Gold - The Full Circle

THE FULL CIRCLE: GOLD " DERIVATIVES " GOLD

From Gold:           Gold has been valuable to mankind for over 5,000 years of recorded history.  Gold has been the ultimate safe haven for centuries.  Gold is money; gold is a commodity; gold is tangible; gold is value; gold is reliable.

To Derivatives:       Derivatives, by their nature, have no value of their own.

Derivatives are financial contracts, whose values are derived from the value of something else (known as the “underlying”), and which signify an agreement to buy or sell the underlying up to a certain time in the future at a prearranged price.

First major derivatives created for gold.

The popularity of derivatives skyrockets.  Gold loses popularity.

Derivatives created for just about anything (i.e. real estate, commodities, stocks, credit.)

Unprecedented financial crisis occurs.

Back To Gold:        Attention shifting from derivatives of “no value” to physical GOLD which is tangible and of “value.”

HISTORY – FROM GOLD TO DERIVATIVES

The Federal Reserve was instituted in 1913 and the $50 Gold Certificate was officially issued.  It was completely honest and upfront; it stated right on the certificate:  "Fifty Dollars In Gold Coin, Payable To The Bearer On Demand".

Here is a gold substitute.  Any holder of this certificate held title to 2.41896 troy ounces of Gold (at $US20.67 per troy oz.) which could be redeemed at any bank or from the U.S. Treasury itself at any time.

THE PRECEDENT IS SET.

Enter The Federal Reserve and the 1914:  The $1 Federal Reserve Bank Note.  At the time this was issued, a "note" was well understood to be a promise of payment.  Accordingly, this is prominently labeled as a "Federal Reserve Bank Note.”

And what was this Note redeemable in?  Here's what it said:  "Secured By United States Certificates Of Indebtedness Or One-Year Gold Notes, Deposited With The Treasurer Of The United States Of America".  The Note was directly redeemable in Treasury debt, but it was NOT directly redeemable in gold.

AND THE STORY OF DERIVATIVES GOES ON . . .

DERIVATIVES

Derivatives are so called because they have no value of their own. They derive their value from the value of some other asset, which is known as the underlying.

The popularity of derivatives skyrockets.  Gold loses popularity.

Derivatives go wild . . .  derivatives for real estate, derivatives for commodities, derivatives for stocks, derivatives for indexes, derivatives for credit…

Derivatives are even written on other derivatives !

By the end of 2008, the world economy is approximately $60 trillion while the notational value of global derivatives is $500 trillion (or eight times the size of the world's GDP.)

Unprecedented financial crisis taking place.

Warren Buffet obviously knew what he was talking about when he termed derivatives “financial weapons of mass destructions.”

BACK TO GOLD

A financial crisis of epic proportions is taking place.  Flight to quality, flight to GOLD is the order of the day.  Gold is real money.  Gold is tangible.  Gold is real value.

Demand for gold has skyrocketed, physical gold NOT paper gold (“derivatives”), leading to unprecedented shortages of physical gold.  Half the bullion dealers and coin dealers in the world can't get it.  Government mints in South Africa and Australia have run out of gold bullion required to produce their 1oz gold coins.  The U.S. Mint has even suspended production of Gold Eagles.

There is $1 trillion in gold derivatives with a shortage of physical gold (the “underlying”.)  Gold’s time is now.

Sponsored by ST. ELIAS MINES LTD., a company focusing on GOLD

St. Elias attends the 2009 Vancouver Resource Investment Conference and Mineral Exploration Roundup

Sunday, January 25, 2009 - On a clear, cold day, surrounded by opulent yachts, 4,000 people with an interest in mineral exploration in Canada gathered at the Westin Bayshore to see, hear, deliberate, and hopefully find a way out of the current economic crisis. Concurrently, people were filtering through the doors of the Canada Convention Center in droves to attend the Vancouver Resource Investment Conference. In total, the number of people through the doors of these conferences is said to be around 8,000. Among them was the St. Elias Team; networking, handing out business cards and further spreading the St. Elias story to all who will listen. Attendees included individual investors, financial planners, fund managers, brokers, investment clubs, and industry professionals.

