Sunday, April 13, 2014

ETF's Have Been Pillaged to Supply Central Bank Shortfall

By Greg Hunter,

$8 billion fund manager Eric Sprott says there is a big opportunity surfacing in precious metals. Sprott contends, “I’ve always believed there is more demand than supply for the last 14 years. I’ve documented it. I am suggesting the western central banks have very little gold left. I think the whole decline in the gold price is the liquidation in the ETFs to supply some of that shortfall. I think manipulation and relief from the manipulation and the ongoing demand, well in excess of supply, is going to power gold higher.”

On precious metal price manipulation, Sprott charges, “We seem to get more and more evidence of it all the time. The German equivalent to the SEC saying the possible manipulation to gold would be worse than LIBOR, and I think worse is a very important word here because there can’t be more money involved because LIBOR is way bigger than gold, but worse means the egregiousness of the price decline. Furthermore, we had another group come out and say the LBMA fixed the price . . . the price was manipulated 50% of the time.”

On the question of western central banks running out of gold, Sprott says, “We might already be there when you think back to the German situation where they got all of 5 tons last year. Isn’t that a de facto ‘we’re not delivering the gold?’ I think that is such tokenism to the extreme. I have always thought there would be tightness. Whether it shows up in the COMEX one day or the fact that premiums blow out in China because they can’t get delivery, we are going to see that. . . .The supply demand numbers get better every day.”

What is Sprott’s forecast for silver? He says, “I think it’s safe to say every time gold has gone up, silver has gone up some multiple of that, and I wouldn’t expect any difference going forward here. What is Sprott’s price forecast for the yellow and white metals? Sprott predicts, “I have said many times that gold will exceed $2,000 an ounce this year, and silver will exceed its previous high of $50 this year. . . . On a linear trend line, gold should be $2,100 right now . . . and if you throw on another 15%, you are looking at gold at $2,400 by the end of the year.”

On China’s possible financial collapse, Sprott worries, “Anytime you have a financial collapse, the last place you want your money is in a levered bank and/or a government bond, and for that matter, most stocks. So, what’s left when you exclude those categories? Gold is the place you turn.” Sprott goes on to say, “On a corporate debt basis, China has one the most egregious leverage ratios out there. You could get this domino type of effect. Anytime there is financial uncertainty, that is what gold thrives on.”

On the possibility of a Ukraine/Russia war, Sprott says, “There are two fears. One is war, which would be just devastating for everybody. The other fear is there could be a financial domino fall away from this. Perhaps the banks in the Ukraine, which are already facing tremendous strains because of demands on deposits, fail, and because somebody else is invested with that bank, they end up with a problem. . . . . War could certainly cause a financial domino, but we could have a domino without war. There’s a huge bank run going on in Ukraine. The currency is crashing. The ruble is crashing. It is surprising how far all these currencies have gone down. We also experienced a huge decline in the value of the dollar . . . it fell half of one percent in one day.”