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Gold Fundamentals - Gold is money because of its intrinsic characteristics -

Updated July 2011

  • You don't buy Gold because price going up and you're making money but rather because the value of the 'fools gold' Fiat Paper Money is racing towards it real value or ZERO. Mathematically if the value of a Fiat currency races to ZERO the value of a commodity and Gold in particular has to race exponentially to 10³¹.

  • If we take U.S. gold reserves at 252 million ounces and we divide that amount into the national debt of 14 trillion that yields a staggering amount of $53,639 per ounce. Even taking the world official gold reserves divided into the US debt of 14 trillion we still get $15,873 per ounce.

Along with the International Exchange and the Chicago Mercantile Exchange, JPMorgan now also accepts gold as collateral. The European Commission for Economic and Monetary Affairs
has also decided to accept the gold reserves of its member states as additionally lodged collateral. We also regard the most recent initiatives in Utah and in numerous other States as well as in Malaysia, and the planned demonetarization of silver in Mexico as a clear sign of the times. The foundation of a return to "sound money" seems to have been laid.

A change they wanted and a change they have.  An important driver of the slow production growth for Gold is the dramatic decline of South-Africa, which produced 1,000 Tonnes in 1970, but below 200 Tonnes in 2010. China has become the world's largest Gold producer but most of the Gold production comes as by-products from base metal mines, which can be volatile.

Chinese citizens turn to gold in one of greatest booms in metal's history - article


January 20, 2011 - It's not that Gold is up so much; it's fiat paper going down and rapidly falling in a credibility crisis for major currencies that underlie the western financial system. Hard to understand! The public has been lied to and cheated by the Central Banks for decennia now...and the chickens are coming home to roost!

Even today, as the gold rally has reached the 10-year mark (following a 20-year bear market), the metal represents a mere 0.6 per cent of total global financial assets (stocks, bonds and cash). This is near the all-time low (0.3 per cent) reached in 2001, and significantly below the 3 per cent it accounted for in 1980 and the 4.8 per cent it was in 1968

  • The USA holds 8,133 Tonnes of Gold (27%)

  • The Euro zone holds 10,542 Tonnes of Gold (35%)

  • Non-G7 hold 3,411 Tonnes of Gold (11%)

  • China holds 512 Tonnes of Gold ( 1.7%)

  • Russia holds 790 Tonnes of Gold (2,62%)

  • Total official known reserves is 75%

 If you want to understand why gold is rising despite few signs of price inflation, it boils down to the understanding of how money is valued. (March 4, 2010)

The quantity theory of money, believed by monetarists, suggests that too much money chasing too few goods will produce inflation in time.

The Fed, the EU and the UK are printing money like drunken sailors, but the signs of hyperinflation are nowhere to be seen. Yet, despite this, the price of gold continues to climb. Why? People, on the margin, are becoming increasing skeptical of Fiat Money (dollar, Euro, Pound) ability to preserve value over time. Gold has not gone parabolic (yet), often result of hyperinflation, because people have yet to believe en mass that Fiat paper money is "cooked" or worthless. There lies the basic description of the subjective theory of value of money as presented by the Austrian School of Economics.

Today the Authorities don’t recur to the physical printing of Money. Instead they multiply DIGITAL MONEY by clicking “Enter”

If you have no Gold, you have no money - but which scenario should you follow with Gold at the today's peaks? (November 23, 2009)

Gold is making new highs almost every day in Dollars, Euro, British Pound, Swiss Franc, Canadian Dollar, Rupee and has now also broken out when expressed in Australian Dollar and South African Rand. Technically it becomes very hard to forecast any corrections and at which level these may happen (it is absolutely not sure we will see important corrections between now and the Spring of next year and Central Banks have put a parachute at $ 1,045 under the Gold price by buying 200 tons from the International Monetary Fund at this level). Bravo to the idiots of the IMF for selling the tax payer's gold!

My personal feeling is that we could well see the reverse of the 2008 deleveraging: Gold and Silver came down and kept going down burning all support levels and staying oversold. We now could see Gold and Silver go up and stay overbought for some time. [Remember this is exactly what happened when the Gold pool failed to control Gold at $ 35].

As indicated below there is ONLY so much GOLD and Silver and the capitalization of the Gold sector is extremely small. Once the Herd moves in, we will indeed see spectacular figures.

  • To be safe you should allocate at least 35% of your assets to Gold and Silver.

  • Buy more if the Gold price comes down but don't go over your monthly limit and don't chase the price.

  • Make sure you allocate part of the amount to Gold and Silver mines. As the price of Gold and Silver goes up, their Earnings and Dividends also will.

  • In case you want something more spectacular, buy some Gold and Silver Juniors. But make your home work before doing so.

