# Gold Bubble goes POP?

Discussion in 'Business & Economics' started by Believe, Apr 15, 2013.

1. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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A year or so I suggested in post that gold coated tungsten bar could be spotted by neutron activation of it as the gamma rays emitted would be different (and the induced radioactivity was not very long lived), but perhaps there is a much simpler way you can do at home with very little expense:

Between 0 and 100 C the specific heat of gold can be assumed to be 0.0301 but that of tungsten is 0.0321 cal/gram. Thus if 100 grams of tungsten is placed in boiling water (100C) long enough to be at 100C and then placed in small amount of 0C water, say 5 grams (5 cc) held in a well insulated container slightly larger than the bar or gold being tested - it cools down to a lower temperature, T. It will heat that ice water up more than a pure gold bar or one with part of the "gold" bar being actually tungsten. I.e. Tt > Tg.

Use distilled water. A one liter bottle will let you test all of your 200 bars of gold.

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First put precisely 5 grams of it in your home made (more below) "well insulated container" (except for the open top) and then into your freezer. For stability, the flat bottom of the container has an area at least a four times greater than the cross section of the bar. That container is about 50% taller than the bar is long with very slightly greater cross section. Then put metal bar into boiling water. Periodically checking freezer's water for a thin ice layer on top. Break it and mix the ice chips and water - without mixing, the bottom water would be at 4 degrees C, water's densest state. Use a fine glass "swissle stick" and tap / wipe it on the inside wall of the container, to be sure not to remove any of the 5 grams of water.

While your "gold' brick continues submerged in gently boiling water, wait for the tiny bits of broken ice floating on top to melt. As soon as the last one melts, remove bar from boiling water (via the fine fishing line loop attached to the top - more below) and quickly wipe dry with only an adsorbent paper towel lightly touching the hot bar as it hangs in the air via the fishing line loop from your finger. When dry, so that water mass remains exactly 5 grams, lower metal bar into the 0 C water. Wait for water and bar to come to same temperature - about 4 minutes of wait before you first measure the temperature - more below. Measure again every minute and use the highest water temperature observed. (Keep measuring until you see the temperature is falling.)

For a numerical example, If bar were pure gold the heat gained by the five grams of water would be same as that lost by the gold bar and when this heat transfer is over the water and bar are at temperature Tg. Raising 5 grams of 0C water to temperature Tg requires 5Tg calories. Cooling 100grams of gold down from 100C to Tg give up 100x(100-Tg)x0.0301 calories. Set these two heats equal and solve for Tg = 37.578 C.

Do the same for a pure tungsten bar and solve 5Tt = (100-Tt)x3.21 for Tt. Or
Tt = 100 / [1 + (5 / 3.21)] = 100 / 2.5576 = 39.099 C

If the bar were 60% W and 40% gold, then the expected final temperature of the cold water would be: 0.4 x 37.578 + 0.6 x 39.099 = 38.437C

The temperature of boiling water may not be exactly 100 C but a simple approximate correction for altitude (or better by the measured air pressure) is adequate as the final cold water temperature does not depend strongly on the value of “100 C” used.

What it does depend upon strongly is the precision that the mass of the ice water to be heated is precisely known. (5 grams, not 5.1 grams, etc. To show this, is why I gave more of the algebra in the calculation of Tt.) This is relatively easy to know precisely by careful volume measurement (or precises weight scale measurement is better as no correction for density as function of temperature is needed. For example, small hypodermic syringes with capacity of only 2.5 cc exist and they can be read to ~1% accuracy. I.e. with one you can know your water mass Volume, V, is 5.01 > V > 4.99 cc. Many clinics will give you one so long as you make it clear you have no interest in the needle.

Measuring the temperature of the final cold water to two decimal points is not easy but very feasible. A fine platinum wire with 1000.0 ohms when at 0 C will have a resistance of 1385 ohms when at 100 degree C* and essentially none of the heat released by the cooling “gold bar” will be used to heat it to only a fraction of 50 degree C as it will have mass at least 10,000 times less than the bar and like tungsten and gold also has a very low specific heat. The change in the resistance of almost any wire (if you don't want platinum expense even for a fine wire) is nearly linear between 0 and 100 C, so one could probably use an old tungsten filament light bulb (after removing the glass bulb) ** that you have calibrated the temperature change – measured resistance at both 0 and 100 C and one point between to check the linearity. For example equal masses of 100 and 0 C water when mixed are nearly exactly at 50 C.

