Precious metals have had an especially tough go of it over the past month. Both gold and silver are back in price territory last seen in 2010.
Eric Sprott returns to the program to discuss the facts as we know them in this market, and what's likely to happen from here. Specifically, he explains the tremendous imbalance currently seen between global supply and demand for precious metals. In his view, prices will have to correct upwards -- prodigiously -- to bring the two back in alignment:
We see almost 60 tons a week being delivered on the Shanghai Gold Exchange. Well, you start annualizing 60 tons a week you’re talking 3,000 tons a year now. We saw 94 tons of gold go into India in September. We saw the Russian Central Bank buy 37 tons of gold in September. I mean I could come up with numbers that might suggest that we’ve got 400 tons a week of demand. And we only got 230 tons a week of mine supply. And I’ve only gotten to three data points. I haven’t even gone to the rest of the world.
We’ve now created a situation unfortunately in the market where between high frequency trading and algorithms and interference by the planers they can make things happen that looks like everything is OK. And it’s the "OK" part where I think we can really relate to gold not being allowed to go up. Because that's the canary in the coal mine. If gold was above $2,000 we’d all be wondering: What the hell is going on here? And so they haven’t allowed it to happen.
But by suppressing the price -- and one of the great things about a price of $1,100/oz is that you can buy a lot of gold at $1,100 versus $1,900 -- you can buy almost 50%-60% more gold than you could three years ago with the same amount of money. And you can buy 3x the silver. With the same amount of money!
So, they’re just making the market so small that sooner or later somebody is going to figure it out. And take it on. It’s just such a small market. Imagine if the whole inventory is only $15 billion. What the hell is $15 billion in this day and age? It’s nothing. And a lot of that inventory is already held by people like us and like-minded people where it’s not coming back on the market. So, I’m kind of very hopeful that things are going to work out for us. I know it’s just been a depressing time, in particularly for people like myself and our customers who are in the mining stocks -- the miners have just been eviscerated here. But, by the same token if the market comes back to its sense and gold and silver move up from here, there’s going to be a lot of money made in precious metals equities.
I think a true price recovery has got to come from the physical market first. When the mint says they don’t have any more silver coins, that's a good sign there’s more demand than supply. Maybe folks start figuring it out then.
To me, the biggest win will be if there is a delivery failure. If somebody says we were promised some gold we didn’t get it. And that could happen -- I mean we just can’t have China continue to buy 60 tons a week. That's impossible.
Click the play button below to listen to Chris' interview with Eric Sprott (38m:46s):
Sounds like a great discussion with Sprott. I will have to listen to it.
I'm commenting right now because 60 minutes is having a segment on water depletion right now and it's pretty good!
I need some help. I'm desirous to buy some junior metals companies that are now so low but HOW?
Have any of you had any experience with Sprott Global Resource Investments, Ltd??? Rick Rule's "A Guide to Natural Resource Investing" was excellent but we all know that it EASY to put together a good-looking document. Vested interest always wins out, no?
So, if anyone wants to comment about my need, please contact me: zenpollinger@gmail.com, or even HERE if agreeable.
Secondly, I frequently heard about Griffin's The Creature from Jekyll Island but never read it. Well, I finally started it yesterday and AM SO PLEASED. It is fabulous and is almost like a graduate course in political-economy. I guarantee you will LOVE it. Can you imagine that the six guys who got together to create the blueprints for the Fed had an estimated one-fourth of the total wealth of the entire world!!! Holy shit!! Can't wait to read the full 588 pages. And his style is gorgeous. Happy reading.
Aloha! As WT alludes, perhaps not consciously, there are many "golds". There is the "black gold" that Jed Clampett liked so much. There is the "atmospheric gold" that we breath to sustain life. There is the "liquid gold" that we drink and use to grow plants. Then there is the monetary commodity gold that Eric speaks to.
