Friday, May 30, 2014

Chinese Government Controls all Exports of Gold

The Chinese government controls all exports of gold and since they are a net buyer, they probably would not allow any exports.

The amounts of gold involved are so large that clandestine sources seem unlikely. There is only one government in the world that even owns 4,000 tonnes – that’s the U.S., supposedly.

I think it comes down to the powers that be simply trying to keep things under control. The dollar is coming under extreme pressure here, and it looks to have broken down here, in fact. That should have people going into gold.

The U.S. GDP growth, which was expected to be around 0.1%, will probably be revised even lower for the first quarter of 201414. I do not believe that any economic recovery is really occurring, because the middle class is simply being routed. We are seeing no real wage gains and inflation is well beyond reported CPI numbers, which are just a joke. In the real world, we all know inflation is much higher.

There’s no rational explanation, in my opinion, of where the gold is coming from apart from central banks.

- Source, Eric Sprott via Sprott's Thoughts

Wednesday, May 28, 2014

The US is Running Out of Gold to Supply the Market

I am very excited about developments in the gold and silver markets today. I have been speculating since late 2012 that Western central banks could be running out of gold. I put the sell-off in gold and silver in 2013 to the fact that the Western banks needed a way to generate physical gold supplies. As the metals prices went down, there was a lot of liquidation of gold, which increased the supply by an estimated 900 tonnes last year.

Let’s look at the figures. The annual supply of gold is around 4,300 tonnes. 3,000 tonnes come from mining and the other 1,300 tonnes or so from recycled material2. In 2013, an additional 900 tonnes came onto the market from ETFs that were being liquidated – a supply increase of around 21%.

Quite frankly, I believe this was all orchestrated in order to create this supply. During the time when the price was knocked down, a tsunami of buying started. India bought 336 tonnes from April to June of 20133. I’m sure that the central bankers went to the Reserve Bank of India and said: “You’ve got to stop people from buying gold.”

Of course, the Reserve Bank of India went on to create rule after rule to try to stop people from buying gold. They managed to get monthly imports of gold down to around 20 tonnes from its normal imports of around 80 tonnes per month. Obviously, those official numbers leave out smuggling, which probably makes up a very large amount of gold imported into India.

At the same time that Indians were buying, the Chinese were jumping in, too. The mine supply, excluding China and Russia which tend not to export any gold, is only around 190 tonnes per month. You had Indians buying 50 tonnes and China buying 90 tonnes4 – that does not leave much left over for the rest of the world. Blogger Koos Jansen, from In Gold We Trust, says that Chinese demand alone last year was 2,000 tonnes5. So demand has far outstripped supply.

There is also interesting news coming from Dubai concerning this supply/demand imbalance. A group there is building a gold refinery that can process 1,400 tonnes of gold per year6. Well, the current refining capacity in the world is around 6,000 tonnes. Somebody is going to add another 20 percent of capacity. The supply falls far short of that at only 4,300 tonnes. Why is this refining capacity so much higher than the official supply of gold?

I believe that the volume of gold being exchanged must therefore be much higher than the official number of 4,300. To me, it’s just another piece to the puzzle, and it all points to central banks surreptitiously supplying gold to China. Gold from central banks, held in LBMA-sized bars, is being recast into kilogram-sized bars, which are preferred in Asia. It all points to this: gold is flooding out of central banks in the West and into Asia’s coffers.

Another piece to the puzzle is Germany’s current effort to repatriate its gold supposedly held by the U.S. So far, it has only received 5 tonnes back from the U.S. Treasury7. They’ve asked for 300 tonnes back over 7 years. That would imply around 3.6 tonnes per month.

It’s worth noting that the U.S. is supposedly the largest holder of physical gold in the world. Its books should contain 1,500 tonnes held for Germany8 and 8,100 metric tonnes of its own9. So why have they only delivered 5 tonnes over the last year?

We now get monthly data from Switzerland about where its gold imports come from. In February, 114 metric tonnes came from the UK10 – a country which does not produce any gold. So where did that gold come from? Who did it belong to? The most obvious answer would be the Bank of England, or ETF holdings.

