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#1 grog

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Posted 16 November 2017 - 01:18 PM

Latest - Oil for Gold
the latest has yet to come
 
 
 
drop the Petrodollar in favor of Gold
 
 
 
█  █  █  █  █  █  █  █  █ 
 
Petro_Gold.jpg?width=500
 
 

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#2 grog

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Posted 16 November 2017 - 01:35 PM

Oil For Gold - Real Or Imagined?
 
 
 
 
October 29, 2017
 
 
 
 
 
By having control of the physical market for gold, China can threaten to use it to destabilize the dollar, without destabilizing the yuan. As such, it is potentially devastating, and used carelessly could trigger an economic collapse in Western capital markets, wreaking financial and economic havoc in America and other advanced nations. China will never be wholly independent from trade with these nations, and severe financial and economic damage to the advanced economies will rebound upon her to some extent. For this reason, she has so far held off using gold as an economic and financial weapon, while she continues to insulate herself from periodic crises in Western economies.   - Alasdair Macleod (Oil For Gold)
 
In response to questions about when China would finally cast aside the dollar and run the price of gold up, I've always replied that China would be shooting itself in the foot if it tried to replace the dollar too quickly.  Don't forget, China holds about $1.2 trillion in the form of Treasuries. Note: this ratio does not include the market value of its gold holdings, the actual amount of which is unknown outside of a small circle of Chinese officials.
 
When the idea of a gold-backed yuan-denominated oil futures contract surfaced, it became en vogue for those unable to analyze their way  out of a paper bag to issue commentary refuting the idea.  For some, if an event has not already occurred, they are unable to "see" it.
 
This article from Alasdair Macleod is a must-read for anyone who wants to understand the path leading up to the ability to convert oil sold in yuan or gold by China's largest oil suppliers.  Judging by the various recent oil trading and gold trading agreements between Russia and China, the conversion of oil sales into gold  may well be already occurring in a two-stage process between Russia and China.
 
The purpose of this article is to put the proposed oil for yuan contract, which has been planned for some time, into its proper context. It requires knowledge of the history of how China's policy of internationalising the yuan has been developed, and will be brought up to date with an analysis of how the partnership of China and Russia is taking over as the dominant power over the Eurasian land-mass, a story that is now extending to the Middle East. To read the rest click here: Oil For Gold - Macleod
 
While Alasdair does not overtly acknowledge the idea of a gold-backed oil contract coming from China, I would argue that the article about a gold-yuan oil futures contract  in the Nikkei Asian Review - a highly regarded publication - was likely floated intentionally by the Chinese Government. If you read through Alasdair's article, it's difficult not to come away with the impression that China has been methodically and patiently putting together the pieces to support the ability to convert oil sold China - benchmarked by the yuan - ultimately into gold.
 
Yes, the fact that China does not currently permit gold to be removed from China in large quantities needs to be addressed.  Analysts using this to refute the oil/yuan/gold notion seem to conveniently overlook the fact that regulations can be revised.  I would suggest that "footprints in the snow" are leading to this eventuality. It's now possible to sell oil to China in dollars or rubles or rials then  convert the proceeds into offshore yuan and buy gold in China's Free Trade Zone.  As Alasdair himself points out:  "Gold futures contracts in yuan are now available to international dealers in Hong Kong and Dubai using the SGE gold price as benchmark."
 
Furthermore, the Commercial Bank of China (State-owned) is the sponsor of a gold futures contract offered by the London Metals Exchange.  Seems pretty obvious that an oil seller can ultimately convert the proceeds of oil sold to China into gold using three transactions.  Why not consolidate that process into one contract?  I would suggest that a gold-backed yuan-denominated oil futures contract is inevitable.  Just maybe not one the timeline preferred by the western gold investing community.
 
 

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#3 grog

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Posted 16 November 2017 - 02:09 PM

The Historic Gold-Oil Ratio Forecasts A Much Higher Price For Gold
 
 
 
 
JANUARY 2, 2014
 
 
 
 
While many analysts on Wall Street forecast gold to head lower in 2014, they fail to realize that its historic ratio to oil points to a much higher price.  It seems like everything today is based on financial wizardry rather than fundamentals of a physical economy.
 
The economy has moved so far away from the fundamentals that it no longer has any idea how to function without total market rigging.  The Fed and central banks believe they can continue to control the markets, however the weight of all that paper crap will overwhelm them at some point in time.
 
I recently wrote the article, Silver To Hit New Highs As The Quality Of Analysis Sinks To New Lows.  In the article I provided information on how the historic Oil-Silver Ratio would relate to a much higher price of silver today.
 
For example, the price of silver would be $92.67 today based on the average Oil-Silver ratio during 1961-1970.  For quick reference here is the table from the article:
 
Present Silver Value At Prior Silver-Oil Ratios (based on $111.30 Brent crude oil)
 
1981-2000 (3.8 ratio) = $29.30
 
1971-1980 (2.1 ratio) = $52.95
 
1961-1970 (1.2 ratio) = $92.67
 
Some of my readers asked me how the historic Gold-Oil ratio would impact the price of gold today.  So I decided to look at the data and put this article together.
 
From 1961-1970 the price of gold behaved similar to silver - basically flat compared to price of oil.  Of course this was due to the fact that the Fed & Central Banks had to manipulate the gold market through the London Gold Pool to keep the price fixed at $35 an ounce.
 
