by Bobby Elgee; Sights Unseen Paranormal 

Today, I used my EVP machine and it recorded a ghost’s voice. I also utilized my Ghost Image Capture Device to take a picture of a ghost. Another investigator used an Electric Detector that picks up spirit energy. I also used my Indoor Battery-Powered Illuminator–fancily called ‘a torch’ by our friends across the pond–to light up some ghosts in a dark room. We also used an interesting invention, a Television Spirit Capture Device, which records video of dead people. Finally, we analyzed all this research data on a computer that is specifically set up with programs–like Photoshop and Itunes–that help to find ghosts. 

Does the above paragraph sound as asinine and ignorant to you as it does to me? Interestingly enough, there are ghost hunting teams that use language similar to what I’ve typed above. To me, reading a paragraph like this makes a couple of things painfully obvious: 

1. The person writing it has absolutely no technical expertise whatsoever. 

2. They aren’t even coming close to practicing debunking. For people like this, everything is a ghost. 

Sorry, for venting…the moral to this story is KNOW YOUR EQUIPMENT. I have a lot to learn, that’s why I do research, read my owner’s manuals, and depend on experts and consultants to help me research potential evidence. 

None of the technology used in ghost hunting was originally designed to find ghosts. Be accurate in your description of the equipment you use. Know what it was originally designed for, and the theory behind using it to detect possibly paranormal events. 

Otherwise, you risk looking like a fool. Not sure about you, but I’m enough of a goof ball as it is, so I like to cover all my bases. 

Now, you’ll have to excuse me because my Electoplasma Initiator/Personal Massager is ringing.

Ghost Equipment

The last thing Chinese were generally despised, discriminated against and performing dangerous, backbreaking work for 60 to 75 cents a day in the American West, Gin Lin stood out in the crowd. He not only gained the respect of the business and civic leaders of southern Oregon but also became wealthy beyond most men’s wildest dreams.

Fast clipper ships carried the news of the 1848 gold strike at Sutter’s Mill across the Pacific. Peasants toiling in China’s rice paddies heard that gold had been discovered in California almost as soon as factory workers in Boston and New York did. Soon the Chinese were calling America’s West Coast Gum Shan, or the "Mountain of Gold." By February 1849, the first of the Far Eastern gold-seekers had landed in San Francisco. Hordes would follow

Like thousands of his countrymen, Gin Lin fled crushing poverty, war, overcrowding, disease and civil unrest in his homeland to seek his fortune in the gold fields of America.

Living conditions in mid- 19th-century China were almost unbearable, particularly in Kwangtung (Canton) province. For thousands of years the fertile delta of the Pearl River in southeast China had been the country’s rice basket, but farms that once flourished had been subdivided and parceled out to generations of descendants, leaving plots too small to support a family. Squalor and filth along the teeming waterfronts caused typhoid, malaria, cholera and plague to run rampant. Social unrest and civil war added to the misery The Taiping Rebellion, which lasted from 1851 to 1864, claimed more than 20 million lives.

Young men who could only hope to make 10 cents a day in China, if they could find employment, jumped at the chance to earn 60 to 75 cents a day as miners or railroad workers in the New World. Not even the dangers of a Pacific voyage or the uncertainties of living in a foreign land could deter them.

Unlike most European emigrants, who came to America seeking freedom and hoping to build a new life, the Chinese came as temporary residents intent upon improving their economic plight and returning to China. Known as sojourners, they were strangers in a strange land. About half the men were married, but very few brought their wives. They sent much of their earnings home. Only 5 percent of the Chinese who came to America in the mid-1800s were women, most of those having been orphaned or sold by their families.

Ill-clad and unprepared for cold weather, some of the early sojourners froze to death. Their standard wardrobe consisted of loose-fitting light-blue denim pants, blue tuniclike shirts, white stockings, skull caps and cloth shoes with paper soles. Many wore the large conical straw, or "coolie," hats that provided some protection from sun and rain as well as storage space. Later arrivals added coats and boots to their attire. The queue, or long pigtail, which hung down the middle of the back from an otherwise shaven head, was not a fashion statement but considered a necessity. Manchu dictators forbid returning workers to re-enter China without them.

