know this, my knowledge of gold is for the simple ones, of small thought, such as I. Resist the traders mind, hold your wealth close. There are those that will take your worth at the very time you need it most. Most will not see the time or place, few are allowed!

thank you

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