* Data from table 4 here: http://www.edn.com/design/analog/43...call-for-PRTDs-and-precision-delta-sigma-ADCs

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** Only the tips of the more massive “rods” supporting the tungsten filament should be immersed in the final cold water. Use a low wattage bulb, like a 110V refrigerator light bulb, to get a small, very fine, tungsten filament. To avoid breaking the filament, slowly crush the glass bulb in a vice.

To make only 5 grams of water cover the “gold bar” with layer of water for the temperature immersion probe on top the bar, the “well insulated container” must snugly fit the bar. That "enough water covering top of bar for temperature measurement" is the first thing to confirm is possible. If you must, use 10 grams of water, redo the math, but you accuracy will be less. Perhaps there must be 10 or more % tungsten in the "gold bar" to detect it with confidence. To be sure the tungsten wire does not touch the highly conductive “gold bar” coat top of bar with film of plastic that can survive the boiling – for example “Duco cement” - What I called “air plane glue” when building flying rubber band model airplanes as kid.

I have not done a careful sensitivity analysis, but am sure this approach, if carefully done, would detect the presence of Greater than 5% tungsten in the "gold bar" and any one going to the time and effort to make a false gold bar, using a tungsten core would surely put more than 5% W in it.

PS make your "snug fitting insulating container" by gluing flat sections of thick foam (sheet isopour)*** around the gold bar which has some thin cardboard sheet spacers on it surfaces, except the top. (There under the duco cement, is a thin fishing line loop that makes lifting the bar out of the boiling water easy.) Your only significant expense will be to get or borrow a digital ohm meter that can measure to at least one decimal place resistance of ~ 1000.x ohms. (You could make that too in the form of an analog bridge with one leg your temperature probe and the balancing leg linear stretch of nichrome wire on a yard stick.) Nichrome wire is very cheap as used in electric heaters. If you do the temperature measurement with a home made resistance bridge, or a borrowed precise digital ohm meter, the cost of you equipment should be less than $5 and your consumables per bar tested less than 5 cents. *** Zero cost as many items now come in box with thick isopour filling space between the item and the inner walls of the box. - I. e. have at least one side flat. Last edited by a moderator: Aug 12, 2013 2. ### Google AdSenseGuest Advertisement to hide all adverts. 3. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Please Register or Log in to view the hidden image! I bet it at least tests 1300 again and may even bounce off 1280 before the climb to all time highs. 4. ### Google AdSenseGuest Advertisement to hide all adverts. 5. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Yesterday stocks fell significantly on fear the Fed may "taper" soon. That should make gold fall too as that tends to reduce the inflation with less "thin-air" money being produced, but gold rose more than a percent and is still rising today (now at$1368.50/ oz). Perhaps here is why:

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Now more than 50 potential claims on each ounce of deliverable to you physical gold at Comex, world's largest depository! (Most of the gold at Comex has a specified owner already - can't be delivered to you.) If you have any contract claim there on the registered gold, get it out now before the other 49 owners take your gold and you get only promises that Comex will buy more gold in the open market (at much higher prices) and deliver later.
Note that gold price has punched thru the $1360 "resistance" line of prior post 82 as if it was not even there! Test of$1420 would seem to be next - certainly not headed now for 1000/oz as Joepistole predicted in post 57:
BTW a final note, by "edit", on how markets closed today:

9. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Other graphs at: http://seekingalpha.com/article/1644122-time-for-gold?source=email_macro_view&ifp=0 show total demand for gold in 2012 was ~4400 tonnes but straight line of graph extended indicates demand of ~5500 tonnes in 2013. Gold holding ETFs, like GLD, the largest decreased their holdings in 2013 by 400 tonnes. Here is the "why" quoted from that link:
"According to the World Gold Council, ETF outflows accelerated during the second quarter as a number of hedge funds and speculative investors exited their positions in reaction to predictions of US economic recovery. The prospect of the US government tapering quantitative easing by the end of 2013 had a disproportionate downward impact on the gold price as some investors in ETFs saw their key rationale for seeking a safe haven in gold fade." I.e. these ETFs must sell gold (a "negative demand") to pay people selling their shares of the ETF. I think some of these ETF sellers are using the funds to buy gold, as they grow less trusting that the EFT will be able to deliver or become concerned that the government will freeze their accounts (as it did in 1932, I think it was).

