A study in gold

The highway is for gamblers, better use your sense; take what you have gathered from coincidence. The empty-handed painter from your streets, is drawing crazy patterns on your sheets.


Warren James said...

I have a shirt that looks just like that!! Crazy action. I really get the impression that if the line breaks (down) then all hell breaks loose, maybe the paper gold contract selloff that FOFOA speaks of (the headfake prior to freegold action).

So for the record, my bet is with the FED - they should be able to keep beating this horse a little longer, kicking that can, etc. That means gold is about to rebound in a big way, a mutli-month rally :) Bring it! Yay! Go go, Mr Bernank. Another hotdog, please. And popcorn. More beer.

Victor The Cleaner said...

It is certainly getting more interesting every day.

I know FOFOA's argument that the price of paper gold is largely made by speculators who will get scared and dump the paper gold, or who are investing on margin and will get squeezed and have to dump. Then, the London bullion market may run out of reserves because the 'strong hands' who try to get rid of their dollars and keep accumulating, can suddenly get more weight of gold for the same amount of dollars.

Also, if nominal interest rates turn negative in the collapse, gold would be in backwardation, i.e. those who own gold and usually lend it to borrow dollars to invest, would stop lending, removing further supply from the market. Basically a repeat of 2008, just worse.

But this scenario also tells you how the USG or the Fed can rescue the bullion market in this case. They just have to buy all the paper gold that the speculators dump in order to prevent the paper price from crashing. Perhaps they need to buy even more paper gold in order to raise the price sufficiently in order to stop the 'strong hands' from draining too much reserves.

It is somewhat tempting to bet on a binary outcome. Either this is 'it'. Then the time for your physical comes some time this summer the latest. Or the Fed manages to run up the paper price. Did they learn from 2008 at all?


Victor The Cleaner said...

Ah, by the way, I wonder whether Saudi Arabia will indeed crash the oil price before the end of June (as for example Chris Cook is expecting).

If the price goes down to $50/bbl with an unchanged gold price of $1650, this would give a gold-oil ratio of 33, well beyond the historical peak:


If you imagine that they are targeting a gold-oil ratio of 15, gold would have to go down to $820/ounce. This would not be possible without breaking the bullion banks.

Conversely, if gold goes to the upper boundary of your orange channel, say $2050/ounce, this would imply an oil price of $140/bbl. They would need to start a war in order to get it there.

So it seems the gold-oil ratio is going to drop out of its long term range of 10...20 for good.


Warren James said...

@Victor That is a great summary of what I understand from your notes to date. It simplifies things down to questions like 'what is the shape of the price slope required to keep the flow of physical gold, flowing in the required directions'. My guess it's the slope we see here, and it should become more true as things unravel. But I'll happily go back to the drawing board if the theory does not hold.

Kid Dynamite sent me a bunch of information about manipulation, I'm still digesting it, but the manipulation potential you describe seems simple enough - after all they can just print money to do it.

I guess that's the kind of social and political dimensions that I've been trying to get my head around, which I felt, needs exploring. Back room bailouts and the like would produce the same rule-bending effects such as papering over the crashing value of debt, while retaining the tap on the productivity of the common man.

(munches popcorn)

Speaking of politics, I have a big freegold question that I'm scared to ask lest it pisses some freegold people. But as things progress, semantic details and hypotheticals will matter less and less. What is certainly evident is that gold is starting to walk, very slowly, up the red carpet. :)

costata said...


What is your "big freegold question"?

Warren James said...

Hi costata, well since you asked:

I'm curious that many supporters of the freegold thesis have never questioned the identity of Another. Perhaps what I mean is that I'm more curious it is not questioned.

Hypothetical: let's suppose that Jelle Zijlstra was in fact the guy who wrote under the guise of 'Another'. Now suppose it was known and documented that he suffered from severe and decapitating dementia in the decade before his death. The disclosure should logically have a bearing on any subsequent interpreation of the writings.


You'll note that I'm neither saying it is him, nor that he had dementia. And I know fully well that the writings stand well by themselves as deep wisdom, have some external evidence, and have been thoroughly explored and commented on. But if there was something big in the historical events like dementia then that skews subsequent interpretations. I have read most of FOFOA's posts over the years, and digested tens of thousands of comments. I'm just curious why the general response is to dismiss the identity as unimportant. I have grappled with this question for months, but Jelle's 'appearance' crystalized the thought for me.

I really would have thought that character and environment details would go a long way to either strengthening the theory or weakening a primary theory. Freegold is not the sole progenitor, I could ask the same hypothetical of the entire New Testament if it were discovered and reliably proven that the Apostle Paul was a narcissistic control freak who suffered from regular halucinations and fits. The lack of historical medical records surviving from the Roman empire are a bit lacking, but a decade in the modern era is not too bad for finding and testing evidence.

Perhaps it reveals a special approach which I have not yet catalogued? For the record, yourself and Dr Peter Trzaska are on record as saying the identity of Another is 'not particularly important' (to paraphrase). Hope this is received in the honest nature in which it is put forward, I have no quarrel with anyone.

costata said...