The main staple of the Oriental diet was rice supplemented by a few fresh vegetables and dried fruit when available. Because they boiled their water to make tea, the Chinese often avoided the diseases that swept through the mining camps.

The clannish ways and strange customs of the sojourners caused the white population to mistrust and resent them. One Chinese practice the whites found especially disgusting was that of exhuming their dead so the bones could be transported back to China. Father Francis Xavier Blanchet, an early resident of the gold-rush town of Jacksonville, Ore., wrote: "Whenever a child of the deceased leaves for China to visit or on business, they dig up the body, scrape the bones, and carefully transplant them in China so that their souls will go to Paradise."

Violence was commonplace in the mining camps, and the sojourners were often blamed for anything that went wrong. Since nonwhites were not allowed to testify against whites until 1862, and often did not get fair treatment in the courts even after that time, Chinese were frequently beaten, robbed and even killed with impunity. In some mining camps, shootings were almost a nightly occurrence.

Following the gold rush north, the first Chinese began trickling into southern Oregon shortly after the 1852 strikes were made on Jackson Creek, where the rowdy town of Jacksonville mushroomed almost overnight. More strikes quickly followed in the Siskiyou Mountains, as well as along the Applegate and Rogue rivers and their tributaries. By 1870 there were between 2,500 and 4,000 Chinese miners in southern Oregon.

The sojourners were welcomed to Jackson County with a $2-per-month head tax in 1857, and it was doubled in 1858. In addition, the state adopted a law in 1862 that directed every Negro, Chinaman, Kanaka (Hawaiian), and Mulatto" living in Oregon to pay an annual $5 poll tax. As if that were not enough, any Chinese engaged in any kind of trading was charged a $50-per-month fee. An article that appeared in the September 1, 1866, issue of The Oregon Sentinel, Jacksonville’s Republican newspaper, expressed the resentment and open hostility directed toward the Chinese: We hope that during the present legislative session, the very important question of taxing the Chinese miners will not be overlooked…. It seems an unwise policy to allow a race of brutish heathens who have nothing in common with us, to exhaust our mineral lands without paying a heavy tax for their occupation. These people bring nothing with them to our shores, they add nothing to the permanent wealth of this country and so strong is their attachment to their own country, they will not let their filthy carcasses lie in our soil. Could this people be taxed as to exclude them entirely, it would be a blessing."

Those whites who put aside their prejudices long enough to get to know the Chinese found them, on the whole, to be peaceable, respectful, friendly dependable, generous and very hard-working. Celebration of the Chinese New Year was always observed with fireworks and candy that the sojourners happily shared with their non-Oriental neighbors. Although the mining camps and "shanty towns" in Oregon were filthy, Chinese miners practiced better personal hygiene than most of their white counterparts, taking daily baths with soap and warm water and changing their clothes before dinner.

Some may have drifted in from California on their own, but most sojourners arrived in Oregon under contract to a Chinese boss who farmed them out to work for white mine owners. The mine owner paid the boss in a lump sum and he, in turn, deducted any amount the worker still owed on his transportation across the ocean. All purchases of food and supplies were also made through the Chinese boss.

Gin Lin was such a boss. His arrival in southern Oregon went unnoticed and unrecorded, but it was soon apparent that he was different from most of his countrymen. Elmira McKee Thurman, an earlyday Oregon resident, remembered him as dark, heavy-set and rather youthful looking. Instead of the usual queue, he sported a full head of bushy hair.

Oregon did not allow Chinese to stake mining claims or own mining property yet by 1864 Gin Lin managed to buy mining property from John Wilson near the settlement of Buncom at the confluence of Sterling Creek and the Little Applegate River for $900.