It seems the one basic component that makes each of those "golds" most valuable is their "purity"! If water is polluted it is unfit to drink and can cause illness or death, as many Fourth World places know all too well. If oil is unpure it is more costly to consume and pollution levels rise. Of course if you ever lived in Los Angeles on a smoggy day then you know what unpure air looks like! Then we have the impurities of gold and its markets. Governments and central banks have polluted gold to what it is today. No longer a medium of exchange to buy groceries or run businesses, just something of disdain from the CNBC S&P purists. But its true value lies in its ability to offset the value death spirals brought on by its two greatest polluters, government and central banks. A USD is only as good as Congress and the US Fed. If politicians are true to their two historical common denominators … greed and hubris … then we can be guaranteed that the USD will fail as money. Just like every other Empire has failed. Why? Back to the basis of all humanity … the human condition, which is "being human"! You surround yourself with the most sophisticated technology to extend your life and make grand calculations and even travel faster and further, but none of that immense technology can ever cure humans of their one flaw. Is it a flaw? We are what we are!
All that said … I think the biggest monetary related failures ahead will come from "exchanges". You can define that as any place you park your hard earned "labor units" whereby it is converted into some sort of tradable commodity. You could say a bank is an exchange. You could say the NYSE or COMEX. Take your pick. Call the event a black swan or force majure or just a simple old crash! Of course once such an event happens it is too late to seek assets without counterparties tied to those events. Heck, just the failure of AIG almost brought down the entire global banking system. That was not that long ago!
All that black swan stuff said … the only "real safety net" is rural regions with ample water and clean air and the ability to generate electricity off the grid. Historically speaking there are few places on Earth where such long term assets can be found. I reside in one those locations and I think it is one of the most undervalued and overlooked assets on the Earth today. Sam Kinison had a solution for the starving people in Africa in the desert. U-Hauls! You move people to where the "food is"! It was a comedy act, but there was whole lot of reality in that joke! Food does not grow in deserts. I can think of a few major cities in deserts. Off the top of my head there is Las Vegas, Phoenix, El Paso and Los Angeles. Warren Buffet will tell you when its time to buy U-Haul stock!
We are now living so far from earthly reality in every sense of the word "reality" that it is truly frightening that there could possibly be so many "greater fools" in existence at a time when technological advances have been so profound. It seems like a major culling of the gene pool is long, long, long over due! As a famous lawyer friend of mine says, "Carry on bravely!"
all over again! Ahhaha. Gold will follow Deflation lower as that is what the powers that be desire. That's been the case and as they say "they will fight this tooth and nail" as well.
Aloha! I am involved as a partner in a digital studio venture based in Hollywood. We produced a show for Rebecca Costa she called "Countermeasures". She gained fame as a venture capitalists in Silicone Valley.
I was lucky enough to be part of production of the G. Edward Griffin show back in 2011. I met him as he sat in make-up and also got to speak with him in the green room. I had heard of him and read his book prior and of course I would suggest the book to anyone who wants to be in the know when it comes to the history of the US Fed.
Here he talks about the Occupy Wall Street events at that time. He also talks about the US Fed as well. He makes a lot of good points!
Also Rebecca talks about the Solyndra debacle which she had an indirect connection to in her venture capital network. Career politicians are just so boring-g-g-g!
Kaimu. GREAT suggestion and offering. I especially like the end where Griffin offers an
"alternative": not crony capitalism, not the Fed reserve system (power brokers and central planners)), but REAL,TRUE FREE Market capitalism. Slow growth yes, but no booms and busts!! Backed by something tangible.
by Marin Katusa. If this guy can find metal mines like he can write a book, I'm signing up with Doug Casey's Casey Research–maybe with Sprott too! Two are better than one.
Highly recommended for the BIGGER picture
I should have said this rather than "the Bigger Picture."
Chris and Adam. I haven't yet seen all the revised video chapters of The Crash Course but I do hope you somehow incorporate Katusa's insights, especially concerning oil and the reserve currency.
I believe that I now better understand WHY the USA MUST stay in Iraq and Afghanistan, maybe forever??
Saudi Aramco, Iraq National Oil Co, National Iranian Oil Co, China National Petroleum Co, Rosneft in RUSSIA.
And like all good black holes it is completely invisible.
Richard Dolan describes how your money is being hoovered out of your pocket by secret squirrel clubs.
