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PM End of Week Market Commentary – 9/1/2017

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  • Sat, Sep 02, 2017 - 10:13am



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    PM End of Week Market Commentary – 9/1/2017

On Friday gold rose +3.40 to 1330.00 on extremely heavy volume, while silver rose +0.16 to 17.80 on heavy volume. Nonfarm Payrolls disappointed, and that caused a lot of volatility in the buck – first it dropped hard, but then it reversed higher. Gold and silver both seemed to do relatively well regardless.

The PM sector map looked great this week – picture perfect, actually. Junior miners led the seniors, while silver led gold. Only the silver miners are lagging a bit. Senior miners executed a golden cross this week, which is a very bullish sign longer term. It doesn’t get much better than this for PM.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 6.84% -17.12% rising rising falling rising ma200 on 2017-08-28 2017-09-01
Senior Miners GDX 5.85% -6.21% rising rising rising rising ema9 on 2017-08-16 2017-09-01
Palladium $PALL 5.25% 46.65% rising rising rising rising ema9 on 2017-08-31 2017-09-01
Silver $SILVER 4.37% -6.07% rising rising rising rising ema9 on 2017-08-25 2017-09-01
Silver Miners SIL 3.93% -20.96% rising rising falling rising ma50 on 2017-08-24 2017-09-01
Platinum $PLAT 3.45% -3.74% rising rising rising rising ema9 on 2017-08-28 2017-09-01
Copper $COPPER 2.65% 49.94% rising rising rising rising ema9 on 2017-08-16 2017-09-01
Gold $GOLD 2.58% 0.97% rising rising rising rising ema9 on 2017-08-16 2017-09-01

Gold rose +33.50 [+2.58%] this week, breaking above 1300 on Monday and never really looking back. Even gold-in-Euros managed to rally on the week. Gold’s RSI7 is starting to show signs of being overbought, with the RSI7 at 80. Friday’s candle print was a spinning top, which the code felt had a 41% chance of marking the top. Forecaster gives gold a +0.69 rating, which represents a strong uptrend. Intraday, gold seemed to have a strong bid whenever a dip occurred; it also showed some good resilience even during times when the buck rallied. These are all bullish signs.

The December rate-increase chances remains at 40%.

COMEX GC open interest rose +43,587 contracts this week. That’s 135 tons of new paper gold. As a point of reference, about 48 tons of actual gold are mined every week.

Silver shot up +0.85 [+4.37%] this week finally managing to climb above the 200 MA. At least half of the gains came on Monday’s breakout. By end of week, silver had even managed to close above the previous high of 16.72 set back in June. Silver is looking a bit overbought, with its RSI7 at 79. In spite of that, the candle code felt that Friday’s spinning top was a bullish continuation. Forecaster also shows silver in a strong uptrend, with a +0.76 rating.

The gold/silver ratio fell -1.30 to 74.70.

COMEX SI open interest fell by -7,941 contracts.

Miners shot higher this week, with more than half of the gains coming on Monday’s breakout. Even better, the junior miners actually managed to outperform the seniors – the junior miners have been languishing a bit in recent weeks. Friday’s candle print for GDX was a high wave (36% bearish reversal); GDXJ printed a hanging man (47% chance of a reversal). Forecasters showed relatively strong uptrends: GDX (+0.63), and GDXJ (+0.77). GDX also executed a “golden cross” – the 50 MA crossed above the 200 MA, which is a buy signal for longer term traders.

The GDX:$GOLD ratio rose +3.06% on the week, and the GDXJ:GDX ratio rose +0.93%. That’s bullish. Historically, we generally don’t have significant moves higher in gold unless the miners outperform; since about February the ratio has drifted slowly downhill. This week may be a hint that gold may be ready to start a more significant move higher.


The buck moved up +0.05 to 92.58. That small weekly change concealed a fairly large amount of volatility, with the most excitement happening Tuesday when the buck dropped well below the critical “round number 92” support level intraday – right up until the buyers showed up and pulled prices back to safety. As a result, Tuesday’s doji ended up being a very strong bullish reversal bar, and Wednesday we saw a swing low. That sounded great, except that the buck has struggled to follow through.