However, the London Gold Pool fiasco started to get into trouble by the end of the decade as the price of gold increased to $41.39 in 1969… shown in the chart below:
 
Gold vs Oil Price & Ratio 1961-1970
 
If we consider the average Gold-Oil ratio for 1960's decade it was 20 to 1.  Which means one ounce of gold could buy 20 barrels of oil when gold was still functioning as a monetary metal.
 
After Nixon dropped the Dollar-Gold peg in 1971, all hell started to break loose in the gold market as the price of the yellow metal shot up to $97.32 by 1973.  You will notice that the Gold-Oil ratio increased substantially in 1973 compared to 1971.
 
The reason for this was due to the fact that the price of gold (1971-$40.80, 1973-$97.32) increased to a much larger degree than oil (1971-$2.24, 1973-$3.29).   This is shown in the next below:
 
Gold vs Oil Price & Ratio 1971-1980
 
As the price of oil nearly quadrupled in 1974 to $11.58 from the impact of the Arab Oil Embargo, the Gold-Oil ratio fell to 13.8.  Even though the price of gold declined a bit in 1976, it moved higher in tandem with the price of oil by the end of the decade.
 
After the Dollar was no longer pegged to gold, the average Gold-Oil ratio during 1971-1980 declined to 15.9 compared to 20 in the previous decade.
 
When I crunched the numbers for the Gold-Oil ratio for the years 1981-2000, I was quite surprised that the average was higher than the previous time period.
 
Gold vs Oil Price & Ratio 1981-2000
 
You will notice that from 1986 to 1999, the gold price trend line was above the oil price line.  Thus, we had very high Gold-Oil ratios during this time period.
 
The reason for the lower price of oil is that several new large fields came online.  We had the North Sea Oil Field come into production, Alaska Prudhoe Bay and a ramp up of the Gulf of Mexico.
 
Interestingly, gold was valued higher to oil than I assumed… even higher than the 1971-1980 time period when it reached a record of $850 an ounce.
 
The lower price of oil is what pushed the average Gold-Oil ratio higher to 18.6 in 1981-2000 compared to 15.9 in the prior time period.
 
Now… let's look at what took place since 2000.  Here we can see a few noticeable trends.  First, during the majority of this time period, the oil price line was higher than gold.  Second, the average Gold-Oil ratio is much lower than in any of the previous time periods.
 
Gold vs Oil Price & Ratio 2000-2013.New
 
If we disregard the 2009 Gold-Oil ratio as it was a huge anomaly and focus on 2010 and 2012, the price of gold valued in oil terms was at its highest.  Furthermore, even though the price of gold hit a record in 2011, the average price of gold was 2012 was higher.
 
Average Gold Price
 
2010 = $1,225
 
2011 = $1,572
 
2012 = $1,669
 
2013 = $1,411
 
So, when the price of gold was attempting to break-out above $1,800 in September of 2012 and surpass its 15 to 1 Gold-Oil ratio, the Fed & member banks came into the markets and decided enough was enough (shown by the nice Red Arrow).
 
This was also true with Silver:
 
Silver vs Oil Price & Ratio 2000-2013.New
 
(NOTE:  the chart should read Oil-Silver ratio)
 
An interesting factor as it pertains to energy and gold can be seen in the table below.  I have been compiling data for diesel consumption in the top gold miners.  Not only is the amount of diesel consumption per ounce of gold produced increasing… so is the price of diesel.
 
Top 5 Gold Miners Diesel Cost 2010-2013 Est
 
The majority of the diesel used by these mining companies is in the extraction of the gold ore.  A small percentage of overall diesel consumption is used in construction of mine sites as well as a source of electric generation in remote locations when electricity is not available.
 
In 2010, the top 5 gold miners produced 24.7 million oz of gold consuming 18.7 gallons of diesel per ounce to do so.  If we go by the U.S. price of a gallon of diesel in 2010 ($2.99), these top gold miners spent $1.38 billion for this fuel cost.  Thus, it took approximately $55.91 in diesel-fuel costs per ounce of gold to extract the ore.
 
If we make some conservative assumptions based on past trends, the estimated cost of diesel to extract gold in 2013 will more than double to $113.68 an ounce.  This is quite interesting once we consider that the current price of gold is $1,227 compared to the average of $1,224 in 2010.
 
The figures in the table are used as a form of reference.  Diesel prices throughout the world are higher or lower than the average shown in the U.S.,  but, at least it gives us a basic idea of just how much fuel costs are rising in the production of gold.
 
The gold miners are consuming more energy than ever to produce gold today, however Wall Street believes the price of gold needs to fall below $1,000 in 2014.  So it goes… as Wall Street becomes more insane, so do the markets.
 
Getting back to the Gold-Oil ratios, let's look at what the gold price would be today based on the past ratios:
 
Present Gold Value At Prior Gold-Oil Ratios (based on $111.70 Brent crude oil)
 
1981-2000 (18.6 ratio) = $2078
 
1971-1980 (15.9 ratio) = $1,776
 
1961-1970 (20.0 ratio) = $2,234
 
If we go by the 1961-1970 historic Gold-Oil ratio when gold was a monetary metal, than the price of gold would be worth $2,234 today.  Of course this does not consider all the other factors such as the upcoming collapse of the global fiat currency system, U.S. Treasury Market and the majority of paper assets.
 
