Dual pricing of Gold

Freegold theory says that existence of paper gold brings the price of gold down. This happens because some physical gold demand goes into paper demand. How much of it is true, is up for debate.

There are other parts of the theory which show that Gold's value should be much higher, but has been held down due to the paper gold system. Basically Gold was never completely free from the shackles of paper gold. First the gold standard, resulted in the currency acting as the paper gold. Then after it's demise the paper gold system was created. I guess because people feel safer holding paper promises to gold than real gold. Basically, the price of gold has remained suppressed forever.

Now the theory predicts that everything is in place for freegold to arise from the ashes of the current system. It just needs the paper gold system to die out. It will die out naturally when the gold is not available for sale at the market price. The market price is set by the sellers and buyers of paper gold, ie the price is set in the west. And the east buys at that price. As the price goes down due to selling of paper/physical in the west, the buying of physical increases in the west.

Note that the east does not buy the paper much.

So if anytime it happens that the west sells a lot of paper/physical gold, and the demand from the east increases so much that the sellers in the west cannot meet that demand. The problem will happen due to the difference between the paper demand in the east. So if west sells too much, the physical sold will be less than the amount of physical that the east wants to buy at that price. This will cause the price of physical to rise, but similar demand for paper will not materialize. This will break the price of gold.

When the price of gold breaks, the gold will go in hiding. It will only be available in the black market at a much higher price. The market price will become only of paper gold, causing it to crash. I don't expect the price of gold to reach its freegold value immediately. It will take some time as more and more people will start buying gold. Yes that time has not come so don't expect this to be true at the moment.

Now the theory says that the "Giants" know the real value of gold. This is supported by the fact that price of every other rare stuff is rising in the world. Price of paintings by masters, extremely rare gems, etc are rising in price. Gold should be there, but it cannot be there, as the price of gold is too low. The gold available on the market cannot bear the "Giants". If they tried to buy on the open market the price of gold would rise too fast. Now "Giants" are patient, they don't need to buy gold. They can just buy other things, which they are doing.

But what if a huge stack of gold became available off the market. Will they want to pay a premium for it? I think they will, because they already have too much disposable income. Another had given an example where somebody had put up a stack of 9million ounces, to be sold unbroken. It was bought at a premium by somebody, ie off the market. Maybe somebody can check that story out. It's a huge amount of money, buying around 280 tonnes of gold at once. It was more than the lots that UK sold. At the time gold was around 300$/oz, so the amount was 2.7Billion at the time, and if it was sold on the market, it would have caused the price to go down, like the UK selling did. But somebody bought the whole thing at a premium. Makes sense through the freegold lens, otherwise doesn't.

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