This may be the reason why there is no inflation even with all the money printing. It is going into amazing new technology. Like this internet thingy, and making other people very rich.
Entertain the thought that Gold and Silver may be a distraction.
Regarding timing and being off by years, we have to put it into perspective, and Eric should not be so exasperated at the tenacity of the status quo. Sometimes I get the impression that Sprott thinks things are going to continue on almost as usual afterwards, with a somewhat diminished standard of living, but the financial system will be rebuilt and we will work towards something like we used to have… Unfortunately I don't envision it that way. This isn't going to be some dot com or real estate bubble bursting. This is going to be a monumental shift in the world, it will be the dividing event between pre-Peak Oil and post-Peak Oil humanity. It will be a complete financial reset, the end of 100 years. We are up against the most powerful and corrupt people in the world. Do not be surprised to see them drag it out as long as they possibly can. In doing so, we can only assume that they will have completely emptied western bank vaults when this is over, making the aftermath even worse. Gold bugs will not really be "rich" if they live in the West, because society will devolve so badly that it isn't going to be about cashing in and buying fun stuff. It will be about survival, and if you are identified as a PM hoarder then your chances of survival go down in some respects. If you can get your gold in a private vault in Singapore, and move over there, well that might be a different story.
Aloha! Okay, just thinking out loud here! Evolving politics with blended Marxism … hmmm? Well, I have to say Karl Marx warned us about what would happen to capitalism when bankers took over the means of production. We're here! Like G Edward Griffin said in the video link I shared it is not enough to protest and revolt against the current regime of corrupt leaders. A true revolution already knows what means of production and government will replace the corrupt regime once it is over thrown. The American Revolution was not spontaneous combustion.
Supply and demand … what's that? Who really knows what forces are in the markets every day to influence momentum? Just earlier this year the LIBOR scandal took center stage and based on email legal discovery traders were manipulating the LIBOR market in exchange for day old sushi! That goes beyond corruption into just plain old death defying decadence and extreme hubris! I would like to see that HUBRIS event at the next X GAMES! In ancient Greece people were put to death for "hubris"! Now its just day old sushi! Another magnanimous milestone of manipulation! Who knew sushi had such value? So is gold demand out stripping supply? Who knows, but I think the COMEX has evolved into nothing more than a GOLD LIBOR!
Also like G Edward Griffin mentions he believes that true capitalism died off in the world after WW2. I have to say I agree. How can you have true capitalism when markets hang on the US Fed FOMC news release? Government owned GM stock? Bank America and AIG bailouts? Banks dumped their loan officers for trading desks! Traders analyze to death every word in the FOMC in order to determine if the economy is on track or not. How the hell would a private banking cartel with no means of any sort of production know what a giant global economy needs to make it robust much less maintain a sustained recovery? That was never the Fed charter anyway! Certainly the US Constitution never meant for the Congress to fund solar panels and EBT much less Obamacare!
So where are we headed? I do not buy the Marxism to Maxism idea whereby we end up in a MAD MAX world where a gold owner is targeted for termination. If that is the case then before the gold owners die off the food and water owners will go first! Look at Katrina. The Safeways got looted not coin shops! You can't eat gold. Besides right now there is probably 1 in 1,000 Americans who even knows what a real gold coin is. No, I doubt the US government ever decrees gold is money in an emergency and so when it comes to MAD MAX fantasy time it will be the US Dollar hoarders that will be offed first starting with the banks! Paper money is decreed legal tender not gold. Who robs coin shops nowadays? I keep hearing "bank robbers" in the news! If you think back to the last major US Bank Emergency in 1933 FDR confiscated all the public gold. Why would you kill someone to own something you can go to jail for having? Al Capone didn't kill people for their gold … and neither did Tony Soprano! I think gold hoarders will own a basis in a future viable currency, whether decreed or not, and that concept goes way beyond the conniving pea brain of your basic tattoo gangsta! Ah, ya gotcha bling?