Data from the U.S. offers a similar problem. The U.S. Geological Survey showed that the U.S. exported 80 tonnes of gold in January11. The U.S. only mines 20 tonnes a month12, and imports another 20. So where did the extra 40 tonnes of exports come from? Who supplied it? The answer is most likely the U.S. Treasury.

The whole reason for Western central banks, particularly the U.S. to supply gold to Asia is to suppress the price of physical gold. Most people realize that low interest rates and printing money will eventually be very bad for the U.S. dollar. One thing that would tip people off to imminent danger to the U.S. dollar would be a much higher gold price. Keeping gold’s price low is just part of the financial policy.

All this money printing is designed to help the U.S. address its massive obligations, which include its current debts and off-balance sheet obligations of around 80 trillion dollars. Their annual revenues are only around 2.8 trillion dollars and their expenditures are 3.5 trillion13. Everyone knows there’s no way they can afford to keep going and cover their obligations. This leaves money printing to cover the gap.

Ultimately, we will find out the extent of manipulation in the gold market when someone finally fails – most probably the U.S. running out of gold to supply the market. And I don’t think we are far off here.

- Source, Eric Sprott via Sprott's Thoughts

Saturday, May 24, 2014

China and Russia are Turning theirs Backs on the US Dollar

There’s going to be a point where countries will have to assess each of the currencies on their own merits. As you know, I live in Canada, and I can assure you that when I look at the data that the U.S. supplies, the dollar will lose a lot of value. I am sure that countries like China and Russia would look at the same data and come to the same conclusion.

China and Russia look like they could already be turning their backs on the dollar. Brazil and India have complained about the printing of money and the disastrous effects on currencies. They could also be turning their back on the dollar.

I am not so sure that the dollar will remain in the same high esteem as the market has historically given it.

In the broad stock market, things have not started to change just yet, but we are starting to see some cracks appear. Housing numbers have been quite weak. We’ve seen tech stocks come under attack. Some of the major banks have warnings on their trading levels going forward. Those stocks seem to be breaking. So the generals are coming under pressure.

I’m not sure when a decline will start happening, but I feel safe in predicting that within 24 months, the value of these stocks will be much lower than today. I don’t think it’s nearly as safe as the banking interests would tell you.

- Source, Eric Sprott

Saturday, May 17, 2014

Silver Could Go to $400, It Could Go to $1000

‘Well, you can default on some things.’ And we know there has to be some form of default. We say either ‘We can’t afford to pay you’ or ‘We’re going to depreciate the currency and we are going to pay you with devalued currency.’

But if they take that second option where they are just devaluing the currency, the price (of silver) can go anywhere. There is no limit where something that’s in demand and real can go relative to these fictitiously valued currencies. So of course silver could go to $400. It could go to $1,000. If we get into some hyperinflation, who knows what the number could be?

But if you ask just ‘What would you rather have, a $20 bill or an ounce of silver, or $1,300 in notes or $1,300 in physical gold?,’ I think the answer is a very simple answer when you realize what’s going on today. It’s funny that we have to put up with this two years of nonsense that’s gone on in the paper markets, but most of the people you interview, who foresaw these things many, many years ago and participated in it as you and I did, just know that the day is coming when we are going to see some huge moves in the price of gold -- not withstanding the CME's trying to limit them at the time.

That is not going to work. They will probably default. Someday the Chinese will put in an order in (to buy) and there won’t be any gold, and silver could disappear so quickly, (laughter ensues), or platinum or palladium. There is hardly any production per year, and what production there is, probably a third of it is on strike right now. So I think our day is coming.

- Source, Eric Sprott via King World News

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Thursday, May 15, 2014

We Are Dealing With the Bottom of the Vaults

I hope that we find out that there is no gold left because I think we are dealing with the bottom of the vaults. James Turk was making a comment that we are starting to see 1960s bars showing up at the refineries. Well, that’s just because they are getting to the bottom of the barrel....

So I think the outlook is stunning for all of the metals.