Friday’s candle was a takuri line (a normally fairly bullish single-candle print) but the code didn’t give it a very high rating. The buck remains below its 9 EMA. The forecaster gives the buck a +0.32 rating, which is a gentle uptrend. I’m not sure we’re looking even that good right now. If my speculation early this week was correct and the buck’s rebound on Tuesday was due to central bank intervention (absolutely nobody wanted to see the buck crack 92 – not BOJ, not ECB, and not the Fed), the lackluster performance for the rest of the week makes sense. If there is no real fundamental buy-side interest, central bankers can bring about a short-covering bounce, but there won’t be any follow-through unless they keep pouring money in.

Currency markets – especially the buck and the Euro – are too big for the central bankers to fight them long term.

US Equities/SPX

SPX spent much of the week rallying, closing up +33.50 [+1.37%] to 2476.55. Previous high for SPX was 2490, set back in July – we are rapidly approaching that level once again. Thursday saw SPX break above a previous high, invalidating the lower highs/lower lows downtrend pattern. Candle print on Friday was a spinning top, which the code gives a 33% chance of marking a high. The forecaster has a rating of +0.81, which is a strong uptrend. It looks like risk on to me, at least for now anyways.

The equities sector map looks a combination of special cases; sickcare (XLV) led, breaking out to new highs due to a fancy new (and expensive) drug being approved by the FDA. This caused the biotech group (IBB: +7.97%) to scream higher in response, since many of them have similar kinds of new (and expensive) drugs of a similar class that presumably will also be approved. Bringing up the rear are financials (XLF) and utilities (XLU). Likely XLF is projecting some damage to the financial industry from Hurricane Harvey – insurance claims, as well as (potential) mortgage defaults. Taken as a group, the sector map looks relatively bullish. Risk on for equities.

VIX dropped -1.15 on the week to 10.13. Looks like we’re headed back to single digits.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 5.85% -6.21% rising rising rising rising ema9 on 2017-08-16 2017-09-01
Healthcare XLV 2.89% 11.93% rising rising rising falling ma50 on 2017-08-30 2017-09-01
Homebuilders XHB 2.27% 6.50% rising falling rising falling ma50 on 2017-09-01 2017-09-01
Technology XLK 1.87% 24.69% rising rising rising falling ema9 on 2017-08-22 2017-09-01
Materials XLB 1.84% 13.68% rising rising rising rising ema9 on 2017-08-30 2017-09-01
Cons Discretionary XLY 1.62% 11.58% rising rising rising falling ma50 on 2017-09-01 2017-09-01
Industrials XLI 1.51% 16.85% rising rising rising falling ma50 on 2017-08-31 2017-09-01
Energy XLE 0.92% -6.92% rising falling falling rising ema9 on 2017-08-31 2017-09-01
Cons Staples XLP 0.55% 1.05% rising falling rising falling ema9 on 2017-09-01 2017-09-01
REIT RWR 0.46% -6.59% rising falling rising falling ma50 on 2017-08-31 2017-09-01
Telecom XTL 0.17% 10.83% rising falling rising falling ema9 on 2017-08-24 2017-09-01
Financials XLF -0.16% 24.71% rising rising rising rising ema9 on 2017-09-01 2017-09-01
Utilities XLU -0.62% 11.88% falling rising rising falling ema9 on 2017-09-01 2017-09-01

Gold in Other Currencies

Gold rose in all currencies this week, climbing in XDR by +37.11. Gold is closing on breakouts in several currencies.

Rates & Commodities

TLT dropped -0.45% on the week, with all of the damage happening on Friday. The candle patterns were a bit odd, but Friday’s big drop [-0.97%] resulted in a four-candle swing high and a brisk drop below the 9 EMA. TLT’s forecaster plunged a massive -0.94 points in one day, pulling TLT into a modest downtrend (-0.36). I’m not sure why bonds were hit so hard on Friday.