  • Check our calculated technical objectives and adjustments on a regular basis.

  • Don't forget and DO SELL and don't be stubborn when the time has come.

  • Ask us for our advice if you are in doubt.

  • Invest more and/or use the balance only if Gold corrects to $ 1,075, $ 1,045

  • example : 100,000 in total

  • buy 5,000 per week or 20,000 per month.

  • buy only NEW Gold coins with the lowest premium if Silver is taxed in your country.

  • make sure you also buy Gold and Silver equities which will generate a nice income over the next years.

  • DO IT NOW!...don't wait for $ 2,000!!!

  • DO NOT TRADE: buy and sit tight, ride the wave all the way.


Total Gold Stock on Earth


In the world there are currently around 140,000 Tonnes of gold ‘above ground’. To visualize this imagine a single solid gold cube with edges of about 19 meters (about three meters short of the length of a tennis court). That's all that has ever been produced.

Divided amongst the population of the world there are about 23 grams per person, about 1.2 cubic centimeters each.

The World is indeed running out of GOLD and Silver.





November 12, 2009

"There is no doubt in my mind that we'll have a mania in Gold. And because the gold and the silver markets are so tiny, the rush into them will be like trying to push the contents of the Hoover Dam through a garden hose. Gold and Silver positions will go ballistic," - Doug Casey

Gold production is also down.

October 24, 2009

From the most recent work of the Gold Anti-Trust Action Committee there are strong indications that the London bullion market operates on a fractional-reserve basis.

It would appear that at least 64,000 Tonnes of gold have been sold via unallocated accounts against a maximum reserve of only 15,000 Tonnes.

The cataclysmic event in gold could be triggered by an audit or simply by purchasers asking for delivery of their gold.

July 20, 2009

Over the past decade, private bankers have emptied national treasuries of gold bullion, selling this bullion on the open market in order to keep the price of gold low in order to mask the increasing vulnerability of their paper-based assets.

The US claims the US Treasury still holds approximately 7,000-8,000 tons of gold but has not allowed a public audit of its reserves since 1954; and since 1999 the UK and Swiss have seen their gold reserves decimated as bankers freely sold their gold in order to cap the rise in the price of gold to keep the banker’s paper money scheme intact.

But most investors will continue to play the banker’s game with the banker’s paper money and continue to invest in paper assets as it is the only game they know. What they don’t know is that the banker’s game is almost over; and, for those who understand what is happening, this is the opportunity of a lifetime to profit—and to survive. Darryl Robert Schoon

January 18, 2009 - Biggest fall in SA gold since Boer War
Allan Seccombe

Posted: Thu, 15 Jan 2009

[miningmx.com] -- SOUTH Africa has dropped into third place of the world’s gold producers after the biggest drop in bullion output since the Boer War in 1901, London-based precious metals consultancy GFMS said on Thursday.

This is a poor showing for the country that dominated gold production for a century, but it has seen output taper off as mines became deeper and more expensive and dangerous to operate. In 2008, South African mines had to contend with a week-long shut down because of electricity shortages in January and then curtail power consumption by 10%, which lowered production at some companies.

South Africa is now number three behind China and the United States, GFMS said in its Gold Survey 2008, without giving figures. China claimed the number one spot in 2007 when its production rose to 276 tons against South Africa’s eight percent fall to 272 tons.

“South Africa faced a crushing year, with production plummeting by an estimated 14%, the sharpest percentage fall since 1901 when the country was still embroiled in the Second Boer War,” the consultancy said.

Based on figures from the South African Chamber of Mines website, the largest fall came between 1899 and 1900 when gold output fell 90% to 10.8 tons from 113.15 tons. It then dropped to eight tons in 1901 before rocketing back to 53.44 tons a year later.

The Boer War ran from October 1899 to May 1902 between Britain and two Boer republics, with gold, to some degree, lying at the heart of tensions.

South Africa’s production is now at its lowest in 100 years, GFMs said, basing its assessment on preliminary 2008 figures and its archives. South Africa produced 1,000 tons of gold at its peak in 1970 and it has been declining ever since.

China has boosted its gold production because of increased foreign investment there, while South Africa has experienced a decline because of cost pressures and a vigorous government approach to safety, which entails shafts being temporarily shut after fatal accidents.

Overall, gold production last year from mines around the world fell to its lowest level since 1995 because of technical issues, skill shortages, power constraints and a weakening global economy that made financing difficult.

China, however, boosted production three percent and new mines came into production in Russia and Mexico, which should give a temporary boost to supplies.