With the current price of Brent crude at $110 and gold at $1227, the Gold-Oil ratio is 11.1, lower than the 12.6 average for 2013 and 11.6 average for the decade.
 
As the Fed & Wall Street continue to delude the public that the proper value for the price of gold is to head lower, the energy fundamentals are pointing to a much higher figure.  Financialization and Bull Excrement rule the day in the economy.
 
Fortunately, those few who still adhere to the fundamentals will benefit tremendously when the $100's of trillions of paper claims falls under the weight of Newton's Law of Gravity.
 
 

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#4 grog

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Posted 16 November 2017 - 02:15 PM

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#5 grog

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Posted 16 November 2017 - 02:18 PM

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#6 grog

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Posted 16 November 2017 - 02:20 PM

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#7 grog

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Posted 16 November 2017 - 02:29 PM

Gold/Oil Ratio Extremes
 
 
 
 
 
August 20, 2004
 
 
 
 
 
With crude oil relentlessly marching towards $50 this summer, market commentary is utterly dominated by the potential implications of this major oil upleg.  In fact it is rather amusing to see practically every single negative development in every major market blamed on oil, the new universal scapegoat for Wall Street.
 
What a convenient excuse too!  While the stock markets remain overvalued in a Great Bear following a supercycle bubble and therefore almost certain to grind lower until their ultimate secular undervalued bottom, conventional investors can continue to blissfully ignore all these timeless truths thanks to oil.  If the markets were to plunge from here, I am certain that oil, and not rampant overvaluations, would be assigned the blame.
 
But while conventional investors blame oil for all of their bad trades rather than their own folly in buying grossly overvalued stocks during a supercycle bust, contrarians can celebrate this new commodities bull.  Indeed there are positive relationships between oil and other commodities that forecast vast profits ahead for those willing to heed them.  The tight relationship between oil and gold is the primary example.
 
It is fascinating to realize that the Ancient Metal of Kings, gold, has a very strong positive correlation with the King of Commodities, oil, throughout modern history.  When oil is strong, gold tends to be strong as well.  In fact, the prices of these two commodities are so intertwined over the long term that they seem almost incapable of heading in separate directions over longer strategic timeframes.
 
This week I would like to consider the powerful gold and oil interrelationship over the past four decades or so.  The implications of our present major oil upleg for gold investors and speculators are enormous and the coming precious-metals profits will be vast if these commodities’ rock-solid historical relationship holds.
 
Instead of resigning to the self-defeating Wall Street strategy of lamenting and whining about oil rising on global demand growth outstripping global supply growth, why not just accept this as the new reality?  And if the States, Asia, and Europe are unlikely to quit guzzling oil soon, if ever, then why not deploy our capital so we can ride these new strategic trends to great profits?  Regardless of if we personally like rising oil or not, we must adapt to new market realities to be successful in multiplying our capital.
 
Understanding the gold/oil ratio is one key way to realize why rising oil is not damaging to all markets.  While higher oil prices do tend to slow down the economy as a whole and reduce disposable income for most Americans, which certainly does eventually adversely affect the stock markets, gold shines brilliantly during these very times.  The gold/oil ratio helps quantify this relationship for analysis.  It is simply computed by dividing the gold price by the oil price.
 
Our trio of graphs this week are updates from my earlier “Gold Boiling in Oil” series of essays.  This line of research is battle tested over time and has already helped us lead our subscribers to huge profits in gold-related investments and speculations in the past four years.
 
When my original essay advancing these arguments was published over four years ago in June 2000, oil was trading near $32 and gold around $292.  Since then gold has run up nearly 47% while unhedged gold stocks (HUI index) have screamed 340% higher!  It definitely leads to big wins to pay attention to the gold/oil ratio and trade accordingly rather than fretting about higher oil prices.
 
And, truly, in real inflation-adjusted terms oil prices are not even that high yet in the grand scheme of things.  Our first chart uses the latest US CPI inflation numbers just released this week to show the real prices of gold and oil in today’s 2004 dollars over the past four decades.  All of this talk of new record highs in oil in the news every night, while technically true in nominal terms, is extremely misleading.
 
Comparing the prices of anything over the long term without considering changes in purchasing power due to the Fed’s relentless printing-press inflation is like comparing apples to oranges.  $45 oil may seem high today to an average American who hasn’t studied market history, but as this real chart shows it is really nothing to get excited about.  Oil was higher than today’s levels for over half a decade in the late 1970s and early 1980s and the world didn’t implode into the dark ages.
 
Want high oil prices?  Try the staggering $93 per barrel achieved in April 1980 at the top of the last oil bubble!  We are barely even halfway to those stellar extremes today!  As a matter of fact, the average real oil price since 1980 has run nearly $37 in 2004 dollars.  Thus today we are not even that much higher than average yet around $45.  Perspective is everything in the markets, and ignoring inflation in multi-decade price comparisons assures a dangerously skewed view of reality.
 