JNK was mostly flat, dropping -0.05% on the week. Really what happened is that JNK spent most of the week moving higher, dropping hard on Friday which wiped out all the gains for the week and printed a swing high which had a 58% chance of marking a top. Interesting that JNK now seems somewhat aligned with TLT. Perhaps traders are just fleeing fixed income.

CRB climbed +1.75% on the week, with most of the gains happening on Thursday – when traders woke up to the fact that Hurricane Harvey might lead to shortages in gasoline (RBV17 up +0.21 [+13.44%] to 1.75). 4 of 5 groups moved higher, with energy, industrial metals, and PM all performing strongly. Industrial metals continued their relentless rally – copper rose +2.65% (+0.08 to 3.12), which is another new multi-year high. I’m starting to become a believer in the “industrial metal supply destruction” story.

Crude fell -0.48 [-1.00%] to 47.38. Crude dropped for the first half of the week, shrugging off the relatively bullish IEA report (crude draw: -5.4m barrels, gasoline unchanged), reversed direction strongly on Thursday, and Friday crude printed a three-candle swing low. Crude closed the week back above its 9 and 50 MA lines, and the forecaster crept back into uptrend territory, now reading +0.04. Volume this week was very heavy. It looked as though traders were having a hard time trying to figure out the impact of the hurricane on oil production, first selling off hard, then rallying back almost as hard.

The crude COT report shows that managed money went very heavily short this week, adding +82k contracts – which almost doubled their total short interest (177k total). This is in just one week! They also bailed out of 32k longs. That could be enough to mark a low for crude.

Physical Supply Indicators

* SGE Au9999 contracts are at +1.29 premium vs COMEX. Premium is almost gone.

* The GLD ETF tonnage on hand rose +26.01 tons, with 831 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.82 -0.34% to NAV [up]
 PSLV 6.69 -0.36% to NAV [up]
 CEF 13.15 -6.1% to NAV [up]

* Bullion Vault gold (!/orderboard) showed a discount for both gold and silver.

* Big bars premiums were: gold [1kg] 1.0% and silver [1000oz] 2.6%.

Futures Positioning/COT

COT report is through Aug 29th, when gold closed at 1314.60, and silver at 17.37.

This week in gold, the commercials net position fell again, this time by 28k contracts; commercials added 22k shorts, and sold 6k longs. Commercials are very heavily short now. Managed money net rose by 27k, adding 25k longs and closing 1.7k shorts. There are very few managed money shorts left. Both commercial shorts and managed money longs are very extended. A top could happen at any time, at least according to the COT.

In silver, the commercial net position fell by 10.5k; shorts rose by 7k, while longs fell by -3.6k. Managed money net rose by 8.2k, dropping 6.4k shorts and picking up 1.7k longs. Managed money is rapidly running out of shorts. At the current rate, we only have one more week of short-covering left. That’s not good, since it appears that the entire silver rally in recent weeks was mostly about managed money covering short (-45k) vs going long (+15k). Contrast that with gold where its rally was almost entirely about managed money buying new longs.

Gold Manipulation Report

There was one after-hours spike in gold on Wednesday; it didn’t do much more than whet the appetites of the longs. Someone got cheap gold courtesy of whoever attempted the smash. My sense is, someone may have been trying to push the market over after Tuesday’s big failed rally.

Eurozone Status

  • German Elections; October 2017: Merkel has a 13.75 point lead over Shulz.

  • There was a migrant crisis summit held in Paris this week; the proposed solution coming out of the meeting was a repeat of the Turkish migrant deal: essentially bribing African countries to keep migrants from coming to Europe. M5S spokesperson had nothing good to say about the proposal. (

  • Given the resounding victory of anti-migration candidates in local elections in Italy this year, its quite likely that migration issues will drive national election results in Italy in 2018, with euro-skeptics in one form or another looking poised for victory. The sense I have is that Brussels is scrambling to “fix” the problem prior to this latest date with destiny

  • Italian Elections: No updated polling data. Most recent data (Aug 9) shows anti-Euro M5S is slightly ahead of the PD: 27.4% to 26.85%. A combination of FI + LN (both semi-anti-Euro parties) continue to poll at 28%.


