- Eric Sprott via a recent King World News interview:
Saturday, December 21, 2013
People are Losing out to Inflation
"There was some work done in the UK saying that by having zero interest rates you help the banking system by 120 billion pounds a year. But of course the opposite side of that is the savers don’t make 120 billion pounds. And with this financial repression ongoing, people can’t better themselves. They are losing out to inflation."
Thursday, December 19, 2013
Western Central Banks Leasing Gold into the Market to Keep it Down
The Chinese announce their monthly gold production, so we know how much gold is produced; we just don’t get export and import data. The only data we get is that Hong Kong exports well over 1,000 tons into China. That makes it highly unlikely that China would be exporting at the same time it is importing. It’s hard to imagine that somebody isn’t supplying that market. In my mind, that someone is central banks.
I think Western central banks lease gold into the market to keep the price down. We can’t tell what they lease, because on their own balance sheets they have one line called gold and gold receivables. Of course, gold receivables is the least they put out, so they can pretend they own it. But, in fact, the gold is gone. We get no transparency whatsoever as to what part of that line is real metal and what part of it is leased gold.
Central banks think they should be totally nontransparent. As you may be aware, there has been no audit of the gold held by the U.S. Department of the Treasury since 1954. There are no physical data supplied by any central banks as to what their current positions are.
Earlier this year, Germany requested the 330 tons that it had leased to the U.S. Department of the Treasury be redelivered to Germany. At first the U.S. declined to deliver, and then it agreed to deliver the gold over seven years. There is no logistical problem with delivering gold. So why is it that when a country says it wants its gold back, which would represent approximately 4% of all the gold theoretically the U.S. has, that it takes seven years to deliver it? It begs the question.
Central banks think they should be totally nontransparent. As you may be aware, there has been no audit of the gold held by the U.S. Department of the Treasury since 1954. There are no physical data supplied by any central banks as to what their current positions are.
Earlier this year, Germany requested the 330 tons that it had leased to the U.S. Department of the Treasury be redelivered to Germany. At first the U.S. declined to deliver, and then it agreed to deliver the gold over seven years. There is no logistical problem with delivering gold. So why is it that when a country says it wants its gold back, which would represent approximately 4% of all the gold theoretically the U.S. has, that it takes seven years to deliver it? It begs the question.
- Eric Sprott via:
Tuesday, December 17, 2013
World Gold Council Data on Gold is Wrong
I have always had a dispute with the data that Thomson Reuters GFMS GoldSurvey puts out, which the World Gold Council uses as the basis for its analysis of gold. Since I’ve been involved in the gold market, the supply always magically equals the demand. Of course, we know that’s almost impossible.
The report has two what I call fudge numbers. One is recycling, which is a very big item. The report suggests it could be upward of something like 1,600 tons some years. I don’t know how it would possibly come up with that number. I find it very difficult to get numbers on recycling in any country, let alone all countries.
Two, the report always uses what it calls a net investment demand or supply. It’s the plug number to make supply equal demand. Many times I think that the investment number is understated.
Furthermore, as I wrote in “Do the Central Banks Have Any Gold Left?,” we have seen a net increase in gold demand over the decade of at least 2,000 tons per year (2,000 tpa). China’s demand alone is going up 100%; jewelry demand is up 50%. Mine supply has essentially been flat at 2,700 tpa, or 2,100 tpa for Western consumption because China and Russia don’t export the gold they produce. As we move into 2013, we start to see significantly higher imports of gold into the Asian countries. That makes the shortages even more extreme. We could see demand of 5,100 tpa. That would result in a 3,000 tpa shortfall, not a balance. How can all these people be buying all this gold per year when the supply hasn’t gone up? That is why I question the GFMS data. I think it is flawed.
The report has two what I call fudge numbers. One is recycling, which is a very big item. The report suggests it could be upward of something like 1,600 tons some years. I don’t know how it would possibly come up with that number. I find it very difficult to get numbers on recycling in any country, let alone all countries.
Two, the report always uses what it calls a net investment demand or supply. It’s the plug number to make supply equal demand. Many times I think that the investment number is understated.
Furthermore, as I wrote in “Do the Central Banks Have Any Gold Left?,” we have seen a net increase in gold demand over the decade of at least 2,000 tons per year (2,000 tpa). China’s demand alone is going up 100%; jewelry demand is up 50%. Mine supply has essentially been flat at 2,700 tpa, or 2,100 tpa for Western consumption because China and Russia don’t export the gold they produce. As we move into 2013, we start to see significantly higher imports of gold into the Asian countries. That makes the shortages even more extreme. We could see demand of 5,100 tpa. That would result in a 3,000 tpa shortfall, not a balance. How can all these people be buying all this gold per year when the supply hasn’t gone up? That is why I question the GFMS data. I think it is flawed.
Sunday, December 15, 2013
Is Gold Suitable for Any Investor?
If this seems high, remember that I am a risk-taker and a very successful investor. I am happy staying the course on this. Whether this allocation is suitable for any specific investor depends entirely on that investor’s financial situation and risk tolerance profile. What I find really interesting is that right now, gold – the metal and the stocks – represent half of one percent of all the assets in the world.
So you have some investors like me with a large allocation to gold. The average person, meanwhile, never owned any gold, even while it was going from $250 to $1,900. Gold is still a very under-owned asset, in my opinion.
So you have some investors like me with a large allocation to gold. The average person, meanwhile, never owned any gold, even while it was going from $250 to $1,900. Gold is still a very under-owned asset, in my opinion.
- Source, Eric Sprott via the Sprott Group:
Friday, December 13, 2013
How much of your portfolio is devoted to precious metals stocks and bullion?
Between shares in mining companies and physical bullion, I have at least 80% of my total portfolio invested in gold and silver. This is similar to the amount in the public accounts I run such as the mutual funds. I have been happy to remain there. It was a wonderful trade since 2000, and, of course, an awful trade since the 2011 peak.
Breaking it down further, the amount of bullion that I hold has been going down – to probably 15 percent of my total portfolio right now. It was as high as 35 or 40 percent.
This year, I am selling bullion to buy stocks because the leverage is so much higher in the equities than in the physical bullion. We decided to move into stocks, and we have participated in a number of private placements in the past 3 or 4 months in companies that are highly leveraged to the price of the metals going up.
I am putting my money down on the price of gold going up, and seeing a quantum increase in the precious metals equities.
Breaking it down further, the amount of bullion that I hold has been going down – to probably 15 percent of my total portfolio right now. It was as high as 35 or 40 percent.
This year, I am selling bullion to buy stocks because the leverage is so much higher in the equities than in the physical bullion. We decided to move into stocks, and we have participated in a number of private placements in the past 3 or 4 months in companies that are highly leveraged to the price of the metals going up.
I am putting my money down on the price of gold going up, and seeing a quantum increase in the precious metals equities.
- Source, Eric Sprott via the Sprott Group:
Wednesday, December 11, 2013
Eric Sprott and David Morgan on the CFTC
Monday, December 9, 2013
How did we miss the top of the market, in 2011?
With the benefit of hindsight, anyone can say that we all should have been selling in ’11. But we stayed in because the facts at the time seemed indicative of more growth, not a peak and subsequent decline.
Back then, it was suggested that the Fed might exitQE 2. Some might have interpreted this as a reason to sell gold, much as suggestions of ‘tapering’ recently were interpreted in that way. They launchedQE 3instead, which we expected to be bullish for gold.
So they did not exitQE; they added more stimulus instead. In addition, the Chinese entered the market, buying at least 1,000 tons more in 2012 than in 2011. Despite these facts, gold has continued to founder.
Disregarding China and Russia, since that gold is consumed domestically before entering the global market, the yearly mine supply is roughly 2,100 tons of gold. It surprises me how China can enter the market and buy 50% of available mine supply, or an additional 25% of the total supply, and yet the price of gold declines.
Where is the supply of gold coming from? I have publicly claimed that I believe gold ETFs are seeing their physical holdings go to China. In my view, this is where the 700 tons of physical gold that were redeemed during the first six months of ’13 ended up.
Meanwhile, the world’s largest consumer of physical gold – India – has been stifled. Government has imposed some very draconian measures to stop people from buying imported gold, and this has worked. Officially reported gold import numbers declined very severely, and premiums jumped for domestic gold sales.
So despite this bear market for gold, I view people who are willing to sell gold here as extremely short-sighted. For now, the Chinese demand for gold is (I believe) being supplied by gold draining out of ETFs, and the fact that Indians cannot get their hands on the stuff legally. How much longer can this current situation hold?
All of these factors stopped me from telling investors to sell gold and other precious metals in 2011.
Add to this the fact thatQEkeeps increasing and that ‘tapering’ has been thrown out by the Fed. There is a very solid case for continuing to own gold and other precious metals equities right now.
Back then, it was suggested that the Fed might exitQE 2. Some might have interpreted this as a reason to sell gold, much as suggestions of ‘tapering’ recently were interpreted in that way. They launchedQE 3instead, which we expected to be bullish for gold.
So they did not exitQE; they added more stimulus instead. In addition, the Chinese entered the market, buying at least 1,000 tons more in 2012 than in 2011. Despite these facts, gold has continued to founder.
Disregarding China and Russia, since that gold is consumed domestically before entering the global market, the yearly mine supply is roughly 2,100 tons of gold. It surprises me how China can enter the market and buy 50% of available mine supply, or an additional 25% of the total supply, and yet the price of gold declines.
Where is the supply of gold coming from? I have publicly claimed that I believe gold ETFs are seeing their physical holdings go to China. In my view, this is where the 700 tons of physical gold that were redeemed during the first six months of ’13 ended up.
Meanwhile, the world’s largest consumer of physical gold – India – has been stifled. Government has imposed some very draconian measures to stop people from buying imported gold, and this has worked. Officially reported gold import numbers declined very severely, and premiums jumped for domestic gold sales.
So despite this bear market for gold, I view people who are willing to sell gold here as extremely short-sighted. For now, the Chinese demand for gold is (I believe) being supplied by gold draining out of ETFs, and the fact that Indians cannot get their hands on the stuff legally. How much longer can this current situation hold?
All of these factors stopped me from telling investors to sell gold and other precious metals in 2011.
Add to this the fact thatQEkeeps increasing and that ‘tapering’ has been thrown out by the Fed. There is a very solid case for continuing to own gold and other precious metals equities right now.
- Source, Sprott Group:
Saturday, December 7, 2013
What's Next for Gold?
Eric Sprott, CEO of Toronto-based Sprott Asset Management, says gold's price has recently dropped because faulty statistics underreport demand and overestimate supply.
In October he wrote an open letter to an industry group, asking them to change the way they calculate supply and demand for gold in a way that would make the metal seem like a hotter commodity.
"This lack of quality information has certainly been one of the driving factors behind the lack of investors' confidence towards gold as an investment," he wrote.
In an interview, Mr. Sprott called gold's recent drop in price "bizarre."
In October he wrote an open letter to an industry group, asking them to change the way they calculate supply and demand for gold in a way that would make the metal seem like a hotter commodity.
"This lack of quality information has certainly been one of the driving factors behind the lack of investors' confidence towards gold as an investment," he wrote.
In an interview, Mr. Sprott called gold's recent drop in price "bizarre."
- Source, Wall Street Journal, read the full article here:
Thursday, December 5, 2013
Eric Sprott to Step Back From Daily Fund Management by End of 2014
Sprott Inc. is changing focus and investment strategy, as its gold-focused founder Eric Sprott prepares to step back from daily fund management ...
- Source, Globe Investor:
Tuesday, December 3, 2013
What will it take for precious metals and precious metals equities to turn around?
It has to be the precious metals prices themselves. The stocks are probably 99% correlated to the price of the underlying metals being produced or explored for, and they typically go up two or three times faster than the precious metals prices.
Going forward, I believe we will begin to view the levels we saw this summer – with the lowest low on June 28 – as the bottom for the price of gold. For the stocks, it will all be about metals prices.
Going forward, I believe we will begin to view the levels we saw this summer – with the lowest low on June 28 – as the bottom for the price of gold. For the stocks, it will all be about metals prices.
- Source, Sprott Group:
Sunday, December 1, 2013
Gold is Going to $2400 by Next Summer
Friday, November 29, 2013
United States is Going the Way of Detroit
“I compare it to what’s happened in Detroit, where 10 years ago we knew they were broke, and finally, one day they said they were ‘broke.’ The outcome of that was they told the pensioner, ‘You can only get 33 cents on the dollar.’ And the same will happen to the US (pensioners).
What happens when someone’s (social security or pension) check falls by 50% or 60%? The economic chaos that will ensue will be unbelievable. But it’s going to happen. It’s so clear cut there is nothing that can be done about it. The whole world has this huge debt problem. If you have this view that the countries are insolvent, what does it mean for all of us? I’m talking about, as human beings, how is everyone going to survive? It’s a scary prospect.
We don’t have enough jobs and income to support the profligate governments that we have. We just don’t have enough. The disposable personal income and wages keep going down. We have 50 million people on food stamps, and we get 10,000 people a day retiring. Anybody, mathematically, can tell you we can’t afford it.
What do we cut first? So far in the US they have cut nothing. It’s interesting, Eric, by analogy, even in Canada, which has a pension fund, people under 35 have already been told that they can’t retire until they are 67. We (Canadians) know we don’t have enough, and we have a fund with money in it. In the US there is no fund. They pretend that there is some fund there, but there is literally nothing in the fund. So there are going to be some (horrific) consequences down the line.”
What happens when someone’s (social security or pension) check falls by 50% or 60%? The economic chaos that will ensue will be unbelievable. But it’s going to happen. It’s so clear cut there is nothing that can be done about it. The whole world has this huge debt problem. If you have this view that the countries are insolvent, what does it mean for all of us? I’m talking about, as human beings, how is everyone going to survive? It’s a scary prospect.
We don’t have enough jobs and income to support the profligate governments that we have. We just don’t have enough. The disposable personal income and wages keep going down. We have 50 million people on food stamps, and we get 10,000 people a day retiring. Anybody, mathematically, can tell you we can’t afford it.
What do we cut first? So far in the US they have cut nothing. It’s interesting, Eric, by analogy, even in Canada, which has a pension fund, people under 35 have already been told that they can’t retire until they are 67. We (Canadians) know we don’t have enough, and we have a fund with money in it. In the US there is no fund. They pretend that there is some fund there, but there is literally nothing in the fund. So there are going to be some (horrific) consequences down the line.”
- Eric Sprott via King World News:
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