Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Price Of Gold And The Art Of War Part IV

Commodities / Gold and Silver 2015 Jan 08, 2015 - 03:19 PM GMT

By: Darryl_R_Schoon


If you wait by the river long enough, the bodies of your enemies will float by
                           Sun Tzu, The Art of War, 5th century BC


After theV, bankers could no longer force the price of gold lower by loaning central bank gold and selling it in the open market. In 2001, as demand—and the price of gold—rose, the bankers were forced to flood markets with discounted ‘paper gold’, gold futures, i.e. paper promises of future gold deliveries at lower prices, in order to contain gold’s rising price.

The bankers sold their paper promises of cheaper gold on COMEX to contain gold’s rising price in an acceptable range for the next ten years, i.e. a controlled ascent, with two notable exceptions. The first was the 2008 global economic collapse. The second was the euro zone sovereign debt crisis in 2011.

In both crises, the price of gold began to rapidly rise, breaking above the bankers’ control at A and B (see gold trendline chart); when increasingly fearful investors turned to gold signaling that a severe financial crisis was underway; a signal bankers’ feared could destroy confidence in their lucrative and long-running ponzi-scheme of credit and debt.


Severe financial crises such as the 2008 global economic collapse and the 2011 eurozone crisis are an anathema to the bankers’ confidence game of credit and debt; a game where confidence is critical to keeping credit and debt circulating in increasing amounts and sufficient velocity, a monetary phenomena masquerading as growth necessary to pay down constantly compounding debts accrued when money is issued in the form of credit from central banks.

If investors suddenly withdraw from stocks and bonds and buy gold and silver, the price of gold and silver will explode upwards triggering an exodus from stocks and bonds; and the bankers’ ponzi-scheme will collapse as the circulation of credit and debt will fall below the levels necessary for markets to effectively function—this is the raison d'être for the bankers’ war on gold.

If you know the enemy and know yourself, your victory will not stand in doubt; if you know Heaven and know Earth, you may make your victory complete.
Sun Tzu, The Art of War, 5th century BC

It was the 2011 eurozone crisis (the second breach, B, of the gold trendline) that is responsible for gold’s present malaise, i.e. its fall from $1900 to $1200. In the summer of 2011, the EU sovereign debt crisis had rapidly worsened and the price of gold skyrocketed, rising from $1480 in July to $1900 by September.

The explosive breach of the gold trendline in the summer of 2011 is responsible for gold’s subsequent fall and present low price. This is because gold’s near vertical ascent is what bankers feared most, a spectacular 28.4 % rise in two months; that, if allowed to continue, would signal to investors that it was time to trade their stocks and bonds for the safety and profits­ of gold and silver.

Of the bankers’ reaction, I wrote:
When Europe’s debt contagion spread in the summer of 2011, the price of gold began moving rapidly higher which bankers feared could itself turn into runaway contagion…Jesse’s Café Americain traced the planned ambush of gold by central banks during their September take-down…Gold had risen to a record high, $1900, on September 1st and on September 2nd, central banks then took corrective action, dropping their lease rates for gold sharply lower into negative territory.
This meant that central bankers would actually pay bullion banks to borrow their gold and sell it on the open market. The new supplies of gold capped gold’s increasingly steep seven month rise and, by the end of September, the price of gold fell back to $1600.
After Sept 2nd, gold lease rates still remained negative, insuring a continued low price for gold even as the European debt crisis accelerated and the global economy slowed. This is exactly what central bankers intended. Gold is a barometer of systemic distress and central bankers wanted to conceal the flames rising from their now burning house.
drschoon,Gold Fire Sale, February 2012
After gold’s explosive breakout in 2011, the bankers have done everything in their power to force gold lower so investors will not be tempted to abandon increasingly volatile and unstable paper markets for the safety and upside of gold and silver.

This is why gold is $1,200 today instead of $2,200, $2,600 or higher. Demand for gold from the east—China, India and Russia—continues to increase, financial and geopolitical crises continue to proliferate and yet gold continues to trade in a moribund, depressed range.

Bankers have successfully overcome free market dynamics by distorting the price of gold primarily through the use of ‘paper gold’, gold futures sold at a discount enabling bankers to artificially force the price of gold lower.

In Gold Bulls Retreat As Short Holdings Rise to Highest Ever , Bloomberg News reported:
… The most-traded Comex gold option on Oct. 3, 2014 was for the right to sell December futures at $1,100 an ounce, or almost 8 percent below where prices ended the day… Short positions increased 4.5 percent to an all-time high of 81,262 contracts. The bearish holdings doubled since the last week of August.

As the pressure on the banker’s faltering ponzi-scheme continues to increase, so, too, does the bankers’ need to constrain the price of gold as another explosive breakout could gain sufficient momentum to overcome the bankers’ considerable resistance—a possibility that has stiffened the bankers’ already considerable resolve.

In the end game, however, resolve isn’t enough.

The conclusion from November’s missive is reiterated. November’s conclusion itself is a reiteration of the October missive’s conclusion. The bases for both metals – on both the nearest contracts – have moved into backwardation. The height of the backwardation has no precedent since 2008. For those heavily skewed towards silver over gold, the outperformance of silver is likely to commence with no notice.
Sandeep Jaitly, Fekete Research: Gold Basis Service, November 27, 2014

On November 9, 2014, Dr. Fraser Murrell’ article, Permanent Gold Backwardation = Global Meltdown - An analysis of the potential for permanent gold backwardation to lead to global financial crisis and an enormous increase in the gold price shed light on Professor Antal E. Fekete’s and Sandeep Jaitly’s work on backwardation and precious metals.