Why is considering inflation essential?  Imagine having a $20k income in 1980 when a hamburger cost $1.  Assuming you really liked hamburgers, you had enough buying power to consume up to 20,000 of them per year.  Fast forward to 2004 and assume you are earning $200k in today’s dollars.  If you think back to 1980 and earning only 20k you probably feel very blessed today.  Your 10x gain in income does sound good on paper, but if a decent hamburger runs $10 today then you still only earn enough to purchase 20,000 hamburgers per year.  It’s a monetary wash and you are no better or worse off!
 
Your nominal income went up greatly, the nominal hamburger price also soared, but in real terms of what your income can buy nothing actually happened.  In this simplified example, all that really transpired is the Fed increased the money in circulation by 10x, hence both incomes and prices went up by 10x while real purchasing power remained constant.
 
The price of hamburgers, oil, gold, or anything is only relevant over long spans of time in inflation-adjusted constant-purchasing-power terms.  Around $45 in today’s dollars, oil is only half as expensive as it was to Americans in 1980 based on our income levels then.  True new all-time oil highs will not be achieved until oil exceeds $93, and this number is constantly rising as long as the Fed incessantly runs its printing presses.
 
Based on this chart, oil doesn’t even start to get interesting until it breaks $50.  And I would probably not consider oil prices to be on the high end of things personally unless it gets above $60.  The next time some Wall Street commentator moans about today’s “all-time high oil prices”, realize he is either naïve and has not studied market history, or he is trying to mislead you by intentionally ignoring inflation, or he is outright lying to deflect your attention away from the real issues plaguing today’s stock markets like excessive valuations.
 
The long-term chart above is also very valuable to help visualize just how closely gold and oil prices tend to correlate over strategic time frames.  If you look at major secular trends measured in years, gold and oil pretty much move in lockstep.  Yes, they deviate tactically over shorter periods of time as their respective supply-and-demand influences dictate, but over the long run they travel the same path.  Their prices tend to oscillate around each other and periodically cross on this chart.
 
Over the entire four-decade span of time charted on this graph, these monthly gold and oil prices have a correlation coefficient of 0.835 and an R-Square value of 69.7%.  These are very impressive numbers over such a long period of time and really drive home just how closely gold and oil are intertwined.
 
If you focus your attention on the far right side of this graph, however, a glaring anomaly becomes instantly apparent.  Since oil bottomed near $11 in December 1998 ($13 in 2004 dollars) it has surged up dramatically in several subsequent uplegs achieving a mammoth 312% bull-to-date gain as of this week.  But over the same period of time gold has lagged dramatically, only rallying by 39% or so in nominal terms.  So far the gold price has not been able to even attempt to retain parity with oil in recent years.
 
Now the only other similar time in history when oil was strong and gold lagged was in the late 1970s.  As this chart reveals, for years gold lagged oil but when it finally did decide to catch up it powered higher with a vengeance.  I believe we are being set up for a similar scenario today, where crude oil blasts higher while gold gets off to a slow start initially.  But eventually investors will realize that gold is radically undervalued relative to crude oil and they will bid up the gold price dramatically in the coming years.
 
The gold/oil ratio is the perfect tool to help precisely quantify the degree to which gold leads or lags crude oil.  As I discussed regarding the gold/silver ratio in the current issue of our monthly Zeal Intelligence newsletter for our subscribers, any ratio ultimately describes the relative overvaluation or undervaluation of one commodity as expressed in another.
 
When the gold/oil ratio is high, it means that gold is overvalued relative to crude oil, either that gold is getting too expensive or oil is getting too cheap.  When the gold/oil ratio is low, as today, it means that gold is undervalued relative to crude oil.  Either oil is getting too expensive or gold is getting too cheap.  For a variety of reasons discussed below, I believe that the latter statement is most true today, that gold is just too cheap.
 
As the latest graph of the gold/oil ratio reveals, this key ratio is currently at its third lowest extreme in history!  The red numbers marking each low correspond with the first graph above.
 
One of the most fascinating attributes of long-term ratio analysis is the elegance with which it integrates two foundational market principles.  First, all markets abhor extremes.  Nothing stays chronically overvalued or chronically undervalued for long.  Just ask the NASDAQ refugees from their 2000 crash!  Second, a direct corollary to the first principle, over time all valuations revert back to their means, or averages.
 
When investors identify unsustainable extremes and harness their capital to ride the inevitable mean reversions, it is one of the surest-fire and least risky ways possible to earn massive profits.  My entire Long Valuation Wave thesis on the general stock markets is based on this very idea, as are many other successful investment and speculation theories.
 
In terms of the gold/oil ratio, today gold is the third cheapest that it has ever been relative to oil in our modern age!  At one ounce of gold only being worth 8.7 barrels of oil today, only the 8.2 barrels in September 1976 and 8.1 barrels in November 2000 have been lower.  In addition to these three all-time extremes, there have been three other slightly lesser extremes in this gold/oil ratio which are noted in the graph above.
 
Now if you examine all five of the past four decades’ extreme lows in the gold/oil ratio (GOR), there are a couple rather striking attributes that they all share.  First, because the markets abhor extremes, the GOR doesn’t linger for long once it hits an extreme high or low.  Second, because markets always mean revert, each of these extremes is always followed by a mean reversion.  Either oil plunges or gold soars or both to bring the GOR back into line.
 
This chart highlights the four-decade GOR average line in white, which happens to be at the level where an ounce of gold will buy 15.4 barrels of oil.  In addition, we drew in standard-deviation lines to help judge the degree of extremes.  By definition, 68.3% of the data points are within one standard deviation of the mean, 95.4% are within two standard deviations, and a whopping 99.7% are within three standard deviations.  The farther out that a particular GOR extreme is from the mean, the rarer it is statistically.
 
Now please consider the past five extreme GOR lows before today’s.  Using the standard-deviation and average bars drawn in above we can roughly quantify the degree of mean reversion, and often overshooting, after each extreme low.  For example, after September 1976’s extreme GOR low of 8.2 the GOR ratio quickly mean reverted and overshot to +1 standard deviation.  Since it traveled from approximately -1 SD to +1 SD, we can say it moved 2 standard deviations in rough eyeball terms.  The actual precise number from the raw data is 2.5 standard deviations.
 
The second GOR extreme, June 1982’s 9.0, ended up mean reverting about 1.6 standard deviations back up to its average.  The third, November 1985’s 10.6, blasted from -1 to +3 or through an amazing 3.9 standard-deviation bands.  Four and five weighed in at 3.2 standard deviations and 1.3 standard deviations respectively.  If we average these mean reversions we get a typical expected surge higher of 2.5 standard deviations after an extreme GOR low.
 
The standard deviation of the gold/oil ratio is running right at 5.0.  If today’s GOR follows historical precedent and mean reverts back up 2.5 standard deviations, we are talking about a 12.5 addition to today’s extremely low GOR.  Thus, a potential target gold/oil ratio in the next inevitable mean reversion is 8.7 plus 12.5, or 21.2.  And as you can see above, a 21.2 GOR is barely above +1 standard deviations so it is not a rare event by any stretch of the imagination and is actually quite probable.
 
What does all this mean?  Don’t let the necessary statistical mumbo jumbo cause your mind to zone out, because the implications to gold investors are profound and potentially enormously profitable.  If today’s extreme GOR low around 8.7 catapults up to 21.2 in the years ahead, which is merely an average mean reversion, what will this portend for the price of gold?
 
We should consider this in three scenarios, oil rises, oil falls, or oil flatlines.  I personally believe oil is going to rise significantly over the long-term, but in fairness all three scenarios should be considered.
 
While oil may be overbought short-term, I believe it is in a long-term bull market.  On the supply side major new oil deposits are getting harder and harder to find.  Unfortunately it appears that the world as a whole is reaching its Hubbert Peak of production, the peak-production level at which existing fields will never yield greater numbers of barrels per day and will actually start declining as they are depleted.  Some major oil companies have been restating their reserves downwards and none of the majors are succeeding in growing supplies fast.  Even the mighty OPEC claims it is running near capacity!
 
On the demand end as we Americans know better than anyone else, once one experiences a first-world oil-rich lifestyle it is almost impossible to go back.  Billions of people in China and India alone, let alone the rest of Asia and former Soviet-block European countries, are finally getting their first tastes of an oil-driven first-world civilization.  They are unlikely to suddenly stop driving cars, transporting goods, or moving people.  On the contrary, their per capita oil demand should ramp up vastly and eventually start approaching American levels.
 
With global demand growth far outstripping global supply growth, oil could rise for a decade or more until some wild new technology manages to displace it as prices get too high.  Let’s be really conservative and assume a $60 per barrel average price in the coming years if this scenario plays out.  A gold/oil ratio mean reversion to only 21.2, not even extreme on the upside, would yield a target gold price of $1272!  That is up 215% from today’s levels.
 
Now the Wall Street scenario of choice today is that oil is chronically overvalued and falls dramatically.  Perhaps massive new Siberian deposits are found and come online, or spectacular new deep-water drilling technology is developed.  And maybe the economies of China and India slow down so oil demand growth in Asia abates.  Let’s assume oil falls all the way down to $30 in this scenario, a price which I suspect is ridiculously low given today’s immensely bullish supply and demand fundamentals for crude.
 
At $30 oil and a 21.2 gold/oil ratio mean reversion, we are still looking at $636 gold.  This is 57% higher than today’s levels.  Thus, even in a near doomsday scenario where oil prices plunge to $30, the current GOR extreme is so obnoxious on the low side that gold will have to surge higher anyway to bring this ratio back into line.  Talk about a good speculation!
 
A final scenario is oil flatlines near $45 in the coming years, neither rocketing towards $60 and beyond nor plummeting to $30.  At a GOR of 21.2, $45 oil means $954 gold, or a massive 136% gain from here.
 
Isn’t this exciting from a contrarian perspective friends?  The gold/oil ratio is so extraordinarily low today that gold prices will have to go much higher when this ratio inevitably mean reverts even if oil falls dramatically.  And you can play with these numbers as much as you want, including reducing the expected mean reversion, and it is still very bullish for gold no matter what happens to oil prices in the years ahead.
 
This is why betting with a mean reversion near a historical extreme is such a high-probability-for-success trade.  By all historical standards gold is just far too undervalued today relative to oil, but the markets abhor extremes and they will mean revert to correct this one sooner or later here.  If you are long leveraged gold investments and speculations like quality unhedged gold stocks when this happens, you will probably earn a fortune.
 
