Why We Buy Gold, Oil and Life-Sustaining Tangibles with Counterfeit Dollars

 

The chart above shows price volatility for oil priced in Pounds (blue), U.S. Dollars (orange) and Euros (grey) dating back to 1950. Note the price of oil in gold (yellow line) compared to fiat currencies. Prior to the late 1960s, when Lord Keynes started the poisonous march toward modern monetary psychosis there was no volatility in the price of oil. The Kennedy administration started to give lip service to Keynesian monetary thinking and Democrats as a whole could never seemed to spend enough money to buy votes until President Nixon went all in as a Keynesian and bastardized the U.S. dollar by detaching gold from it, thereby turning it into a counterfeit instrument used to fund the military industrial complex against which his ex-boss, President Eisenhower had warned America. Eisenhower foresaw exactly what is happening now in America, namely that we are losing our republic to an unbridled democracy, which always equates into a “mobocracy.” The rule of law is being thrown out the window by those who have redistributed wealth from the middle class that created it to the bankers, corporate elites, and government-related military industrial complex who have been fed by U.S. taxpayers and the Fed’s printing presses. The rich and powerful like George Soros, Bill Gates, Michael Bloomberg, and many other multi-billionaires, now sit atop of the World Economic Forum (WEF). They are using excuses like climate change and lab-created epidemics to scare the world into submission without allowing honest and reputable scientists to challenge the self-serving religious beliefs of the WEF. Now, even Joe Manchin has joined forces to betray the citizens of West Virginia and America’s middle class as a whole. The bottom line is this: since 1950, in terms of gold, a barrel of oil has not budged in price. Long term, trading fiat money for gold makes sense because gold retains its wealth while fiat evaporates toward its intrinsic value of zero. To preserve wealth, you must exchange fiat dollars for precious metals, energy supplies and commodities. 

Many investors, yours truly included, have been frustrated with gold and silver not rising immediately, as politicians and bankers have been debasing the dollar at increasing rates of speed. Oil and other commodities have outperformed gold recently as the supply of dollars has increased dramatically. The main reason for that is because the BIS and the central banks under the BIS have disguised the loss of dollar purchasing power by intervening in the gold derivatives’ markets.

The Gold Anti Action Committee (GATA) has been documenting this reality for years, but only recently a consummate London gold insider, Peter Hambro, wrote an article explaining how price discovery is denied to those who buy and sell actual physical gold rather than paper contracts.  In his article, Hambro goes on to explain the 1980s evolution of the London paper gold market and its many derivatives which are the smoke and mirrors’ mechanisms through which the London “gold market’ pursues its fractional-reserve paper gold scheme to this very day. Here is what Peter had to say:

Once investors swallowed this stupefying pill it was easy to sell them gold that simply didn’t exist. Of course there were wary investors who found it hard to believe that the likes of Mocatta, Montagu, Rothschild and Sharps Pixley were undoubted counterparties and wanted to be assured that the gold would be there when they called for it.

“Easy, we said. Don’t bother to pay for it, just give us an initial cash margin and agree to a variation margin and our paper promise is as good as gold. This was the simple derivative.

“If you thought the price would go down, you could sell us gold you didn’t have and margin the trade in the same way. Then along came a raft of options and other products and the derivative market – for that is what this chimera was called – started to spiral like a tornado.

By suppressing the price of gold, central bankers have conned investors into believing in a currency that has become increasingly worthless over the years, starting in a major way with the 2008-09 financial crisis, and then dramatically increasing monetary destruction at an exponential pace with the Covid epidemic. In order to keep a lid on the price of gold, central bankers and their partners in crime at money center banks have had to crank up their paper market selling at an exponential pace as evidenced by the chart above on your right that records the notional amounts of derivative contracts at insured U.S. commercial banks. This has been done to keep investors unaware of the increasingly worthless state of their own currencies.

But exponential events usually don’t last long. And even when paper market price suppression in the past was modest compared to Q1 of this year, as Michael Oliver’s chart on your right shows, gold has performed very well over the long run which is why an ounce of gold will buy as much oil now as it did before President Nixon began the destruction of the dollar in 1971. It’s a bit below the trend line for now, but given the amount of paper market suppression required to hold it down, we have to be ready for an explosive rally higher for gold in the not-too-distant future. In fact, it’s possible we saw the first inklings of it this week.

Last month I started tracking the financial condition of companies covered in this letter on a regular basis, as best as I can. During periods of market contraction this is most important, but even if the gold markets are going to  explode higher like a beach ball jumping from beneath the water, and even if as I expect the prices of gold mining shares are about to explode higher, it’s always prudent to be aware of the financial conditions of companies you follow. For exploration companies, running out of cash means potential dilution. Companies that take advantage of rising stock prices to raise money are able not only to survive but if they are efficient at finding ounces in the ground they will likely build great value for investors. This revised letter is devised to help subscribers to be aware of companies that have positioned themselves well to successfully face any and all future environments.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.