Dr. Murrell wrote:
Antal Fekete warned many years ago that a “permanent gold backwardation” would act as a financial black hole that would consume the entire global financial system…some “financial experts” (who have called Fekete a “pseudo-expert”) including Dr Tom Fischer with help from Bron Suchecki (Perth Mint), have claimed that backwardation represents nothing special and that it creates no arbitrage opportunity and so it has NO effect on the economy.

However, their argument fails to understand the nuance of “fractional reserve bullion banking” whereby (in addition to buying and leasing physical gold) a bullion bank can create (out of thin air) and sell into the market gold certificates which carry none of the costs of holding physical gold  The extra saving results in the arbitrage.

… (1) when there is high market demand for physical relative to future gold, the bullion banks can arbitrage by selling (expensive) spot certificates and buying (cheap) futures, and (2) when there is high market demand for future gold relative to spot gold, the bullion banks can arbitrage by buying back (cheap) certificates and selling (expensive) futures.

There is however one obvious risk in this business, namely that they get stuck with a full arbitrage book in a permanent backwardation – whereby they have sold (unbacked) gold certificates and the market never swings back into a contango to let them out…

… Over the last three years the bullion banks and governments have tried to break the backwardation and normalize the economy by dumping huge amounts of physical gold and “paper gold” at the gold spot price.

But they have failed, because although they have reduced the gold price from $1,900 back down to $1,200, they have not been able to create a lasting contango.  Instead, the gold buyers and hoarders have dug in, bought everything and demanded more – which has only strengthened the backwardation.

Sooner or later, the bullion banks and governments will run out of ammunition and they will be forced to step back and allow the market to do its thing…The gold price will eventually peak in the tens of thousands of dollars and unless the bullion banks unwind their short positions, they will either default or go bankrupt.

I count Professor Antel E. Fekete and Sandeep Jaitly as colleagues and friends. In 2009, I was in Canberra, Australia at the Gold Standard Institute symposium as a speaker with Professor Fekete and Sandeep Jaitly when Bron Suchecki spoke, not as a representative of Perth Mint but as one whose knowledge about the gold refining industry contributed needed light on an otherwise opaque subject.
Dr. Murrell’s article, however, on Professor Fekete and backwardation sheds even more light on an even more opaque subject—the backwardation of gold and silver in the end game. Professor Fekete’s thesis that permanent backwardation in the end game will lead to hyperinflation and a total collapse of fiat money and the triumph of gold is in line with my own prognosis.

A recent book, Gold Value and Gold Prices, 1971-2021 by Gary Christenson also bears special attention regarding gold’s price in the end game; although it should be noted the dollar terms in which Gary Christenson values gold are subject to extreme change should hyperinflation destroy fiat currencies as current currency yardsticks may not be tomorrow what they are today. In such terms, gold’s final resting place will be far higher.

I also recommend Fiat Paper Money; The History and Evolution of our Currency by Ralph T Foster, a disturbing book that should be given perhaps as a gift to all economic Luddites who still believe paper money, stocks and bonds will hold their value in the coming days.

On January 24th in Spokane, WA, I, and noted silver expert, David Morgan along with Marshall Thurber will present The Checkerboard Game—the Future of Money, Power and Consciousness, for event details see  

When David Morgan suggested the topic of change should be covered in addition to gold and silver, I asked Marshall Thurber if we could do The Checkerboard Game, a profound life-altering experience about economic and social change, a game he had created for the Positive Deviant Network where I had presented my paper predicting a cataclysmic economic collapse. This will be the first time The Checkerboard Game will be available to the public.

In my current youtube video, The Checkerboard Game and the PDN, I talk about how The Checkerboard Game was created. Marshall was a student of both Buckminster Fuller and Edwards Deming (the father of the quality revolution), two of the greatest minds of the 20th century.

Today, in January 2015, we are well into the end game. Capitalism’s fatal wasting disease, deflation, is gaining momentum around the world as it also did during the 1930s. The present power structure does not have much time left. Its fall has begun and so has the emergence of the better world to come.

Buy gold, buy silver, have faith.

By Darryl Robert Schoon

About Darryl Robert Schoon
In college, I majored in political science with a focus on East Asia (B.A. University of California at Davis, 1966). My in-depth study of economics did not occur until much later.

In the 1990s, I became curious about the Great Depression and in the course of my study, I realized that most of my preconceptions about money and the economy were just that - preconceptions. I, like most others, did not really understand the nature of money and the economy. Now, I have some insights and answers about these critical matters.

In October 2005, Marshall Thurber, a close friend from law school convened The Positive Deviant Network (the PDN), a group of individuals whom Marshall believed to be "out-of-the-box" thinkers and I was asked to join. The PDN became a major catalyst in my writings on economic issues.

When I discovered others in the PDN shared my concerns about the US economy, I began writing down my thoughts. In March 2007 I presented my findings to the Positive Deviant Network in the form of an in-depth 148- page analysis, " How to Survive the Crisis and Prosper In The Process. "

The reception to my presentation, though controversial, generated a significant amount of interest; and in May 2007, "How To Survive The Crisis And Prosper In The Process" was made available at and I began writing articles on economic issues.

The interest in the book and my writings has been gratifying. During its first two months, was accessed by over 10,000 viewers from 93 countries. Clearly, we had struck a chord and , has been created to address this interest.

Darryl R Schoon Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules