Bitcoin Forum

If you think that gold is in trouble because it hit a five-year low, read on!

Serious books were recently published, detailing evidence of central bank suppression of gold prices.  If you think about it, this changes everything.  We have been led implicitly to believe that gold is just a shiny object, obsessed over by gold bugs, and even they can get tired of it.

But this news means that central banks' own assessment is that they must suppress the price of gold in order to maintain public confidence in paper.  And their intelligence on global sentiment is probably better than ours.

To get a full understanding of the issues, we must start with the gold standard era.  Why did central banks swear up and down about upholding their "moral commitment" to redeem paper currency for a fixed amount of gold?  The stated reason was that they wanted to safeguard the stability of paper money and thus the economy.

The metallic standards of the past are of course considered mistakes by modern mainstream economists and central banks, though one has to wonder why the "mistake" dominated the Western monetary system for about three hundred years that were littered with periodic and severe financial crises, and was only abandoned when states were about to run out of gold for redeeming paper at the official price.

Given this history, we could be forgiven for a little skepticism.  It's hard to avoid concluding that the real reason for gold standards was to prop up the value of paper currency (or, equivalently, to suppress the market price of gold in paper currency) so that top politicians and banks could continue to receive benefits by issuing paper money and debt.

The way it worked was that the system ensured that it didn't make sense for savers to hold gold.  Gold earned no interest, while paper money was guaranteed by the authorities to redeem a fixed amount of gold, and this promise was credible while the state had enough gold in the vaults.  Meanwhile, holders of gold lived under the same price inflation as everyone else, due to the expansion of the money supply from currency and debt issuance.

However, the incentives for the elites were to issue maximal money and debt, so the system was never fundamenatally stable.  Aside from periodic bank debt crises that came with major economic pain for citizens, in 1890, even the core of the global system, the Bank of England, experienced a run on its gold that needed help from other major countries to restore confidence.  By 1931, Britain had to give up its peg against gold.

Given that the essence of the gold standard was to suppress the "market" price of gold, that system was not very different from what we have today, even though the techniques of suppression are more sophisticated (ie by trading derivatives) and the "target" prices of gold more flexible.

The final unpegging of the dollar from gold in 1971 was a change from explicit to hidden suppression of gold.  The hidden nature of the suppression also made gold price rises (in effect, devaluation of paper against gold when the authorities had no choice) less embarassing.  Between $35 and $1000 per ounce, the dollar has lost 97% of its value.  Armed with the evidence, the Great De-monitisation of Gold has now been discovered to be the Great Devaluation of Paper.

All of this points to the reality that is the polar opposite of conventional wisdom, that the gradual weakening, and then the abandonment of the gold standard were *good* news for people who believe in state-free money.  These events signaled the gradual loss of control by the authorities in suppressing gold.  They made gold more like money and paper currency more like debt.

So, hopefully, we are waking up to a hidden reality that money is not what the elites make it, but what people make it, in the long run.  The elites may have been granted a lot of power by the system, when they first establish a mechanism of manipulation.  But that very power gives these elites the irresistible incentives to undermine their own system, so that the long arm of nature always catches them, in the end.

This power of nature was made clear when China had to punish by death those who transacted with anything other than the state paper money, and then had to go back to physical silver anyway, in the 1500s.  (BTW, China was no Zimbabwe -- the paper money was not poorly run and had lasted for a few centuries, like our own.)

Gold (or any other metal) may not be a perfect monetary system, but given the nature of the elites that humanity must deal with, it may be humanity's best hope.  With the possible exception of Bitcoin, of course.

Gold and all metals are inferior to bitcoin. As you point out, gold never stands on its own, it always requires a currency that is backed by gold, and no matter how much they swear and promise they will uphold this standard, they always end up printing more notes than there is actual gold and they have to come off the gold standard and back to fiat.

This cycle is impossible to stop because gold NEEDS a currency to work, and currency ALWAYS gets printed too much. The only thing that stops this is the invention of bitcoin. Bitcoin needs no currency because it is already easy to exchange, and it has all of the scarcity and controlled supply of gold that makes it a good store of value.

Gold will get eaten up by bitcoin and will be just another metal like nickel or titanium that is used for industry and jewelry, not money.

Alot of people like gold because it is fungible and has been the long term standard store of value. It is a reference point however, and intrinsically has no additional value over bitcoin. In fact, it can be argued that Bitcoin has more intrinsic value, that is in itself another debate.

Gold is just going through the market cycle, none of its fundamentals have changed and no other commodities have entered the space to relatively de-value Gold. So, really its not a problem, just buy when its blood on the streets.

...

I would not announce the Death of Gold so quickly just because a great new set of technologies has been invented.  Gold has been valued by humanity -- by almost all cultures -- for 5000 - 6000 years.  I doubt that 5000 years of historical value for gold will disappear just because Bitcoin has come along.  Through the millennia, gold has proven itself hundreds of times as the best Store of Value around, beating EVERY fiat currency.  Why would people who really understand wealth (like the central bankers and the Rothschild family) hold so much gold?

My *guess* is that Bitcoin will be a game changer.  But, "technology often eats its children..."

My other guess is that gold will always be expensive, and always held in much esteem.

Gold and Bitcoin are quite complementary.  It's just smart to hold some of each.

Gold HAD his time. Now it's over, along with the fiat scam. Sure, Gold back them made sense, but right now Bitcoin deprecates it on every single aspect you can ask for. And no, there's no inherit value to Gold or any money. Money is is money if people will value it, period. The rest are the characteristics of said money, and nothing, nothing ever has been as good as Bitcoin at being money. Bitcoin takes the best of both worlds from gold and credit and twists it into a new paradigm of unknown unknowns. The possibilities are endless.

I think Bitcoin and Gold could reinforce each other. A stable numeraire.

Thank you for your thoughtful replies.  This give-and-take is what makes this forum so valuable and fun.  To lay out my take on the points raised by all your replies:

It may seem as if gold or silver had been associated with paper forever (as that's what our great-great-great-grandfathers and before lived under,) but medieval money were simply gold or silver coins.  Precious metals being fungible, there were few practical problems for these coins to circulate.  (The association with paper was in fact the invasion of state-based money that signaled the beginning of the modern finance-burdened economy.)  If we need to make money electronic for the modern age, Austrian economists have proposed systems like 100 percent reserve banking and totally free banking.  (In effect, having an electronic embodiment of gold or silver without losing the integrity of the system as we have since paper money started in the Dutch Golden Age.)

