Post 2: Gold Standard

Are we still relying to gold as positive support for currencies?

By now everybody, every country, knows that we are no longer using gold as a standard to support our sovereign cash. It was dropped as support for the US DOLLAR by Richard Nixon in 1971. This is also the date the USA treasury introduced FIAT money. FIAT money is essentially a form of intangible currency which is not backed by gold but rather by a guarantee of the government issuing it.

From my own research the gold mineral did increase to 1,600+ US Dollar per ounce, for a short period in 2012 and then floated close to where it is now, around US Dollar 1,450/ounce.

Later in the blog I will come back to the term "Inflation", but for now I can say I have done all calculations since 1960 to 2016, to provide feedback of the income related to gold holdings. Gold has been a steady income source over eighty years, performing at par with the inflation rates, given by the FED, for the same period. 

Gold has been in demand ever since the 1970's but it is held captive by those who control the market. They, whoever they are, do not allow for much speculation, so it is not a profit related market, tightly controlled and not subject to bulls and bears. It is so tightly regulated that governments of this day and age, who are buying truckloads of the commodity, which should be influencing the price upward, find a price unscathed by demand.

Since I was active on the international market, with a German company, to invest in gold mining operations all over the world, I had to conduct research pertaining to set-up of a mine, through the start-up line, to sales. 

It emerged from my research, that there are only three refineries in Africa. No gold are supposedly allowed to be sold on international markets without being cast in specific weights and numbered by a refinery. On the one hand, that is good, because it contains crime in speculation and substitution. On the other hand, it restricts trade on an informal basis, which would give a better support for market requirements. It will/does elicit a lot more undocumented production for the black market and therefore, no or little tax on production, which could surpass professional and regulated mining.  

In my refined search for investors I found many, who would do anything for a good deal in mining, until they understood, that setting up plant and machinery for a mine, is a hefty sum, which does not include a guarantee of a huge pocket of gold reserve. On the other hand, informal mining is also not genuinely lucrative because it is normally inconclusive and an accidental find, which could claim the life of the single miner, even before any gold is found/sold. Informal mining is extremely dangerous, never-the-less it takes place on a huge scale. Although illegal, most of these African refineries, which belongs to a range of secretive companies, must be buying black market gold for a penny a dollar, under the pretext that they are not able or allowed to. It is the way scrap dealers operate on a global scale. I have operators who dealt with them and know this for fact. We do not have to test it for resonance, it happens. Who gains from this? Obviously the owners of the mine and refinery, who are normally the shareholders of some or other conglomerate. In my story line, this does not impact on the result, but I expect you to remember this when I add mix in the jug of economics.

We are always informed that gold has no bearing on our present currencies and is not considered a support for it. It is emerging now that this news are being cast aside by some of the more prominent Economies and that gold is definitely considered as a support for national currencies. As example we heard the news this week, that Deutsche Bank has confiscated twenty tons of gold, owned by Venezuela. This gold is redeemed, whether used as an excuse for seizure or a genuine tenure for unpaid loans, which were given in the last three years. If gold was becoming irrelevant, DM would stake no value to it.

Is gold, as standard, never going to be viable again?

Not a strange question in 2019. Every country in the world is hoarding gold, buying thousands of tons per year, to support what?

Yes, gold will find its place as currency support again, soon. For this to happen, the Petro Dollar will have to be suppressed or replaced as global trading currency. When will this happen? The process has already started, but the completion or transfer as global currency, could take ten years or longer. The woven fabric of dollar transactions are very well dispensed into the dynamic of the banking and trading system, it cannot be eliminated in one day or even a year.

Where is the gold coming from, since there are very few profitable gold mines operating in the world? It is evident from corporate stats that the majority pool of legalized gold is not harvested from legitimate corporations. From this evidence it should be evident that the gross product mined, comes from internal legal mines and small, perhaps illegal mining operations. This in turn will mean that the international community is not following its legitimized track of purchase, only, they are/they could be buying illicit gold from illegal miners when ever it is tabled for sale.

How is it possible that China, Russia, India, USA, Europe,

etc., are dashing for gold, during the years 2016 to 2019, without a price hike. Most countries in the world are buying thousands of tons gold, why is it not reflecting on the gold price?

The answer lies in self manufacture. All these countries are buying bullion from their own mining operations. The real shift in price will come when non-mining countries start buying gold. This is the only way that these governments can contain the gold price.

Gold price is controlled by the big purchasers just like the price of oil is. Only one issue prevails and that is that the price can only be controlled as long as there is total control of manufacturing and the sales market.

Gold is not in this vehicle. Just like cocaine, gold will always be produced by a sector of uncontrolled entities as well and sold black market. This operation is much bigger than we are told. Information on black market gold is suppressed because those who buy must be doing trades in this market, at huge profits.

There is no doubt in my mind that the gold price will hike above five thousand dollars an ounce as soon as non-mining entities start buying huge amounts of gold.

Please leave a note to say what you think!!