- Source, Eric Sprott via King World News

Tuesday, May 13, 2014

Way More Physical Demand Than Supply

One of the reasons why I thought they had the raid last year was to get an extra 1,000+ tons out of the ETFs because they had run out of gold.

And it (the amount of gold being dishoarded) has obviously gone up. When you think, Eric, the Chinese increase their imports by a minimum of 1,000 tons -- that’s a 25-percent piece of the market that they never had before, and the price went down. And the Indians came in and bought an extra 20 percent of the silver market last year, and the price went down. (Laughter ensues).

We have all these incongruous things happen that in a normal market are literally impossible. All the physical evidence we have suggests there is way more demand than supply in all those markets. And sooner or later there will be a failure to deliver. How long they can keep up the goings-on in the Comex and the LBMA when there are no real deliveries? We’ll see because we are not far from the time when there is nothing left to buy.

- Source, Eric Sprott via King World News:

Thursday, May 8, 2014

Heads I Win, Tails I Win, Gold Going Higher

"My gut feeling is that we will get through this in the same fashion we got through it in the 1970s. The shocks we take will be severe but survivable. If you look out at the landscape and ask, ‘What happened to the system in 2008?’ -- well, what happened to the system in 2008 was, of course the mortgage bubble bursting.

You had an asset bubble come apart and it provided its own form of a stress test on the largest financial institutions in the world. Are there other overvalued assets all over bank balance sheets? Yes, of course. Sovereign debt, student loans, municipal finance, junk corporates, etc.

And if you look at things that way, you think that the situation is absolutely hopeless. But if you look at the narrative for the next 5 years or 10 years, it’s almost definitely ‘heads I win, tails I win’ as an investor in high-quality natural resource stocks.

If we go into a period of hyperinflation -- in other words if we go into global default via the depreciation of the purchasing power because we can’t possibly fund our obligations -- then the nominal value of resources like gold and silver will go up very much as they went up in the 1970s.

If, by contrast, quantitative easing, also known as counterfeiting, works and the world goes back into a boom, then natural resources do well because demand recovers and supply is still constrained because of two or three decades of underinvesting. Right now I feel like I’m sitting in a situation where I flip the coin and as I said it’s ‘heads I win, tails I win.’ That’s a wonderful place for natural resource investors around the world."

- Rick Rule of Sprott Asset Management via a recent King World news Interview

Tuesday, May 6, 2014

China is Consuming all of the Gold Produced

Billionaire-entrepreneur and founder of Sprott Asset Management, CEO Eric Sprott says the official economic numbers are bogus; most people realize they are paying more for life's necessities than reported. Even after spending trillions of taxpayer dollars, the Fed has accomplished little other than put the US further into debtor's prison. Last week, the EU put savings accounts with over 100,000 Euros at risk of confiscation.

Eric Sprott says that investors across the pond should be bracing for something similar, unless of course savings are held in physical bullion, coins and bars. But tarry not, according to his research physical demand for gold exceeds global mining output; one nation (China) is consuming all of the gold produced in the entire Western world. Bank trading desks combine their financial clout with the leverage facilitated by paper contracts to manipulate the precious metals markets with impunity. 

He shares a recent headline story of a homeowner who found a container of gold coins in the backyard worth $30,000 when buried, now worth $10 million, illustrating the safe haven qualities of the yellow metal.

- Source, Gold Seek Radio

Sunday, May 4, 2014

Gold is Entering into a New Bull Market

"There is so much going on right now, Eric, it’s amazing. I’ve been in this place several times before in my career, where you are coming out of a bear market into a bull market. What’s fantastic for me is being part of the Sprott organization, I have the financial resources and the human resources, and the reputation resources to take advantage of it....

I guess the bad news is that at age 61 I am being pulled in more directions than normal. The good news is I know just how much fun the next five or six years are going to be. So I have absolutely no trepidation about any part of the market I’m in, which is a truly spectacular place to be."

- Rick Rule of Sprott Asset Management via a King World News interview

Friday, May 2, 2014

Sprott's John Embry: Has Gold Bottomed?

Sprott's John Embry discusses the recent price activities in gold. He is asked the question we all want to know, has gold bottomed? He discusses this and his views on where gold is heading.