1:30 PM, PST, Sunday afternoon - 2009 Vancouver Resource Investment Conference - John Embry addresses a grossly over-crowded conference room and states, “Gold is essential for economic survival when the full realization of this economic tsunami is realized.” He then went on to say that gold had to overcome the significant strength of the U.S. dollar. It also faced tremendous head winds due to the anti-gold crowd. When you look at all these factors, Embry feels that gold had a tremendous year. “I think gold and silver represent the best supply and demand story in the 35 years I have been in this industry. This will be fought by the anti-gold crowd until they run out of ammo,” says Embry. “There will be an accelerating debasement of the U.S. currency. It won’t be the world’s reserve currency for much longer.”

Gata (Gold Anti-trust Action Committee) consisting of Al Korelin, Bill Murphy, Chris Powell, Jay Taylor, and Ed Steer takes the stage and makes the following statements:

·         “Central banks are not omnipotent and eventually the laws of the markets take over. Gold hasn’t looked this good since the 1930s.”

·         “Gold is going to go bananas. They say that the reason we have all this leverage is that we have gone off the gold standard.”

·         “I think anybody who is not interested in the resource sector should have their head examined.”

·         “I am glad to see such a crowd here.” The outlook for gold is very bullish. “People are going to make a fortune.”

Public junior exploration companies accounted for a significant number of the exhibitors present. Junior resource stocks reside in a realm that has long been considered the Wild West of the equity markets. Investors who speculate on the junior circuit are the consummate gamblers. The allure of juniors will always captivate investors. It's exciting to own a portion of a company that is - in effect - a modern day treasure hunter. In the search for precious metals, if a junior scores a find, the owners of the company (shareholders) will be greatly rewarded. In short, speculating in juniors allows desk jockeys to become prospectors. As Brent Cook so eloquently put it, “There is a hardcore group of investors that believe in turning rocks into money.”

GOLD SOARS ABOVE $900 ON SAFE-HAVEN DEMAND

By Polya Lesova

12:46 PM ET Jan 23, 2009

NEW YORK (MarketWatch) -- Gold futures rallied above $900 an ounce Friday to their highest level since early October, as falling equities and worries about the global economy prompted investors to seek a safe haven.

Gold for February delivery was last up $40.70, or 4.7%, to $899.50 an ounce in electronic trading on Globex.

Earlier, gold soared to an intraday high of $901.20 an ounce on Globex, which is the metal's highest level since Oct. 8, 2008.

"The market is up on safe-haven buying after equity market weakness this morning and poor earnings, which make gold attractive to investors right now," said James Steel, gold analyst at HSBC.

On Wall Street, U.S. stocks posted losses, with the Dow Jones Industrial Average dropping 106 points, or 1.3%.

In more worrying economic news, Britain's economy contracted at its fastest quarterly pace in nearly 29 years during the final three months of 2008, government data revealed Friday, marking a result even worse than most economists' pessimistic expectations.

Gross domestic product shrank by 1.5% in the final three months of the year, following a 0.6% quarterly contraction in the July-to-September period, the office for national statistics said in its initial estimate.

The British pound plunged to a 23-year low Friday against the dollar, undermined as data confirmed the U.K. economy fell into a deep and potentially long-lasting recession in the final three months of 2008.

"The true secular measure of currencies is gauged against gold," as the metal extends to fresh record highs against the British pound, three-month highs against the euro, nearly four-month highs against the U.S. dollar and only three-day highs against the rallying yen, said Ashraf Laidi, chief market strategist at CMC Markets.

Gold has breached well above its 200-day moving average against both the euro and the dollar, but the metal remains 11% lower than its 200-day moving average in yen terms, Laidi said in a research note.

"Since there remains ample upside in yen terms, Japanese investors may deem this as an opportunity to drive up the metal to next key targets, thus prompting global investor demand further higher," Laidi said.

Also on Globex, other metals posted strong gains. March silver futures soared 66 cents, or 6%, to $12.02 an ounce and April platinum futures rose $27.60, or 3%, to $962.50.

March palladium futures gained $10.20, or 6%, to $195 an ounce and March copper futures rose 7 cents, or 5%, to $1.47 a pound.

Among mining shares, Barrick Gold Corporation  rallied 11%.

The Amex Gold Bugs Index , which tracks the share prices of major gold companies, gained 9%. The SPDR Gold Trust , the largest exchange-traded gold fund, rose 5% and the Market Vectors-Gold Miners ETF  gained 9%.