White men were frequently eager to sell what they considered "played out" mines to Chinese. "The white man’s philosophy was to get as much gold as he could and then move on," says Marjorie Edens of the Southern Oregon Historical Society. The industrious Chinese seemed happy to take over "played out" mines, and when they moved on to richer diggings, the claims they left behind were truly worthless.

Soon many of the laborers Gin had formerly contracted out to other mine owners were working for him on the Little Applegate River. He treated his men with honesty and fairness, even helping some of them purchase their own claims. He made sure the claims were legally recorded by Jacksonville attorney Charles Wesley Kahler and that the proper taxes were paid.

Gin’s crew worked hard for him. Rich veins of gold were uncovered at his mining operation, and the Gin Lin Mining Company began to play an important role in southern Oregon’s economy.

Gin continued to work his Little Applegate mine through the 1870s until the deposits waned. In 1881, he purchased more claims in the Palmer Creek and Flumet Flat area farther up the Applegate River.

As Gin Lin’s wealth grew, so did his status among Jacksonville’s citizenry. The sight of him driving a handsome buggy pulled by a high-stepping horse around town became a familiar one. He became friends with several of the area’s most prominent business leaders, including pioneer photographer Peter Britt, who took several photographs of him; banker C.C. Beekman; attorney Wes Kahler; and cabinetmaker David Linn.

David Linn’s son, Fletcher, described the Chinese miner in his book Memories: "Gin Lin was a large, robust character, not at all like the ‘Coolie’ or laboring Chinese who constituted the laboring force in his operations; and on one of his visits to ‘China Town,’ he came across the street to meet father, and introduced himself as ‘Gin Lin alle same Dave Linn’s cousin,’ and he and father became quite good friends."

Gold deposits found along the Applegate River and its tributaries were soon depleted; new mining methods had to be developed to excavate the yellow metal buried in ancient streambeds along the hillsides. Hydraulic mining was the answer, and Gin Lin was the innovator of this type of mining in southern Oregon. He had the equipment he needed hauled in by pack train from Crescent City Calif, and set his Chinese crew to digging water ditches.

Hydraulic mining used pressurized water to loosen the packed gravel of the slopes. The success of hydraulic mining depended upon a reliable source of water. In order to divert water from the larger streams to the mining operations, the Chinese used picks and mattocks to dig hundreds of miles of ditches through the dense brush and rocky slopes of the upper Applegate Valley Many of these ditches can still be seen.

Water from the ditch flowed into a large wooden structure called a"headbox" From the headbox it was diverted into a penstock made of riveted steel pipes that lined a trench leading downslope. The abrupt drop in elevation increased the water pressure. The penstock pipe delivered the water to a large nozzle the miners called a "giant." Water blasted from it into the exposed hillsides. Loosened material was washed through a series of sluice boxes, or wooden troughs, which separated the gold-bearing silt from the gravel. Worthless gravel and cobbles were cast aside into tailing piles.

Fletcher Linn told about visiting Gin Lin’s hydraulic mining operation: "When I was home from college for a brief visit on Christmas in 1887, father suggested that I join him on a Sunday trip to visit Gin, as he had often asked father to do. We hitched a horse to the light buggy, and started very early as the mine was ten or twelve miles from Jacksonville, over the hills into the Applegate Valley When we arrived, the operation was closed down for a ‘clean-up’; so we missed seeing the operation, but ‘Gin’ surely entertained us in showing us some of the results of his week or ten days run. I had seen several other hydraulic operations, but never one to equal this one of ‘Gins.’ The work done, and earth removed by those huge Hydraulic Giants, was really amazing. The ‘clean up’ was the largest of its kind that I ever saw; and the Chinese workers were carrying out the gold in small buckets full, under the protection of a couple of armed guards pacing the upper ledge or rim of the mine. All ‘Gin’ would say as he glanced at the buckets and then to father, was ‘Putty good, Cousin, Putty good.’ We had a fine visit with ‘Gin’ and a mighty interesting day"

As a result of his mining activities in the Applegate Valley Gin Lin deposited between $1 million and $2 million worth of gold dust and nuggets in the Beekman Bank in Jacksonville. He became a familiar face in town.