Gold, silver, and the miners joined industrial metals and took off skyward, finally breaking through resistance levels that had successfully capped both gold and silver over the past three weeks. Attempts by the shorts to slow the move higher in gold did not appear to work. Given the flat dollar performance, this week’s move had nothing to do with currency. Lastly, miners actually outperformed the metals this week, which is a positive sign.

The COT report for gold shows an increasingly strong setup for a short-term top for gold; managed money shorts are at historical lows, they are heavily overextended long, and the commercials are fully loaded up short. Silver looks a bit different; its rise has mostly been about managed money short-covering, and the managed money silver shorts are almost gone. Its possible that silver’s top may just happen because of a lack of managed money shorts to squeeze.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage had a big increase, and ETF premiums rose. Shanghai premiums vs COMEX are almost gone. Perhaps gold is now flowing from East to West? Just kidding, goldbugs. Kind of.

My speculations about central bank intervention causing the dollar’s strong reversal on Tuesday occupy my thoughts right now. If there is no fundamental interest from traders in buying the buck at these levels, gold should not be under any pressure from a from a major move higher in the buck. That’s gold-positive. We’ll have to see how the buck does next week. If I’m right, it will either drift sideways, or attempt to plunge once more.

I don’t think Harvey is dollar-positive; we can’t know today just what the impacts will be longer term. Is it a sort of reverse-neutron-bomb (destroys infrastructure, leaving the people alive) or just a temporary hiccup? How difficult will it be to restart the industries in Houston?

This situation reminds me of “parallel war” which I first heard described in a lecture given by Col. John Warden, the architect of the strategic bombing campaign used during Gulf War 1. The concept behind parallel war was this: if you disable the electrical generating capacity of a country at the same time you hit the pipelines that feed the electrical plants, you can take out both for far longer than either one on its own. That’s because pipelines require electricity to operate the pumps, and generating plants require fuel (provided by the pipelines) to run. Take out both simultaneously, and maybe neither can be restarted without a substantially larger amount of work. In Houston, we may be seeing a similar thing happening: multiple, interdependent industries may well have been taken out in parallel by flood waters, potentially complicating the ability of each component to restart. Well, its a thought anyway. We won’t know for a while.

Signs of an impending gasoline shortage in the US are showing up in unleaded gasoline futures right now. Here’s what that looks like. Prices are projecting that the problem “should be” solved within 3 months. Of course, last week there was no problem at all.




% Change

RBU17 [Sep]




RBV17 [Oct]




RBX17 [Nov]




RBZ17 [Dec]




RBF18 [Jan]




Will the poor showing by the Nonfarm Payrolls report flow through to other aspects of the economy? Does it presage a more general slowdown? That should show up in dropping chances of a rate increase, and a rally in bonds & utility stocks. GDP Now’s forecast of 3.2% has steadily dropped since it started out 4 weeks ago at 4.0%.

Perhaps Harvey is our black swan. And just in time for September.

Trend-following code says:

Uptrend: gold, silver, copper, natgas, crude, USD.

Downtrend: treasury bonds.

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  • Sun, Sep 03, 2017 - 12:36am



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    bitcoin reversal

Well just yesterday I was going on about how everything looked great.  Not so today; the bearish strong line/bearish engulfing candle print has an 81% chance of marking a top.  That's about as bearish as candle prints gets.  Just as a reminder: the reversal is good for 8 days.  Forecaster more or less collapsed, dropping -1.32; forecaster gave off a sell signal, and is now showing a gentle downtrend.

This could just be yet another pause that refreshes in bitcoin, or it could be the start of a more serious sell-off.  My code is all just short-term trend & reversal analysis, so it has no insight as to where things might be going longer term.