Hi Warren,

(This comment may not print correctly Blogger appears to be having its own mental breakdown.)

I have no quarrel with you. You are describing a hypothetical situation.

My first reaction is that if it could be shown that Another suffered from a mental illness which impacted on his ability to reason (and presumably FOA too) that would undermine their credibility but it would not necessarily undermine their message.

I guess, for me, it comes down to a question of whether they were reporters relaying facts or creative writers telling a story that they invented.

On this issue of Another's ID, many names have been put forward but no concrete evidence to support any of them has been provided. I place more emphasis on the broad range of economists, politicians and bankers we have identified over the years who seem to have had some input, understanding or awareness of this Euro Freegold-RPG project and its implications.

I have seen a lot of material that corroborates A/FOA's claims about the emergence of the Euro Freegold-RPG architecture, the deals in the oil and gold spaces and so on. A/FOA's writings helped me to figure out where to look and what to look for. So I'm convinced that Another was an insider, in a senior position in banking at some point which allowed him to obtain high-level information.

Over and above any other factor that convinced me Another was a reliable source it's the elegant logic of this Euro Freegold-RPG solution to the problems created by the $IMFS reaching its "use-by date". So I, for one, don't feel I need to know who he was. What he said is enough for me supported by my own research.

The insights that A/FOA offered on the nature and evolution of money were also extremely valuable to me in my exploration of this subject. I would value their material for that alone if they had nothing else to offer. It helped me to sort the wheat from the chaff (so to speak) at a time when I had already become deeply sceptical about the gold bug hard money ideology.

costata said...

Hi Warren,

That comment appears to have printed correctly. In preview mode the text was runnning outside the preview window for some reason.


Warren James said...

Costata, thanks for your well-reasoned and articulate reply. That absolutely helps calibrate my investigative approach.

[I hope it helps anyone else reading this who may also be testing the Freegold theory.]

The discussion about the nature of money is also something I have benefited from. The other thing I notice is that as time progresses, most of what is discussed gains strength and support from various sources (as you note). A bogus story suffers from the opposite effect.

This is exactly what I would expect from a concept of this magnitude and importance.

Michael H said...


I am no TA expert, but I suspect that your long-term uptrend lines are too steep (first chart). While they fit the price action from '09 to the present, they do not really fit the prior price action, especially before '05.

Perhaps if the lines are re-drawn to fit the entire bull market since 2001, it would show that we have a little bit more time.

Should the 2001-current trendline be in danger of violation, then I would get worried.


RE the identity of ANOTHER:

The question boils down to which is more important, the message or the messanger.

GM Jenkins said...

Warren, I too have my popcorn and beer this morning and am watching the action. We're right at $1635. Wearing the shirt as well.

Interesting points about oil, Victor - I am thoroughly confused about that market, which is why I never comment on it.

Michael H, those trend lines are only meant to capture the remarkably steady action since 2009 (i.e. post-2008 crash). The reason I extended the top of the channel was just to show that this same slope was once support, for over 3 years (i.e. price bounced off of it 20 times, though it was violated once); since 2008, it has become ultimate resistance. If you go back to my Sunday posts, you'll see that there would be no reason to even begin worrying about the secular bull trend itself unless perhaps gold finished a month below its 3 year moving average of $1350 (which it hit in 2008).

Note that the way I drew this, even though the "lines" of the channels are spaced apart, you could draw a center trend line between them, and the lines I drew would be about 0.75% in either direction, which (for longer term positions) is not inconsistent with how much slack I'll give a technical violation before closing a trade.

doublesuited said...


Thanks for the post. I have 2 questions:

>Kid Dynamite sent me a bunch of information about manipulation, I'm still digesting it, but the manipulation potential you describe seems simple enough - after all they can just print money to do it.

Is this new information or commentary?


>> I have grappled with this question for months, but Jelle's 'appearance' crystalized the thought for me.

Are you referring to the articles discussing his books?

Thanks again and I like the idea. I have read far less than you but I have had similar thoughts.

somanyroadsinvesting said...

A concern I have with the theory is that it is reliant on what powers that be do. Perhaps everything Another and FOA said was 100% factually true at that time. However, here we are more than 10 yrs later. I am sure there has been more than 100% turnover in the people at the BIS, Fed, BOE etc. Do we have another Another telling us what they are doing now? What if they have some new plan that will suppress the price of gold at these levels for another ten yrs? Just a thought.

I agree though in terms of understanding how to think about money, monetary theory, economics etc its has been invaluable.

Edward London said...

@somanyroads...if you look at those who wield power over others, you'll find that the groups are very incestuous and very much the same. It's rare that outsiders get posted to key positions, politically, financially, economically, etc.

Guys like Brzezinski, Kissinger, HW Bush, Rockefeller, and many others are still in significant power positions, even though different people fill various holes.

You may be correct and the plan may have changed, but in reading Brezinski now for some 15 years, I haven't gotten an indication that it has too much. The specific strategies change, but the tactics and goals are often the same.