Gin Lin went to great lengths to keep good relations with the white people of the community even employing several white men in his mines. He was known to shut down operations periodically through the summer months so farmers could use the water from his ditches to irrigate. It is also said that when an Indian burial was exposed, he ordered that the area be left undisturbed.

It is known that Gin Lin had at least four different wives while in southern Oregon. He made several return trips to China, each time bringing back a delicately featured, almond-eyed beauty dressed in fine silks and brocades and younger than her predecessor. He would then simply sell his former spouse to one of his men. Gin Wye, born in Jacksonville, was the son of Gin Lin’s youngest and last wife, Gen Shen.

When the gold grew scarce in southern Oregon as in other parts of the West, most of the Chinese went to work on the railroads. They provided the railroad bosses with a reliable yet inexpensive source of labor.

Of the several thousand sojourners residing in southern Oregon during the height of the gold-mining era, only a handful remained by the turn of the century The 1900 census counted a mere 43 Chinese residents in Jackson County

No one is exactly certain of Gin Lin’s fate, but he disappeared from southern Oregon in the late 1800s. He may have left because of racism or simply because he had made enough money and wanted to return to his homeland, or, as Marjorie Edens says, "all of the above." One story says that he sold his Oregon holdings, withdrew his money from the Jacksonville bank (hiding it on his person) and sailed in 1894 for China, where he was robbed and fatally beaten as he stepped off the ship onto the wharf at Canton. Another version of the story says he lived in China three years with his wife and son before his death in 1897.

Although Gin Lin’s fate may never be known, his legend lives on in southern Oregon. Today the U.S. Forest Service maintains the Gin Lin Trail above the Applegate River where visitors can take a self-guided tour of Gin Lin’s Palmer Creek operation. Part of his story is etched on the moss-covered tailing piles, the overgrown water ditches and the hydraulic cuts in the "mountain of gold" that made him rich.

ds-dom.ru

gold mining tools

historic man first stumbled upon a nugget, raw gold with its radiant sun yellow coloration and metallic luster has captivated and fascinated mankind. The unique gleam of gold attracts the eye, enabling the seeker to detect the smallest of grains in an aggregate of many other materials. The tiniest flakes are easily detected.

Anthropological excavations of Stone Age burial sites indicate that gold was the first element collected and prized by man. This unique metal, gathered in the form of nuggets, seems to have been highly prized but was not used in practical applications. Rating 2.5 ? 3 on Mohs scale of hardness, gold was much too pliable to be hammered into workable tools or weapons. Gold carried little value for prehistoric man except to be admired and treasured for its rare, intrinsic beauty.

However, as man developed he soon discovered numerous applications for the mysterious golden metal. The earliest record of gold exploration dates to Egypt around 2000 B.C. Ancient records tell of an enormous alluvial gold deposit in Nubia, between the Nile River and the Red Sea in southeastern Egypt. This incredible discovery encompassed over one hundred square miles. Using the most primitive of tools and working to an average depth of less than six feet, these first ?miners? pried an estimated one thousand tons of gold from this rich discovery. Egyptian artisans, recognizing the extraordinary malleability of gold fashioned incredible jewelry, ornaments and idols of breathtaking beauty. Throughout the history of man?s involvement with gold, the precious metal has been prized not only for its beauty but for gold?s ability to withstand the rigors of time. No substance that appears commonly in nature will destroy gold. Unaffected by air, moisture, heat or cold, this noble metal will not tarnish, corrode, rust or tarnish. Shimmering gold dust, golden nuggets of placer gold and brilliant vein occurrences have survived 4.5 Billion years of cataclysmic geologic and climate changes; volcanic eruption, earthquakes, upheavals and deposition. Treasures of gold jewelry, bullion and coins, buried for thousands of years beneath land and sea have been found intact; as brilliant as the day they were abandoned.