December 19, 2008

The two most important prices in the world of finance are the price of US government debt and the price of gold. The two are inversely correlated, but the price of gold tends to lead price changes in Treasuries. Gold appears to have bottomed in November 2008, suggesting a future topping out of Treasury prices. The gold price rise should accelerate as the Treasury bubble begins to collapse. These are the two sides of the same coin for what will be the most important story in finance in the coming year. Buy gold, sell Treasuries; sooner rather than later.

We see the Backwardization of the Gold price as the proof that the paper Gold price is clashing with the physical Gold price. This has serious implications.

Professor Fekete recently posted his article, Red Alert: Gold Backwardization!!!, in which he alerted readers that for the first time in history the cash price of gold is higher than the nearest futures price, indicating that buyers value the present physical possession of gold more highly than future possession.

Professor Fekete stated that when gold recently moved into backwardization on December 2nd, a historical line had been crossed, a line which signified whether or not the present system could be saved. Now, according to Professor Fekete, with gold in backwardization, it cannot.

While the war between paper money and gold and silver is still being waged, according to Professor Fekete the outcome is no longer in doubt as the present system is now beyond redemption. This has profound implications for the future price of gold and silver and for gold mining shares.

Permanent Backwardization expected soon.

Physical gold and silver, whether in hand or in the ground will be the last refuge for the trillions of dollars still invested in paper assets. With an estimated $27 trillion of wealth already lost this year, the day is coming when the last believers in paper assets will finally look to gold and silver to preserve their dwindling wealth.

But when that day comes, those owning monetary metals will not exchange their gold and silver for paper money at any price, i.e. permanent backwardization; and the last believers in paper assets will be stuck with now worthless government issued coupons which previously had passed for money.

The recent historic backwardization of gold is a clear indication that sometime in the future a state of permanent backwardization will occur—and on that day, the world will finally be free from the tyrannical slavery of central bank induced indebtedness.

In the last Great Depression, the shares of Homestake Mining, the world’s largest gold mine, went from $4.19 in 1929 to $495 in 1935, paying a $56 dividend that year. In the coming depression, gold and gold mining shares should do just as well—and, after the onset of the depression, just imagine what they will do during hyperinflation.

“Rescue Will Send Gold to Surreal Price Level” (CLICK HERE).

John Embry of Sprott Asset Mgmt focuses on the extreme amount of nationalization and other bailout funding by the USGovt, as a prelude to a potential gold futures default. He said to watch the December COMEX futures contract. The old saying is that gold responds to the medicine applied, but not the prescription written.

“… the US authorities will not hesitate to debase their currency in an attempt to salvage the financial system. In the fullness of time, this will be wildly inflationary and should propel gold and silver prices that would be viewed by many in today’s context as surreal.”

“Gold doesn’t need to go to $1,200 or $2,200,  to prove itself. Gold can simply survive in an era where all other paper assets fail."

"The entire world is going through a generational and even a once in a hundred year cyclical change right before our eyes and we are witness to these historical events. All of these gold and financial sites for over 10 years have been predicting that this financial meltdown was coming.

And don’t fool yourself here. The most important element for survival for those who survived the 1930s were those who were out of debt and had assets that were paid for free and clear. "

Real Negative Interest Rates are the main engine for Gold & Silver


October, 2008 : The gap between the physical gold market and paper gold market is widening.

An example bears this out. In Toronto this week, a major off-market gold transaction took place. The price paid was $1075 per ounce on the physical transaction. Its volume was in the multi-million$. There was no US involvement in the transaction, and the settlement was in euros.

Make sure accumulation of gold and silver bullion is a monthly regimen, because mark my words, it will be next to impossible to obtain some 18-24 months from now.

November 1, 2008: The COMEX gold & silver markets are each hurtling down a dangerous path toward default.

The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the JPMorgan-led corrupted phony paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, it will be clear that the COMEX is running a scam. A default is highly likely. Of course, they can continue to deny contract holders the right to benefit from delivery, as they have been doing for months to ‘Non-Economic Customers’ but soon the ‘Commercial Customers’ will be defrauded. Arrests are warranted. We will see how this corruption unfolds.

Posted October 1st and updated October 3rd, 2008

So why isn't the Gold price running?

Bill Murphy, the chairman of the Gold Anti-Trust Alliance, says it proves the point the alliance has been making for years now. It is being kept artificially in check by central banks and bullion banks.

He also says this control cannot be sustained for much longer and that the gold price could soon be unleashed from artificial restraints.

He points to Monday's gold price fluctuations as an example of the control of its movement. The gold price was fixed at $905/oz in London’s afternoon market only to fall to $894 shortly afterwards.

“It just doesn’t make any sense,” Murphy said.

“The gold cartel goes into the derivatives market and takes the price right down again. They’ve been doing it now for a week,” Murphy told Miningmx. “The gold price should be well over $2,000 now.”