It's arguable that Bitcoin is a better money than gold and silver.  However, IMO old is good in the world of money, everything else being equal.  The reason is not just natural trust by people.  The money has stood the test of time.  We don't know for sure what problems will come up if Bitcoin scales up -- a couple of things right off the top of my head would be quantum computing defeating cryptography, some unknown security hole, and scalability of the system.

That said, as one reply points out, there's really no reason why two or more monies can't live healthily together, with the market determining the exchange rates among them.  Gold and silver did this for millennia.  But this will be true *only if the state gets out of the way*.  When state paper gets involved, something called Gresham's Law almost ensures that the system becomes unstable.  (This was why countries moved away from bimetallic, ie gold+silver, standards and ended up with gold only.)

I would totally agree with the idea that money is no more than a standard, and that no money really has any significant intrisic value.  In fact, national currencies have a huge advantage in this regard, as their legal status given by the state gives them something almost as good as intrinsic value.  (But, of course, as we have seen, this very advantage is an irresistible invitation to theft-by-over-issuance by the elites, and so always gets eroded away.)

E-gold has been tried and failed because it is necessarily centralized. There has to be a vault somewhere to store all the gold and ensure that there is not more "e-gold" out there in circulation than there is gold in the vaults and this necessitates storage fees and employees and creates a central point of failure that must be trusted, the very thing that bitcoin set out to eliminate the need for. E-gold was shut down by the government and really any centralized system such as this will not survive either. The future will be decentralized.

Strange why the media keeps trying to force the point to the sheeple that gold is an ancient relic and now worthless yet people in power are buying as quick as they can get their hands on it.

Russia, China are buying it by the tonne.
Countries are now repatriating their gold.
Texas is repatriating their gold from the FED.
Public gold/silver demand has gone through the roof.

I think the powers that be are currently suppressing gold price through paper gold manipulation enabling them to accumulate physical gold at rock bottom prices.

When the time comes the price of physical gold will go parabolic disconnecting from the paper gold price.

Precious metals have been used for thousands of years as a sign of wealth. This has occurred in civilizations that had no known contact with each other over vast distances, separated by oceans. If we ever find intelligent life on another planet, I would not be surprised if they did use, or at some point in past they used precious metals for the same purposes as ourselves.

Cryptos are only as strong as the network. If a natural disaster ever happened, killing a large percent of the worlds population, there is a chance we could enter another "dark age". Past intelligence and skills could be forgotten. Infrastructure could collapse. Electricity and the internet could become a thing of the past, a distant memory of our generations to come. In the first years, basic supplies would be most valued where everything works on a sort of barter system. Eventually though, as society rebuilds itself, a form of currency would be needed. If we can base anything on the past, this currency would once again involve precious metals, you just cant get rid of them.   

If the public lacks the right awareness, even if bitcoin wins, the elites will do to bitocoin what they did to gold.  It would start with borrowing bitcoins from the public by issuing trusted public debt, evolving into a bitcoin-standard, etc.  If the public has the awareness, any form of leverage will be banned from gold banking where the contractual relationship is storage, not debt.  And banks would compete, and the public would diversify their holdings among banks for safety from criminal conduct.

So the ultimately important thing is not what form money takes, but public awareness.  Without the awareness, we'll never be economically free, no matter what.

The really critical thing is to get the state out of money.  All forms of money would have exchange rates set by the market and sink or swim by their real usefulness.  If you are fighting cancer, you don't spend much time debating which car to get when you cure it.  One car might really be better than another, but it's kind of a minor issue.

It does not have any real story ;D. We humans are making a real story about it!!  ;)

I don't know if that's true...  Most of the gold in the universe, I have read, was created in supernovae and/or large stars colliding.

Gold (and platinum, etc.) is truly "star stuff", Supernova Born.

And much of the gold and platinum-group metals sank to the core of the Earth when it was still hot.

humans were created by star dust too, and there are a lot of theories which support crazy stories, I believe that we all are a part of a continuous random moment and we are free falling into a doom, and we complicate our lives just with thinking ourselves to be too significant. Nobody is as important as nature, not humans and not gold. Gold is a shiny object which people will kill each other over, and that's fucked up. That's the real story.

Gold's physical properties make it a good form of money, no more and no less.

Killing each other over any form of money is fucked up, I agree.  But that is part of the "capitalism" we live under.  Under this system, we have to have economic growth, or the economy implodes.  Since so much money and other financial assets are created and propped up by the authorities rather than a free capital market, if there's not enough real growth to justify the value of the assets, investors will liquidate and we're in for deflation or depression.  So, in thousands of subtle ways, the system nudges everyone to seek profit and economic growth at all cost.

So, we shouldn't be surprised to have so much pollution, unhappiness and conflict.

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Gold Update: Manitou Springs, CO "turista jewelry shop"

(a real story)

I prices some purportedly 96% pure gold nuggets there yesterday (on vacation).  The one I did the arithmetic for went like this:

1.5 gm (approx. 1/20th of a toz) was for $115.00.    Actual gold value: +/- $40.

Ahh, no thanks!

Well even if it is true, they can go on to surpress the price forever as long as they want. And since the spread on gold trading whether on buying or selling is high, you will actually lose out the moment trading starts. Plus don't forget they pay zero interest and some banks will actually charge you the maintenance fee for the gold account. Either way you will still lose out.

The price of gold can't be suppressed for too long. It is estimated that only some 60,000 tonnes of extractable gold remains to be mined out, and at the same time, the demand is increasing very sharply year on year. The current rate of extraction (3,300 tonnes per year) is definitely not sustainable, and in 10 years or so, there will not be enough supplies to cover the demand.

Great read, thank you dude :)

Spot on, you deserve a +1 there...

But gold still can be used as a commodity or for storing big wealth, if you can afford the security equipment.

However as a day to day currency as the blood of the economy, it does need bitcoin.

Evidently, you're confusing cause and effect. It is the Gold Standard advocates that say that no currency can live long enough unless it is backed up by gold...