  • Sun, Sep 03, 2017 - 01:41am



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    China oil benchmark

I've seen quite a few of these headlines going around today and this seems to be an interesting development. It sounds like what they're really doing is just cutting out the USD. Anyone can already convert Yuan to gold, assuming you're holding Yuan. The new twist seems to be that this will severely limit the USG from imposing sanctions on big oil exporting countries – Iran, Russia, etc. and if countries don't want to transact in dollars, they now won't have to, or soon won't have to I should say. About that round number 92 Dave keeps mentioning…. This could force the CBs to spend a bunch of money defending that level, if they truly have drawn that line in the sand, and it seems likely that level could fall. I wonder if this is China's way of saying F-you to the ECB, BOJ, and FED, just trying to push the dollar through 92. I don't know what incentive they would have to do that other than just to cause some chaos. Thoughts on the timing of this?

  • Sun, Sep 03, 2017 - 02:49am



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    China launches Crude Oil Futures Contracts backed by GOLD

Very curious what you financially savy guys and gals think about this.
September 1, 2017 8:56 pm JST

China sees new world order with oil benchmark backed by gold


Yuan-denominated contract will let exporters circumvent US dollar

DENPASAR, Indonesia — China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.


The contract could become the most important Asia-based crude oil benchmark, given that China is the world's biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.

China's move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.



"The rules of the global oil game may begin to change enormously," ….

The Shanghai International Energy Exchange has started to train potential users and is carrying out systems tests following substantial preparations in June and July. This will be China's first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

Most of China's crude imports, which averaged around 7.6 million barrels a day in 2016, are bought on long-term contracts between China's major oil companies and foreign national oil companies. Deals also take place between Chinese majors and independent Chinese refiners, and between foreign oil majors and global trading companies….

China has long wanted to reduce the dominance of the U.S. dollar in the commodities markets. Yuan-denominated gold futures have been traded on the Shanghai Gold Exchange since April 2016, and the exchange is planning to launch the product in Budapest later this year.

Yuan-denominated gold contracts were also launched in Hong Kong in July — after two unsuccessful earlier attempts — as China seeks to internationalize its currency. The contracts have been moderately successful.

The existence of yuan-backed oil and gold futures means that users will have the option of being paid in physical gold, said Alasdair Macleod, head of research at Goldmoney, a gold-based financial services company based in Toronto. "It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either," Macleod said

  • Sun, Sep 03, 2017 - 06:05am



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    Another NK nuclear test

Kim Jabba Un certainly keeps things here in Asia interesting, that's for sure.  But what does this mean for gold?  Why, it will mysteriously plunge come Tuesday morning of course!  😉

  • Sun, Sep 03, 2017 - 06:27am



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    RMB convertibility issues

Rather than this being some sort of anti-dollar news, I think its just China trying to get around a problem they have of RMB convertibility.  China is a big boy now, and they want to play in the big arena, but they also don't want to open their capital account – they want to retain their iron grip on their domestic economy.  As a result, traders don't really want to accept RMB in exchange for hard commodities.  Why is that?  If you have a futures contract, there is an implied additional bit of currency risk that comes attached to it.

An RMB oil future has oil price risk + RMB price risk.  A USD oil future has oil price risk + USD price risk.  The market is saying that given a choice between RMB and USD, the USD has less risk attached because the US has an open capital account.  By making the RMB convertible to gold, that makes the RMB currency risk more or less go away, which makes the RMB/Gold futures contract look more attractive.

Again, this seems as though it is more about eliminating exposure to RMB currency risk than anything else.  That's my guess anyway.

If China had their way, I suspect they wouldn't involve gold at all.  They are more or less forced into doing this because nobody really wants to own any RMB currency risk right now.  After all, China could wake up tomorrow and devalue it due to their massive private debt issue.  That's why "smart Chinese money" has been fleeing RMB for the past two years.

  • Sun, Sep 03, 2017 - 01:42pm


    Chris Martenson

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    This is GIGANTIC news.