Our final graph presents this gold/oil ratio from a different perspective called the gold cost of crude oil.  It tells us how many ounces of gold it takes to buy 100 barrels of oil at any given time in modern history.  At the four-decade average of 7.1, for example, it means that a buyer would have to sell 7.1 ounces of gold to raise the cash necessary to buy 100 barrels of crude.  This alternative view of the GOR offers additional insights.
 
Not surprisingly as a gold/oil ratio derivative, the gold cost of crude oil is also at its third most extreme level in modern history.  At 11.5 ounces of gold for 100 barrels today, only September 1976’s 12.2 and November 2000’s 12.4 are greater.  And if you look at the five previous extreme gold-cost-of-crude-oil spikes, they all reverted rapidly back to or through the mean without exception.  Odds are today’s extreme will follow suit.
 
So let’s assume that today’s gold cost of crude oil (GCCO) mean reverts from 11.5 back merely to its average of 7.1, a very conservative assumption since four of the five previous GCCO extreme highs reverted well below the mean.  What would this portend for the price of gold in our three different oil scenarios discussed above?
 
At secular-bull $60 oil, 100 barrels of crude would be worth $6000.  If it takes 7.1 ounces of gold to buy this shipment of oil, then the gold price would be $845, or 109% higher than today’s levels.  At flatlined $45 oil, this 7.1 GCCO yields a gold price of $634, 57% higher than current levels.  And at doomsday $30 oil, we are looking at $423 gold which is still a modest 5% above today’s status quo.
 
This third most outrageous gold/oil ratio extreme in history that we see today is so fascinating and so important because its inevitable mean reversion virtually guarantees a major rise in the price of gold from current levels.  By modeling merely average to below average mean reversions and oil prices ranging from 33% higher to 33% lower than today’s, we saw a range of potential gold gains running from 5% on the extreme low end to 215% on the high end.
 
Since the current gold/oil ratio extreme seems to be telling us that a continuing gold bull is inevitable, it makes great sense to invest and speculate in gold-related plays.  My long-time favorite leveraged gold investments and speculations are quality unhedged gold stocks, which greatly leverage the underlying gains in gold.
 
For example, bull market to date in gold, the HUI unhedged gold-stock index has leveraged the Ancient Metal of Kings by 6.2x on average during each major upleg.  So if gold runs up 5% to 215% higher as the gold/oil ratio mean reverts in the coming years, the best gold stocks could see gains running from 31% in an oil doomsday scenario to 1333% or higher during a continuing oil bull market.  That’s a heck of a lot of potential upside in my book with very minimal downside risk!
 
If you don’t want to put in the long years of research time necessary to uncover the great gold opportunities yourself, please consider subscribing to our acclaimed monthly Zeal Intelligence newsletter.  My partners and I analyze and monitor these incredible gold and silver opportunities every month and recommend new trades as appropriate.  We are currently trading elite gold and silver stocks, highly-leveraged gold-stock options, and are always looking for new ways to profitably ride this ongoing gold bull.
 
The bottom line is today’s incredibly low gold/oil ratio extreme is absolutely unsustainable in light of historic precedent.  The markets abhor extremes and always mean revert away from these extremes.  Riding these inevitable mean reversions is one of the most profitable and least risky strategies possible for investors and speculators.
 
And since gold is so ridiculously undervalued relative to oil today, it really doesn’t matter where oil goes.  Whether oil soars or slumps, a gold/oil ratio mean reversion is going to push gold higher, probably a whole heck of a lot higher, in the years ahead.
 
Rather than whining about the oil upleg like the myopic Wall Street shills, why not ride this coming gold/oil ratio mean reversion up to potentially legendary profits in your own portfolio?  Put the oil bull to work for you!
 
 

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#8 grog

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Posted 16 November 2017 - 02:46 PM

Russia and China Declare All Out War on US Petrodollar - Prepare for Exclusive Trade in Gold
 
 
 
 
 
JULY 16, 2017
 
 
 
 
 
The formation of a BRICS gold marketplace, which could bypass the U.S. Petrodollar in bilateral trade, continues to take shape as Russia's largest bank, state-owned Sberbank, announced this week that its Swiss subsidiary had begun trading in gold on the Shanghai Gold Exchange.
 
Russian officials have repeatedly signaled that they plan to conduct transactions with China using gold as a means of marginalizing the power of the dollar in bilateral trade between the geopolitically powerful nations. This latest movement is quite simply the manifestation of a larger geopolitical game afoot between great powers.
 
According to a report published by Reuters:
 
Sberbank was granted international membership of the Shanghai exchange in September last year and in July completed a pilot transaction with 200 kg of gold kilobars sold to local financial institutions, the bank said.
 
Sberbank plans to expand its presence on the Chinese precious metals market and anticipates total delivery of 5-6 tonnes of gold to China in the remaining months of 2017.
 
Gold bars will be delivered directly to the official importers in China as well as through the exchange, Sberbank said.
 
Russia's second-largest bank VTB is also a member of the Shanghai Gold Exchange.
 
To be clear, there is a revolutionary transformation of the entire global monetary system currently underway, being driven by an almost perfect storm. The implications of this transformation are extremely profound for U.S. policy in the Middle East, which for nearly the past half century has been underpinned by its strategic relationship with Saudi Arabia.
 