Each Tonne (metric ton) is 1000Kg or 1 million grams. Comex now has slightly less than 0.8 million ounces of "deliverable gold." - See data in graph of post 85. 31.103478 grams = one Troy ounce. To keep numbers simple, lets say 31 grams = one ounce and credit Comex with 8E5 ounces. I .e Comex has 24.8E6 grams of deliverable gold or 24.8 metric tonnes. That was OK for the paper gold traders until now, as few asked for delivery. In a world where the physical demand is more than 200 times greater than the gold Comex has, that is dangerous. 200x 24.8 = 4960 tonnes and global demand is well north of 5000 tones / year now. Comex's paper gold traders are playing in a game with more than 200 fold leverage. There are more than 50 owners for each ounce of gold Comex has, and each can demand Comex give it to them. - What you think will happen when more than 2% who can ask for delivery do so ask?

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10. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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looks like gold, now at $1395.50/oz will test$1400 later today.

Perhaps Comex has already started to add to the Asian demand for physical gold to limit the rate of fall of "deliverable" registered gold in its valuts, but it is still declining as more people with right to ask for delivery are doing so:

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A couple of weeks ago, there were more than 50 potential claims on each of the 817,485 ounces Comex had in the vault.

Summary: It looks like the deliverable (against claims) gold is being requested and delivered faster than Comex is buying in the open market, but if Comex is adding to the physical demand, that could be why price of gold is now rapidly rising.

Last edited by a moderator: Aug 25, 2013
11. ### ayush001Registered Member

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Years ago, I speculated why: I.e. China, when US dollar collapse will help more than it hurts (long term*) will back their bonds for central banks only with gold.

12. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Paper gold will not be able to set the price of gold much longer. Physical demand will.
Many dozens of people have claim to each deliverable ounce of the "registered gold." Some of the smarter ones have in only one week moved ~10% of all the Comex's vault registered gold into the "elegible gold" status - I.e. it now belongs to them and only them. Can not be given to others with claims on the registered gold, which is now rapidly shrinking as I predicted it would in posts in this thread, several months ago.

I don't have current data, but a few weeks ago there were slightly more than 50 claims out against every existing ounce of deliverable gold. As now there is 10% less of that, probably there are about 60 claims on each ounce of deliverable gold Comex has. If you have any claim on the shrinking supply take delivery NOW or at least do what the smarter holders did last week - transfer it so it is yours and yours alone (while there is still some left in the vault).

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13. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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The removal of the immediate threat of stikes against Syria has removed the recent gains in the price of gold, but the long term supply demand is still acting to drive the price up. Even central banks have become net buyers. Note that the strores of gold available to meet requirement for delivery continue to fall as I have documented in many prior graphs so the selling of Gold backed ETFs to take delivery will cease long before the growing demand in Asia, especially China does. I.e. in 2Q13 the physical demand for investment (gold bars to hold long term) was almost same as the short term selling in ETFs and at all time high record, expected to continue to increase until price significantly rises. I.e. gold is now being removed from the market faster than it can be mined. GLD closed today back in my "screaming buy" range - at 127.670 but probably will fall more on the momentum - keep a close eye on it to decide when to buy.

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Here, it is in text and numbers, proving that a picture is worth a 1000 words:
Now a few words on the supply picture:
The Pascua Lama project in Chile, one of the world's largest, is halted with no indications production will resume soon.

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Yes, were back in GLD's "screaming buy" land, but may be able to get slightly cheaper still.

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14. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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A month of so ago there were 50 potential owners who could demand each ounce of gold in the vault. To understand why the ratio is climbing as the gold in vault available to satisfy demand drops, consider a simple example, valid a month of so ago, with 100 bars of gold in the fault then. I.e. then there were 5,000 who could claim them; If they wanted to take delivery instead of sell their "long contract" with with current low price of gold, claiming might make a sure "realized loss."

Lets assume 13 did ask for a bar of gold in the past month rather than sell their contract. Now there would be 87 bars in the vault with 4987 claims on them. The new ratio is thus increased from the earlier 50 to 57.3, about in agreement with the current facts. The ratio will rapidly change in a final run get "your" gold at some point, (perhaps when the ratio becomes 100 ?) as then the vault is clearly going to be empty soon.

15. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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* Miners sell their produced gold, even at price below cost of production, as many are doing now, because it is some income to help pay their workers, interest on their loans, etc. They can do this only as long as the have cash in the bank – no one will lend money to company going ever deeper into loses.

I. e. not only is current production less than last year, it will fall more as more producers run out of cash to pay bills, unless the price of gold moves significantly higher. - As it will soon when there is no more gold to deliver to Comex's holders of long contracts – see my recent posts that give data indicting Comex vault's store of “deliverable gold” will be zero by end of 2013, or sooner. Comex CEOs don't want to go to jail for failing to deliver gold they have guaranteed they could. So they will enter the market and pay whatever price holders of physical gold demand.

16. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Last week we saw a large transfer of eligible gold to registered status (making it eligible for delivery - very confusing names, perhaps on purpose?) in the JPMorgan warehouse, but total gold held at COMEX warehouses continued to fall for the week and ended the week 7,665 ounces lower but the big transfer increased the registered gold at Comex by 92.610 oz. Thus, JP Morgan, a possibly others, are converting some of their privately owned gold it gold that can be used to satisfy delivery demand by long contract holders. Thus, I am probably wrong that the delivery gold at Comex* will go to zero by end of 2013, causing nothing to back the paper gold by then; However, the net flux of gold out of US etc. to Asia remains strong, and the price must increase as physical gold in the West decreases. Effective what is happening is that gold is moving from "weak hands" (I. e. the traders who don't take long term positions) to the "strong hands" that expect to hold it for years. China, alone is Hoarding ~64% of all gold currently being removed from the Earth. Buying something like 1200 tons / year in 2013 and producing ~ 300 = or - 100 tons / years. (how much is a great state secret.) Probably is now displacing Germany as 2nd largest government owner and Germany wants it gold back from US, but US is stalling - says OK but wait 5 years.

*JP Morgan doesn't want to see the chaos, Comex defaulting on contracts would create, so is helping delay that day by switching from being an exclusive owner of some tons stored at Comex to being one of many having a claim on the same gold. The hand writing is on the wall, but the wall is movable, for a few years, further away. China, Germany, India, even Brazil, want to (and are) holding more of their asset in gold and less in dollars, at least as a percentage as are at least 2/3 of other nations too. The situation is highly unstable, with ~ 60 potential owners of each ounce of deliverable gold and total supply in the West of physical gold in steady absolute decline.

PS gold flows in and out of Comex every day, but one day 160,000 ounce were removed - date unknown by me, but I bet it was when markets fell and prospects for US defaulting looked worse than now. Total gold at Come as of last Friday was 6.8E6 vs 11.1E6 oz at start of 2013 or 4.3 million oz drop in 9 months. As JP and others MAY transfer more of their privately owned gold to the registered stock, to delay paper gold chaos and defaults, so this 4.3 /9 = 0.478 rate of total decline is more useful than my old estimation based on only registered gold's rate of decline at Comex. If it continues unchanged (not likely as near end many will be trying to get "their" gold).
I. e. we have about 6.8 /0.478 = 14.2 months be for Comex either has no gold or it a very active buyer in the open market.
(Comex competing with rich Chinese to make supply = demand, instead of the current supply << demand with paper gold seller holding price low.)

My "on or before Halloween 2014 run on the dollar" prediction is looking like I had a near perfect Chrystal Ball 7+ years ago!

Data used above, like most in this thread is from: http://seekingalpha.com/article/173...r-continues?source=email_authors_alerts&ifp=0 or earlier publications by same source and usually given in the prior posts.

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*Much to smuggler's delight (And in China too as many prefer the government not to know they are burying gold in the back yard) As article notes gold bought by the banks is not included in the 1300 tonnes coming thru Hong Kong. Some of that may be from the ~400 tonnes each year of domestic production. Some is smuggled across the Mongolian border, where one of world's richest gold mines is in operation (privately mined too, mainly at night by "turtles." So called as the gold is in back packs and at times they crawl to avoid detection by company guards.). Some Chinese have given banks yuan to get credited with X grams of gold at current market rates - the govern of course could seize the gold held in their names, As US government did in 1932? paying only $35/oz. Thus, I believe China already has more than enough gold to back RMB bonds for IMF and central banks. Both would prefer the interest paying bonds to asking for the gold, except short term and small volume testing to see China does deliver gold promptly when requested. (Very unlike the US, which is requiring Germany to wait five years before the gold US was only storing for Germany will be given to Germany.) Last edited by a moderator: Oct 9, 2013 18. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Please Register or Log in to view the hidden image! Please Register or Log in to view the hidden image! Net imports (cumulative / back curves are negative exports = positive imports) of almost (900 + 400) tonnes from these two countries alone (official data, none from other countries or the smuggled imports included) is 100 tonnes more than in all of 2012 from all sources! Note also China I world's largest producer of gold ~400 tonnes /year is 40% more than the # 2 producers for at least last three year (how much is great state secrete.) You must wonder why - I have been telling a plausible reason for several years: China will back its RMB bonds, which will pay higher interest than US can afford with gold when China wants to displace US dollar as world's reserve currency and then China, not the US, gets to pay for its imports with printed paper as well as much less competitive buying by broke US and EU driving up the price of those imports. China is rapidly driving US buying as fraction of its exports down - from 42% five years ago to less than 16% now so soon China will tell the US: Go to Hell. We don't need to sell to you and won't lend more to you. Our factories are hard pressed to supply domestic demand and customers with cash. 19. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 I just stumbled on: http://www.usdebtclock.org/gold-demand-by-country.html which tells gold demand by countries, dynamically.I was suprized to see there that China + India is only slightly more than 25% of the total which when I looed was 155,792,259 ounces (annually I assume) and the total mine production plus recycling was 152,993,397 so an annual short fall of nearly 3 million ounces. Graphically from another source here is China's inports via hong Kong in first part of 2013 vs all of 2012: Please Register or Log in to view the hidden image! imports have now doubled to 826 tons for the first nine months of 2013. Last edited by a moderator: Nov 9, 2013 20. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Also note there are now slightly less than 60 potential claims on each ounce of registered gold existng. Recall the "eligible gold" already has a definite owner. More who are "long" are with registered gold contracts are claiming it and transferring it to the privately owned "eligible gold" stocks (or arranging to send it to Asia to collect 15 to 20% premium there.) Please Register or Log in to view the hidden image! As you can see above: in 10 months, 8 days, less than 28% (compared to ounces at start of 2013) of the gold available for delivery to those ~60 with claims to it, is still available. If you have such a claim, get your gold now before one of the 59 others with a claim to it does. Last edited by a moderator: Nov 11, 2013 21. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Soon more than Germany will want their gold to be closer to them. * Part of this may be due to Swiss governments recent agreement with US to tell how much Americans have hidden away there. Gold owned by Long ETF contract, like at Comex (see prior posts), are increasing taking delivery and sending it to London or Switzerland and from there it moves to the new Aisian vaults; but with chna buying world's largest private vault, some may stay in NYC for months until direct to China shipment details are established. 22. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 gold backing for long contract (registered gold) still dropping: 23. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 Please Register or Log in to view the hidden image! I note: (1) Not only are Asian governments buying gold but, on average, ALL central banks are now reducing the fraction (or absolute amount, in some cases) of dollars held in their reserves. (2) About 2+ years ago China did a 180 degree policy change. No longer illegal for Chinese to own gold, but facilitated by new "gold bank accounts." I.e. make deposit of Y Yuan for credit of G grams of gold. They can't take the gold out, but get the then current value of it in Yuan. This was very smart move by the CCP as they reduced the circulating Yuan to keep inflation down, aided the banks, and can always confiscate the gold (or as FDR did, pay$35/oz, tiny fraction of its value now).
(3) China admits to production of ~430 tonnes / year of gold, but sells none. (That is 40% more than second place producer.)
(4) Like India, there is a large demand for smuggled gold. In India, much of it made into jewelry women wear, but in China is hidden (buried usually) so government cannot as easily confiscate it.
(5) This is my speculative bet as to why Gold in China is increasing by at least 2000 tons annually now: China is switching to more of a domestic than export economy, but exports are still growing. They increasing go to nations who supply China things it must import who don't need loans from China to buy with, as the US and EU do. US has dropped from 42% to 15% of China's exports, and soon will be of little import to China. Then China can back its bonds with gold and paying higher interest on them than the US can afford. (Destroy the dollar.)

Why would it be to China's economic interest to see the value of its dollar assets in reserved greatly decline? Answer: Because that is a "one time" loss and more than compensated by being every year able to pay for its imports (a growing cost) with printed paper, as the US has done to a large extent for at least three decades.

What ever government is the world's main reserve currency, has a huge economic advantage on all others. The US had that reserve currency status and also via the "PetroDollar" system. Both are now on the verge of collapse. More efficient cars, or electric ones, and natural gas (some as LNG) and China's air pollution problems are reducing the need for petroleum, plus China has locked up decades of it in paid-up-front contracts. One of a about five years ago was Brazil's PetroBras got 10 billion dollars and will send an daily average to of 200,000 barrels for 20 years to China. - That is only one of several dozen, some with 30 years duration and larger daily volumes of oil to be delivered.

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