- Source, The Gold Report:
Long-Term Food Supply - WiseFoodStorage.com
Monday, April 29, 2013
Recessionary Malaise Setting In
"I see things going from bad to worse economically, and so do many others. Walmart just announced that January 2013 was a lousy month and its start to February was its worst in years. Apple's iPhone manufacturer Foxconn just announced a hiring freeze in China because of a decline in iPhone production. Italian industrial production new orders were down 15%. You can feel the recessionary malaise setting in."
Sunday, April 28, 2013
When Gold and Silver Got Hit
"It’s just pure insanity. When gold and silver got hit, gold traded about 120% of its annual production in one day (in the paper market). We had offerings of 25% of the world’s mine production at one time, and who in the hell would have 25% of the world’s mine production available for sale in a minute? And who would want to sell it in one minute? It’s just ridiculous...."
- Eric Sprott via a recent King World News interview, read the full interview here:
Friday, April 26, 2013
A New Phase in the Gold Bull Market
“The recovery has been quite impressive so far. I suspect when we all look back at this a year from now when the price of gold is at record highs, we will look at this smash and say, ‘That was the bottom.’ It’s typically what happens at a bottom. Everyone panics.
The volumes were incredible, all paper by the way. But the sheer cleansing of the system, when everyone should have realized that all of the facts, all of the future prognostications of what the central planners are likely to do, and the goings on in the financial system, were screaming at you to buy gold. And at the same time everyone is panicking out of it.
I think people will rue the day they might have considered that the gold bull market was over because I think we are going to go in to a whole new phase of a bull market here.”
The volumes were incredible, all paper by the way. But the sheer cleansing of the system, when everyone should have realized that all of the facts, all of the future prognostications of what the central planners are likely to do, and the goings on in the financial system, were screaming at you to buy gold. And at the same time everyone is panicking out of it.
I think people will rue the day they might have considered that the gold bull market was over because I think we are going to go in to a whole new phase of a bull market here.”
- Eric Sprott via a recent King World News interview, read the full interview here:
Wednesday, April 24, 2013
Silver Lining to Banking Crises
(This video cannot be embedded. Please click image to view)
"Eric Sprott, Chairman of Sprott Inc. forecasts silver returns will eclipse gold under the strains of global banking crises."
- Source, Yahoo Finance:
Monday, April 22, 2013
Gold Will Hit a New High
“I’ve always imagined that gold would hit a new high by the end of this year, over $1,900, so that is what I think.”
- Eric Sprott via a recent Globe and Mail interview, read the full interview here:
Saturday, April 20, 2013
A Rude Awakening In Metals
- Source:
Thursday, April 18, 2013
Overleverage in the Banking System
“We have a financial system that has been chaotic for quite a long time and I think the manifestation of the Cypriot depositor raid is symptomatic of what’s likely to happen going forwards,” Mr. Sprott said. “For us, it showed we do have a template because of overleverage in the banking system.”
- Excerpt from a recent Globe and Mail article:
Tuesday, April 16, 2013
Eric Sprott sells big chunk of Silver Trust units
By Darcy Keith of The Globe and Mail:
Eric Sprott has been busy offloading units in his Sprott Physical Silver Trust over the last few weeks.
It may be fortunate timing; the fund hit a record low today amid the vicious 5 per cent plunge in silver prices.
INK Research, which monitors insider buying and selling activity, points out to us that regulatory filings show Mr. Sprott sold $46,258,984 (Canadian) over the past 30 days in the trust. The sales to the public occurred almost daily in several transactions. (You can click here to see his last 10 transactions.)
The fund, which like the metal today is down about 5 per cent, has a market cap of about $1.3-billion. Ted Dixon, CEO of INK Research, notes that there has not been any indication of Mr. Sprott selling units in his Physical Gold Trust or in Sprott Inc.
When we asked Sprott for why the sudden burst of sales, here’s what spokesman Glen Williams had to say: “The shares were sold by his charitable foundation to meet some of its obligations. The rest of the units were sold to buy shares in silver mining companies, which he believes will outperform the metal itself on the next rally.”