THE RISE & FALL OF THE PETRODOLLAR
 
The dollar was established as the global reserve currency in 1944 with the Bretton Woods agreement, commonly referred to as the gold standard. The U.S. leveraged itself into this power position by holding the largest reserve of gold in the world. The dollar was pegged at $35 an ounce - and freely exchangeable into gold.
 
By the 1960s, a surplus of U.S. dollars caused by foreign aid, military spending, and foreign investment threatened this system, as the U.S. did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued.
 
America temporarily embraced a new paradigm in 1971, as the dollar became a pure fiat currency (decoupled from any physical store of value), until the petrodollar agreement was concluded by President Nixon in 1973.
 
The quid pro quo was that Saudi Arabia would denominate all oil trades in U.S. dollars, and in return, the U.S. would agree to sell Saudi Arabia military hardware and guarantee the defense of the Kingdom.
 
A report by the Centre for Research on Globalization clarifies the implications of these most recent moves by the Russians and the Chinese in an ongoing drive to replace the US petrodollar as the global reserve currency:
 
Fast forward to March 2017; the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade. This would be done by finalizing the issuance of the first federal loan bonds denominated in Chinese yuan and to allow gold imports from Russia.
 
The Chinese government wishes to internationalize the yuan, and conduct trade in yuan as it has been doing, and is beginning to increase trade with Russia. They've been taking these steps with bilateral trading, native trading systems and so on. However, when Russia and China agreed on their bilateral US$400 billion pipeline deal, China wished to, and did, pay for the pipeline with yuan treasury bonds, and then later for Russian oil in yuan.
 
This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold. The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts - basically a barter system or trade.
 
The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil. The world's top importer (China) and exporter (Russia) are taking steps to convert payments into gold. This is known. So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.
 
All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on. This will fundamentally threaten the petrodollar.
 
According to a report by the Russian government media, significant progress has been made in promoting bilateral trade in yuan, between the two nations, as the first step towards an even more ambitious plan-using gold to make transactions:
 
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One measure under consideration is the joint organization of trade in gold. In recent years, China and Russia have been the world's most active buyers of the precious metal.
 
On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.
 
In April, Sberbank expressed interest in financing the direct import of gold to India-also a BRICS member. Make no mistake that a BRICS gold marketplace could be used to bypass the dollar in bilateral trade, and undermine the hegemonic control enjoyed by the US petrodollar as the global reserve currency.
 
"In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today," according to strategic risk consultant F. William Engdahl.
 
Russia and China are now creating a new paradigm for the world economy and paving the way for a global de-dollarization.
 
"A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed Renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America's ability to use the reserve dollar role to finance her wars with other peoples' money," Engdahl concludes.
 
 

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#9 grog

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Posted 16 November 2017 - 02:50 PM

"America's ability to use the reserve dollar role to finance her wars with other peoples' money"


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#10 grog

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Posted 16 November 2017 - 02:55 PM

Venezuela Drops The Petrodollar
 
OIL RICH VENEZUELA STOPS ACCEPTING US DOLLARS FOR OIL

 

http://yournewswire....he-petrodollar/


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#11 grog

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Posted 16 November 2017 - 03:08 PM

"Our military bases aren't subjugating anyone"
 
 
 
Your Petrodollar is a parasite system on the whole world.
 
You need troops all over the world to enforce it. Especially near oil.
 
Parasites go home!

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#12 grog

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Posted 16 November 2017 - 03:19 PM

Turkey rejects Rothschilds by ditching dollar and buying up gold
 
 
 
 
█  █  █  █  █  █  █  █  █
 
 
 
November 16, 2017
 
 
 
Turkey rejects Rothschilds by ditching dollar and buying up gold
 
Turkey has rejected the corrupt House of Rothschild, as citizens and banks drop the US dollar in favor of gold. 
 
The central bank has sharply ramped up gold buying in recent months, in a move a World Gold Council report calls a 'revolt against the International Monetary Fund.'
 
According to the report, investments in gold have reached record highs as the people rise up and reject the Rothschild-controlled IMF.
 
Rt.com reports: "Bar and coin purchases, a measure of investment demand, were 47 metric tons so far in 2017, compared with 14.8 tons in the same period a year ago," ZeroHedge quotes the report as saying.
 
View image on Twitter
 
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 GoldInvestingAdvice @Gold_Advice
 
Turkey Buys 47 Metric Tons of #Gold in 2017 YTD $GLD $TUR
 
8:20 PM - Nov 14, 2017
 
 1 1 Reply   10 10 Retweets   7 7 likes
 
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The Turkish central bank has bought almost 30.4 tons of gold this year. The surge in buying is reportedly triggered by state measures aimed at diversifying international reserves in light of rising tensions between Turkey and its traditional Western allies the US and Europe.
 
A year ago, President Recep Tayyip Erdogan called on the Turkish public to keep savings in gold and avoid the US dollar, urging the central bank to back that policy.
 
At the same time, the exchange value of the Turkish lira has dropped 15 percent since the beginning of October. The plunge inevitably makes the national currency increasingly unattractive as a savings vehicle.
 
View image on Twitter
 
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 London Kapital @londonkapital
 
Many important data, especially the inflation figures from the US, will be released and the Fed officials will be talking. #Turkishlira continued to decline, while the #dollar started positive for the new week.
 