And surely not the other way around

i think any good digital or material its good and yers diamans and gold are rare and precisose like the BTC sometimes soo even dollars euro gold yen etc its all good to have and spend the lower part possible in order to be less nervouse as possible. not like milirtar extremes

As I've shown lately, the gold market cap is minuscule compared to the derivatives market, so does it make any sense for CBs to suppress gold prices? In which way is that beneficial to them, if at all?

I see no reason in doing this

Why would banks bother to manipulate gold prices because the derivatives market is much bigger?  The gold market is worth $20 trillion - there is a hell of a lot of money to be made!  Banks have already been found guilty of fixing LIBOR rates etc. so why would they stop there?

The price of gold could be suppressed to prevent a flight to safety from stocks/shares etc during the current economic climate.

If people are led to believe the price of gold is on a downward trend they are less likely to pull their cash from more risky investments.

The house of cards will fall sooner rather than later and the price of gold will go "to the moon" overnight.

I think it has also been proved beyond reasonable doubt that the price of gold is suppressed through paper games, the price smack down when gold price starts to take off through the dumping of millions of dollars worth of paper gold is becoming laughable.

http://www.bloomberg.com/news/videos/b/a3e3b49d-6d0d-4bfb-b12c-9cd68d597bb2



Only a matter of time until we see a disconnect between "paper gold" prices and real physical gold prices.  I think a lot of people are going to be in for a shock when they realise they paper gold claim has been leveraged 125:1  :)

The last 20 years (at least) people searched cover in the US dollar in case of a financial meltdown, not in gold. If what you say were true, then in 2008 gold should have surged ("and sky is the limit"), but in reality it collapsed together with stocks...

Gold is good, but it is not liquid

Except now we face the demise of the USD so where do they run for safety now?

I would argue about gold been liquid,  I think you have to be very rich man to struggle to sell your entire worth in gold in one go.

I guess the rumors of the US dollar death are greatly exaggerated. Not that it is invincible or immortal per se (or anything of the kind), but in fact it should not be. It is enough that it should be less vulnerable and more strong than other currencies...

Just being stronger than others does wonders

Furthermore, I don't say that the price of gold is not manipulated, but it is not manipulated somehow different or to a significantly higher degree that any other commodity which has a huge financial derivatives market (oil being the most conspicuous example as of recent)...


I've heard such stories from gold bugs for more than 10 years already. This won't happen

It is already starting to happen on a small scale as premiums are increasing to offset drops in spot price -

http://www.zerohedge.com/news/2015-08-29/despite-being-pet-rock-premium-physical-bullion-exploding


We are all very small cogs in the big machine and have no influence on how it all plays out.

All we can do is try our best to cover our asses for when it does all go tits up.

Diversification be that gold, silver, bitcoin, land etc. will help and not keeping all your wealth as cash in the bank waiting for a "bail in" as Cyprus and soon Greece has shown.

And what will happen when gold deposits run dry? I am sure that there are some places on earth with unknown gold deposits, we just need to find them.
But my question is will price of gold suddenly skyrocket if gold will be so hard to get? it surely looks that way. It will like 'ultra halving' using bitcoin terminology.

I can point you to a site which claims something to that tune (e.g. "This Shocking Event Will Change The Gold Market Forever") or even more disastrous day after day. Here  (http://kingworldnews.com/gold/)it is. In short, believe none of what you hear, and only half of what you see...

And especially beware of the half-truth. You may have gotten the wrong half

It is extremely unlikely that such hidden gold deposits will be discovered any time in the near future. Gold occurs in certain unique geological formations, and almost all of these formations have been undergoing metal extraction through mining. There are "unrecoverable gold deposits", where recovering gold is not economical. Mining one oz. of gold from these deposits can cost as much as $5,000 or $10,000. But as the gold price increases, some of these deposits will become profitable to mine. 

Do recall, everyone, that gold is different in one very fundamental way than every other commodity: that the stock:flow ration is far higher than them all.  There are some 175,000 tonnes of gold above ground, and some 3,300 tonnes mined (plus some recycled IIRC).  No other commodity comes close to that much stock to flow.

This means that mines shutting down (etc.) do not influence gold price much in the short-term.

It is demand that will change the price of gold, and big time.  And the Big Enchilada will be when paper gold fails (when people want physical for their paper).  There are about 100 paper claims on gold vs. 1 oz physical.  What happens when the demand starts big (a worldwide currency crisis for example), and "paper gold" owners cannot get the physical they think they "own"?

Very high prices.  Think $10,000 (non-inflated price).

I dont think gold price will fall when people will realize that certificates are ponzi scams.

Its the certificate price that will fall to 0, but then the pressure will be uplifted from the physical price in the sense that, with printed fraudulent certificates they cannot surpress the price anymore.

Then the gold price will rise to all time highs.


However i dont think it will stay high very much, its just a speculative commodity for me, it will collapse quickly rightafter.

Those paper claims on gold are cash-settled futures (and the likes), so their owners neither can claim nor actually have any desire to own physical gold...

You do have the option of having gold futures settled in metal and delivered although at this point in time many opt to settle in cash.

However there is a clause in the contract where you can be forced to settle in cash (because most of the gold does not exist), when we get to the point where the dollar is failing and people wish to take physical delivery of the metal this is where 125:1 leverage will get messy because 124 people will just get a wad of worthless paper if they want it or not.

Paper gold is nothing but a legalised ponzi where you get a paper claim backed by nothing and should be outlawed.

So you are saying that printed ponzi fraud gold certificate doesnt have enough gold backing it (3-4% maybe) and when people do a run on the banks claiming real gold for their ponzi cerficates:

The bank will give them another printed ponzi fraud IOU called fiat money in exchange for their ponzi fraud gold cerficate?


Hahaha this is just a twilight zone bullshit, I cant believe people are so idiots to fall for it.

There are many types of gold futures including those which can be settled only in cash (and these I referred to in my post)...

I guess they make up the majority of traded gold futures

http://www.zerohedge.com/news/2015-08-03/comex-edge-deliverable-gold-drops-record-low-124-ounces-paper-every-ounce-physical

...

My understanding of the COMEX gold settlement process is very scant, but IIRC, I believe they can settle in cash in extremis (that is, no physical gold for you if they don't have it or want to give it up).  It's in their rulebook I once saw quoted at Zero Hedge.

Also, there appear to be onerous delivery requirements for physical gold & silver deliveries (certain warehouses only, use of Brink's and similar, etc.).

Physical gold <> paper gold.  

Maybe that should be:

physical gold <<<>>> paper...

Gold will always a good value in my opinion, as it is scarce and is a useful metal (jewelry, conductive properties, ductile etc.)

I love Bitcoin, but it only has value because we agree that it has. Gold has intrinsic value (it is useful per se) just as potatoes  ;D

I still love gold, because people can touch, wear it, and use it for cosmetics.

So the value has all around appeal for most people. And as long there is a demand for it, I see profit.

Dude, people wear their underwears everyday too. You can touch it and fucking wear it as a cosmetic if you are into that shit, its not about the extra features it has to offer man, if that's how you feel about an asset or a currency. The only reason there is demand for it is because of its historic existence from decades, if you measure gold in comparison of bitcoin regarding percentage increase in potential, you'd know where to really see profit.

Gold has the faith of governments. Right now, bitcoin is restricted to a community on the internet (and some corporations who see it easing e-commerce transactions). That is a big difference.

And THAT is the big risk of Bitcoin, being that such a small community uses it.  I like BTC (I have some) and hope that it succeeds, but gold has 5000 years + of history as the best Store of Value.

The central banks hold gold.  So do I.  If any of you have children, you should consider holding some too.  Inter-generational wealth.

Wait...why?  What's so special about gold, when so many other elements (rarer than gold or not) are just as expendable, but even more applicaple (energy, etc.)

Why do we hoard gold from each other....why can't we see the 'gold' in fort knox (in a way that does not compromise its security)?

Nothing makes sense any more.  The government is fighting the same sort of thing they pretend to venerate.

Because a gold bar will be the same gold bar even in a thousand years, and by holding gold governments assume they will exist no less than that, lol ("Tausendjähriges Reich")...

Energy? How do you stockpile energy?  :o
Do you stockpile barrels of oil? Gold is a lot easier to store? It is a no-brainer to use gold as a store of wealth, rather than oil.

I think his argument was going to be directed to a government operating on resources based energies, etc. The whole argument about why gold is one of the best storage of wealth is because it has been around from centuries. Not anything as rare as gold has been around for so long, and if it has, it was unable to capture the potential value people have invested in it. Gold fails in functions for an appropriate currency or storage of wealth but it has one of the most major feature: VALUE AND TRUST OF PEOPLE.

Gold has always had political relationships it is simply due to governments holding large reserves of it
When its devalued its usually to harm or leverage out one country or another.
Geopolitics etc.

Hi I want to share my personal opinion about this. The problem here imo lies in the majority of the population don't know really well how money works in our economy.

What makes a currency a source of prosperity?

• Must ease the transaction of assets: for that it must be easily accesible, used worldwide by any person and be easily exchanged (gold does not fit in this rule since it has a limited quantity)
• Its market capitalization, ie total volume of currency, and its rate of issuing by each country or entity must be tied to some form of quantifiable asset owned by the agent wanting to issue the currency: here lies the elephant in the room, what most experts think is the root of the cyclical economic crises the world has; the Fractional Reserve Banking system that allow the banks to only have a 10% of the total of deposits backed by cash-on-hand available for withdrawal. This extends to loaned money so the 10% rule can be reapplied to issue 10 times more money than the bank has over and over again. A recent example of the implications of this system is the intervention of the Bank of China to save its economy by lowering interest rates on its loans. Companies on the verge of bankrupcy can ask for loans at low interest rates to rebuy their stock and inflate its price artificially without any real growth of the company. The stock market will reflect an economic growth but this will be all fake. This, in my opinion will lead to a bigger economic meltdown when those loans are overdue.
• Must be widely accepted and trusted: gold is falsifiable and difficult to track down, you need some form of verification of the metal and when you need to make big transactions it becomes a problem to check every ingot. The only solution that gold contribute is that one mentioned before of representing a quantifiable asset to back currency issuing, for example if the reserve banking system would be abolished. A better quantifiable asset would be an accurate measure of a country industrial power, enterprises, natural resources, but I admit gold (as diamonds, gems or any other scarce resource), in this case would be more comfortable to measure than a country real assets and resources. But imagine we use diamonds, South Africa with its diamond mines would be allowed to issue much more currency than the rest of the world when its growth is not much bigger if not much smaller than other countries. For that reason it is better to establish an inventory of the total of resources, enterprises and industries available to each country or corporation as a mean to establish its assets. Any other way is opening the door for speculation and repeat past mistakes. What leads me to my next point.
• Must not be object of speculation: as I mentioned before when you tie the market cap to an accurate measure of a country assets you can't create artificial scarcities or flood the market with stocks to drive the price down (in this case the trackeability helps to fight this as well). You know something is wrong in the market when you can buy contracts for several tons of aluminum when you aren't going to use that metal for anything productive, just to speculate on the price. Is famous the story of Wall Street brokerage firm that bought several thousands heads of cattle to speculate on their price but forgot to sell them and they ended paying more than what they invested to rent a place to store the cattle and feed them. To avoid speculation a currency with a trackeable source is specially useful since it allows to know if the buyer is an enterprise in need of the resource or a speculative party. Gold is difficult to track and our paper money can be tracked but needs intervention by the government. Some cryptocurrencies allow a easier tracking by normal citizens and even its automatization and implementation of more security measures as they are open source and constantly evolving, adapting to the new needs of the population.

As you see cryptocurrencies comply with most of these requirements and if not they can evolve and address those needs. Gold only use is to give some form of material backing to the currency issuing but is a lacking way to quantify value as mentioned in the post. The only flaw of cryptocurrencies is they need some sort of computational power, a physical support open to attack or malfunction but that happens with any form of currency we choose as anything can be stolen. When cryptocurrencies improve the redundancy of their storage wallets and the majority of the population learn to use it the malfunction flaw will be addressed.

Does anyone know the last time a government actually  proved what amount of gold they claim?

...and what happened to all of Gaddafi's?

The last credible audit of the gold at Fort Knox (the US gold) was carried out in 1953, that is more than 60 years ago...