“They’re (the cartel) getting to the point where they’re going to hit the wall, where this physical demand is going to take them out,” he said. “It’s going to be above $900, above $900, above $900 and then the dam’s going to explode. Maybe they’re just trying to hold it together until they get this bailout approved and over with.”..click here for more...

Gold is the ultimate currency, the only REAL MONEY, it has no liability attached to it and is universally fungible. Gold made a new high expressed in Euro, Pound Sterling and Australian Dollars. Historically Gold goes up together with the interest rates!

The War between paper gold and bullion gold is a war to determine which will take command of the price of gold, nothing more, nothing less. The more massive the paper manipulation, the more violent the coming correction. The asylum managers are losing control of their paper-physical arbitrage.

For Gold the price today should be $ 2,250 to match the 1980 high of $ 840. If one were to use the statistics maintained by John Williams at Shadowstats.com the numbers would be $ 5,000 . We maintain a 1:1 relation to the Dow Jones Industrials hence it should be $ 9,000 +.

We maintain a 1:1 relation to the Dow Jones Industrials hence it should be $ 8,000 + (Oct 2008).

 Posted October 23, 2008

 John Embry of Sprott Asset Mgmt has raised the possibility of a December gold futures contract default. He is not predicting it, or claiming it as certain, but rather mentions how talk centers on the December gold contract as having extreme stress for actual delivery. Pressure is building. The December contract not only is end of quarter, but end of year. He suggests a possible default. He said, “there is probably going to be such an event to change perceptions.” He cited a possible force majeure that could act as a “seminal event that defines the whole situation.” He explained that the physical gold price would then dictate the paper gold price, a return to normalcy, and with a gigantic move up in the gold price. Right now the paper gold market is overwhelming the physical side, but the physical side is constricted on supply. He explained that hedge funds are being unwound on a massive scale, slaughtered by margin calls. The long side must call for delivery on many contracts. He also expects there will be many questions on the Exchange Traded Funds soon as well, although those are surely not as important as the COMEX contract defaults. Watch and listen to his interview on the Canadian Business News Network (http://watch.bnn.ca/tuesday/#clip104603), and be sure to move to the 10 to 11 minute mark.

Posted October 3rd, 2008

Flight to Cash is the order of the day, and Gold ultimately is a beneficiary, albeit with infuriating bouts of $100 price swings. IMPORTANT is to understand we have a DELEVERAGING of the balance sheets of Banks and Hedge funds. This huge GARAGE sale will decrease in intensity once the Bailout plan is operative and the freshly created liquidity seeps into the system. However, at this point ALL VALUABLE assets are sold (incl. Gold) and the funds repatriated (read: Euros and other Forex exchanged for Dollars). This action has a double  illogic action: it pushes down the price of Real Money and increases the price of Fiat paper money (DOLLAR) or debt. This also explains why the volatility of Gold is the greatest when expressed in Dollars.

Additionally, we see a disconnect between the physical Gold price and the paper Gold price. Non-believers can check this out on EBay.

Posted September 27, 2009


Buy physical GOLD NOW before it is too late! Gold sits in a bullish triangle. As it tried to break out, the price was promptly smashed back by the PPTeam. Their power is largest on a Friday afternoon. The shortage in the physical markets persists (US mint suspends Buffalo) and sooner or later the paper market will have to catch up.  Again, we cannot believe the markets stay this resilient as the biggest drama since the Great Depression of the 1930's is unfolding.

Updated November 7, 2008

"There is rationing of Gold in Dubai...Silver dealers have run out of stock..." World's largest gold refiner  runs out of Krugerrands.

Last year, world production of gold sank to the lowest since 1937 as reserves are depleted and few new sources of gold have been found.

But while professional and institutional investors trading paper bet on the  Gold Price scramble to reduce their positions, private individuals are creating a squeeze in physical metal right across Europe and North America.

The US Mint has reportedly halted sales of American Gold Eagle coins, and is said to be refusing new orders from gold bullion dealers.

Kitco Inc., one of the largest gold investment retailers in the USA and Canada, warns on its website that "due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products".

"Once inventory is received there may...be delays in processing and shipping by our vaults."

Meantime in Germany, the Pro Aurum dealership based in Munich says that its website hit "meltdown" last week thanks to record-high traffic. It claims the same problem hit other German gold retailers, too.

"We've seen a dramatic increase in the number of orders. We called in our gold-dealing team to work the Assumption Day holiday [on Friday]. All our branches saw prolonged waiting times for over-the-counter cash sales, and this will surely continue over the coming week."

Chart top left:

A long term  idea of Gold Supply and Demand. See how production and supply comes down each time Gold spikes up.

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