1:18 PM - Nov 13, 2017
 
 Replies   1 1 Retweet   2 2 likes
 
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Most emerging market currencies have been under pressure, but the US-Turkey row, escalated by tit-for-tat travel and visa restrictions, has boosted speculation.
 
Meanwhile, global demand for gold continues to slump. It dropped nine percent to 915 metric tons in the third quarter of this year, the lowest level since 2009. The decline was reportedly caused by a softer quarter in the jewelry industry, and lower inflows into exchange-traded funds.
 
 
█  █  █  █  █  █  █  █  █ 
 
 
█  █  █  █  █  █  █  █  █ 

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#13 grog

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Posted 17 November 2017 - 10:32 AM

US dollar will lose its ‘kingpin’ status – economist Jim O’Neill

 

 

 

http://theunhivedmin...ist-jim-oneill/

 

 


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#14 grog

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Posted 17 November 2017 - 10:36 AM

Turks follow Erdogan’s call to get rid of dollars & buy gold

 

http://theunhivedmin...llars-buy-gold/

 

5a0c160efc7e939e4f8b4567.jpg


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#15 grog

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Posted 17 November 2017 - 11:50 AM

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The US Dollar is a commodity-based currency
 
That commodity is oil.
 
Foreign companies must first get US Dollars to buy oil from foreign producers.
 
This keeps the value of the US Dollar artificially high.
 
Because foreign companies are forced to use US Dollars to buy oil from foreign producers, this makes the US Dollar a parasite currency.
 
A parasite currency on all the world's currencies.
 
_____________________________________________________________
 
The world’s top foreign consumers of oil:
 
Brazil, China, Germany, India, Japan, South Korea.
 
_____________________________________________________________
 
The value of the US Dollar is kept artificially high because foreign companies are forced to use US Dollars to buy oil from foreign producers.
 
One year before 9/11 was September 2000.
 
This was when Saddam Hussein announced his decision to switch Iraq oil sales away from US Dollars.
 
_____________________________________________________________
 
So when a nation decides to dump the US dollar, there is a US instigated destabilization campaign against that nation.
 
The same happened to Muammar Gaddafi, the deposed leader of Libya.
 
Gaddafi had already declared his intention to stop selling Libyan oil in US dollars.
 
_____________________________________________________________
 
You can now see that the US Dollar is a commodity-based currency.
 
That commodity is oil.
 
This is why, where there's plenty of oil in the world, there's plenty of American troops.
 
_____________________________________________________________
 
 
 
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#16 grog

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Posted 17 November 2017 - 12:43 PM

Why should anti-War people care about the Petrodollar?
 
 
 
"America's ability to use the reserve dollar role to finance her wars with other peoples' money"
 
Perhaps this is part of the reason why America is so enthusiastic about getting into wars?

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#17 grog

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Posted 17 November 2017 - 12:43 PM

Why should anti-War people care about the Petrodollar?
 
 
 
"America's ability to use the reserve dollar role to finance her wars with other peoples' money"
 
Perhaps this is part of the reason why America is so enthusiastic about getting into wars?

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#18 grog

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Posted 18 November 2017 - 11:01 AM

Petro_Gold.jpg?width=500

 

 

 

 

Saudi Arabia wants to kill the petrodollar - economist

 

The United States and Saudi Arabia are so interdependent that a rift would mean disaster for the petrodollar system and the greenback’s reserve currency status, warns economist Brandon Smith. He is sure Riyadh is planning to ditch the dollar.
 
 
 
"ditch that dollar - go for gold"

 

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#19 grog

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Posted 18 November 2017 - 11:20 AM

How Much Longer Can The Petrodollar Survive?
 

Nov. 16, 2017 6:14 AM ET

 

In 1971, Nixon detached gold from the U.S. dollar and the international monetary system.

To maintain demand for a now intrinsically worthless dollar,

the mighty U.S. military was used to demand all international oil sales be paid for in dollars.

 

https://seekingalpha...odollar-survive

 

"ditch that dollar - go for gold"

 

1058296_620x410.jpg


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#20 grog

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Posted 18 November 2017 - 11:40 AM

Geopolitical Tsunami: Pax Americana, Petrodollar, & The Coming Crisis In The Gulf
 
 
It's easy to get lost in all things Middle East, especially concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia.
 
Three days after the most stunning purge in recent Saudi history - which was really a countercoup, that led to the arrest of dozen of Saudi Arabian royals, ministers and businessmen to further the control of the Kingdom - Saudi Arabia called Yemen's missile launch on Riyadh an 'act of war' by Iran, and also played victim by saying Lebanon has declared war against the Kingdom.
 
How to make sense of this all? 
 
An author on twitter by the handle Black Pigeon Speaks beautifully outlines today's events in an easy to understand video titled: PAX AMERICANA, PetroDollar & the Coming CRISIS in the GULF… 
 
The author of the video focuses on the Middle East and says a perfect storm is gathering upon the horizon, as the whole world is changing and the only way to change it for the better is to understand the world around you.
 
The video opens up with a brief understanding of the stunning purge in Saudi Arabia and how it has cleared any potential obstacles for King Salman's son ascension to the throne.
 
 
 
 
"ditch that dollar - go for gold"
 
c3352932.r32.cf0_.rackcdn.comcontentpic6

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