I think if you really categorize precious metals as money, then I think only silver is a real "precious metal" money.

Gold still suffers from lack of divisibility which is a core property of money. Prices are generally relatively too low for gold, so this makes trade very difficult with standardized gold coins or gold cubes.

So for everyday goods standardized silver coins, cubes or rounds are a better physical "money".

Perhaps if you want to go higher then use electrum coins with standardized purity ratio, but other than that gold is only for rich people.

But i told you guys already that even if these metals serve as money, bitcoin is still way better than them.

Gresham's Law

The last complete audit was in 1953, but partial audits were conducted several times after that. For example, a partial audit in 1986 covered around 97% of the government owned gold held in Fort Knox. That said, only around half of all the American gold is stored in Fort Knox. Out of the 7,716 tonnes of gold being held by the United States Mint, some 4,583 tonnes is being held at Fort Knox. The remainder is being held at Denver (1,364 tonnes) and West Point (1,682 tonnes).

https://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm

It is an official story, lol. But there are no audit reports from that time. The US government is said to have lost those reports (for the audits held in between 1974-1986), wtf

Great thread, lots of useful information here that I did not previously know, and I follow gold closely.  Clearly gold is a BIG subject.

I believe that an "Audit of US National Gold" would cost peanuts, relatively speaking.  Hell, even I could put a team together to do a proper audit (that would include several kinds of specialists like metallurgists, testing equipment, auditors & accountants, statisticians, security, credible representatives from the press, etc.) and do a reasonably good job, for, say $5,000,000 (it would cost, but $5 million is PEANUTS vs. the value of the gold we supposedly have).

Such a comprehensive Audit, visible to the world and done by competent specialists, would END the the matter once and for all.

^^^^ I am afraid that it will cost much more than $5 million. The auditors need to check the authenticity of gold, which itself can be quite time consuming as well as expensive. Then they need to determine which bullion bar belongs to which department of the United States treasury. It is quite time consuming, but not impossible to put in to action if we consider the total worth of the gold.

...

bryant.coleman

Yes, it would cost money.  $5 million indeed might be too low, I was making a mental calculation in hatching that number.

An adequate team would indeed be necessary to do a reasonably thorough job of an Audit.

But, I put "statisticians" in my list for a reason.  Were it me (oh, what fun!), I would walk into each room at Ft. Knox, and say: "unstack that pallet right there.  OK, take THAT bar in the middle with that number, core it, and check its (core) purity.  Oh, and THAT one over there in the corner.  And THIS one in Room B, melt the whole thing down and assay it."  Etc.

I think that a well-chosen PORTION of each gold pile would be enough to satisfy everyone that the gold amount is pretty close to what they claim.

I don't think it would cost a fortune.  And it SHOULD be done.  Perhaps it would cost the government MUCH less, as I am sure there would be LOTS of volunteer experts (high visibility!) who perform some of those services GRATIS!

That is the question, wtf. Part of that gold had evidently been sold to France (well, exchanged for the US dollars), and a few other smart govts in the 60s. And you guess, France is now the second largest holder of gold...

I`m not saying gold=silver, because it clearly is not equal.

But at current silver/gold rates, you can see that from a healthy 20:1 ratio the ratio now is over 60.

So just from an investment standpoint, if the precious markets kickoff, you could make a bigger ROI with silver, than with gold.

Thanks for a thoughtful response.  I agree that most people don't really understand money (and its relationship to the economy.)


We would certainly like currency to support prosperity, but in my opinion, trying to control currency to bring about prosperity is exactly equivalent to the argument for economic central planning that if we don't control food production, the population will starve.

In the rare modern examples of money that was not controlled by the state, i.e. the Italian Renaissance and the Scottish free banking era, there was great prosperity.  When money and finance were left to market forces, there was also enough credit and financial innovation to support economic growth.  The difference was that there was no artificial (government-driven) support for debt, so lenders took the full hit when borrowers couldn't repay.  As a result, lenders were careful and there were none of the bubbles and financial crises we see today.


I think the key issue here is not limited quantity (which also applies to Bitcoin)) but fungeability (divisibility.)  If gold becomes mainstream money, the market should provide 100% reserve gold banking that allows depositors to transact with electronic gold.  This would solve the problem you describe.


This is good in theory and in an ideal world.  But the elites of this world don't support such an ideal.  The amounts of dollars and closely related assets far outstrip any conceivable economic output of the US, at current prices (and the same could have been said about the issuance of paper sterling by Britain when it was dominant.)  The reason is that issuance of money is an easy way to get "free" wealth and power, and to "solve" problems, for the elites, and no human being has proved to be able to resist the temptation to over-issue money.

While your idea is theoretically sound, there is no practical way to set up incentives to implement it.  So we are now left with the second-best option, which is a limited-supply currency that no one can expand.

Given that there's no practical and ethical way to tie the quantity of money to real economic output, what medium money takes becomes really pretty arbitrary.  I would agree that this facilitates speculation initially, but the steady state should see convergence to some standard with an ethical distribution of wealth.  (If South Africa doesn't produce much real wealth, eventually, most of the diamonds would go to other countries and S. Africans would have to work for a living.)


Speculators have an incentive to be right, since they lose money if they are wrong.  Thus, they serve a socially-useful purpose by correcting bad market signals (and especially those sent out by governments to confuse the public.)  For example, speculators in gold today are probably responsible for the US not issuing even more money (and thus destabilizing the world economy more.)  When too many people want gold, it becomes difficult for the authorities to issue too much money and still keep gold prices down.

Traceability also has both pros and cons.  Governments in modern times have, most of the time, engaged in some degree of financial repression.  (A mild form is suppressing interest rates while issuing assets to drive inflation higher than interest -- thus making savers lose wealth automatically by staying in safe assets; a severe form would be capital controls as practised by China to stop savers dumping yuan to get into dollars, at present.)  While traceability helps fight crime, it also helps financial repression, which ultimately helps the elites temporarily by propping up asset values, but also makes the eventual crash worse.

Very much interested information from this thread. Hopefully the OP got his answer.