A relatively rare native metallic element, gold ranks fifty-eighth in abundance amongst the ninety two natural elements that make up the earth?s crust. Although considered a rare element, of all metals gold is, with the exception of iron, the most widely distributed over the planet. Gold has been found on 90 per cent of the earth?s surface and is mined in high mountain ranges, in the deeply weathered soil of the tropics, harsh deserts and in the permanently frozen tundra of the Arctic.

Gold is commercially mined on every continent with the exception of Antarctica. The richest gold producing area of the world is the Witwatersrand District of South Africa. This ultra rich area has yielded eighteen thousand tons of gold with no end in sight. Additional notable gold bearing areas around the world are Siberia in the former USSR, the Porcupine District in Ontario, Canada and in the United States the Yukon District of Alaska and the famous Mother Lode District in California.

In the United States nature was extremely generous. Thirty-two states have recorded significant commercial gold production. The highest yielding areas are located within the western states, California, Colorado, Alaska, Nevada and South Dakota. Other abundant locations for prospecting include Georgia, Arkansas, Idaho, Utah, Montana, Washington, New Mexico, Wyoming, North and South Carolina, Tennessee, Michigan, Vermont and New Hampshire. The recreational gold prospector can find gold in his pan in practically every state of the union.

Gold is an ideal media for craftsmen. It is a metal that can be deformed by pounding without breaking or crumbling. Gold, in its pure form is the most malleable or workable of all metals. One single ounce of gold can be drawn and stretched into an ultra fine wire over 50 miles in length without breaking or pounded to the amazing thinness of one hundred thousandth of an inch without disintegrating. Gold is easily carved, readily buffs to a gleaming polish, can be heated repeatedly without discoloration and joins to itself or other metals by soldering without the need for a bonding flux.

For more than 6000 years gold has been considered symbolic of wealth, power and status. In 1350 B.C. the Egyptian boy king, Tutankhem, was interred in a coffin elaborately cast from 242 pounds of solid gold. Throughout history men and women have adorned their bodies with brilliant, gleaming gold. The ancient custom of exchanging gold during marriage ceremonies continues today. The nobility of Medieval Europe liberally sprinkled gold in the form of dust, flake or leaves on their food to demonstrate the host?s great wealth. Today gold is still often used in food and has the E Number 175. However, since metallic gold is inert to all body chemistry, it adds no taste nor has any other nutritional effect and leaves the body unaltered.

Primitive man believed gold contained a hidden, internal fire, a gift from the Gods with mysterious healing and magical powers. Numerous cultures of sun-worshippers revered gold as the tangible essence of their God; solid sunshine. In modern day Japan believers seek gold?s medicinal magic by immersion in a bathtub designed in the form of a phoenix crafted from 400 pounds of pure gold. Health and gold have long been entwined in the wondrous belief that something so rare and beautiful could not be anything but healing and healthy.

Today modern esotericists and forms of alternative medicine embrace the healing properties of gold. Some gold salts have anti-inflammatory properties and are used as pharmaceuticals in the treatment of arthritis and other similar conditions. However, only salts and radioisotopes of gold are of pharmacological value, as elemental or metallic gold is inert to all chemicals it encounters within the body.

Gold is a ?storehouse of value?, the natural way for man to preserve capital and protect against financial uncertainty or monetary collapse. In modern times gold has served as a hedge against the threat of inflation and as a secure and safe way to secret away assets. The ?hoarding? of gold occurs most frequently during times of war, adverse world conditions and international fears of economic instability. Gold has often defeated the attempts of governments to inflate the currency of their country as well as circumventing the aims of those holding political power to direct the economy of other nations.

Throughout recorded history, gold, the crowned king of metals, has been considered the ultimate monetary exchange. Gold is the only currency that isn?t someone else?s responsibility or liability; it is more that just a paper promise to pay upon demand. Gold?s worth does not rely on the economic stability of any country, political power or financial cartel. Gold has value in and of itself.