Oil futures fell Friday, pressured by rising inventories and worries about the severity of the global economic downturn.

The "Acid Test"

The "Acid Test", what does it mean:

In the most common/everyday use, the expression "Acid Test" is used as a generalized term for "verified" or "approved/tested."

In finance and business, the term "Acid-Test" refers to a formula (or ratio) that measures the ability of a company to use its near cash or quick assets to immediately extinguish or retire its current liabilities or, in other words, verify a business' liquidity.

In today's high-tech world, "Acid Test" has an entirely different meaning - there are three Acid Tests (Acid 1, Acid 2 and Acid 3) which are designed to test web browsers for compliance with current web standards.

But where did the term "Acid Test" originate?  And why is it so recognized or associated with quality or value?

The answer to both of these questions is GOLD.

The Acid Test was originally used to determine the value o f GOLD.

GOLD has and always will be associated with quality and value.

The "Acid Test" - Science

Gold is insoluble in nitric acid, which will dissolve silver and base metals, and is the basis of the gold refining technique known as "inquartation and parting".  Nitric acid has long been used to confirm the presence of gold in items, and this is the origin of the colloquial term "Acid Test".< /span>

The "Acid Test" - History

During the 1800's salesmen traveling through the rural areas of North America, selling their wares (manufactured goods), would often take payment in gold and/or old items made of gold.  They used nitric acid as an easy way to estimate the gold content of say…a gold candlestick holder.  He did this by scoring the candlestick lightly and pouring nitric acid on the nick.  The colour the liquid turned would then determine the percentage of gold present.  In other words the acid test was as "good as gold" to coin another phrase.

An "Acid Test" for gold was used during the California Gold Rush of the 1850's by gold seekers and gold traders to quickly and incontestably find whether a given metal, excavated or found, was gold or a mere base metal.

The metal would be submerged in a strong acid (most often nitric acid)  Unlike base metals, precious metals, including gold, do not corrode easily.  Thus, base metals would begin to fizz or bubble when immersed in acid, while precious metals would remain unaffected.  Hence, a clearly visible result is obtained on the spot, with no need for further testing.  For these reasons, the acid test became the most popular way to test for gold, since it was decisive, immediate, cheap and simple to perform.

The Acid Test - Today

The acid test is still used today by jewelers, pawn shops and other 3^rd party gold buyers as a quick, inexpensive and accurate test of the purity of gold items.

 

SPONSORED BY ST. ELIAS MINES LTD., A COMPANY FOCUSING ON GOLD

Comex Gold Boosted By Flight To Quality

Tue, Jan 20 2009, 19:34 GMT
http://www.djnewswires.com/eu/

PRECIOUS METALS: Comex Gold Boosted By Flight To Quality

By Allen Sykora

Of DOW JONES NEWSWIRES

Flight-to-quality buying on concerns about the banking sector and sagging U.S. equities enabled gold futures to break their inverse relationship with the U.S. dollar and close sharply higher Tuesday.

February gold gained $15.30 to $855.20 an ounce on the Comex division of the New York Mercantile Exchange.

 

Follow the link below to read the rest of the article on FXStreet.com

 

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=0445e754-6868-4a5b-b6a8-652c19fbe061

Drill Results from the Jales/Gralheira Gold Property, Portugal

Today St. Elias announced results from a recent drilling program on the Jales/Gralheira Gold Property (the "Property") in northern Portugal.  The results of this drilling program were consistent with all previous exploration/drilling programs conducted on the Property.  The main mineralized intersection returned 2.05 g/t over 5.5 metres that included 10.1 g/t gold and 37.5 g/t silver across 0.65 metres.

 

The Property is owned 51% by St. Elias Mines Ltd. and 49% by Kernow Resources & Developments Ltd.  (collectively the "Companies".)  The claims comprising the Property are held under an Experimental Mining License.  This drillling program, together with metallurgical testing, is part of an ongoing program on the Property, the results of which will form part of a scoping study being prepared by the Companies to advance the Property under the Experimental Mining License. 