I agree with RealBitcoin, silver has been the money most widely used throughout history among the 2 precious metals, and about the ROI, that is something that I agree as well, one of the reasons for that is that most uses of gold actually preserve gold (examples, jewelry, coinage, etc) while a significant amount of the industrial uses of silver, destroy it. (or make it very difficult to recover)

Silver is bad money while gold is good money. The bad money drives out the good money from circulation. That's why silver had been more widely used than gold through history. People spent silver but saved gold specie...

I'll also mention another thing.  Maybe it's psychological?

Once most people who have lots of experience with both PMs, you tend to see that most gradually come to like gold better.  They hold onto the gold coin, preferring to spend the silver ones.

If I ever have to spend any of my PMs, I will spend my silver first, no matter what the Au:Ag ratio is.

There seems to be some fairly universal attraction of humankind to gold.  Maybe that's from the very ancient past...

Gold is very special in its properties including outward appearance, that is, color and shine. Silver, on the other hand, is nothing out of the ordinary, you could easily confuse it with tin, for example...

To me, tin has more appeal

deisik

I would be interested to hear your views on platinum, a lovely PM.

Pt is much scarcer than gold, and has a fair amount of industrial use.  Looking at its industrial use, I saw a comment: "Platinum is for optimists."  Pt has almost the amount of shine (almost as reflective) as silver.  Pt does not corrode either, no need to polish it...

Platinum is also "value-dense" (a little goes a long way), but Pt prices have fallen hard lately.  Nor is as liquid as Au and Ag.

Gold is the primary driver of all PMs (more so for silver, less for palladium and platinum). Thus if you are interested in the price of platinum, you should follow the gold lead. And I'm currently bearish on it. Unless the US gov decides on another round of QE, I'm still expecting the price to hit sub-$1,050 level...

Not until then will I look into gold again

More like a case of when and not if.

Now also talk of negative interest rates in the pipeline, if this happens it will drive pm prices hard.

Yes you are right, gold is very popular over the period of time. Anyone can directly buy the gold and anyone can invest into the gold. Demand of gold is always high; some people invest in gold, some people need for jewelry and other cosmetics.  I think it's a good idea to have at least a small part of one's portfolio in gold and this is a good time to get in. Prices have come down from recent highs and demand will only increase.

The real story of gold is that, during zero-interest deflation that is uncontrollable without the help of a bipartisan Congress willing to cut spending and redistribute wealth, gold will go to the moon without government intervention because people lose faith in fiat currencies as we go from a deflationary deleveraging to rapid inflation as the government tries to stimulate the economy again by essentially printing money.  During the Great Depression, the government confiscated/purchased gold at a fixed price, but gold mining stocks outperformed by a massive amount during this period in history.  It runs very counter to common sense, but that is because we are not in a normal economic cycle.  If you look at gold charts you will see this is starting to get reflected in the price as the Fed acknowledges the situation.

The last 400 years of Western history *is* the story of suppressing gold prices.  The modern monetary system (which hugely benefits a small elite but makes everyone pay the social and economic price) couldn't survive without this suppression.

The reason is that people, at some level, see through the deception and collectively demand gold to protect their savings.  This is not going to get easier for the elites, as trust in them has eroded at a faster pace after the 2008 crisis.  The outsiders among US presidential candidates are having a field day, with really no qualifications other than being outsiders.

The current deflationary and weak-growth environment also threatens the entire system (even though deflation-with-inequality is better than stagflation, in the short term, from the point of view of preserving trust in paper currencies.)  The threat is that this system *must* have economic growth to justify the value of the mountain of financial assets based on paper currencies, or investors will want to liquidate to cash, which will destroy demand, as happened during the Great Depression and the Japanese stagnation.

If that eventually happens (as seems more and more likely nowadays,) the authorities will have no choice but effectively to devalue currencies against gold, explicitly or implicitly, by a huge amount.  Only that would give them enough monetary stability to greatly expand their relatively timid efforts to stimulate both growth and inflation since the crisis.  At the same time, the inflation that would result from such stimulation would go a long way to wiping out the real value of debts -- a debt overhang which has been tying the hands of the authorities in every way in their efforts to stimulate.

I suspect that very few people realize the true meaning of Gresham's Law, and especially as applied to gold and silver.  Gresham's Law really says that, *where there is an artificially supported exchange rate between two monies*, the undervalued money will be hoarded, and only the overvalued money will be left in circulation.

Unfortunately, silver got completely excluded from the monetary system since about 1870, and that's why it has been trading at well below its long-term exchange rate against gold.  It's a long story, but, essentially, the authorities eventually learned that fixing exchange rates (such fixing, allowing the issuance of paper, being the ultimate source of wealth and power for the very top elites of the modern world) among paper, gold and silver was hard to juggle.  They had to eject one of the three.  Certainly they wouldn't eject paper, so they chose one of gold and silver.

What this means is that, unless the elites lose control totally, silver will be left out in the cold.  Before they lose control, we know they will try (effectively) devaluing paper against gold to lend stability to paper.  So gold is good in two scenarios, where silver is good in only one, and we don't know the relative likelihood between the two.  (Keep reading the news!)

Gold is also held by the central banks, silver is not.  Here is some commentary by FOFOA (he very much likes gold, but does not like silver):

http://fofoa.blogspot.com/2015_06_01_archive.html

FOFOA posted this nice little chart:

http://2.bp.blogspot.com/-sT1SSS5xZe4/VXqqIEMtA7I/AAAAAAAAGwg/NHaxKhV6t1c/s1600/stock_to_flow.jpg

Note that gold has a huge stock:flow ratio.

Gresham's Law (or, rather, the principle behind it) would hold even in the case of a floating exchange rate (for example, Bitcoin vs USD). I have explained this here  (https://bitcointalk.org/index.php?topic=351712.msg3767719#msg3767719)(and in greater detail further on)...

Thanks man this is so interesting! I always thought in these terms even though I did not know anything about this Gresham's law.
This makes so much sense right now.

...

deisik and friends

One problem that has been seen many times, particularly in US financial history, is the relative valuations (to each other) of gold and silver have caused their own problems.  For example, when US silver production went up a lot in the last half of the 1800s, there was so much silver that it's price was down a lot from the 15:1 (16:1) ratio that was in effect.  The producers (and other fans, especially Wm. Jennings Bryan) of silver caused much US gold to go to Europe (as the Europeans were arbitraging a low gold price -- too low, Au:Ag was a fixed ratio despite more silver flooding the markets).