The current world price of gold is established daily by the London Gold Market which trades gold bullion and coins with other financial world centers such as Zurich, Hong Kong , Frankfurt and Paris. The price is based on pure or ?fine? gold, therefore the value of gold gleaned in its natural state may vary depending on the impurities it contains. However, raw gold sold as specimens or jewelry will always bring a considerably higher price. Gold nuggets are as distinctively different as snowflakes, although similar, no two nuggets are alike. A nugget of unique character and shape may sell for as much as five times its value by weight.

Do you have broken or discarded gold jewelry you not longer wear? Now may be the time to cash in on the current gold rush. With the price of gold exceeding the $1000 an ounce benchmark, an errant earring or broken gold chain could add up to a significant sum.

To receive the best price for gold you may wish to sell, know the karat count. Because of the softness of pure 24k gold, it is usually alloyed with base metals for use in jewelry, altering its hardness, color, melting point and ductility. Alloys with lower karatage, typically 22k, 18k, 14k or 10k, contain higher percentages of silver, copper or other base metals in the alloy. The higher the karat the more you should expect to be paid. If you only have a piece or two to sell, try a local jeweler or take a vintage piece to an antique jeweler. They?ll take the artist?s craftsmanship into consideration and you will net a much higher price than for just the gold weight.

Gold Dredges

For eons the human imagination has focused on things that cannot be seen or things that happen and are unexplainable. What causes this phenomenon, these paranormal activities and is the force behind them good or evil, dangerous or curious and natural or unnatural? Famous scientists and intrepid explorers have vouched at the possibility that these lingering apparitions of long deceased fellows still haunt our waking world and go out of their way, daily, to prove the existence of such paranormal occurrences.

People have photographic, cinemagraphic and witness evidence of things such as transparent spirits, Will O’ the Wisps, Headless horsemen and other paranormal activities such as objects moving without human or natural intervention, doors slamming, lights flickering, and presence of mystical orbs.

The arguments for or against these paranormal occurrences are numerous with “scientists” on either side of the argument trying to disclaim or prove what the previous one had said. Why the fascination though, why would someone try to prove something with instruments that are probably incorrect for the use in the study they are busy with in the first place? Intrepid ghost hunting has become the livelihood of many an entrepreneur willing to take advantage of the gullible nature of paranormal scientists in their quest to prove the inexplicable. Theses humble entrepreneurs go out of their way to sell paranormal scientists equipment used for ghost hunting that often cost hundreds to thousands of dollars where probably the most humble of equipment could do exactly the same job.

Do not get me wrong, I am in no way suggesting that there are no ghosts nor am I suggesting that there are, it just infuriates me to see people been taken advantage off by others who should know better. But then again if people are gullible enough to fall for such things then maybe they should be taken advantage of.

I myself am fascinated by the subject of ghosts as it plays a relatively unusual roll in the human psyche. Have your parents or even you not ever scared you or your children into behaving by telling you that this or that spirit, ghoul or other entity will come and get you or your child if there is no behaving.  Also you have often heard stories of ghosts, spirits or other entities doing good for fellows in history by leading them out of danger or even leading others to their rescue. These paranormal beings have featured in stories where they have comforted, reassured and uplifted the spirit of those around them. Yet there is always an evil element to every character and you have probably heard of paranormal happening where people have been injured, killed, and mentally scared. Now the question that one has to ask is whether the injuries were self inflicted or were they perhaps bought about through mishandlement. Look at young children that are physically hurt by these so called paranormal events, they often portrait scratches, bruises and shallow cuts and these are even bought about under controlled conditions where the children are sleeping and with nobody near them.

The arguments are often endless and tend to go in continuous circles but there is no mistaking that through out history the subject has fascinated human kind and this even before the advent of scientists. So make up your own mind about what or what not to believe but do so with an open mind and without fear. Go and do those ghost tours, find your own sightings and explore the other side of human nature and only once you have done that will you be able to say with surety that you do or do not believe in ghosts.