 

The Property covers a large mesothermal gold/silver vein system.&n bsp; Mesothermal gold deposits are known globally for their large size and continuation to depth.  The Property includes the Jales Mines (the largest gold project/mine in Portugal), which produced about 830,000 ounces of gold in ore grading 12.9g/t gold and approximately 3,000,000 ounces silver between 1933-1992.

B.C. Juniors Play a Lead Role in World Resource Exploration

Investment Opportunities of a Lifetime!

Joseph R. Martin
Chairman, Cambridge House International Inc

 

We, who live in BC, are very much at the centre of the universe in the demand for metals. Large producers, for the most part, do not get involved in exploration. That job falls into the hands of the hundreds of mineral exploration companies called "Juniors". It is estimated that about 60% of all world wide mining exploration is done by Canadian companies. It is further estimated that one-half to two-thirds of those companies are based in Vancouver.

 

Over the past few years, I have visited mining exploration projects in China, Thailand, Korea, Australia, the US, BC., Saskatchewan, the Yukon and Quebec. Newsletter writers who speak at Cambridge House Investment Conferences write and talk about projects they have visited in every corner of the world. And on almost all projects, there are people from BC working diligently in the search for new deposits.

 

Internationally, BC is recognized as the world leader in mineral exploration. Yet, because most of the projects are outside of the province, the industry does not get the recognition it deserves at home.

 

BC media have ignored this great industry. Politicians do not understand how the industry works, thinking only of projects within the province. British Columbia personnel have taken mineral exploration to new world class levels by providing technical expertise, fund-raising, and the many other things that go into this "High Risk-High Reward" business. It is an industry like none other, and one that creates enormous wealth for this province and the world.

Gold will Emerge Winner in this Tug of War

Gold will Emerge Winner in this Tug of War

By Christopher G Galakoutis
Jan 19 2009 10:02AM

A Federal Reserve balance sheet that has grown from 900 billion to well over 2 trillion since last fall may be on its way to 10 trillion according to some observers.  There is no denying it’s been pedal to the floor in money-printing efforts to restore the credit markets back to health.

What also needs to be restored is profits for the banking industry.  It is that industry, after all, that the Fed really answers to.  It is also an industry that knows how to profit from inflation.  Throughout history bankers and the ruling classes have profited from inflation, as a transfer of wealth occurs at the expense of the vast majority of the population.

Along those lines what we have witnessed since last fall has been a Fed effort to create inflation and rescue the banking system.  This following a textbook case of the law of unintended consequences, where runaway commodity and food prices -- a consequence of an irresponsible bubble creating Fed -- earlier in 2008 and a financial sector ailing due to its own greed, saw a miscalculating Fed bring a violent reversal of those trades and a crash, when it decided to backstop certain financial institutions and not others.

Since then, the Fed has been purchasing commercial paper, mortgage-backed securities, and any and all other assets to keep the banking system from collapsing into a deflationary spiral.  Expansion of the Fed plan, including purchasing consumer and small business loans, as circumstances warrant with the help of the Treasury, is sure to follow.

Calls for the Fed to "proceed with caution" with its new policy are going unheeded.  The fear is that plans are not in place to immediately reverse course at first sign of inflationary trouble.  In a market where a misguided fear of a deflationary winter has its grip on most, inflation is a luxury item beyond reach for now.

The stock market crash and continued deleveraging brought the financial system’s money flow, gripped by fear, to a standstill.  The Fed’s efforts at gorging the money supply with new liquidity is an attempt to overcome that standstill -- an opposing force also referred to as the rate of money velocity -- and create positive inflation.

With green lights flashing across the central banking landscape, eager governments and millions of citizens in dire straits, it is hard to imagine that unlimited money printing will give way to a finite opposing force.  The point the opposing force is finally overcome is obviously of real concern due its inflationary ramifications, and was reflected in the strong price of gold throughout this crisis.  Gold’s strength looks to be signaling a coming inflation and an inability of central banks to withdraw said stimulus in time.

Weighed down by enormous debt levels, no domestic savings from which to draw, angry foreign creditors and a collapsing tax base, the Fed has no choice but to inflate in a big way; while it may be a race to inflate worldwide, the US has more baggage than others.  With all countries both daring the inflation monster while trying to stay one step ahead of its jaws, the one that is weighed down the most, much like the slowest antelope in tiger country, will naturally be the first to be caught.  The carnage won’t be pretty, but gold will shine.