Are we not community? Just like Congress Warlords have no means of production and by nature they are quite stupid as to economic viability much less longevity, so when the bread and bullets run out so does their reign … If it even gets to that. Just look up "Mao"! I believe Americans have too much embedded Freedom genes to go MAD MAX! Russians though have embedded Czars in their blood. They have been bouncing from one Czar to the next since forever! From Nicolas to Stalin to Putin! Russians truly know how to suffer!!! Given that it's not even MAD MAX in Russia yet! Hmmm … yet?
Back to Griffin. He recommends End the Fed, but that is short sighted. If we End the Fed then go all the way and End the CIA and NSA!
[quote=KennethPollinger] Can you imagine that the six guys who got together to create the blueprints for the Fed had an estimated one-fourth of the total wealth of the entire world!
[/quote]
Dear Zen /Ken,
If the six founders of the FED already held one-fourth of the total wealth of the entire world before the foundation of the FED, then the new federal reserve banking system could not have been the cause for the extreme inequality of the worldwide distribution of wealth.
The standard view is that a cause C has to precede its effect E.
I want not at all to defend the existing system but I suppose that the relations and dependencies are much more complicate.
Have you ever read about the so called Panic of 1907 in the USA? http://en.wikipedia.org/wiki/Panic_of_1907
The Wikipedia article suggests that it was at least one of the leading motives for the subsequent foundation of a national reserve bank in the USA: "A significant difference between the European and U.S. banking systems was the absence of a central bank in the United States. European states were able to extend the supply of money during periods of low cash reserves. The belief that the U.S. economy was vulnerable without a central bank was not new. Early in 1907, banker Jacob Schiff of Kuhn, Loeb & Co. warned in a speech to the New York Chamber of Commerce that "unless we have a central bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history". Aldrich convened a secret conference with a number of the nation's leading financiers at the Jekyll Island Club, off the coast of Georgia, to discuss monetary policy and the banking system in November 1910. …”
You are an entrepreneur, so you are used to take risks. Whereas I have never tried and never dared. Kudos to your courage and to your work efforts!
But you are not only an entrepreneur you also read books. I’m always eager to hear from you about new ones.
The following by Aaron Brown is allegedly quite the opposite of the peakprosperity forum. I think it is worth being read:
Red-Blooded Risk
Hardcover: 432 pages
Publisher: Wiley; 1 edition (October 11, 2011)
ISBN-10: 1118043863
ISBN-13: 978-1118043868
From page 32 to 55 he explicates seven principles of modern financial risk management.
I sum up what I learned concerning market timing so far. It has nothing to do with Aaron Brown’s book.
Let us imagine that an economic good G is in a long downturn coming from its top at 200 points respectively 200.- US$ per tradable unit.
The ultimate bottom will be reached at 100.
A small saver S buys at 105; shortly before good G reaches its bottom because he / she thinks that it is so cheap.
A half year later a professional trader T buys at 109 in a beginning uptrend, four month after good G bottomed.
Who did the better trade?
The professional trader T!
Why?
No one could know in advance that the downturn would stop at 100. Good G could have fallen to 50 or 35 or 27 and so on. The small saver S was rescued by pure luck.
From the professional trader’s perspective the small saver S bought too early. Trader T watched for some indicators hinting at a trend reserval in order to lower his / her risk for losing considerable money in a continued downturn. The professionals assess their trades risk adjusted. I don’t know how many key figures they take into account and how they calculate. We could ask davefairtex. But the purchasing price is at least only one of them.
Further our perception of the current price could be biased by an anchoring effect: http://en.wikipedia.org/wiki/Anchoring
Best regards
This site will not touch black budgets or black projects with a ten foot pole. All the while, complaining in frustration, that they just can't understand what's happening.
[quote=KennethPollinger]. Can you imagine that the six guys who got together to create the blueprints for the Fed had an estimated one-fourth of the total wealth of the entire world!
[/quote]
Another book about the FED:
William Greider:
Secrets of the Temple: How the Federal Reserve Runs the Country
Simon & Schuster; Auflage: Touchstone. (1989)
ISBN-10: 0671675567
ISBN-13: 978-0671675561
Looks like a gold futures algo went wild earlier today. A $263 dollar futures rise in 20 minutes. Then in resets from $1463 back down to $1200. GCR algo test run?