The USA was on a BIMETALLIC standard, and when new sources of gold or silver hit the market, it caused distortions.  With relative prices pushing that Au:Ag ratio around, it was decided, rightly IMO, that a single PM would be the best reference price.  And the PM they chose was gold.  So gold is what the USA stores as well as the rest of the world.

Silver is a precious metal too, with an even longer and more common use as a monetary metal than gold.  But, gold is what we as a people really want!

Truly free markets naturally decrease inequality; if you don't have much money, you're willing to work for less, and thus more likely to get hired or purchased from.  The same holds among countries as among individuals.  That money begets money through investing would not be problematic if the assets were allowed to sink or swim in the market.  (If your investments did well, you were contributing to growth and others' incomes anyway; if they did't do well, you were taking the fall.)  The problem is that  money and finance are not a truly free market.  Asset values are propped up by public power (because the state is able to, by controlling the core asset, money) and that's where money begets money in an undeserved manner.

The current worsening inequality is precisely the result of the propping-up of assets, since the rich own most of the assets.  One way to look at it is that the authorities are keeping rich people very rich, in order that their whimsical purchases allow others to survive.  Another way to look at this is that, one way or another, the system must have inequality and poverty in a low-growth environment with lots of created money.  Otherwise, the inflation would eventually take away trust in money and thus the power of the elites.  (Thomas Piketty, no friend of markets, also observes a historical correlation between low growth and inequality.)

The core driver of the whole process is that the propping up of assets gives the elites most of their power and wealth.

Gold is one of the most valuable mineral in our planet and we find it very pricey. And also gold can be used in investing the price of it will become more expensive as years go by when it is invested in the right way.

An interesting contrarian view of the repression of gold as money, and I think you are right. The current situation at least allows for private gold holding, for those who want.

In the case of truly floating exchange rates, when A's price drops against B, you could argue that A is now undervalued, but you could also argue that A was never worth as much as its old price.  This is just like any other market, and there's no clear answer.  When the state is supporting an exchange rate, and the market leans one way, the state must lean the other way.  There is no question which currency is undervalued, and which is overvalued.  Gresham's Law concerns itself with state intervention, which is distinct from the free-market scenario.

In fact, you didn't say anything new beside what has already been said in the thread by the link I provided. We have agreed there that we would call this an expansion of Gresham's Law (for the convenience sake)...

Personally, I think that Gresham's Law is primarily about one money driving out another from circulation

Gold has its price fixed for many decades now and very pricey because many consumers want it.
It is a good investment in the future.

If we really talk about truly floating exchange rates, we can say neither, that is, A cannot be undervalued at the moment, nor can it have been overvalued in the past. Why? Because the very definition of a floating exchange rate excludes such an option. If the rate of A to B changes with time, it just means that the value of A has changed against B...

In other words, a truly floating exchange rate correctly reflects the ratio of values at any given moment

Aside from gold is a very known natural metal we have, and it is very valuable a lot of consumers want it and the price of it is very high. Gold miners and the companies producing gold got very rich because of its value. It is a good investments in the future too.

If I read you correctly, you seem to be saying that the state needs the power of issuing money in order to protect us against the banks.

The truth is that the state and banks are in alliance.  The state needs banks to invent new assets that people might trust temporarily, to provide demand for the money and public debt issued by the state, so politicians can continue to receive "free" power by issuing debt.  The investment banks (and the commercial banks before they were properly regulated) are rich and powerful precisely because the state stands behind their debt (in one way or another.)  This public guarantee of private debt is what the state has to offer to banks for their service of propping up the state-issued assets.  The real role of the central bank is to keep the alliance alive by holding each side to its bargain.

Fiat has reached it's breaking point. Private Space companies like Planetary Resources will eventually succeed in the coming decades and the increased supply of PM will crash their prices. Crypto is the only game in town on a long enough time frame.

I think you are living in fantasy land.

Why do you think developing mining spacecraft, fueling, launching into space, finding/landing/mining a pm rich asteroid, return to earth and safely land with  tonnes of metal on board will be any cheaper than just mining it directly out of the ground on earth.

The Rosetta mission where a space craft landed on a comet cost 1.4 billion euros and that was a one way trip with no mining operation and return trip bolted on.

If you put the total cost at 3 billion for the bolt on mining equipment and return trip you need to mine 92,914 tonnes of pure gold just to break even at current spot prices.  Bearing in mind the gold will be contained within an ore so the total tonnage to return to earth will be far higher than the 92,914 tonnes.

Maybe in several hundred years but not something I believe I have to worry about in my own or child's life span.

And as for Bitcoin going to the moon, I think the far more likely outcome is that governments will launch their own versions of bitcoin so they can maintain full control and bitcoin will either be made illegal or just fade away and remembered as the first "crypto" experiment.

Thankfully, there's a growing awareness that, among all the gold-based assets, only physical gold is worth the proverbial powder.

Money has been around for millennia, while paper money has only been around for 400 years.  Human experience seems to suggest money is very useful to the economy.  E.g. it provides a way to save for old age.  Having little intrinsic value, money requires faith.  It's just that modern elites have managed to extend that faith to a system whose incentives make it inherently unstable and exploitative.

Hopefully, with growing awareness, the elites will eventually have no choice but to dismantle this system.

If only they can substitute the fiat money with something better. And no, Bitcoin is not any better, it has the same major problem that gold had when it had been money, i.e. money supply totally detached from the needs of an economy...

Credit money is perfect in this respect, but it is easily misused and heavily abused

...

deisik & BobK71

I think all three of us agree that a system like a Gold Standard or gold coins being circulated is likely unwieldy and not even desirable. 

Fiat is with us and likely always will be.  Yes, it is easily abused (now is but one of hundreds of examples we see in history), but fiat works well as a Medium of Exchange.  All societies need currency for the economy to flow smoothly.  If our US$ fails us, then another currency will come along.  And it will likely not be "backed" by anything either.

Gold will serve perfectly in its role of Store of Value.  That is its highest and best value.

Atlest then have competition in currencies. We need a free market for currencies, not just a few central bank controlled ones.

We need intependent currencies like bitcoin to even the balance of power. Gold is not suitable for that.