Ghost Hunters

“ …It is, in short, the only unquestioned and generally acceptable means of payment among nations, as dollars are the only unquestioned and generally acceptable means of payment among Americans, francs among Frenchmen, sterling among the British, and so on.”

Peter Bernstein, ‘A Primer on Money, Banking and Gold.’

Peter Bernstein is no gold bug. Rather, he is one of the world’s foremost authorities on capital markets and economics. A Primer on Money, Banking and Gold was first written in 1965, when gold was still the international currency. It is our contention that in the years ahead, gold will once again resume that role.

Prior to 1971, gold was effectively the commodity with which international payments were made. The flow of gold into and out of countries said more about a nations’ economic health than anything else. Indeed, the outflow of gold from the US in the late 1960s ultimately triggered President Nixon’s decision to suspend gold convertibility. In a fateful decision, the global financial system’s link to sound money was broken.

Ever since, the world has been on a US dollar standard, a monetary system where only one country has the benefit of borrowing and repaying debt in its own currency. In order for this system to prosper, the true international currency, gold, needs to be discredited. We believe gold has been held down for many years in order to allow the US dollar based international financial system to survive. But the official grip on the gold price is beginning to weaken, perhaps this time for good.

The smart money knows this and is beginning to move into gold. There is a silent gold rush taking place all around the world. Investors who understand gold’s role as an international currency are selling their surplus paper dollars and buying the yellow metal. This has led to unprecedented demand for bullion and coin dealers everywhere are struggling to meet this demand.

The Australian newspaper reported over the weekend that the Perth Mint is not taking any more orders for gold until January. Our guess is that the Mint does not want to expose itself to higher future prices given that it does not have the inventory to meet the demand for bullion. In a recent report, The World Gold Council said investment demand for the September quarter was $10.7 billion, double last year’s quarterly total.

Yet the price of gold in US dollars has been under pressure and gold producers have little incentive to increase output at these price levels. Even in Australian dollars, the price of gold is not high enough to encourage increased production. According to Bloomberg, Australian gold production was down 8% in the third quarter.

Strong demand and weak supply should be creating much higher prices. One explanation as to why this is not happening relates to the short term impact of hedge funds selling gold to meet investor redemptions. However, we do not see this as a major cause. Hedge funds are more likely to deal in gold futures rather than physical gold. We will discuss the futures market in a moment.  

More ominously, we believe central banks and bullion banks (basically large international banks) are attempting to keep the price of gold down to reflect the ‘strength’ of the US dollar monetary system the world has operated under since 1971. This theory has been convincingly argued for many years by the Gold Anti-Trust Action Committee (GATA) in the US.

In summary, the argument is that central banks loan or lease gold to the bullion banks, who then sell the gold on the spot market and invest the proceeds in higher yielding treasury securities, earning a positive spread and easy money. In this way, central bank gold holdings are monetised and the proceeds are reinvested back into US government debt. More importantly, the additional supply of gold coming onto the market from the vaults of the central banks helps keep the price down.

Central bank officials certainly deny that they lease gold in order to keep the price low. Their explanation is that they simply lease gold to earn a small return on an asset that does not pay interest.

This is an ingenuous argument. Gold is an insurance policy – a wealth protector not a wealth generator. The benefit of earning a tiny return is more than offset by the risk of losing control over a country’s gold reserves. This fact will soon become painfully obvious to a number of countries.

The gold leasing and carry trade has in effect created a huge short position in the gold market. That is, the loaned gold must be paid back at some point. So central banks have considerable counter-party risks as they are relying on banks to repay the gold loaned to them.

How much gold is loaned out? That is an impossible question to answer, as there are no requirements for central banks to disclose this information. According to IMF (International Monetary Fund) accounting standards, central banks can include swapped or leased gold as a part of their official reserves, a practice that would lead to double counting of gold. So there is a decent likelihood that some of the world’s official gold reserves are not safely stored away, but have instead been leased and sold on the spot market.