I've seen quite a few of these headlines going around today and this seems to be an interesting development. It sounds like what they're really doing is just cutting out the USD. Anyone can already convert Yuan to gold, assuming you're holding Yuan. The new twist seems to be that this will severely limit the USG from imposing sanctions on big oil exporting countries – Iran, Russia, etc. and if countries don't want to transact in dollars, they now won't have to, or soon won't have to I should say. About that round number 92 Dave keeps mentioning…. This could force the CBs to spend a bunch of money defending that level, if they truly have drawn that line in the sand, and it seems likely that level could fall. I wonder if this is China's way of saying F-you to the ECB, BOJ, and FED, just trying to push the dollar through 92. I don't know what incentive they would have to do that other than just to cause some chaos. Thoughts on the timing of this?


This puts not one but two daggers straight into the petro-dollar heart.  First it bypasses the dollar itself for oil trading and settlement by the largest petroleum importer on the face of the planet.  Second it allows full and open convertability of the Yuan into gold on two Chinese exchanges.  The gold standard has just been resurrected!

This is really, really big news.  I cannot over state just how big.  

I'm jaded enough to suspect that these next few weeks will be packed with articles in the NYT and WaPo about how China is now a rogue nation, operating outside the bounds of decency, with child slaves, sex scandals, and unacceptable maritime offenses.

Every country that has tried to approach this "third rail" of US foreign policy has been badly burned.  Let's see how the Deep State and Shadow Government branches react to this.



  • Sun, Sep 03, 2017 - 04:23pm



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    gold standard resurrected???

Uh Chris, I'm pretty sure that China isn't fixing the RMB at a specific number of grams.

If you believe they are doing this – could you point me to a place where they've announced the number of grams they're fixing the RMB to?  That would be remarkable news if that's what was going on, but I am going to go with the odds here: I don't think it is in China's interest (with such a vast private debt overhang) to make RMB convertible to a fixed number of grams of gold at this point in the game.

I think all that happens is that, if you are short oil, at settlement you will receive (your choice) either either a fistful of RMB, or a number of grams of gold – the specific number to be determined at whatever the current international price of gold happens to be at that moment.

I think this is mildly interesting, but no more than that.  Nobody wants to hold RMB, so if China wants to play in the world market and still wants to retain a closed capital account, they need to make the settlement option more palatable, and gold serves that purpose just fine.


  • Sun, Sep 03, 2017 - 04:41pm


    Jim H

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    Yes, this is huge.. the monetary equivalent of a Cat-5 hurricane

More from the Asia Nikkei article;

Grant Williams, an adviser to Vulpes Investment Management, a Singapore-based hedge fund sponsor, said he expects most oil producers to be happy to exchange their oil reserves for gold. "It's a transfer of holding their assets in black liquid to yellow metal. It's a strategic move swapping oil for gold, rather than for U.S. Treasuries, which can be printed out of thin air," he said.

Grant Williams seems to agree with Chris' view, and not so much with Dave's view of the meaningfulness of this move by China. 

The implications are equally striking when it comes to Gold demand, and ultimately the Gold price.  This is a very clear statement by China that the real reserve currency is Gold… or Oil.. .or Gold and Oil : )

It will be interesting to watch the controlled ascent of Gold going forward.. I don't think it will be possible to stop it now.  In my view the bankers who run the world are going to have to let Gold find a new (higher) level before re-asserting the manipulation game.  The price will need to be high enough to scare some scrap back onto the market… most probably something with a 2-handle.

U.S GOLD SCRAP MARKET DRYING UP: Americans Pawned Off Their Best Asset To Go Further Into Debt

  • Sun, Sep 03, 2017 - 04:43pm



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    oil for gold

Guys, the oil producers can already swap oil for gold.  Here's how.

Saudi Arabia sells oil for USD.  Saudi Arabia then takes the USD, and buys gold with it.

Presto.  Saudi Arabia has sold oil for gold.

If you disagree with me, can you explain where I went wrong?

Unless and until a fiat currency is pegged to a specific number of grams (or ounces) of gold, nothing new is happening.


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