Warren James said...

@doublesuited, yes. By 'discovery' I mean 'recently received attention'. GATA recently published an item, linking back to an end-of-april article where Jaco Schipper talks about how he discovered two books by Dr. Jelle Zijlstra in a secondhand book store. I was interested to buy a copy of the 1992 book, but decided that price was too high. I suppose this show that the extent to which you pursue lines of research depends greatly on your own circumstance and your relative need to pursue answers. At some point everyone reaches a point of 'ok, I'm satisfied with those answers', or bookmarks the stopping point for investigation at another time.

re: manipulation discussion - it's old stuff, information and perspectives I wish I had known a long time ago and perhaps had been always available for study. Kid Dynamite and Bron Suchecki are being incredibly generous with their time - laying out for me the core innards of the markets. I'm doing my best to understand, though assimilating all the various frameworks is tough work (my head is a crowded place).

Most of the time there is an informal back thread discussion running between screwtape files authors, where we discuss the relative value of what is being presented on the intertubes. Generally we accept that we're working with very little information and the best we can do is try and connect the dots to form a bigger picture. At no time do we claim to know it all, only that we strive for the best picture of the current reality. It's the question that drives us. You know the question, don't you? 'What is the (financial) matrix?' ;)

doublesuited said...

OK thank you for the response.

Pamplona said...

GM, it seems the gold oil ratio is breaking to the upside. My target is 17. I also see WTIC is completing a wedge formation. We could see gold in the 1740s by month end.

costata said...


Obviously I think that A/FOA's legacy should be respected and it is still of great value. At the same time it's over a decade since they wrote so I also think we have to do our own spade work and analysis.

Doing this has led to some important finds IMO. For example the Sheik Yamani interview transcript where he claimed that the Anglo-Americans wanted the oil price 400% higher in the 1970s rather than the Saudis.

Then there was the "coincidence" of China commencing to buy USG paper in size for the first time right after the US allowed them into the WTO. Thus giving the $IMFS an extension of life though vendor financing USG debt.

The article written as a result of an FOI release where the RBA indicated that the inground gold in Australia would be taken if the Fed Gov needed to rebuild its reserves after that last big sale of gold reserves in 1997.

An explanation of the shafting of George Soros and his partners on Russian debt that Another predicted would happen.

There have been quite a few more and steep learning curves on some complex subjects as well.


doublesuited said...

Does anyone feel that knowing the identity of FOFOA would be a positive? He seems to be pretty central to the free gold theory these days. People clearly spend a lot of time reading and thinking about his work.

I understand how most people want to maintain their privacy and I respect that but wouldn't his work become more "mainstream" or followed if uninformed people just couldn't quickly write him of as some random gold blogger even if that is obviously not true.

Victor The Cleaner said...

FOFOA himself has said that he writes anonymously because he prefers his articles to be judged by their merit and not by his position or reputation.

From what I know, it is basically ruled out that he is an insider, but I think you should direct any such question to FOFOA himself and let him answer it rather than induce others to speculate and potentially to spread incorrect theories about his person.


Victor The Cleaner said...

Imagine he was some well-respected macro-economist, say a retired university professor. Would this affect the significance of his work?

Sure, some people would show up and say "but professor X writes that....". Then you get a situation such as "Roubini claims that..." and "but Krugman says he is wrong ..." And immediately you are discussing loyalties and reputations rather than content.

It is the right choice to remain anonymous and focus on the facts.


Warren James said...

@Victor, you asked "Imagine he was some well-respected macro-economist, say a retired university professor. Would this affect the significance of his work?"

Personally I believe it would, because it allows objective study of the promoter of the ideas, potentially revealing any bias and analysis of inputs which led to the original expression. These tests are more accessible to a wider range of people because we use those sorts of social analytical skills every day, i.e. they are still valid tests depending on the frame of reference of the observer. But if I may paraphrase what you are saying: 'it is difficult for most people to conduct these kinds of tests objectively without introducing their own bias, hence better to eliminate them (through anonymity)'.

And yes, the agreement here is these particular tests carry little weight in comparison to the rest of the evidence, specifically against the backdrop of the sheer quantity of research and analysis conducted by independent authors; namely the people I am lucky enough to have commenting here on the topic: costata and your good self. Thank you both for helping shape my enquiries, I'm excited to have a grasp on a concept as big and deep as this freegold transition. :)

Victor The Cleaner said...

Back to the charts. Is anyone else getting the impression that gold is magically supported whenever it gets too close to the lowest pink line?

Is it just chartsters buying at the obvious support level, or is it perhaps more significant?


costata said...

Thank you Warren. Pleased to offer any input into your research that I can.

GM Jenkins said...

I agree Victor, Since the obvious looking breakout at the end of February, it's been trading weird. Check out the monthly chart in my new post: very bearish, in that we're now in our fourth red month for the first time in over a decade, but on the other hand, it's been very controlled and looks a lot like the action in 2005, when bears could only stall it into moving sideways before it exploded by $300.