This is certainly the contention of GATA and others. Recent efforts to obtain an updated audit of the US’ official gold reserves, stored mainly in Fort Knox, Kentucky, have been met with silence by the authorities. Despite the gold being the property of the US public, the facility is completely off limits and no official tours are conducted. Conversely, tourists and US citizens alike can see foreign central bank gold held in custody at the New York Federal Reserve in Manhattan.

If the market for physical gold is confusing and opaque, then so is the market for gold futures. The futures market is a way for investors, or more correctly, speculators, to gain exposure to the gold price without owning the physical metal. And futures provide leverage.

For example, the active futures contract at the moment is the December contract. One contract represents 100 ounces of gold. So the buyer of one December contract at US$820/oz will pay the seller US$82,000 in exchange for 100 ounces of gold. In practice though, most contracts are settled with cash rather than delivery of the physical metal.

There are increasing rumours that the COMEX, the exchange that runs the gold futures market, does not have the required physical metal should buyers of the contracts demand bullion as payment instead of cash. This is not surprising, as many of the players on the futures market are hedge funds. Such speculators look to capture leveraged price moves rather than buy contracts to receive physical delivery. 

The ‘open interest’ in the gold futures market reflects the amount of activity in gold futures and since peaking in early 2008, the amount of contracts ‘open’ have declined considerably.

Part of the decline obviously reflects lower participation from the hedge fund players. More importantly though, we believe the decline in open interest represents investor distrust in the exchange to deliver on its promises of gold delivery. If you really want to own bullion, why buy a futures contract? In the past, the gold futures price led the spot gold price. If participation in the futures exchange continues to decline, we wonder how long this will continue. 

Given the anecdotal evidence of physical accumulation around the world, we sense that investors large and small are beginning to wake up to the fact that the days of the US dollar as the world’s sole reserve currency are numbered. The fiat money experiment that began in August 1971 is drawing to a close.

Not that anyone in an official capacity wants to recognise this. In a recent meeting of the House Financial Services Committee in the US, Republican Senator Ron Paul asked Fed Chairman Ben Bernanke whether central bankers ever discussed gold in the context of a new international monetary system. Bernanke’s response was to the effect that they only discuss gold in terms of how much they plan to sell.

If this is true, the trade by central banks has so far been a poor one. Central bank sales (separate from the leasing of gold discussed earlier) have been co-ordinated since the Washington Gold Agreement was signed in 1999.

The agreement was precipitated by Gordon Brown, the country’s then chancellor, selling half of England’s gold reserves in 1999. The fact that Brown inexplicably advertised the government’s move prior to the sales saw the gold price plummet and threaten the gold mining industry, so a formalised gold selling agreement was put into place.

The first agreement, from 1999-2004, stipulated that the 11 member nations of the new euro, plus a few other European nations, limit their gold sales to 400 tonnes per year, or not more than 2000 tonnes over five years. The countries signed a second agreement in September 2005, limiting sales to 500 tonnes per year, or not more than 2500 tonnes in total.

There are a few points to note about these agreements. Firstly, the sales represent supply over and above annual production and the gold price has increased considerably since the agreements began. There is now less than one year left in the second agreement and sales in the first four years have all been under the 500 tonne limit. Evidence to date suggests that sales in the final year will be well down on the proposed limit, as banks decide to hold onto their remaining gold.

The fact that central bank sales have added supply to the market while the gold price has continued to rise over the past 9 years suggests the unfolding bull market is a powerful one. While unelected officials sell their citizens’ gold wealth, individuals are taking matters into their own hands and buying the gold back. We believe this will prove a great trade for the individual, and a poor one for the central banks, with major ramifications.

IMPORTANT: This message, together with the Fat Prophets website and all its contents have been prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the Fat Prophets website. Past performance is not a reliable guide to future performance, and investors should be aware that returns can be negative. For a full explanation of the performance calculation methodology, please visit the Fat Prophets website.               

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