Mr. Sprott hasn’t been shy in expressing his views recently that both physical silver and precious metals equities are undervalued.
What silver equities he may be purchasing we don’t know. But, according to fund data as of March 28, the top stock holding in the Sprott Canadian Equity fund was First Majestic Silver Corp., followed by Silver Lake Resources Ltd. The fund’s top holding overall, however, was physical silver bars.
Mr. Sprott also sold large holdings of the units in the Sprott Physical Silver Trust back in 2011. At the time, he also stated the money was reinvested in silver metal or silver equities.
Eric Sprott has been busy offloading units in his Sprott Physical Silver Trust over the last few weeks.
It may be fortunate timing; the fund hit a record low today amid the vicious 5 per cent plunge in silver prices.
INK Research, which monitors insider buying and selling activity, points out to us that regulatory filings show Mr. Sprott sold $46,258,984 (Canadian) over the past 30 days in the trust. The sales to the public occurred almost daily in several transactions. (You can click here to see his last 10 transactions.)
The fund, which like the metal today is down about 5 per cent, has a market cap of about $1.3-billion. Ted Dixon, CEO of INK Research, notes that there has not been any indication of Mr. Sprott selling units in his Physical Gold Trust or in Sprott Inc.
When we asked Sprott for why the sudden burst of sales, here’s what spokesman Glen Williams had to say: “The shares were sold by his charitable foundation to meet some of its obligations. The rest of the units were sold to buy shares in silver mining companies, which he believes will outperform the metal itself on the next rally.”
Mr. Sprott hasn’t been shy in expressing his views recently that both physical silver and precious metals equities are undervalued.
What silver equities he may be purchasing we don’t know. But, according to fund data as of March 28, the top stock holding in the Sprott Canadian Equity fund was First Majestic Silver Corp., followed by Silver Lake Resources Ltd. The fund’s top holding overall, however, was physical silver bars.
Mr. Sprott also sold large holdings of the units in the Sprott Physical Silver Trust back in 2011. At the time, he also stated the money was reinvested in silver metal or silver equities.
- Source, Globe and Mail:
Sunday, April 14, 2013
Maybe he Has a Point
"There is more reason to own gold than ever before; Silver will be an even better investment than gold; Don’t invest in bonds – they can ultimately be worth zero if banks and countries default; Don’t hold your money in banks – banks may eventually be allowed to fail – and in any case as today’s fiat currencies are debilitated through monetary expansion policies they will devalue against precious metals. (Indeed he said as an aside that he wouldn’t be caught dead with his money in the bank!). Sprott’s financial acumen has made him a billionaire – maybe he has a point."
- Source, Mineweb:
Wednesday, April 3, 2013
Silver Will be Hundreds of Dollars in Price
“If gold goes to a new high this year, I think silver is going to a new high, which means above $50. Where is it ultimately going to go? I think it will be in the hundreds of dollars. If gold goes to $3,000, silver is (already) going to be (trading) $150 to $250."
- Eric Sprott via a recent King World News interview, read the full interview here:
Tuesday, April 2, 2013
Caveat Depositor
By: Eric Sprott & Shree Kargutkar
“If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’” – Jeroen Dijsselbloem, March 26, 2013 1
A deal has just been struck with Cyprus. However, it was not the deal that Cyprus saw other countries receive. This was not the deal received by Greece, Italy and Spain. There were no bailed out banks in the aftermath. There was no transfer of risk from over-levered banks to the taxpayers. The risk was pushed back onto the banks. Their equity was wiped out. Their bondholders were wiped out. Their uninsured depositors saw their accounts raided for additional liquidity. It wasn’t just that the rules of the game had changed, the game itself changed. By raiding the depositors’ accounts, a major central bank has gone where they would not previously have dared. The Rubicon has been crossed. Going forward, this is expected to be the “template” for dealing with risky, over-levered banks and the countries which support them.
For the first time since the crisis began, we are faced with a new paradigm, or a “template”, for how a major central bank will address weakness in the financial sector. While the old template involved “bailing out” through transfer of risk from the corporate sector to the taxpayer, the new template calls for “bailing in”, whereby the risk is contained within the affected institution at the expense of equity holders, bond holders and finally the depositor.
How does the new template affect you?
This “template” is already being applied to the “too big to bail” banks in other developed countries around the world. A statement in the joint paper published by the FDIC and the Bank of England in December 2012 reads:
“An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailedin creditors would become the owners of the resolved firm…. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers”.2
Note the lack of the phrase “uninsured depositors” in this context, which opens the doors for both insured and uninsured depositors to be affected. In a similar vein, Canada’s recently released budget addresses the same problem. Page 144 of Canada’s Economic Action Plan 2013 reads:
“The Government proposes to implement a – bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers.”3
Likewise, New Zealand’s Open Bank Resolution policy allows for a “bail in” of afflicted banks by wiping out the equity holders first, the bond holders second and finally forcing a haircut on the depositors.4
Over-levered banks are not a recent development. We are faced with a banking crisis, seemingly once every generation. In a majority of cases, the bad banks were allowed to fail and newer, stronger banks took their place. However, the recent modus operandi of the central banks and policy makers allowed over-levered banks to get even bigger, rewarded risk taking with bailouts and let the inherent problem of unsustainability fester.
CHART 1: BANKS ASSETS – COUNTRY GDP
We carried out the exercise of taking the largest banks, or in other words, the “too big to fail” banks in the G7 countries and added up their assets in relation to the host country GDP. For the layperson, a typical bank’s assets are primarily composed of the loans they have originated while the liabilities are primarily composed of deposits they have accepted. With the exception of the US, all G7 countries have banking systems that have become larger and in some cases dwarfed their respective economies.
Governments around the world are finally beginning to realize the gravity of the risk that exists in their banking sectors. The EU has decided to build upon the new template of the “bail-in” regime. The US, UK and Canada have all followed suit. This puts the onus squarely upon the depositor. The depositor is a lender to the financial institution that he banks with. However, most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks. Several G7 countries already have provisions that allow troubled banks to be bailed in using depositor accounts. We have been vocal about our concerns over the state of the global financial system for the better part of the decade. The Greek tragedy is now being played out in Cyprus with a new twist as depositors have been unwillingly turned into sacrificial lambs. Given the size of the banking sector in most G7 countries and the burgeoning government debts, the ability of the governments to bail out their banks is severely constrained, especially considering the political headwinds that exist today. For this reason, we strongly believe that real assets trump a fiat currency in a “savings” account. It is not our intention to be alarmist here, merely to say, “caveat depositor”.
“If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’” – Jeroen Dijsselbloem, March 26, 2013 1
A deal has just been struck with Cyprus. However, it was not the deal that Cyprus saw other countries receive. This was not the deal received by Greece, Italy and Spain. There were no bailed out banks in the aftermath. There was no transfer of risk from over-levered banks to the taxpayers. The risk was pushed back onto the banks. Their equity was wiped out. Their bondholders were wiped out. Their uninsured depositors saw their accounts raided for additional liquidity. It wasn’t just that the rules of the game had changed, the game itself changed. By raiding the depositors’ accounts, a major central bank has gone where they would not previously have dared. The Rubicon has been crossed. Going forward, this is expected to be the “template” for dealing with risky, over-levered banks and the countries which support them.
For the first time since the crisis began, we are faced with a new paradigm, or a “template”, for how a major central bank will address weakness in the financial sector. While the old template involved “bailing out” through transfer of risk from the corporate sector to the taxpayer, the new template calls for “bailing in”, whereby the risk is contained within the affected institution at the expense of equity holders, bond holders and finally the depositor.
How does the new template affect you?
This “template” is already being applied to the “too big to bail” banks in other developed countries around the world. A statement in the joint paper published by the FDIC and the Bank of England in December 2012 reads:
“An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailedin creditors would become the owners of the resolved firm…. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers”.2
Note the lack of the phrase “uninsured depositors” in this context, which opens the doors for both insured and uninsured depositors to be affected. In a similar vein, Canada’s recently released budget addresses the same problem. Page 144 of Canada’s Economic Action Plan 2013 reads:
“The Government proposes to implement a – bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers.”3
Likewise, New Zealand’s Open Bank Resolution policy allows for a “bail in” of afflicted banks by wiping out the equity holders first, the bond holders second and finally forcing a haircut on the depositors.4
Over-levered banks are not a recent development. We are faced with a banking crisis, seemingly once every generation. In a majority of cases, the bad banks were allowed to fail and newer, stronger banks took their place. However, the recent modus operandi of the central banks and policy makers allowed over-levered banks to get even bigger, rewarded risk taking with bailouts and let the inherent problem of unsustainability fester.
CHART 1: BANKS ASSETS – COUNTRY GDP
We carried out the exercise of taking the largest banks, or in other words, the “too big to fail” banks in the G7 countries and added up their assets in relation to the host country GDP. For the layperson, a typical bank’s assets are primarily composed of the loans they have originated while the liabilities are primarily composed of deposits they have accepted. With the exception of the US, all G7 countries have banking systems that have become larger and in some cases dwarfed their respective economies.
Governments around the world are finally beginning to realize the gravity of the risk that exists in their banking sectors. The EU has decided to build upon the new template of the “bail-in” regime. The US, UK and Canada have all followed suit. This puts the onus squarely upon the depositor. The depositor is a lender to the financial institution that he banks with. However, most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks. Several G7 countries already have provisions that allow troubled banks to be bailed in using depositor accounts. We have been vocal about our concerns over the state of the global financial system for the better part of the decade. The Greek tragedy is now being played out in Cyprus with a new twist as depositors have been unwillingly turned into sacrificial lambs. Given the size of the banking sector in most G7 countries and the burgeoning government debts, the ability of the governments to bail out their banks is severely constrained, especially considering the political headwinds that exist today. For this reason, we strongly believe that real assets trump a fiat currency in a “savings” account. It is not our intention to be alarmist here, merely to say, “caveat depositor”.
- Source, Sprott Asset Management:
Wednesday, March 27, 2013
Do Western Central Banks Have Any Gold Left? Part II
By: Eric Sprott & Shree Kargutkar
The past few months have been difficult for the gold investor as selling pressure in the gold futures market has set a decidedly negative direction for the price of the yellow metal. As fundamental investors, we always pay special attention to the supply and demand dynamics of gold and, recently, we have found it very difficult to reconcile lower prices with continued strong demand for physical gold.
While the supply of gold has remained largely static, we have seen a steady increase in demand for the yellow metal. India and China have emerged as strong buyers, consuming over half of the mine supply in recent years. Central banks have switched from being sellers of gold to being net buyers, with their gold purchases in 2012 increasing by 17% to almost 535 tonnes. Exchange traded products (ETPs) around the world have continued to add to their gold hoards, as have institutions and private investors. Furthermore, central banks, such as South Korea and Russia, have added to their bullion reserves early in 2013, which points to sustained strength in demand. These facts are important because, over the past decade, the annual supply of gold has stayed flat at approximately 4,000 tonnes.
Much ado has been made about the recent sell-off in the yellow metal forcing certain ETPs to liquidate, adding a supply of gold into the market in the process. Our work reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011, May 2012 and July 2012) have all coincided with gold finding strong price support and rallying higher.
In our September 2012 MAAG, titled, “Do Western Central Banks Have Any Gold Left???”, we reconciled the annual change in demand for gold between 2000 and 2012 to be almost 2,300 tonnes. We went on to hypothesize that given the massive change in demand, the only suppliers large enough to fill the gap between supply and demand were the Central Banks. Now, our long search for the “smoking gun” to prove our hypothesis appears to have finally materialized.
Every month, the US Census Bureau releases the FT900 document, which outlines US International Trade Data. Going through this document, we were intrigued to see that in December 2012 the US exported over $4B worth of gold and imported around $1.5B worth of gold, representing a net export of $2.5B or almost 50 tonnes1. This surprising number led us to look at the previous releases of US International Trade Data which go as far back as 1991 – what we found was truly shocking. Not only has the US been consistently exporting large quantities of gold on a net basis, the amount of gold the US has been exporting is above and beyond what the US should be capable of exporting.
The gold market is fairly simple to understand from a supply and demand perspective. Since you cannot fabricate gold out of thin air, supply comes from new mine production, scrap gold recycling and investor disposition of bullion. Demand comes from many sources including investment demand, electronics, dental and industrial uses to name a few. There can be short-term aberrations between supply and demand where the market can be oversupplied, or demand can outstrip supply, however, over a longer period, supply should equal demand with the price acting as the equalizer. Under this assumption, the amount of gold that the US is exporting should equate to the amount of gold that the US is not consuming over a long enough time frame.
Table 1 lays out our framework for analyzing the US gold supply and demand.
Table 1
For our analysis of supply and demand, we have very robust statistics as far as mine production, import-export data, coin sales and ETP demand from GFMS2, the US Census Bureau3, the US Mint4 and Bloomberg5, respectively. We have good data on gold recycling, jewelry sales and gold use in electronics and industrial applications from the CPM Group6.
Table 2 lays out our analysis for 2012 using the supply and demand framework.
Table 2
We used this framework to analyze supply and demand in the US going all the way back to 1991, which is as far back as the FT900 documents go. Over the span of 22 years, the total amount of gold that the US has exported – above and beyond its supply capability – is almost 4,500 tonnes! A truly stunning figure. (See Table 3).
TABLE 3: US GOLD MARKET, CUMULATIVE SUPPLY DEMAND 1991-2012 (IN TONNES)
Admittedly there is an unknown in our analysis, that being gold bullion acquisition and disposition by private investors. However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years. The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes. The US Government gold holdings have not been audited or verified in more than four decades. The US trade data defines the export of nonmonetary gold as a sale of gold from a private seller within the US to an official agency. In September 2012, we espoused that the Western Central Banks have been surreptitiously selling/ leasing their gold through private channels in an effort to increase the available supply and in turn suppress prices. This new analysis using official US agency numbers seems to provide the strongest validation of our hypothesis to date. It is worth noting that our data only covers two decades and that the export ‘gap’ could in fact be significantly larger if earlier numbers were included or the real private investor demand for gold was known.
We are currently in an environment where policy makers are intent on devaluing their currencies in an effort to create growth. Real rates continue to stay negative in most of the developed world. Every marginal dollar of debt that is created is producing lower and lower amounts of growth. In a world overwhelmed by mountains of debt and economic growth which is sub-par at best, precious metals and real assets can act as insurance against the stupidity of policy makers. The evidence pointing towards the suppression of the gold price is becoming increasingly apparent. Don’t be the last person to figure this out! The current sell-off in gold should be viewed not with extreme trepidation but as an unbelievable opportunity to buy the metal at an artificially low value.
- Source, Sprott Asset Management:
The past few months have been difficult for the gold investor as selling pressure in the gold futures market has set a decidedly negative direction for the price of the yellow metal. As fundamental investors, we always pay special attention to the supply and demand dynamics of gold and, recently, we have found it very difficult to reconcile lower prices with continued strong demand for physical gold.
While the supply of gold has remained largely static, we have seen a steady increase in demand for the yellow metal. India and China have emerged as strong buyers, consuming over half of the mine supply in recent years. Central banks have switched from being sellers of gold to being net buyers, with their gold purchases in 2012 increasing by 17% to almost 535 tonnes. Exchange traded products (ETPs) around the world have continued to add to their gold hoards, as have institutions and private investors. Furthermore, central banks, such as South Korea and Russia, have added to their bullion reserves early in 2013, which points to sustained strength in demand. These facts are important because, over the past decade, the annual supply of gold has stayed flat at approximately 4,000 tonnes.
Much ado has been made about the recent sell-off in the yellow metal forcing certain ETPs to liquidate, adding a supply of gold into the market in the process. Our work reveals that the previous ETP sell-offs, (which occurred in January 2011, December 2011, May 2012 and July 2012) have all coincided with gold finding strong price support and rallying higher.
In our September 2012 MAAG, titled, “Do Western Central Banks Have Any Gold Left???”, we reconciled the annual change in demand for gold between 2000 and 2012 to be almost 2,300 tonnes. We went on to hypothesize that given the massive change in demand, the only suppliers large enough to fill the gap between supply and demand were the Central Banks. Now, our long search for the “smoking gun” to prove our hypothesis appears to have finally materialized.
Every month, the US Census Bureau releases the FT900 document, which outlines US International Trade Data. Going through this document, we were intrigued to see that in December 2012 the US exported over $4B worth of gold and imported around $1.5B worth of gold, representing a net export of $2.5B or almost 50 tonnes1. This surprising number led us to look at the previous releases of US International Trade Data which go as far back as 1991 – what we found was truly shocking. Not only has the US been consistently exporting large quantities of gold on a net basis, the amount of gold the US has been exporting is above and beyond what the US should be capable of exporting.
The gold market is fairly simple to understand from a supply and demand perspective. Since you cannot fabricate gold out of thin air, supply comes from new mine production, scrap gold recycling and investor disposition of bullion. Demand comes from many sources including investment demand, electronics, dental and industrial uses to name a few. There can be short-term aberrations between supply and demand where the market can be oversupplied, or demand can outstrip supply, however, over a longer period, supply should equal demand with the price acting as the equalizer. Under this assumption, the amount of gold that the US is exporting should equate to the amount of gold that the US is not consuming over a long enough time frame.
Table 1 lays out our framework for analyzing the US gold supply and demand.
Table 1
For our analysis of supply and demand, we have very robust statistics as far as mine production, import-export data, coin sales and ETP demand from GFMS2, the US Census Bureau3, the US Mint4 and Bloomberg5, respectively. We have good data on gold recycling, jewelry sales and gold use in electronics and industrial applications from the CPM Group6.
Table 2 lays out our analysis for 2012 using the supply and demand framework.
Table 2
We used this framework to analyze supply and demand in the US going all the way back to 1991, which is as far back as the FT900 documents go. Over the span of 22 years, the total amount of gold that the US has exported – above and beyond its supply capability – is almost 4,500 tonnes! A truly stunning figure. (See Table 3).
TABLE 3: US GOLD MARKET, CUMULATIVE SUPPLY DEMAND 1991-2012 (IN TONNES)
Admittedly there is an unknown in our analysis, that being gold bullion acquisition and disposition by private investors. However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years. The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes. The US Government gold holdings have not been audited or verified in more than four decades. The US trade data defines the export of nonmonetary gold as a sale of gold from a private seller within the US to an official agency. In September 2012, we espoused that the Western Central Banks have been surreptitiously selling/ leasing their gold through private channels in an effort to increase the available supply and in turn suppress prices. This new analysis using official US agency numbers seems to provide the strongest validation of our hypothesis to date. It is worth noting that our data only covers two decades and that the export ‘gap’ could in fact be significantly larger if earlier numbers were included or the real private investor demand for gold was known.
We are currently in an environment where policy makers are intent on devaluing their currencies in an effort to create growth. Real rates continue to stay negative in most of the developed world. Every marginal dollar of debt that is created is producing lower and lower amounts of growth. In a world overwhelmed by mountains of debt and economic growth which is sub-par at best, precious metals and real assets can act as insurance against the stupidity of policy makers. The evidence pointing towards the suppression of the gold price is becoming increasingly apparent. Don’t be the last person to figure this out! The current sell-off in gold should be viewed not with extreme trepidation but as an unbelievable opportunity to buy the metal at an artificially low value.
- Source, Sprott Asset Management:
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