In a gold world, for example, medium of exchange function could be served by well-regulated 100% reserve banking of gold, using electronic tokens for transactions.  (Banks would essentially be storage facilities.)  For this to work would require a mass awakening, but any real progress in this area would require that anyway.

The core issue is not whether "fiat," gold-standard, or any type of system is better or worse than any other system.  It is who gets to decide.  No one or group is qualified, or should be qualified to decide.  The minute someone is endowed with that power, eventually its full destructive force will visit.  Each type of money has functioned well for millennia by more-or-less surviving in the free market.  Let it continue to do so.

"Easily abused" is putting it too mildly IMO.  The system, at its core, and likely by design, is theft.  Since modern humans don't tolerate being stolen from once they find out, ever greater theft and exploitation must be invented to cover up an original act.  To maintain trust in dollars after the financial busts that led to the Great Depression, money was tightened and the worst of the resulting pain was exported to Germany.  This led directly to the rise of the Nazis, and war.

If the system doesn't directly tell a terrorist to blow something up, it has acted in many ways to create the misery that nurtures the terrorism.  In fact, you could argue that making people angrier and angrier, and not stopping until they lose control is, consciously or not, how the system sustains itself through the centuries.  Once chaos and destruction begin, the dominant imperial reserve issuer is back in the driver's seat, since the world will be forced to beg for its help to bring peace back.

The Italian Renaissance and 18th century Scottish free banking era had great economic progress without managed money.  "Managing the money supply in accordance with the economy" is precisely equivalent to central planners' argument that if they don't control the production of food, people will starve.

There's nothing intrinsically wrong with credit, and it's an engine of growth.  The key is whether the state gets involved in propping up its value, and in deciding how much it's like money.  Once the state (and its banking allies who help it hatch the schemes) gets involved, the system becomes inherently unstable (as opposed to just abusable.)

Without elite intervention, prices tend to adjust healthily to the economy.  Historically, this is not the case 100% of the time.  When Spain found mountains of silver in South America, Europe experienced a lot of inflation and Spaniards became wealthy.  This might not have been fair, but these disturbances were self-limiting rather than toxically contagious.

Probably, if faith in our monetary system collapsed overnight, and people wanted nothing but, say, gold, there would be a lot of economic pain.  (Milder versions of this have happened throughout modern history.)  But the root cause of the problem is not, as widely reported by mainstream economists, the sounder money that people flock to.  The cause is always the financial asset bubble that occurred before the collapse, which is driven by the incentives faced by the elites under state-controlled money, in the first place.

Distortions always cause malinvestment, and the worst kind of malinvestment is probably in people.  The artificially highly valued dollar and the need to invest vast sums of created dollars at anything that might become a good business is building a large cohort of well paid finance and IT professionals in the US, and others who depend on their purchases.  If the dollar returns to free-market determined value, most of these people won't know how to supply whatever little demand there will be in the new economy.

Interesting enough, there are conspiracies that Fort Knox, a vault in Kentucky in the US that holds giant stashes of gold, really contains nothing. Given this, USD would most definitely collapse. USD isn't something that's able to hold itself up without having something physical behind it.

Gold is sure a good investment in the future but as of now I dont think everyone can afford it because even now the value of it is very high.

The value of gold is a natural metal that is produced but the quantity of of it is very limited that it makes it pricey.

...

Miss Fortune

Gold is supposed to be expensive.  It always has been.

Gold is also "wealth dense", perhaps its best characteristic.  Of course, "wealth" is in the eye of the beholder, but for over 5000 years gold has held a lot of value in our eyes.

But, gold can EASILY be bought is amounts as little as 1/10th of an ounce.  Gold 1/10th Eagles are typically available at coin shops and would cost maybe $135.  And there are other options for 1/10th oz pieces (also French 10 Franc pieces at about 0.09 ounces -- slightly smaller, but slightly cheaper too).

If your stupid you can buy gold in amounts as small as 1 grain bars (0.06479891g)

http://www.greatamericancoincompany.com/mc_images/product/detail/goldgrain.JPG

When you work out the premiums involved it will bring a tear to your eye though :)

Best value for small pieces in the UK are either 1/2 sovereigns (3.66g fine weight) or full sovereigns (7.315g fine weight), both can be had for 3-4% over spot and are VAT and capital gains tax free.  Recognised world wide and are extremely liquid.  You also get a bit of history as many are hundred plus years old, my oldest one is dated 1858 so 157 years old.

You can also get the big boys, the quintuple sovereign (also known as the £5 coin) -

This is one of my quint sovereigns (about 1.2 troy oz fine weight) V a regular sovereign

https://i.imgur.com/gjC51bh.jpg

Gold is integral part of humans and it will remain in demand in future also. The main reason for constant and increasing demand for gold is its historic existence from decades, if you measure gold in comparison of bitcoin regarding percentage increase in potential, you'd know where to really see profit. But people have faith and trust in gold from the ages and it will continue.

Gold is very popular over the period of time. Anyone can directly buy the gold and anyone can invest into the gold. Demand of gold is always high; some people invest in gold, some people need for jewelry and other cosmetics.  I think it's a good idea to have at least a small part of one's portfolio in gold and this is a good time to get in. Prices have come down from recent highs and demand will only increase.

...

markj113

IMO, buying some 1/10th oz bullion gold coins is as small a size as you need.  These run for some $140 - $150 here in the USA.  The US Mint, Canada, Austria and several others produce those 1/10th oz sizes.  YES, the premia are a bit higher, but there may be a time when you do not want to have to chop your 1 oz Gold Eagle into bits...

The 1/10th oz coins are marked with the country's mint and the weight of gold.  They are attractive, and likely to be accepted eherever gold is accepted.

I keep a few 1/4 oz gold coins too, good "size diversification".  One oz coins are big enough for all but VERY HIGH VALUE transactions, and since you can "stack" 20 Eagles into one of the US mint tubes, that is a great alternative to buying 1 kg (or 500 g) bars, which are more likely to be suspected as being counterfeit.

Who's negativity would that be though?

The bankers and their paper games driving the price aritificially low, comex leveraged over 300:1?

Physical gold sales have gone through the roof as more people realise this artificially low price is indeed a sale :)

Also you have Russia and China buying up all the physical while the West plays the paper promise game.