a different kind of article about gold
bronco2078
Posts: 10,211 ✭✭✭✭✭
I came across this article on 24h gold today which contains some ideas about gold and oil that I haven't seen before.
It talks about buying oil with gold and fears that middle eastern countries could amass a huge portion of the worlds gold because of the amount of oil they are in possession of.
It also talks about the idea of paper gold and that if a person that had a lot of money and wanted to buy a lot of physical gold they wouldn't be able to get it close to COMEX spot price. That spot only works for physical gold purchases in small amounts.
It rambles around a bit but I found it interesting
24hgold, think like a giant
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The last time the coin shop I retired from had an order for 3,500 ounces of gold it called our supplier in NY, which called the RCM, which loaded them, from inventory, on an armored car and had them at the customer's bank in Chicago in three days.
I think they mean a lot as in tonnes of gold not 1000's of ounces. Anyway a lot of gold means something different at $250 an ounce than it does at $1650 an ounce .
I was more interested in the gold/oil dynamic that the article touched on. My memory is a little fuzzy on the subject but I thought initially we had to pay for oil strictly in gold. Didn't the mint make gold tokens specifically for paying the Saudis for gold. I've seen pictures of them on this site I believe weren't they equal to a sovereign in size with one blank side and writing on the other side?
It seems to me that they are implying that the huge increase in demand for oil caused the end of the gold standard.
It was a balance of payments deficit, and also because DeGaulle was demanding France's gold holdings that pressured Nixon into closing the gold window, but in my opinion, the trend was established years earlier with the ramping up of deficit spending due to the escalation of the Vietnam War. Oil demand may have been part of it, and that impact was probably felt when OPEC decided to squeeze the oil-consuming nations with their embargo in 1974.
The vehicle that removed price pressure off oil was the implementation of the "petrodollar" which was essentially a protection agreement for Saudi between the US and Saudi Arabia wherein the US provided security in the Gulf Region in exchange for making the dollar the accepted unit of trade for oil transactions worldwide and for the Saudis to break OPEC's stranglehold on oil pricing by overproducing at the rate of an extra million bbls of crude oil per day to make up for the market shortfall caused by the embargo.
The petrodollar is now being pressured by bilateral trade agreements between many countries, including China, Russia, India, Brazil and now even Britian - in order to get away from the US's overproduction of Treasuries in relation to the US's economic output. We've given way too much away, and it's rapidly catching up with us.
I knew it would happen.
So apparently oil didn't have to be purchased in gold but oil royalties had to be paid to the Saudi government in gold by Aramco.
Here is an article about it coinweek
Its interesting that the $20 size coins weighed over an ounce because at that time gold was supposedly worth $35 an ounce according to the US government